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IIIN 2026 Q2 财报电话会议

Operator: Hello, and welcome, everyone. Welcome to the Insteel Industries, Inc. Second Quarter 2026 Earnings Call. My name is Becky, and I will be your operator today. All lines will be muted throughout the presentation portion of the call, with a chance for Q&A at the end. I will now turn the call over to your host, H.O. Woltz III, to begin. Please go ahead. H.O. Woltz III: Good morning, and thank you for your interest in Insteel Industries, Inc. Welcome to our second quarter 2026 conference call, which will be conducted by Scot R. Jafroodi, our Vice President, CFO, and Treasurer. Before we begin, let me remind you that some of the comments made in our call are considered to be forward-looking statements that are subject to various risks and uncertainties which could cause results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. Despite falling well short of our expected financial performance in Q2, we believe the upturn in business activity we reported previously is still intact. Winter weather is a fact of life in our business; it happens that during Q2, conditions were severe and prolonged in many geographies, particularly compared to recent years. Project delays, while undesirable, are common in the industry. We are confident that short-term weather conditions and project delays do not create or destroy demand, and that postponed demand will be realized during the balance of fiscal 2026. I will now turn the call over to Scot to comment on our financial results, and then following his comments, I will return to discuss our business outlook. Scot R. Jafroodi: Thank you, H. Good morning to everyone joining us on the call. As we reported earlier this morning, our second quarter results were weaker than expected, reflecting the combined impact of winter weather disruptions, lower spreads, and higher unit conversion costs. Net earnings for the quarter were $5.2 million, or $0.27 per diluted share, compared with $10.2 million, or $0.52 per diluted share, in the same period last year. Shipments for the quarter declined 5.9% year-over-year but increased 6.9% sequentially from the first quarter. While the second quarter typically reflects some seasonal softness, conditions this year were significantly more severe. Following a solid start in January, we experienced extended periods of winter weather across most of our markets, which reduced construction activity and disrupted operating schedules for both customers and Insteel Industries, Inc., weighing on order flow and shipments. In addition, certain projects originally scheduled for delivery during the quarter were deferred to later in the year for reasons unrelated to weather. Although we are still early in the third quarter, recent order activity has been solid, with April shipments trending above forecasted levels. With that backdrop on volumes, let me turn to pricing. Average selling prices were up 14.2% year-over-year, driven by the pricing actions we put in place throughout fiscal 2025 and into the current year to offset raw material cost increases, Section 232 tariffs, and rising operating expenses. Sequentially, average selling prices were up 1% from the first quarter even as wire rod costs continued to move higher. For context, published prices for steel wire rod, our primary raw material, rose $90 per ton during the quarter. Although we implemented additional price increases during Q2, limited sequential improvement in average selling prices was influenced by product mix, existing contractual pricing, and softer volumes. We expect these recent pricing actions, along with the additional price increase implemented in April, to provide further benefit in the coming periods as they are more fully reflected in our realized pricing. Gross profit declined $8 million year-over-year to $16.5 million, and gross margin narrowed to 9.6%. The decline primarily reflects lower shipment volumes, reduced spreads between selling prices and raw material costs, and higher unit conversion costs resulting from lower production levels and weather-related operational inefficiencies. Sequentially, gross profit declined $1.6 million and gross margin contracted by 170 basis points as the slowdown in shipments delayed the tailwinds of recent price increases and extended the lag between raw material cost increases and realized pricing. As we enter the third quarter, we expect several factors to support a recovery in gross margin. Demand is improving as we move into the seasonally stronger portion of the year. Recent price increases are beginning to gain traction, and our current raw material carrying values are more favorable. In addition, higher operating rates across our facilities should enhance fixed cost absorption. Taken together, these factors are expected to support a gradual improvement in margin performance as the quarter progresses. SG&A expense for the quarter decreased to $9.7 million, or 5.6% of net sales, compared to $10.8 million, or 6.7% of net sales, in the prior-year period. The decline was primarily driven by a $1.1 million reduction in compensation costs tied to our return-on-capital-based incentive plan, reflecting weaker financial performance this year. SG&A expense was also affected by a $203,000 unfavorable year-over-year change in the cash surrender value of life insurance policies, reflecting the downturn in financial markets and its effect on the underlying investments. Our effective tax rate for the quarter was 23.3%, which is up slightly from 23.2% last year. Looking ahead, we expect our effective tax rate for the remainder of the year to be approximately 23%, subject to the level of pretax earnings, book-to-tax differences, and the other assumptions and estimates underlying our tax provision calculation. Turning to the cash flow statement and balance sheet, operating cash flow provided $4.8 million in the current quarter, compared with using $3.3 million of cash in the prior-year period, driven primarily by the change in net working capital. Working capital used $1.4 million of cash in the second quarter, reflecting a $6.8 million increase in receivables resulting from higher sales and average selling prices, partially offset by a $13.3 million reduction in inventory as we scaled back raw material purchases. Our quarter-end inventory position represented approximately 3.4 months of shipments on a forward-looking basis, calculated off of our third quarter forecast, down from 3.9 months at the end of the first quarter. As we mentioned on our Q1 call, we increased inventory levels early in the year as we supplemented domestic bar rod with offshore material, and that build naturally eased as we moved through the second quarter. Looking ahead, we expect a modest increase in inventory as we move into the seasonal busy period, positioning us to support higher shipment volumes. Additionally, our inventories at the end of the second quarter were valued at an average unit cost that approximates our second quarter cost of sales and remains favorable relative to current replacement cost, which will have a positive impact on spreads and margins as we move through the third quarter. We incurred $4.4 million in capital expenditures in the quarter for a total of $5.9 million through the first half of our fiscal year, and we remain committed to our full-year target of $20 million. Finally, from a liquidity perspective, we ended the quarter with $15.1 million of cash on hand and no borrowings outstanding on our $100 million revolving credit facility, providing us ample liquidity and financial flexibility going forward. Turning to the macroeconomic indicators for our construction end markets, the latest readings from our two leading measures—the Architectural Billing Index and the Dodge Momentum Index—point to an environment that remains uneven but generally stable. The Architectural Billing Index, which typically leads nonresidential construction activity by approximately 9 to 12 months, improved to 49.4 in February from 43.8 in January. While the index remained below the breakeven level of 50, the improvement indicates that the rate of contraction moderated, with fewer firms reporting declining billings compared with the prior month. Additionally, the Dodge Momentum Index, which tracks nonresidential building projects entering the planning phase, increased 1.8% in March. The gain was driven by a 7% improvement in commercial planning activity, which continues to be supported by strong data center construction. Monthly construction spending from the U.S. Department of Commerce suggests only modest growth in overall activity. In January, total construction spending on a seasonally adjusted annualized basis increased approximately 1% year-over-year. Nonresidential spending was essentially flat during the period, with public highway and street construction—one of our key end-use markets—remaining comparatively stronger, increasing around 4% from the prior year. As we close out the second quarter, we remain encouraged by the demand trends we are seeing across our core end markets, while the broader macroeconomic backdrop continues to evolve, including the risk of renewed inflation, uncertainty around the timing of interest rate cuts, potential changes in tariff policy, and geopolitical developments affecting energy and shipping costs. Our customers remain engaged, and projects continue to move forward. Our ongoing dialogue with customers, combined with recent improvements in several leading indicators, supports our confidence in the direction of the business. At the same time, we recognize that these external factors could influence the pace of activity in the near term. Even so, underlying demand conditions remain healthy, and we believe we are well positioned as we move through the second half of the fiscal year. That concludes my prepared remarks. I will now turn the call back over to H. H.O. Woltz III: Thank you, Scot. As I noted in my opening comments, we were affected during Q2 by weather-related and non-weather-related circumstances that resulted in our operating rate, shipments, and financial performance falling short of expectations. Making matters worse, we had staffed up at certain facilities ahead of the seasonally more active part of our year in anticipation of expanding operating hours, which would reduce lead times and result in increased shipments. We carried the cost of ramping up through the quarter but were unable to operate at expected levels. While we continue to believe that demand will be solid during 2026, we will reduce costs if this forecast fails to materialize. At this point, however, we do not expect to be in a cost-reduction mode driven by demand-related concerns. Turning to another subject, the steel industry may have been more affected by the administration's tariff policy than any other industry. The Section 232 tariff of 50% on imports of steel has caused market prices in the U.S. for hot-rolled wire rod, our primary raw material, to rise to a level that is 50% to 100% over the global market price. While last summer we questioned the effect of the derivative products tariff strategy implemented by the administration, we are glad to report a significant decline in the volume of imported PC strand that has entered the U.S. since the tariff was increased to 50% and derivative products, including PC strand, were covered. From August to December, the five-month period following the changes the administration made to the Section 232 tariff regime, PC strand imports fell by more than 50%. The application of the Section 232 tariff to PC strand, together with global uncertainty and higher transportation and insurance costs related to the conflict with Iran, clearly works in favor of domestic industry. Turning to the raw material environment, investors should understand that Insteel Industries, Inc. operates in a small segment of the domestic hot-rolled carbon steel market. Domestic production of steel wire rod, our primary raw material, is approximately 3.5 million tons per year, while U.S. production of all hot-rolled carbon steel is roughly 100 million tons per year. Difficult economic conditions in recent years for producers of hot-rolled wire rod resulted in the permanent closure of two producing mills and financial struggles together with significantly diminished output for a third producer. Altogether, these curtailments reduced actual domestic production of wire rod by more than 800,000 tons per year and reduced domestic capacity to produce wire rod by nearly 1.2 million tons per year relative to apparent domestic consumption of wire rod of approximately 5 million tons per year. By our calculation, capacity equal to nearly 20% of apparent domestic consumption is offline, most of it permanently. These capacity curtailments, together with changes to the Section 232 tariff, caused the U.S. market for wire rod to tighten significantly and created serious questions about the adequacy of domestic supply. Insteel Industries, Inc. therefore was forced to turn to the offshore market for a portion of its supply. The economics of offshore transactions, which include substantial freight costs, require the purchase of large quantities, with resulting impact on inventories and net working capital requirements as reflected on our balance sheet. Net working capital rose approximately $45 million over the last twelve months. We will continue to import a portion of our raw material requirements until such time as domestic availability improves, and we will incur excess net working capital requirements as compared to purchasing domestically, although we have some options to mitigate this adverse impact. Finally, turning to CapEx, as mentioned in the release, we expect to invest approximately $20 million in our plants and information systems infrastructure during 2026. Our investments will support the growth of our engineered structural mesh business, reduce our cash production costs, and enhance the robustness of our information systems. Consistent with past practice, we will provide quarterly updates on our investment activities and expectations as the year progresses. Looking ahead, we are aware of the substantial risks related to the state of the economy and the administration's tariff policies. Regardless of developments in these areas, we are well positioned to pursue growth-related activities, both organic and through acquisition, and to pursue actions to optimize our costs. We will now open the call for questions. Becky, would you please explain the procedure for asking questions? Operator: Of course. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you feel your question has been answered or for any reason you would like to remove yourself from the queue, please press star followed by two. When asking your question, ensure your device is unmuted locally. Our first question comes from Julio Alberto Romero from Sidoti. Julio Alberto Romero: Thanks. Hey, good morning, H and Scot. Good morning. Could we start on volumes a bit and talk about the projects originally scheduled for the quarter that were delayed into later quarters? Any way you can help us better understand how much of this may have weighed on your shipments? And secondly, could you expand on the drivers of the project delays? I think you mentioned they were unrelated to weather. Just hoping you could elaborate a little. H.O. Woltz III: If you can envision a construction project, the owner and contractor would like to start the project and operate continuously until the finish of the project or a portion of the project, but they do not want to open up the site months ahead of having all of their other needed materials and suppliers in line. Therefore, the project that we are involved in was delayed, and we should begin shipping it in the current quarter. The delays are unfortunate, but they are not surprising at all. As we have emphasized, this is a delay of business; it is not a cancellation. We will sit tight and see that come to fruition in the current quarter, and this project will go through our fiscal year and end in 2027. Julio Alberto Romero: Okay, great. Very helpful. You talked about April shipments trending above forecasted levels. How much are those shipments related to project delays pushed to the right—maybe some catch-up from the February weather delays—or any other underlying demand trends at play? H.O. Woltz III: I do not think any of it is related to the project delay because it is still delayed, and we should see some benefits later in the quarter from that. The current shipping performance is solid relative to our expectations, and our pricing actions are taking effect as we expected them to. Julio Alberto Romero: Last one for me: you talked about project mix impacting the average selling price and maybe the spread. Can you talk about whether engineered structural mesh is playing a factor in that at all and, broadly, where ESM mix stands at the moment? Scot R. Jafroodi: Please ask that question again, Julio. Julio Alberto Romero: Sure. You have noted project mix impacting ASP and spreads. Is engineered structural mesh affecting that, and where does ESM mix stand now? H.O. Woltz III: Let me start at the beginning so you understand the difficulty we have in trying to quantify some of these things and why we do not spend a lot of time dissecting the reality of the market. In February, the adverse winter weather began in Texas and ended up in New England. It affected 9 of our 11 facilities, which is unfortunate, but that is how it happened. We had issues in various geographies of various types. In some cases, roads were not passable or stayed hazardous for extended periods. Setting aside road conditions, when it is very cold, you cannot pour concrete. People have various opinions about the temperature at which hydration becomes a concern, but at low temperatures, pouring concrete becomes not feasible. In North Carolina, for instance, we had multiple weeks of cold weather where the temperature did not break freezing. While roads were unpassable for a period, the sustained low temperature was probably of more significance. We did not go through every customer and every plant and try to quantify the impact; we are more concerned about getting our plants operating and covering the eventual demand that comes back as weather conditions improve. Operator: Our next question comes from Tyson Lee Bauer from KC Capital. H.O. Woltz III: Good morning, Tyson. Tyson Lee Bauer: Good morning. When you talk about freight expenses, are there two considerations? Increased freight costs to get your imported supplies in on the inbound side that you have to absorb, as opposed to making shipments from your facilities where you can do surcharges and recoup those freight costs, even if it may be at zero margin but recovered on the revenue line? In other words, is there one bucket you must absorb and another you can pass along? H.O. Woltz III: I would not look at it that way, Tyson. In terms of the raw materials we are importing, we are very well located for inbound freight cost purposes compared to our locations relative to domestic supplies, so I do not think we incur excess inbound freight cost because we are importing. Freight costs, whether inbound or outbound, have risen substantially following the conflict with Iran, and it happened extremely quickly. It coincided with other factors that reduced driver availability. The practical impact is much higher diesel costs and fewer drivers, which means our costs have gone up, and many of our loads have been rejected by carriers who can find loads that pay more. We are working through those issues. I was reading that in the flatbed sector, more than 40% of loads tendered to carriers have been rejected across the economy. We are dealing with something out of our control, but it is our responsibility to manage it from a cost point of view. We debated surcharges versus price increases, and we have elected to increase our prices. Tyson Lee Bauer: So you are recovering those now? H.O. Woltz III: I would not say we have recovered them retroactively. We absorb some of those costs until the effective date of price increases that will, among other things, serve to recover those higher costs. Tyson Lee Bauer: Regarding price increases, you did some early in Q1 and announced another in April. Any idea of the magnitude, and are we expecting additional price increases to get you whole? H.O. Woltz III: Our price increases are implemented to reflect what is happening in our marketplace, both with our raw material costs and with other operating costs. While official inflation statistics may look modest, the impact on our operations has been much more significant. Everything we consume—labor, chemicals, electricity, natural gas—has gone up substantially. Wire rod has continued to increase substantially as well. We are primarily looking to recover our costs by implementing price increases, and we have implemented three since the first of the year. When volume falls, as it did in Q2, we honor the commitments we have made to customers; we are not operating on the basis of price in effect at time of shipment. The next orders are affected by price increases. That is the way the business is done, and that is how Insteel Industries, Inc. is operating. Tyson Lee Bauer: On April 2, there was clarification on Section 232 for steel and aluminum. Would you provide your view on whether that provided clarity regarding foreign content, U.S. content, and different baskets that imports fall into at different rates? H.O. Woltz III: We are affected by two different types of tariffs. Section 232 is the primary effect on our business. There was confusion created by the administration's inclusion of derivative products last summer, and that confusion related to how you calculate the tariff on the product. To know for sure how the tariffs were being calculated, we went back to the entry documents and confirmed that in practically all cases, PC strand that was entering was being assessed a 50% tariff rate. We did not pick up that many importers of record were minimizing their tariff exposure, so the recent clarifications do not have much impact on us because we do not believe we were being under-assessed to begin with. So now any questions about how the values are calculated have been put to rest; we were not really a victim of that. On the other side, over the AIBA tariffs, the AIBA tariffs would have affected any capital equipment that we purchased as well as, primarily, our purchases of spare parts. Purchases of spare parts are not discretionary; we have to do it. The importer of record declares the value of that part and applies the tariff rate to it. In most cases, the tariff was a line item on our invoices. We are studying now the implications of the Supreme Court’s action on AIBA tariffs and the Court of International Trade requirement that those tariffs are rebated to the importers of record. That is not Insteel Industries, Inc., so we will be talking with our vendors about, first, their obligation to recover those tariffs, and second, what to do with any refunds that they obtain, because we actually paid those tariffs but will not be rebated by the government; that goes to the importer of record. All of that is overlaid by the question of where the money will come from. I understand that they have collected $160 billion of AIBA tariffs, and ostensibly all that has to go back to the people who paid it. I would bet a lot that it will not happen that simply. We will not be booking any receivables for tariff collections because it is highly improbable that it will happen in a simplistic way. Tyson Lee Bauer: Understood. Last question: data centers are a headline catalyst for nonres, but they seem prone to delays due to transformers, switches, and power-related components. There are a lot of announcements and expectations, but many have been pushed to the right for permitting and supply issues. Is this a great opportunity that may still be ripe for ongoing delays? H.O. Woltz III: I would look at it from a broader perspective. The good news is that we do not think the data center phenomenon goes away in 2026 or 2027. I think you have five solid years of data center activity. As we pointed out in our last earnings release and conference call, it is really good that it is here because the rest of the private nonres market seems to be weak. A delay is a delay. My guess is that, when we look back at it, it will be reasonably insignificant. The better news is that this will be a solid marketplace for a while. While we are doing business on-site with some of these projects, it is hard to tell how much data center business is included in our legacy business. We sell reinforcing products to customers who make wall panels or double tees, but we do not always know where those are going. There are more references in call reports to data centers that are consuming products out of our legacy business as well as from our cast-in-place business. Tyson Lee Bauer: That sounds good. Thanks a lot, gentlemen. H.O. Woltz III: Thank you, Tyson. Operator: Just as a reminder, if you would like to ask a question, please press star followed by one. We currently have no further questions, so I will hand back over to H for closing remarks. H.O. Woltz III: Thank you. We appreciate your interest in Insteel Industries, Inc. We look forward to talking to you next quarter and encourage you to call us if you have questions in the meantime. Thank you. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.

33天前Insight Analytics约5分钟阅读

JKS 2025 Q4 财报电话会议

Operator: Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co Limited's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host today, for today's call, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella. Stella Wang: Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's Fourth Quarter 2025 Earnings Conference Call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com as well as on Newswire services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Xiande Li, Chairman and CEO of JinkoSolar Holding Company Limited; Mr. Pan Li, CFO of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, CEO of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar's business operations and company highlights. Since our CMO, Mr. Gener Miao, is currently on a business trip, I will deliver the remarks on sales and marketing in his behalf. Following that, Mr. Pan Li will walk through the financials. After that, we will open the call for questions. Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements, except as required under the applicable law. It's now my pleasure to introduce Mr. Li, Xiande, Chairman and CEO of JinkoSolar Holdings. Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li. Xiande Li: [Interpreted] The global PV industry continued to experience volatility due to structural imbalances and shifting trade environment in 2025 impacting financials across the industrial chain. In this entering environment, we maintained disciplined operations and our technological leadership continuously driving upgrades of our n-type TOPCon technology and iterating our high-efficiency products. For the full year 2025, total module shipments reached 86 gigawatts ranking first globally for the seventh consecutive year, impacted by persistently low module prices, the elimination of obsolete production capacity and still evolving product mix and high-efficiency products ramp up. We incurred a net loss for the full year. In the fourth quarter, gross margin decreased sequentially, and our net loss expanded due to rising costs of raw materials such as polysilicon and silver as well as foreign exchange rate fluctuations. However, our energy storage business maintained its rapid growth trajectory, marking an important step in our ongoing transformation into an integrated energy solutions provider. Shipments of ESS grew significantly year-over-year to 5.2 gigawatts in 2025. This approximately 1.7 gigawatts hours recognized as revenue. Our deepening penetration into high-value markets is expected to more than double ESS shipments in 2026, serving as a primary driver for enhancing our profitability profile. Since the fourth quarter, government guidance supporting the high-quality development of the TV industry has continued to strengthen. A series of policy measures have steadily accelerated the phasing out of outdated capacity and the normalization of market competition. guiding the industry to gradually transition from competing on scale and price to quality and value. Leading companies have actively responded to this high-quality development directive pushing module prices back to reasonable levels. In the first quarter of 2026, driven by the pass-through of cost pressures from rising commodity prices, such as silver coupled with the impact of export tax rebates on demand, module prices rebounded significantly sequentially. As the industry's competitive landscape continues to normalize, and supply and demand dynamics marginally improved. Module prices are expected to remain relatively stable with high efficiency and differentiated products continue to command a premium. We continue to drive technological breakthroughs and lead the direction of industry innovation. As of the end of 2025, the maximum lab efficiency of our anti TOPCon cells reached 27.99% while conversion efficiency of our anti TOPCon-based perovskite tandem cell reached 34.76%. As a global leader for TOPCon technology, we held over 700 TOPCon patents by the end of the fourth quarter, surpassing most of our competitors. Furthermore, we partnered with Crystalline to provide the application of AI in R&D of perovskite tandem cell and accelerate the commercialization of next-generation technologies. We continue to drive product upgrades and performance iterations consistently enhancing product competitiveness. In the fourth quarter, shipments of high-efficiency products that exceed 640 wattP increased sequentially to approximately 3 gigawatts, a USD 0.01 premium compared to our conventional products. As our Tiger Neo, the third generation of Tiger Neo series which delivers maximum power output of 670wattp sequentially scales up production volume and shipments this year and accelerate market penetration across diverse application scenarios. The value proposition of our high-performance products will increasingly stand out and is expected to command a higher premium. We continued to enhance our cost control capabilities across market cycles offsetting the impact from raw material price fluctuations through supply chain optimization and technology core upgrades. Development of silver coated copper technology is progressing as planned with large-scale production expected to gradually ramp up in 2026. Our initiatives in smart manufacturing have already begun to generate initial results. Through our lighthouse projects represented by Shanxi Super Factory, our vertically integrated production model continues to improve production efficiency and cost competitiveness providing a replicable blueprint for our global manufacturing footprint. We view our energy storage business as a strategically vital second growth engine. We continue to strengthen our R&D for our core technologies, enhance our system solution capabilities and improved localized customer service and life cycle support, leveraging our global PV distribution channels, we are steadily scaling east shipments and greater synergies between our solar and storage solutions are increasingly materializing. Currently, our sign and high potential ESS orders exceeded 10 gigawatt hour in total. As the global energy transition advances and the demand for great flexibility increases, the role of energy storage with the renewable energy system continues to strengthen. Looking ahead to 2026, we will continue to deepen penetration into high-value markets and explore application scenarios, including 0 carbon industrial parks and data centers. We continue to optimize our global manufacturing and supply chain footprint, enhancing our ability to adapt to diverse market policies and customer needs. Our 2 gigawatts N-type module facility in the U.S. maintained high utilization rates as we continue to strengthen local manufacturing and service capabilities. We are also actively developing new models for long-term engagement in key markets to better address customer demand for high-efficiency products and solutions. 2025 mark the final year of the 14th 5-year plan during which cumulative installed capacity of wind and solar power surpassed the coal-fired power for the first time, becoming the largest source of electricity generation. At the same time, solar power generation has fully entered a market driving phase. The industry's development framework is shifting from scaled expansion towards greater emphasis on operational capabilities and comprehensive value creation, which read is the competitive bar for technology and products. At the same time, recent volatility in global energy markets has highlighted the critical need for energy security, we're enforcing the long-term value of renewable energy. Looking forward to the medium to long-term as the construction of new power systems advances and the new load demand growth from data centers, for example, application scenarios for solar and storage will continue to broaden, enhancing the value of the green power. Industry competition will gradually transition from being cost and skill driven to a model centered on technology called innovation, product competitiveness and the ability to deliver integrated solar/storage solution. We will continue to consolidate our technological leadership, deepening our global footprint accelerate the development of our integrated solar plus storage strategy and consistently improve our capabilities to deliver comprehensive solutions. This will steadily strengthen our long-term competitiveness and profitability at an industry landscape reship. Before turning over to Gener, I would like to go over our guidance for the full year of 2026. We expect a new integrated production capacity to reach approximately 100 gigawatts by the end of 2026, including 14 gigawatts from overseas facilities. We expect module shipments to be between 13 gigawatts and 14 gigawatts for the fourth quarter of 2026 and between 75 gigawatts and 85 gigawatts for the full year 2026. Gener Miao: Thank you, Mr. Li. We are pleased to report that both our robust global sales network and strong product competitiveness drove quarterly and annual module shipments to once again ranking first across the industry. Total shipments were 26 gigawatts in the fourth quarter with total motor accounting for nearly 93% of the mix. For full year, total module shipments were 86 gigawatts. Geographically, overseas markets remained our primary driver accounting for about 60% of total module shipments in 2025. We actively capitalized on growing demand across Asia Pacific and emerging markets, which together accounted for nearly 40% Shipments to the U.S. were in line with our expectations and accounted for approximately 5%. We continue to optimize our product mix increasing the proportion of high-efficiency product shipments and focusing on high-value application scenarios. This high efficiency models highlighted by the Tiger Neo, the third generation of Tiger Neo series have earned widespread recognition for their higher power generation and better LCOE. The order book for these modules has grown steadily since the fourth quarter, allowing us to command a premium over conventional products. As we continue to enhance our product competitiveness, our brand reputation and the customer recognition has strengthened in tandem. Internet's latest global energy storage Tier 1 list for the first quarter of 2026, we are recognized as a Tier 1 energy storage provider for eighth consecutive quarter. Furthermore, we achieved an S&P Global CSE score of 78 points, the highest one among PV module companies. And we were included in the 2026 surtainability year book. On the demand side, recent policy guidance and the discussions during China's 2 sessions and the subsequent industry forums have reinforced the strategic focus on energy efficiency carbon reduction and zero-carbon industrial parts. This provides a solid foundation for the continued growth in Chinese solar market during the 5-year plan. Globally, the ongoing global electrification process, the continuous growth of new power loads from data centers and increased focus on energy security following recent energy crisis are collectively driving demand. Local solar and solar plus storage solutions and their deployment flexibility are ideally positioned to address these issues. In healthy energy system resilience and facilitating seamless incremental power demand for countries. By the end of the fourth quarter of 2025, cumulative global module shipments surpassed 390 gigawatts with other sales network covering nearly to 100 countries and regions. Notably, total cumulative shipments of our Tiger Neo series exceeded 220 gigawatts ranking first in the industry as we continue to reinforce our global market leadership and a strong customer base. 2026 marks our 20th anniversary, and we are using this milestone as an opportunity to further strengthen our product, brand and customer service systems to continuously enhance our competitiveness in the global market. With that, I will turn the call over to Pan. Mengmeng Li: Thank you, Stella. In the challenging fourth quarter, we achieved a 20.9% sequential increase in solar module shipments and a slight sequential increase in total revenues. Our operating efficiency improved significantly from last quarter Operating cash flow was approximately $470 million in the fourth quarter and $280 million for the full year, $25 million hitting the target we set at the beginning of the year to reach positive full year operating cash flow. Looking ahead to we expect full year operating cash flow to remain positive. Looking at our fourth quarter financials in more detail. Total revenue was $2.5 billion, up 8.3% sequentially and down 15% year-over-year. The sequential increase was probably driven by increase in solar motor shipments, while the year-over-year decrease was mainly due to a decrease in average selling price of modules. Gross margin was 0.3% compared with 7.3% in the third quarter and 3.8% in the fourth quarter '24. The sequential decrease was mainly due to a higher revenue cost for products sold while the year-over-year decrease was mainly due to a decrease in average selling price of modules. Total operating expenses were $473.6 million up 28% sequentially and 21% year-over-year. The sequential and year-over-year increases were mainly due to an increase in the impairment of long-lived assets in the fourth quarter of '25. Total operating expenses accounted for 18.9% of total revenues compared to 16% in the third quarter. Operating loss margin was 18.6% compared with 8.7% in the third quarter. Now let me briefly review our '25 full year financial results. total module shipments were 86 gigawatts, down 7.3% year-over-year. Total revenues were about $9.4 billion, down 29% year-over-year. The decrease was mainly attributed to the decrease in the average selling price of solar modules. For the full year, gross profit was USD 201 million, a decrease of 86% year-over-year. Gross margin was 2.2% compared to 10.9% in '24, primarily due to a decrease in average selling price of modules. Total operating expenses were $1.48 billion, down 23% year-on-year, primarily due to a reduction in shipping costs driven by lower volumes of solar module shipments and declining average freight rate in 25 as well as lower employee compensation cost. Operating loss margin for full year of '25 was 13.6% compared with 3.6% for the full year of '24. Excluding the impact of the changes in fair value of convertible notes issued by JinkoSolar in '23, changes in the fair value of the long-term investments, share-based compensation expenses, the net loss resulting from a 5 incident at one of our production facilities in Shanxi province in 2024. And the impairment of the long-lived assets, adjusted net loss attribute to JinkoSolar Holdings ordinary shareholders were about for $8 million in 2025. Moving to the balance sheet. At the end of the fourth quarter, our cash and cash equivalents were $3.3 billion compared even at the end of the third quarter of '25 at $3.8 billion at the end of fourth quarter of '24. AR turnover days were 94 days compared with 105 days in the third quarter. Inventory turnover days was 75 days compared to 90 days in the third quarter. As these metrics show, operating efficiency is steadily improving. At the end of the fourth quarter, total debt was about $6.7 compared to $5.6 billion at the end of the fourth quarter of '24. Net debt was $3.44 billion compared to $1.76 billion at the end of the fourth quarter of '24. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed. Operator: [Operator Instructions] Your first question today comes from Philip Shen from ROTH Capital Partners. Philip Shen: Wanted to get your outlook and assumptions for pricing for Q1 and Q2. I think in your prepared remarks, you said you expect the global ASP to be stable. But are you assuming $0.10 a lot in Q1 and Q2? And then can you also talk about your gross margin cadence as we get through the year? Do you think Q1 is low, is it lower than Q4? And can it go higher from here? Are you guys speaking? Did you guys hear my question? Haiyun Cao: Sorry, Philip, this is Charlie. I'm [ muting ] my phone. Can you hear me? Philip Shen: Okay. Yes, I can hear you now. We didn't... Haiyun Cao: Okay. Let's get back to your question. And if you look at the price index, the market pricing. And I think the module price is rebounding in the last 3 to 5 months and reflecting the cost inflation and as well as I think most of the Tier 1 companies is more disciplined. And as well as there's backdrop as anti-evolutions. And if I talk to specifically Q1, Q2 ASP, we expect quarter-by-quarter, the improve and gradually. And it's a combination of the price inflation in placing as well as we are marking the next-generation Tiger Neo 3 high-inflation products. And that is -- I think we get a lot of changing from our customers, and there is a price premium. So as a combination, I think the market price is up and players are more disciplined. and we have more mix on the high increasing products. Philip Shen: Great. And so we can see the pricing improves. So can you quantify at all? So Q1, do we see $0.11. Q2, do we see $0.12? And then can you also speak to Q1 and Q2? Haiyun Cao: Yes, I think we're not in a position to disclose detailed in ASP for looking. But if you look at the market price, I think you're right, it's kind of the price level depending on different products and different ratings. It's roughly in the range of, I think, 11.5% or maybe 14, depending on different markets, different products in different regions. Operator: Your next question comes from Rajiv Chaudhri from Sunsara Capital. Rajiv Chaudhri: I just have a few questions. The first 1 is on the gross margin impact of the 3 factors you mentioned the foreign exchange, the U.S. dollar rate, cost of silver and the cost of polysilicon. Can you break down for us the amount -- the significance of each of these factors. And just give us a sort of -- if these factors had not shifted from Q3, what the gross margin could have been in Q4, so we understand what the impact was? Haiyun Cao: Yes, I think -- so back to your question, I think if nothing changed, we expect the Q4 margin should be stable or maybe a little bit higher in the fourth quarter. But fourth quarter, there's some headwinds. And just -- you are talking about it's -- if we look at the magnitude, the first one will definitely the commodities, particularly the silver. And I think the price -- the market price is sold. It's up 250% to 300%, not a dramatic change. And second one will be the RMB appreciation. And the polysilicon is not -- the price a little bit higher in Q4, but it's not a significant impact. Rajiv Chaudhri: Okay. So silver was #1, the exchange rate #2 and polysilicon, much less. Great. Next question is on depreciation and CapEx. What were the depreciation and CapEx numbers for '25? And what is your target for '26. Haiyun Cao: The depreciation a year per year in 2025, it's roughly -- sorry, an USD 1 billion per year. So -- and the CapEx in 2025, I think roughly, it's the same number. It's USD 1 billion. It's a totally different number, okay, it's coincidence. And definitely in 2026, we will further cut the CapEx is roughly, I think, roughly RMB 5 billion and roughly USD 700 million. And we make the investment on the CapEx, particularly the last year. It's -- the purpose it upgrades the roughly 40 gigawatts capacity through the next-generation technology, we call it Tiger Neo 3, and we don't have any additional investment plan in 2026. By 2026 payment is the outstanding the payable to the suppliers. Rajiv Chaudhri: I see. Okay. And the other question is on market share and size of market. Can you give us an idea of what you think the market size was in 2025. And obviously, that will allow me to calculate your market share. But related to that is a question of your guidance and the market share that you expect to get in 2026. Haiyun Cao: We -- last year, we delivered roughly 85% roughly gigawatts and were the top 1 in the industry. I think roughly, we get 13%, maybe 13% to 14% market share. And we expect 2026, the global demand a little bit flat or maybe down a little bit small percentage given last year, China reached to the very high peak over 300 gigawatts. And -- but overseas market continued to grow in 2026 and it's kind of the short term, the market size, the total market size a little bit down in 2026 because China specific situations. But for the next year, long term, we are very optimistic. If you look at the conflict Middle East, I think more and more countries, including China, have more determination to push more renewable energy and the energy independence securities are more -- will become more first priorities and for a lot of governments. And for the '26, we guided to 85 gigawatts with a flat with last year, maybe a little bit lower, reflecting the total market size in 2026. I'm talking about that the total markets could be a little bit lower compared to last year. And basically, I think the market share will be relatively stable. But the key operational targets will be improved -- significantly improve our financial performance were healthy operational cash flows, and we will more focus on the high-value customers and from the Utility segment and the DG segment as well. Rajiv Chaudhri: I see. So would you expect in this scenario that your -- the share of international will be even higher than last year in your sales? Haiyun Cao: I think so. I think so because we are trying to lower our exposure in China. And definitely, China last year, it takes around 40% of our shipments in 2025 for Jinko. And I expect 2026, China the percentage will be will be lowered to 30%, maybe a little bit lower, and we're getting more market share from overseas market, particularly the markets with more disciplined and the customer would like to pay for the branding, the qualities and the high increasing products. Rajiv Chaudhri: So Charlie, if some of the Tier 3 and the weaker companies are getting out of the market shouldn't we expect your market share to grow in 2026 even if the market overall is down, are you just being very conservative here? Haiyun Cao: No. Unfortunately, it's not a conservative estimation. And we think this year is kind of the -- how to say, the transition year. And next year, we are looking forward to a lot of good opportunities. And we believe this year, you're right, a lot of Tier 2, Tier 3 even relatively bigger guys will be facing, I think, liquidation issues or maybe consolidation issues. And we -- what we want to do is we penetrate the market with customers who is willing to be a ratable price and we are able to get a reasonable, I think, reasonable profitabilities. Rajiv Chaudhri: Charlie, final question. On the exchange rate, obviously, you experienced a negative margin pressure because the dollar weakened -- sorry, the dollar weakened against the renminbi and your products are priced in dollars globally. Would you consider shifting that into pricing globally in so that in future, as the dollar continues to weaken against RMB that you will -- you are not punished for it because it seems to me that it makes sense to consider this as a strategic rethink. Haiyun Cao: Yes. We're trying to diversify the minimize the risk of facturation in the currencies. And if you look at the price determination in our sales orders, it really depends on the customers, how they view their exposures. Most of our customers, I think the PPA is still in U.S. dollars. So it's kind of a natural hit when they prop the modules from the module makers, but some customers are willing to pay RMB denominated. And we are encouraging the customers who is willing to switch to the to RMB to a little bit lower, the exposure -- currency exposures. And on top of that, I think currency hedging will continue to do that. It's a little bit difficult, but we're trying to minimize impact. And for the pricing impact, we periodically, we reassess the possible the exchange rates and put into the pricing for the future sales order. Operator: Your next question comes from Alan Lau from Jefferies. Alan Lau: So First of all, I would like to understand the company's view on its potential collaboration with the U.S. leader in its local plan in both the space-based solar and also in some huge local 100 gigawatts deployment heard that Ghana was on the ground with some progress. So I would like to know if the company would share updates on that front? And another thing is recently, it seems there's market discussion on China may be prohibiting or stopping the export of solar equipment as well. So would this impact that collaboration? Haiyun Cao: Thanks for the questions. And for the second question, I didn't have any information or comment. And I know there is some kind of message, even public news from overseas media channels. And -- but for the -- I think you are talking about the U.S., the Tesla SpaceX it's probably information Elon Musk is making very bullish and plan to build and 100 gigawatts by Tesla and 100 gigawatts by the SpaceX. And I think it's -- why do you have such bullish plan? I think particularly from Tesla perspective, public news show, okay, because the AI, it is -- there's a lot of demand for electricity, renewable energies and the U.S. is lack of electricity and renewable energy will be the final solutions. And I think we size simply we have visited a lot of equipment suppliers and manufacturing, including JinkoSolar. They have decided the technology to be TOPCon but we don't have any further information to disclose. But again, under Jinko is Pioneer and the innovators for the top content knowledge. And we have, I think, the most powerful capabilities to build integrated the capacities, the digitalizations and have a very strong powerful patterns as well in the gold. And we are quite open to explore the corporate rating opportunities and with partners in different countries. And you can -- so that is the information I think I can see. But in summary, I think the property information show, okay. The Tesla, SpaceX has a plan to build capacities. They are doing a lot of the work including visiting Chinese manufacturing. And -- but we -- from Jinko perspective, we didn't have any further information to these goals. And -- but we are open for the business opportunities, if any. Alan Lau: So good luck for the potential chance on collaboration. And then to follow up, is there any -- what's your view on the pattern -- popcorn patent loss raised by First Solar. So are you seeing this is impacting your shipment in the U.S. or it's not really affected. Haiyun Cao: Yes. We don't expect any disruption or impact in our business and ongoing business in the United States and the first solar litigations, and we have been actively engaged experienced lawyers and to Fight. And we don't believe we infringe relevant patents of First Solar, and we did the research for the producing process. We don't believe it's relevant. And on top of that, we have a very solid experience a couple of years ago, and to deal with 337 with [indiscernible] Solar and remain in the final. And -- but again, we do a lot of preparation work and -- but we are confident, and there is an impact for our operations in the United States. Alan Lau: Understood. Clear. So switching gear to the fee-related issue. So I would like to know, I think probably for this year, there are sufficient projects already safe harbor for this year. So I wonder if you may share with investors on your plan on meeting the fee requirement going forward? Like is there any progress in sourcing partner, et cetera? Haiyun Cao: Yes. I think there's a lot of the safe harbor, the downstream projects and the project will get through the construction and the connections in the next 2 or 3 years. And for the long felt compliance for the manufacturing in our Florida facilities and we are in the final stages and recent negotiations with potential investors. And if there are any is significant make too. We will make the announcement. And we expect it to be closed in the next couple of months. Alan Lau: Understood. That's very good news. And then I would like to switch gears to ESS, like I think the Chairman has guided on the shipment that in the shipment may be doubled. I wonder if you can share in which region are those shipments is going to be? And is there any AI data center-related deals that is being negotiated or in discussion. Haiyun Cao: For the storage business, ESS business and AIDC definitely it's a very hot topic, and we are actively in early stage and discussion with few potential customers. And return. And I think we -- hopefully, we are able to finalize some deals by the end of this year. And therefore, the stories segment by ratings and China really take our small precedes and is roughly 10% to 15%. And our focus will be the Europe, Latin America and some projects from Middle East and Asia Pacific regions. So that's the breakdowns. In the U.S., last year, received around 600-megawatt hours, and we are building solidify our teams. And hopefully, we can make significant breakthrough in the U.S. market in 2026 as well. Alan Lau: Understood. So is there an expected gross margin target on the ESS side of the business? Haiyun Cao: Yes. It's we estimate to be 10% to 15%. That -- we did have a very good backlog last year. And the industry is facing increase of the price of late. And -- but we are trying to manage and minimize exposures, but we estimate it could be in a range of 10% to 15%. Alan Lau: Understood. That's very clear. I think my last question is on the shareholders' return. I wonder if the company -- what's the pace of the buyback or the company? Like is there any further shareholders' return program for this year? Haiyun Cao: I think we will convene 1 make the investment return in the combination of the share repurchase and the dividend and -- it could be -- the magnitude we have not determined, but we'll definitely do that. Alan Lau: Resulting in the past, it was around like the plan was around $200 million per year, but I'm not sure if this is still the plan, different situation in the industry for now. Haiyun Cao: U.S. holding companies and I think now the U.S. company has around USD 200 million in cash. And -- but we're trying to make some investment on this so -- including solar, robotics and some relevant and industries. And so we need to allocate between equity investment and shareholder returns. But we have sufficient, I think, the cash and to return on investment and to investors maybe in the range of 50% to a year. Operator: Your next question is a follow-up from Philip Shen from ROTH Capital Partners. Philip Shen: I wanted to ask about the perovskite outlook. You guys have highlighted your efficiencies there in the laboratory and was interested in getting your perspective on when perovskite could be commercialized in your capacity footprint? Are we looking at maybe 2 to 5 years? Or do you think it's beyond 5 years? Haiyun Cao: So we did make some through the laboratory for the perovskite technology and it's reaching roughly 24% to 25%. But talking to commercial mass adjusting, we think still have a lot of R&D work to do. it will be in the next maybe 3 to 5 years and -- but it's not -- definitely, it's not in the near term. Philip Shen: Yes. Okay, Charlie. And then in terms of your shipments to the U.S. market I think you had in your deck 5% of your shipments went to the U.S. What is your expectation for shipments to the U.S. market in 2026? Haiyun Cao: It's 5% to 10%. And there's a little bit of talent because the shortage of the solar cell in supplies. And -- but we are trying to reach to at least the metal point. Philip Shen: The midpoint of the 5% to 10%, is that what you mean? Haiyun Cao: Yes, yes. Midpoint, yes. Philip Shen: Got it. Can you talk about the source of your non-fosales? Are you sourcing them from the Mid East? Or where are they coming from? Haiyun Cao: Yes, in general, there's several different players and manufacturing, I think, in Africa in different continents. And we I think we are able to secure some of the productions from the suppliers. Philip Shen: Okay. And then in terms of the war, I just wanted to if there are any impacts to the business at all? And then you have your large manufacturing facility here your building in Saudi Arabia. So I want to see if -- do you have any thoughts on that? Haiyun Cao: Thanks for the question. And the Saudi joint ventures, we didn't make any, I think, the break ground, and it's still in the early preparations and waiting for the implementations of the policies, local policies. So we didn't make any investment and significant investment in the joint ventures. And the Middle East contract that it has several impacts. I don't believe it's a long term. Firstly, it will have an impact on our shipment to the Middle East, and we take a sizable market in the Middle East. And given the logistic challenge, and we need to replan we work with our customers, we schedule the cement plants. And there is a significant push for the oil price. And it's a kind of the fundamental cost for a lot of materials, particularly the chemicals and as well as logistics cost. So there is some kind of push for the cost from shipment costs, EV and -- but we are trying to manage in a renewable level. But I don't believe that's a long term, but short-term, there is some kind of impact, but we can get it. Philip Shen: Right. Charlie, so how much do you plan -- like what's the plan for shipments to the Mid East before the war 2026 percentage of your '26 shipments were you thinking? Haiyun Cao: You mean by year? A year? Philip Shen: Yes. For the full year. Like prewar were you thinking like 20%. Haiyun Cao: Yes. I think it's roughly 20%. And -- but it's not is not impacting all the countries but impacts some countries. Philip Shen: Right, in the short term right? Right. So in the short term, maybe it's half of that is maybe challenged by the? . Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

33天前Insight Analytics约5分钟阅读

TRV 2026 Q1 财报电话会议

Operator: Good morning, ladies and gentlemen. Welcome to the 2026. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin. Thank you. Abbe Goldstein: Good morning, and welcome to The Travelers Companies, Inc. discussion of our first quarter 2026 results. We released our press release, financial supplement, and web presentation earlier this morning. All of these materials can be found on our website at travelers.com under the Investors section. Speaking today will be Alan Schnitzer, Chairman and CEO; Dan Frey, CFO; and our three segment presidents, Greg Toczydlowski of Business Insurance, Jeffrey Klenk of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions. Before I turn the call over to Alan, I would like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under Forward-Looking Statements in our earnings press release and in our most recent 10-Q and 10-Ks filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the Investors section on our website. And now I would like to turn the call over to Alan Schnitzer. Alan Schnitzer: Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report an excellent start to 2026 with strong underwriting performance across all three segments and a strong result from our investment portfolio. We also continued to deliver on key strategic initiatives during the quarter. For the quarter, we earned core income of $1.7 billion, or $7.71 per diluted share, generating core return on equity of 19.7%. Over the trailing four quarters, we generated a core return on equity of 22.7%, driven by excellent underlying fundamentals. Underwriting income of $1.2 billion pretax benefited from strong levels of underlying underwriting income and favorable prior year development. Each of our three segments generated attractive underlying and reported margins. Turning to investments. Our high-quality investment portfolio continued to perform well. After-tax net investment income increased by 9% to $833 million, driven by strong and reliable returns from our growing fixed income portfolio. Our underwriting and investment results together with our strong balance sheet enabled us to return more than $2.2 billion of excess capital to shareholders during the quarter, including approximately $2 billion of share repurchases. Even after that return of capital, and having made important investments in the business, adjusted book value per share was 16% higher than a year ago. In recognition of our strong financial position and confidence in the outlook for our business, I am pleased to share that our Board of Directors declared a 14% increase in our quarterly cash dividend to $1.25 per diluted share, marking 22 consecutive years of dividend increases with a compound annual growth rate of 8% over that period. Turning to the top line. With disciplined marketplace execution across all three segments, we generated net written premiums of $10.3 billion in the quarter. In Business Insurance, we grew net written premiums to $5.8 billion. Excluding the property line, we grew domestic net written premiums in the segment by 6%. The declining premium volume in property continues to be a large account dynamic. Property premiums were higher in our small commercial business, and about flat in our middle market business. Renewal premium change in Business Insurance was 5.8%. Retention increased a point from recent quarters to a very strong 86% and was higher or stable in every line, reflecting deliberate execution on our part and a generally high level of stability in the market. Renewal premium change in our core middle market business was about unchanged sequentially, also with retention higher at 89%. In terms of the product lines, RPC in auto, CMP, and umbrella remained in the double digits. RPC in GL and workers’ comp was stable, and RPC in the property line was positive. New business in the segment was a record $775 million, a reflection of our strong value proposition. In Bond and Specialty Insurance, we grew net written premiums by 7% to $1.1 billion. In our high-quality management liability business, renewal premium change ticked up sequentially with excellent retention of 87%. In our industry-leading surety business, we grew net written premiums by 14%. In Personal Insurance, we generated net written premiums of $3.5 billion with solid retention and positive renewal premium change in both auto and homeowners. We will hear more shortly from Greg, Jeff, and Michael about our segment results. The results we released this morning are part of a larger story. They reflect a set of advantages that we have developed and that have compounded over a long period of time. Over the course of many years, we have managed through a wide variety of challenging conditions: the 2008 financial crisis, dramatic changes in interest rates, a major inflection in liability loss cost trends, the global pandemic, severe natural catastrophes, and periods of heightened geopolitical and economic uncertainty. We did not predict the full scope of any of those events. But by carefully balancing risk and reward on both sides of the balance sheet, we were positioned to manage successfully through all of them. We have consistently delivered growth in book value per share and earnings per share at industry-leading returns, averaging more than 1 thousand basis points above the ten-year Treasury over the last ten years, and with industry-low volatility. We have also built as strong a capital position as we have ever had. That track record is not a coincidence. It reflects a set of structural advantages that hold up regardless of the environment. Starting with the breadth of the franchise. We are a market leader across nine major lines of insurance, serving personal and commercial customers across the country and diversified across distribution partners, industry class, and customer size. That balance, which represents a bigger advantage than people sometimes appreciate, has resulted in our consolidated loss ratio being less volatile than the loss ratio of our least volatile segment. In an uncertain world, that kind of structural hedge is a meaningful source of stability. Where we operate also matters. More than 95% of our premiums come from North America. At a time of considerable geopolitical complexity, that concentration is a strategic advantage. And the domestic market offers substantial room for growth. With our broad product capability, our leading market position, and the execution you have seen from us over the years, we are well positioned to continue gaining share, as we have in our commercial businesses over the past five years. Equally important is our ability to navigate the loss environment. We have the data, the analytics, and the discipline to see changes in loss activity early and to reflect what we see in our reserves, our risk selection, our pricing, and our claim strategy. That capability is foundational, because until you have an accurate view of the loss environment, the many downstream decisions are working from the wrong inputs. Our early identification of the acceleration in social inflation is a good example. We adjusted before the market did, and since then, we have grown the business and significantly improved our margins. Our scale is also a significant and growing advantage. Our profitability and cash flow support our ability to invest more than $1.5 billion annually in technology, including in our ambitious AI strategy. Our size gives us the data to power AI and the resources to deploy it, creating a virtuous cycle of better insights, better decisions, and better outcomes. Our financial strength also enables us to absorb the increasing severity of weather losses, and all of these benefits position us as a preferred counterparty in the reinsurance market. Beyond that, our product breadth, risk control, claim expertise, and other capabilities that benefit from scale make us more relevant to our distribution partners, deepening those relationships and our access to quality business. Over time, companies that can leverage scale effectively will have a meaningful edge in consolidating industry premium. As for our investment portfolio, the principles that guide us are the same ones that have served us well for decades. We consistently manage for risk-adjusted returns, not headline yield. More than 90% of our portfolio is in high-quality fixed income, with an average credit rating of AA-. Issue of the day, private credit, is a nonissue for us. We manage interest rate risk by holding the vast majority of our fixed income securities to maturity and carefully coordinating the duration of our assets and liabilities. Our investing discipline has produced default rates that were a fraction of industry averages through every stress event in the past two decades. You cannot gracefully reposition a portfolio in the middle of a dislocation. The time to build that resilience is before you need it. In short, whether we are talking about underwriting or investing, the advantages we have built are designed to deliver across environments. And they have. Before I wrap up, I would like to share that a number of my colleagues and I have just returned from our The Travelers Companies, Inc. Leadership Conference, a multi-day event we host each year for the principals and senior leaders of our most significant distribution partners. As we have shared before, the vision for our innovation agenda includes enhancing our value proposition as an indispensable partner to our agents and brokers. We continue to make significant investments to ensure that we realize that vision through best-in-class products, services, and experiences. What we heard consistently is that our deep specialization across a wide range of modernized, simplified, and tailored products, along with a broad and consistent appetite and extraordinary field organization, the ability to deliver exceptional experiences and our industry-leading claim capabilities, are major differentiators in the market. To sum it up, we are off to an excellent start for 2026, and we are highly confident that the advantages that have driven our success will extend our strong record of outperformance. I will now turn the call over to Dan for the financial results. Dan Frey: Thank you, Alan. The Travelers Companies, Inc. delivered $1.7 billion of core income in the first quarter, resulting in a quarterly core return on equity of 19.7% and a trailing twelve-month core return on equity of 22.7%. First quarter earnings were driven by yet another very strong quarter of underlying underwriting income, which at $1.2 billion after tax marked our seventh consecutive quarter of more than $1 billion. Net investment income of more than $800 million after tax and net favorable prior year reserve development of $325 million after tax also contributed to the strong bottom line result. After-tax cat losses were just over $600 million. The all-in combined ratio of 88.6% was again excellent. The underlying underwriting gain reflected $10.6 billion of earned premium and an underlying combined ratio of 85.3%. Within the underlying combined ratio, the first quarter expense ratio came in at 29%. That is what we expected given the timing of expenses in Q1, and we still expect the full-year expense ratio to be in line with our prior guidance, right around 28.5%. The previously announced sale of most of our Canadian operations closed as expected on January 2, and I wanted to take a couple of minutes to summarize the impact of that sale on our first quarter results. Let us start with premium volume. The year-over-year comparison, with Canada’s business included in 2025 but not included in 2026, reduced the first quarter growth rate for consolidated net written premium and net earned premium by about two points each. The impact in both Business Insurance and Bond and Specialty was about one point, while the impact in Personal Insurance was about four points. The impacts on the growth rate of both written and earned premium will be similar for the remaining quarters of this year. To help with modeling the year-over-year impact for the rest of the year, we provided the quarter-by-quarter dollar impact on Slide 19 of the webcast presentation. Within net income for the quarter is a gain on sale consistent with our expectations when we originally announced the transaction last May. That gain does not impact core income. And finally, within the equity section of the balance sheet, you see a reduction in accumulated other comprehensive loss, which is primarily because the previously unrealized FX loss related to the sold Canadian entities became a realized loss upon sale. The move from unrealized to realized had no impact on total equity or on book value per share. Turning back to the rest of the quarterly results, catastrophe losses for the quarter totaled $761 million pretax, with the largest events being the winter storm that impacted much of the country in January, and a large tornado-hail event in March, both of which you can see in the table of significant cat losses in the MD&A section of our 10-Q. We reported net favorable prior year reserve development of $413 million pretax in the first quarter, with all three segments contributing. In Business Insurance, net favorable development of $162 million pretax was driven by commercial property and workers’ comp. In Bond and Specialty, net favorable PYD of $65 million pretax was driven by better-than-expected results in surety. Personal Insurance recorded net favorable PYD of $186 million pretax, with both auto and home contributing. After-tax net investment income increased 9% from the prior-year quarter to $833 million. Fixed income NII was higher than in the prior-year quarter in line with our expectations, benefiting from both higher yields and a higher level of invested assets. New money yields at the end of Q1 were about 70 basis points higher than the yield embedded in the portfolio. Our outlook for fixed income NII by quarter, including earnings from short-term securities, is consistent with the guidance we provided on our fourth quarter earnings call: expecting roughly $810 million after tax in the second quarter, growing to approximately $840 million in the third quarter and then to around $870 million in the fourth quarter. Net investment income from our alternative investment portfolio was also positive in the quarter, although down from a year ago. Given recent movement in the equity markets, this is a good time to remind you that results for our private equities, hedge funds, and real estate partnerships are generally reported to us on a one-quarter lag. And while not perfectly correlated, our non-fixed income returns tend to directionally follow the broader equity market. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to capital management. Operating cash flows for the quarter of $2.2 billion were again very strong, as we generated more than $2 billion in operating cash flow for the fourth consecutive quarter. As interest rates increased during the quarter, our net unrealized investment loss increased from $1.5 billion after tax at year end to $2.4 billion after tax at March 31. Adjusted book value per share, which excludes unrealized investment gains and losses, was $161.60 at quarter end, up 16% from a year ago. Adjusted book value per share also increased 2% from year end, despite the very strong level of share repurchases during Q1. Share repurchases this quarter included $1.8 billion of open-market repurchases, in line with the guidance we shared last quarter. And as a reminder, $700 million of that $1.8 billion came from the closing of the Canadian business sale in January. We had an additional $185 million of buybacks in connection with employee share-based compensation plans, and we still have approximately $5.2 billion remaining under prior board authorizations for share repurchases. Dividends were $238 million in the quarter, and as Alan mentioned earlier, our Board authorized a 14% increase in the quarterly dividend to $1.25 per share. In summary, our first quarter results once again demonstrate significant and durable underwriting earnings power and attractive margins across our well-diversified book of business, along with steadily increasing NII from our growing investment portfolio. I will now turn the call over to Greg for a discussion of Business Insurance. Greg Toczydlowski: Thanks, Dan. Business Insurance had a strong start to 2026, delivering another quarter of excellent financial results and successful execution in the marketplace. Segment income of $839 million was a first-quarter record, benefiting from strong underlying underwriting results and net investment income as well as favorable prior year reserve development. For the fourteenth consecutive quarter, we delivered an underlying combined ratio below 90%. That sustained underwriting success reflects the strength of our risk selection, granular pricing segmentation, and field execution. Turning to the top line, we generated net written premiums of $5.8 billion. Domestic net written premiums were up 4% over the prior-year quarter as we grew our leading middle market and Select businesses by 5% and 3%, respectively. National property premium declined as we maintained our disciplined underwriting standards. Turning to production, we achieved renewal premium change of 5.8% for the quarter. Excluding the property line, RPC was nearly 8% and in line with the fourth quarter. Renewal premium change was positive in all lines and higher sequentially in the umbrella and auto lines. Retention increased to 86%, up sequentially from the fourth quarter, a reflection of our continued focus on retaining our high-quality book of business in generally stable market conditions. Strong new business of $775 million was a quarterly record. These production results benefit from the investments we have made in product and underwriting precision. Our new commercial auto product, TCAP, which contains industry-leading segmentation, is now live in 47 states. We also recently enhanced our property pricing models, refining catastrophe and non-cat segmentation. Our advanced analytics, market-facing tools, and sales enablement capabilities also played key roles in our success, reflecting the competitive advantages these investments continue to build. We are pleased with these production results and the excellent execution by our field organization. As for the individual businesses, in Select, renewal premium change was strong at 8.8%, while retention increased one point sequentially to 82%. As expected, we are seeing the benefit of having largely completed our targeted CMP risk-return optimization effort. New business of $157 million was strong and in line with last year’s record. These results underscore our continued investments in product, underwriting, and agent experience. BAP 2.0 is now fully deployed nationwide, completing a multiyear initiative that has transformed our small commercial offering. The recent rollouts of the product in California and New York were meaningful milestones. The industry-leading segmentation embedded in the product is contributing to profitable growth. We continue to enhance Travis, our digital quoting platform, which processes over 1 million transactions annually. In Middle Market, renewal premium change was 6.6%, while retention improved two points from the fourth quarter to a very strong 89%. Price increases remain broad-based, as we achieved higher prices on about three-quarters of our middle market accounts. New business of $468 million was up 7% compared to the prior-year quarter, reaching a new quarterly high. Once again, another great quarter for Business Insurance. We are energized by both the impact of the new capabilities contributing to our strong performance and by the additional capabilities we are currently building that will drive our continued success throughout the remainder of 2026 and into the future. With that, I will turn the call over to Jeff. Jeffrey Klenk: Thank you, Greg, and good morning, everyone. We are pleased to report that Bond and Specialty started the year with another strong quarter on both top and bottom lines. We generated segment income of $254 million, an excellent combined ratio of 83.3% and a strong underlying combined ratio of 88.9%. Turning to the top line. We grew net written premiums by a very strong 7% in the quarter to $1.1 billion. In our high-quality domestic management liability business, renewal premium change was slightly higher sequentially while retention remained strong at 87%. We are encouraged by our continued progress in achieving improved pricing through our purposeful and segmented initiatives while continuing to deliver strong retention. Turning to our market-leading surety business. We are very pleased that we increased net written premiums by 14% from the prior-year quarter. Bond premium growth came from both long-term accounts, many of which are relationships spanning decades, as well as high-quality new accounts recently added to our industry-leading portfolio. These new surety relationships reflect years of efforts spent by our outstanding field team earning trust as well as the strategic investments we have made over time to deliver value beyond the bond itself. Our portfolio of premier contractors is well positioned to continue to benefit from higher and broad-based infrastructure spending. So Bond and Specialty Insurance delivered strong results in 2026, driven by our consistent underwriting and risk management diligence, excellent execution by our field organization in delivering our leading products and value-added services, and by continuing to leverage our market-leading competitive advantages. And with that, I will turn the call over to Michael. Michael Klein: Thanks, Jeff. Good morning, everyone. In Personal Insurance, we delivered segment income of $704 million for 2026. Strong underlying underwriting income and favorable prior year development both contributed to this excellent bottom line result. The combined ratio of 82.9% was a terrific result in the quarter. The underlying combined ratio of 78.3% improved by 1.6 points compared to 2025, reflecting strong profitability in both Automobile and Homeowners and Other. Net written premiums for the segment were $3.5 billion. As a reminder, we completed the sale of our Canada personal lines business on 01/02/2026. The decrease in domestic net written premiums of 5% year over year reflects the impact of both auto and home actions we have taken over the past year to improve property pricing, terms, and conditions, and to reduce exposure in high-catastrophe-risk geographies. The decrease also reflects higher ceded premium related to the expanded coverage we purchased as part of the enterprise catastrophe reinsurance program, which renewed on January 1. Turning to Automobile. Bottom line results continue to be very strong. First quarter combined ratio was 82.9%, reflecting a very strong underlying combined ratio of 88.3% and a 6.3-point benefit from favorable prior year development. As a reminder, the first quarter is historically our seasonally lowest combined ratio quarter in Auto. In Homeowners and Other, first quarter combined ratio was an excellent 83%. The underlying combined ratio of 69.7% improved by approximately three points compared to the prior-year quarter, primarily related to the continued benefit of earned pricing. As another reminder, the second quarter historically has been the seasonally highest quarter for homeowners weather-related losses. Turning to production. In Automobile, retention of 82% was relatively consistent with recent periods, and renewal premium change continued to moderate, reflective of our strong profitability. We are pleased to note that both Auto new business premium and the number of new business policies written increased compared to the prior-year quarter. In Homeowners and Other, retention improved to 85%. Renewal premium change in homeowners moderated, reflecting our successful efforts to align replacement costs with insured values. We expect renewal premium change to further moderate into the mid-single digits reflecting improved profitability. We were encouraged to see new business premium higher year over year as we broadened our disciplined efforts to deploy property capacity. These production results reflect progress toward our objective of delivering profitable growth over time. We are executing a range of initiatives to generate new business growth in both Auto and Property, including continuing to enhance product and pricing segmentation, unwinding eligibility restrictions, lifting agent binding limitations, and increasing new agency appointments. We are focused on providing total account solutions that, together with continued investment in digitization and ease of doing business, make us an indispensable partner for our agents, and an undeniable choice for customers. To sum it up, we are operating from a position of strength. The underlying profitability in our personal lines business is excellent. Our multiyear efforts to improve returns and manage volatility in the property portfolio are largely behind us, and early signs of growth momentum in both Auto and Home are encouraging. And with that, I will turn the call back over to Abbe. Operator: Thanks, Michael. We will now open the call for questions. To ask a question, please press star followed by the number one on your telephone keypad. We ask that you please limit your questions to one. Your first question comes from Gregory Peters with Raymond James. Good morning, everyone. Gregory Peters: So for my first question, Alan and Dan, you have talked about your investment in technology every year for years now, and I am curious how it is affecting the culture of the company. I am thinking about this from two perspectives. First of all, a number of your peers have talked about the potential for headcount reduction. And then at the SBU or line of business level, there are risks, I suppose, of deploying new technology both on growth and margin, and maybe sometimes that might outweigh the benefits. So some perspective on those two points would be helpful. Alan Schnitzer: Greg, good morning. Thanks for the question. I love that question. I will take you back to, I think, 2017 when we came out and we said innovation is going to be a strategy for The Travelers Companies, Inc. What we have done in the intervening years really is hone our innovation skills. We are referring to the last, essentially, ten years as innovation 1.0, positioning us for innovation 2.0. But when you talk about the culture, that is a culture that, fortunately, we have developed and honed over a decade. That is everything from how you pick the right initiatives, how you assess performance along the way, how you measure results, how you prepare an organization to manage change, how you communicate to an organization in the middle of change. That has been a constant for us, and I do not think you can wake up on Monday morning and say, okay, we are going to be innovative today. It is a skill set, and we have a lot of hard-won know-how in doing it. I think that has shaped our culture, which is prepared for it. Gregory Peters: Okay. I guess related to looking at the Personal Lines results, again, Michael, just balancing profitability with possibly adjusted pricing to drive new business and growth. Just curious about how you are looking at that equation. Michael Klein: Sure, Greg. Thanks for the question. That is absolutely what we are trying to accomplish: balance growth with returns and generate profitable growth over time. Given the strong profit position, we have taken a number of actions across pricing, eligibility, and distribution management to drive growth. Importantly, we are doing that from a position of strength. The segment combined ratio and underlying combined ratio in Personal Insurance is the lowest first-quarter segment combined ratio in the last ten years. That gives us some flexibility to look at pricing segmentation. That gives us the opportunity to look at base rate levels in certain states to ensure that pricing is consistent with loss costs. Then, as I mentioned in the prepared remarks, we are executing a range of initiatives across distribution management, expanding eligibility, relaxing limitations, to support that growth. We are encouraged by the momentum we are starting to see. Gregory Peters: Got it. Thank you, everyone, for the answers. Alan Schnitzer: Thanks, Greg. Operator: Next question is from David Motemaden with Evercore. David Motemaden: Hey. Thanks. Good morning. I had a question just on the RPC within the Select business. I was a little surprised at the deceleration there. I was hoping you could unpack that a little bit and sort of what lines were driving that deceleration. Greg Toczydlowski: Hey, David. If you are referencing the RPC, first of all, let me point out that is a real strong number for Select, just under 9%. You can see that drove a real strong retention number also. Rate came in at 4% and down from the fourth quarter, but that really is a reflection of how we feel about the portfolio, the rate adequacy, and the very deliberate execution by our field organization. Alan Schnitzer: David, I would add to that. When you are looking at that pricing metric—any pricing metric—and I would say this for Select or, frankly, anywhere else, you really have to look at it as a package of what is the pricing, where are the returns, and where is the retention. When you look at that trio together and you look at Select, it is an excellent outcome. David Motemaden: Got it. And then maybe just for my follow-up. I thought the underlying loss ratio in BI was definitely better than I was looking for. Could you just talk through the moving pieces there? I think last year, you had talked about increased IBNR on liability lines. Any update there? And also, you had talked about some light non-cat property losses the first couple of quarters last year, and there were some questions if that is durable or not. Was wondering if you have any updated thoughts there that you might be reflecting in loss picks. Dan Frey: Yeah, David, it is Dan. Look, overall, we feel really terrific about the underlying profitability in Business Insurance. As Greg called out in his prepared remarks, that has been sustained for quite a while. I think we are in a really sweet spot, to the point Alan was just making about retention, pricing, and returns. Nothing really unusual in the quarter—sort of the normal suspects that you would expect, a little bit of mix impact—but nothing that we would call out as being particularly unusual, including non-cat weather or anything else. David Motemaden: You also talked about our comment last year on the casualty lines and putting a little bit of what we called, I think, an uncertainty provision— Dan Frey: —in both 2024 and 2025. I think we said that at the end of the 2025 year-end call, but I will repeat it here. We did again carry that into the 2026 loss pick. The losses have not performed poorly. We like the margins in this line, but, again, it is a pretty long-tail line. There is still a lot of uncertainty. There is still a lot of attorney representation. We are going to have a healthy respect for that uncertainty, and so we did include that provision again in the 2026 loss picks. David Motemaden: Got it. Thanks. That makes sense. Operator: Your next question is from Robert Cox with Goldman Sachs. Robert Cox: Just a question for you around AI exclusions from policy terms. We are hearing brokers talk about increasing inbounds around AI-related exclusions from policy terms. So I am just curious how The Travelers Companies, Inc. is thinking about underwriting exclusions for AI-related risks and if you are seeing this play out in the market at all? Greg Toczydlowski: Hey, Rob. Clearly, we review our policy language all the time when there are new perils or dynamics in the marketplace, and that is evolving right now. We have not had any material changes, but it is something we are watching very closely. Robert Cox: Okay. Great. Thank you. Then maybe I just wanted to check in on tort reform. I know we have talked in the past—Florida is kind of viewed as a success story there. There are a number of other states that have recently passed some fairly comprehensive actions. I am just curious if you think that these other states could have similar outcomes as Florida and if The Travelers Companies, Inc. would plan to proactively change strategy in those states with regards to underwriting and pricing, or would you wait to see an improvement before changing strategy? Alan Schnitzer: Rob, we have been very encouraged by what we saw in Florida, and we have seen other encouraging actions in some other states, as you have mentioned—Georgia, Texas, Louisiana, South Carolina, and so forth. It has been terrific to see, and I think in part attributable to a really strong ground game that we and the rest of the industry have put on—state by state—making sure that we are pounding the pavement together with other industries, just making the case for the impact of litigation abuse on affordability. We are really pleased to see early gains, and we hope to continue the momentum. It is hard to answer your question on how we are going to execute with a broad brush, but we will look at the dynamics in each state. We will look at the actions that states take and, either at the outset or over time, that will impact how we think about the opportunity there and how we execute. But we are hopeful that this is the beginning of some momentum. Robert Cox: Thank you. Alan Schnitzer: Thank you. Operator: Your next question comes from Andrew Anderson with Jefferies. Andrew Anderson: Hey, good morning. Within BI, as some of these lines continue to see firm pricing other than property, how do you think about the relative attractiveness of workers’ comp from either a growth or a margin perspective? Alan Schnitzer: The workers’ comp business is a fantastic business for us, and it continues to perform very well. You can look at the calendar year returns, and we are open—more than open—for business in workers’ comp. Andrew Anderson: Got it. And within surety, growth accelerated again. How would you frame the demand conditions relative to credit quality? Jeffrey Klenk: Hey, this is Jeff Klenk responding, Andrew. I would tell you that our growth in the quarter for surety was really broad-based. As I mentioned in the prepared remarks, it was new and existing customers. It was from several different segments within our surety business. We are really proud of the high credit quality of our book of business. We continue to look at that as we take new customers into that portfolio. We feel really good that our portfolio will continue to benefit from the broad-based infrastructure spending that is out there as we look ahead. Andrew Anderson: Thanks for the question. Alan Schnitzer: Thank you. Operator: Your next question comes from Josh Shanker with Bank of America. Josh Shanker: Yeah. Thank you for putting me in. I was curious about the expense ratio. It is a little higher than it has been in the past, on both the acquisition costs and the other expense ratio. Can you talk about the drivers and how we should think about that as the year progresses? Dan Frey: Sure, Josh. We are not at all surprised with the expense ratio. If you look at our results over the last five or six years, if you look at the quarters within any given full year, it is not at all unusual to see the expense ratio vary by a point or more from quarter to quarter. 2025 really did not, but 2025 was more of an outlier and just sort of happenstance. You mentioned compensation, commission—so things like at what point do you evaluate the level of accrual that you think you are going to need for profit sharing or contingent commission? In the first quarter last year, we were sitting here coming out of one of the largest cat events in the history of the industry with California wildfires and saying, look, at this rate, we probably do not need a whole lot of accrual for contingent commissions and profit sharing. That is a different situation this year given the profitability of the book in the first quarter. But as I said in my prepared remarks, first quarter came out pretty much where we expected it to be when we gave the guidance last year that we expected 28.5% for this year’s full year. Josh Shanker: And on Personal Lines, is there a difference in the complexion of the business that is churning out of your portfolio versus business that you are winning currently? Michael Klein: Thanks, Josh. I would say absolutely. The business that is churning out of the portfolio is not as high quality as the business that is coming in. When we look at the profile of the business lost versus the profile of the business added new, the profile of the business we are adding new is superior to the profile of the business that we are losing. Josh Shanker: And what are the qualitative features that make business better? Is it bundled? Is it higher-value homes? Is it more cars per home? Or what is the difference between those two cohorts? Michael Klein: The elements that we look at when we look at profile include all those things—credit quality, limit, bundling, number of vehicles, age of vehicle, age of home—really pretty much across the board. The profile characteristics of the business we are adding are better than the profile characteristics of the business we are losing. Josh Shanker: So can we say that you are churning the business you are losing with some intentionality, that that is actually a business you do not want anymore? Michael Klein: I would say we are very happy with the trade-off between what we are writing new and what we are losing. Remember, in Personal Insurance, the business is mostly systematized. There is certainly an element of business we are nonrenewing or declining to offer renewal for based on risk quality, risk characteristics, and our estimate of what the loss ratio relativity on that business is. But really, I think what you are seeing is the successful outcome of a pricing and segmentation strategy that is tuned to attract the business that we want. Josh Shanker: Thank you very much. Operator: Your next question comes from Yaron Kinar with Mizuho. Yaron Kinar: Good morning, everybody. I had two questions on Business Insurance. The first one: It seems like renewal pricing change is below loss trend for the first time in a while, at least based on the last long-term loss trend that the company provided a few years ago. Assuming that persists, how does that change the company’s approach to writing and retaining business? As an example, I think the last time we saw RPC in this range, retention rates were a bit lower than where they are today. Alan Schnitzer: Yaron, I am not going to respond to whether it is in fact expanding or shrinking on a written basis. But what I will say is we are thrilled with the book of business we have, and we are very happy about the business we are putting on the books. The way we think about the execution is not looking at retention as a headline number. It is executing at a very granular, account-by-account basis. When you are looking at the business we want to retain, you want to keep your quality business, you want to get the right price on it, and through a lot of hustle and franchise value, write new business. Given the quality of the book and the returns in this business, the retention and the fact that it ticked up is fantastic. Yaron Kinar: Okay. Got it. And then my follow-up, again in BI, more focused on Select accounts. I am trying to think about the impact of AI here, where on the one hand it probably offers an opportunity to increase TAM—you can drive scale and efficiency benefits. But at the same time, it could also mean that we see more of a shift of small commercial to larger brokers with more data and analytics capabilities, maybe greater negotiating power. How do you think about those dynamics, whether I am thinking about this correctly, and how you see the business develop over the coming years with the advent of AI? Alan Schnitzer: I honestly think it is a little too early to know how that is going to happen. We have acquired three digital agencies/brokers over the years—Simply Business, InsuraMatch, and others—expecting the digitization of small commercial to move up in size, and it really has not. For Simply Business, for example, the small commercial it writes is—I would describe it as micro. For whatever reason, we just have not had the take-up there the way we would have expected eight or ten years ago. Before we see how this business is going to transition from one size of distributor to another, you are going to have to see customers adopt digital distribution for research and purchasing. We just have not seen it. Greg Toczydlowski: And, Yaron, one thing I would throw out in addition—we are really excited about Gen AI within the independent agents channel and particularly in Select and in Middle Market. In Select, we have executed some Gen AI that helps us process the business, endorsements, and changes, and just remove the friction and allow it to be much smoother for our independent agent channel. I do not think it has applicability of just changing distribution channels. We think it can be a great facilitator in helping us be more efficient in our existing distribution channels. Just to go back to your question, to the extent small commercial does gravitate to the larger brokers, that is probably a good thing for us. We have those relationships, and it is probably a plus for The Travelers Companies, Inc. Yaron Kinar: Thanks so much. Operator: Your next question is from Elyse Greenspan from Wells Fargo. One moment for that last question. We can go to the next, and if Elyse jumps back in, we will take her later. Okay. One moment. Your next question is from Tracey Banque with Wolfe Research. Thank you. Good morning. Tracey Banque: Hey, a follow-up on AI and commercial lines distribution. I appreciate your comments on Simply Business and the lower take-up rate. But if I could take that in a different angle, rather than brokers being disintermediated, I am wondering over time, can commission structures change due to the advancement of AI? Alan Schnitzer: It is pretty early, I think, in the evolution of AI and the distribution of insurance to get into that, and it is probably a broader conversation for a different time, different day. Tracey Banque: Okay. Also have a big picture casualty reserving question. Are claim patterns normalizing post-COVID catch-up period? If so, does that inform your loss development factor selection? Dan Frey: Hey, Tracey. Compared to what we saw in COVID, I would say COVID probably disrupted payout patterns as much as we have seen. Normalized relative to that, yes. But the trend in payout patterns in the casualty lines, particularly the long-tail liability lines, has still been increased frequency of attorney representation and a general lengthening of the tail. The things that we talked about in 2024, when we made some adjustments to our loss picks for accident years 2021 through 2023 and then started to factor in that uncertainty provision I talked about in a question earlier today, are still relevant because we have not seen attorney representation rates slow down. We have not seen severity increases slow down. We have not seen payout patterns return to their pre-COVID patterns. It is an extended payout pattern that has, if anything, continued to slightly extend. Operator: Thank you. Your next question is from Elyse Greenspan with Wells Fargo. Elyse Greenspan: Hi, thanks. Sorry about that earlier. My first question, I wanted to ask just about M&A and capital, Alan. Given that things are starting to soften from a market and premium perspective, or continuing to soften, was hoping to get your current views on M&A—things that you might consider and how that fits into your capital priorities right now. Alan Schnitzer: Elyse, I will give you the same answer that I think I have given you for ten years consistently on that, which is we are always interested in M&A of potentially all shapes and sizes, and we are very active in looking at things. I think our shareholders should demand that we are active in looking at things. Whether that is larger transactions, bolt-ons, or acquiring capabilities, that is all within our thought process and within our regular activity. We do not need to do anything at all to continue to be successful. We have all the tools and capabilities that we need to be successful. But if we find the right opportunity that meets our objectives—and I have shared many times our objectives—obviously we are going to assess a transaction in a million different dimensions, but we are looking for transactions that either improve our return profile, lower volatility, or provide us with some strategic capability. We are actively looking for those. When we find them and can get them done at the right terms and conditions, we will do it. Elyse Greenspan: Thanks. And then my follow-up on Personal Lines: as we start to think about gas prices being elevated, given what is going on overseas—and I guess the offset could be potential supply chain issues, which would impact severity—gas prices are potentially helpful to frequency. Can you give some color on the outlook for margins within Personal Lines given some of the things going on in the market right now? Michael Klein: Sure, Elyse. The gas price dynamic really depends on duration. Short- to even medium-term increases in gas prices do not materially change commuting patterns and driving levels, so it does have to be a sustained elevation in gas prices to really impact miles driven. To be clear, if gas prices stay high for an extended period of time, that puts downward pressure on miles driven and is a benefit to frequency. That is the most straightforward dynamic that we could see. But, again, gas prices would need to stay high for an extended period of time to drive that. From a supply chain standpoint, it is a fast-moving, fast-changing situation. There are lots of different things that could happen. There are scenarios where elevated costs actually put downward pressure on consumers and reduce used car prices because there is not as much demand—as just one example of the type of scenario we could see. At this point, it would be speculative to go beyond that and pick a path. Operator: Your next question is from Michael Zaremski with BMO. Michael Zaremski: Hey. Thanks. A question on the home insurance side. Michael, I believe you said that pricing would start to move to mid-single digits. If we look at The Travelers Companies, Inc. historical loss trend in home, it looks like it is well into the double digits. Are you signaling that the loss cost trend is better after the changes you have made, or you are letting margins deteriorate a bit to accelerate growth, or a little bit of both? Especially if you look at the cat load increased guide over the last few years, it has been a bigger part of the equation. Thanks. Michael Klein: Sure, Mike. Taking those pieces and putting them together, the guidance for property pricing moving down towards mid-single digits really just reflects the fact that we have rate adequacy broadly in virtually every state across the country as we sit here today, and we are pleased with the profitability of the portfolio. Importantly, that has been driven by pricing but also by changes in appetite, terms and conditions, and business mix, including state distribution. What you saw between fourth quarter of last year and first quarter of this year was that we had caught up on insurance-to-value. We had gotten coverage limits where they needed to be on property policies, and so we have gone to a lower inflation factor on those property policies renewing in 2026. That explains most of the quarter-to-quarter drop in RPC. What I am signaling going forward is that rate will also start to moderate in response to that improved profitability. Underneath that is an assumption—based on what we have been seeing—that the elevated inflation you are referring to has returned to a more normal level, and that is aligned with that pricing expectation. Michael Zaremski: That is helpful. My follow-up, pivoting to Commercial Lines loss cost trend. If we look at your commentary about loss cost trend being mid-single digits plus in the past, and your reserve releases over the last year or more, it kind of implies that loss trend has been a bit below the historical stated trend. Would you agree with that? Or is loss trend maybe improving slightly versus your historical view? Thanks. Dan Frey: Yeah, Mike. If you look at Business Insurance in particular, a large part of the favorable reserve development we have seen over the last several years in general has been comp related. We have said on comp, each time that it has come up, there has been favorability both in frequency and in severity, particularly in medical cost trend severity. That does not really bleed over into the way we think about loss trend in Commercial Auto or Commercial Property or the General Liability lines as an example. I do not think that we have seen a sea change in the way we think about loss trend to the positive. There is still a lot of pressure on the liability lines, which is why we continue to talk about things like double-digit pricing in them—in umbrella. Fair question, but I do not think we have seen any big changes there. Alan Schnitzer: Mike, I would add that one of the reasons that we have gotten away from talking about loss trends is because it is a pretty narrow concept of frequency and severity. It is a very blunt instrument to think about what is happening across billions of dollars of premium. Each line has its own dynamic, and there are other things that impact margins. There are base year changes, exposure changes, mix changes, changes in our large loss assumptions, and other adjustments that we make for one reason or another. There is a lot of estimation in that number. We try to get away from it, but holistically speaking, what I would say is the loss picks we have reflect what we think is going on with loss trend and, on the whole, it behaved about as we expected. Michael Zaremski: Thanks. Operator: We have time for one more question, and that question comes from Pablo Zuan with JPMorgan. Pablo Zuan: Hi. Thanks for speaking with me. First, just a quick modeling question. You talked about the impact of the Canada sale on earned and written premiums. I think you had mentioned two points. Should there be a similar proportionate impact on the dollar run rate acquisition and G&A expenses? Dan Frey: I think the way we think about it, Pablo, is just think about combined ratio in general. There is a little bit of a mix difference between the way Canada performed relative to the other lines, but not so significant that we think we should call it out and tell you that you need to adjust the run-rate loss ratio. If you asked the same question about whether it is acquisition cost or G&A or loss ratio or claim and claim adjustment expense—sort of up and down the income statement—we do not think it is going to significantly change the profile of the profitability related to those dollars. Pablo Zuan: Understood. My second one, just a follow-up to Rob’s questions about AI and not entirely related to the quarter. The Travelers Companies, Inc. is one of the largest cyber writers in the U.S., and the question is, how are you thinking about your exposures there and risk management given recent developments with AI? Thanks. Jeffrey Klenk: Thanks for the question, Pablo. Absolutely, it is an underwriting consideration. We are thinking about artificial intelligence, and with some of the more recent announcements in the last few days about the strength of the LLM models and what that could mean. It is not just on the negative side—it also has the potential to be on the positive side from an investment in resilience and capability to actually address the threat. We are heavily invested and have continued to invest in our risk control capabilities to address the cyber risk issue. Ultimately, we will have to make sure we are staying on top of it in partnership with broader government entities, as we already are. The investments we have made in our cyber risk control team for the benefit of our customers—the really good news for them is that as this technology continues to expand and change, we are going to be in an even better position to help them identify and remediate vulnerabilities as they come about. Alan Schnitzer: Thanks for the question. Thank you very much. Operator: There are no further questions at this time. I will now turn the call back over to Ms. Goldstein for any closing remarks. Abbe Goldstein: Thanks so much. We appreciate you tuning in. We know we left some questions in queue, so as always, please feel free to follow up with Investor Relations. We appreciate your time. Have a good day. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

33天前Insight Analytics约5分钟阅读

NXXT 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the NextNRG, Inc. Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Following management's remarks, we will move to a pre-submitted Q&A. This call is being recorded. Before we begin, I'll turn it over to Sharon Cohen for the required forward-looking statements disclosure. Sharon, please go ahead. Sharon Cohen: Thank you. I'd like to begin by reminding everyone that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially. Please refer to our most recent SEC filings for a full discussion of relevant risk factors. Today's call will also reference adjusted EBITDA, a non-GAAP financial measure. A full reconciliation of this measure to net loss, the most comparable GAAP measure is available in our earnings release located in the Investor tab of our website. Non-GAAP financial measures should not be considered as a substitute for GAAP results. On the call today is Michael D. Farkas, Founder and Chief Executive Officer; as well as Joel Kleiner, Chief Financial Officer. Michael, the floor is yours. Michael Farkas: Thank you, Sharon, and good morning, everyone. I want to begin with some numbers that will frame everything you're about to hear. In 2024, NextNRG generated $27.8 million in revenue. While in 2025, we generated $81.8 million. I want to repeat that. $27.8 million to $81.8 million. That is about 195% growth in 1 single year. Our on-site mobile fueling business was the driver of this growth. Following the completed merger of NextNRG and EzFill, we integrated 2 acquisitions, [ shelf tap ] up assets and [ Yoshi ] mobility. These acquisitions allowed us to enter into 4 new major markets: Phoenix, Austin, San Antonio and Houston, ending the year operating coast to coast, and results reflected that. We posted 7 consecutive months of record revenue. And by May, our year-to-date revenue has already surpassed all of 2024. Most critically, our margins improved as we scaled. Our full year gross margin in fueling was 8.4%. By Q4, it declined to 10.4%. That is the direction we're moving towards as we continue to optimize our operations, implement smarter customer acquisition, greater route density, increase of fuel mix deliveries and less wasted time. In that curve, we are still early. I want to call out our fourth quarter specifically because it tells you where this business is headed. Q4 revenue was approximately $23 million. October, $7.4 million; November, $7.5 million; December, $8 million. December loan represented 253% year-over-year growth in revenue and 308% growth in fuel volumes, and that is the momentum we're carrying into 2026. I also want to take a moment to highlight something specific because I believe it speaks to the quality of what we are building. Right now, our largest commercial fleet customer, the largest global online retailer is actively cutting other fuel vendors in certain markets. and replacing them with us, NextNRG. That does not happen by accident. That happens when service is cleaner, more reliable and more integrated than the alternatives. This is precisely what we design our products and services to do. And it means that the opportunity with this one customer alone has not even reached its whole potential. I want to talk about our Energy Infrastructure segment because this is where the next chapter of next energy is being written. We closed our first power purchase agreement, Sunny Side into [ Pengatarifs ] rehabilitation and subacute care centers, both in California. Under these agreements, NextNRG will design and build fully integrated on-site smart microgrids combining rooftop solar, battery storage, gas generators and our patented AI-driven controller. These are long-term structured agreements with annual escalators built in. This is not equipment sales, but as contracted energy relationships that generate annuitized revenues over the long term, some as many as 3 decades. We believe finalizing these agreements validates the model. The market exists, customers are ready to commit and NextNRG is ready to execute. Our pipeline of planned smart microgrid projects stands at approximately $750 million, spending municipal, tribal, healthcare, multifamily and commercial facilities. All in various stages of development. We are now converting that pipeline into executed contracts. Before I turn it over, I want to explain something about how this part of the business operates. Because I think context matters when you're looking at our numbers. We are deploying multimillion-dollar energy infrastructure projects to large operational entities which require engineering studies, permitting, utility interconnection approvals, project financing and organizational decision-making that can spend years. The contracts we are closing today are the result of development work that started 18 to 24 months ago. Therefore, when you look at the business, you should be looking at what we've already closed what's in the pipeline and how that builds from the year because each contract represents millions of dollars in revenue and a proven track record accelerates the pipeline behind it. The fuel business funds the operation today, the energy business is where the exponential growth will come from. That is the architecture of this company, and to 2025 was the year we demonstrated that both sides of the business can work. I will now turn it over to Joel to break down what is behind the numbers. Joel? Joel Kleiner: Thank you, Michael. I want to walk through 2025 financials plainly because there is an important story inside these numbers that does not see in the headline loss figure. Revenue for the full year came in at $81.8 million compared to $27.8 million in 2024, an increase of $54.1 million or 195% year-over-year. Cost of sales was $74.9 million, up from $26 million rising proportionally with expanded volume and geographic footprint. Gross profit reached $6.9 million versus $1.8 million in 2024, nearly 4x higher year-over-year. Revenue scaled, gross margin improved and gross profit grew, that is the business working. Gross margin expanded quarter-over-quarter throughout fiscal 2025, demonstrating the company's ability to drive operational efficiency while continuing to grow its revenue base. Our GAAP net loss for 2025 was $88.2 million. I want to walk through the major components because the bulk of that figure is not cash out of the door, and it's important that you understand the distinction. The largest driver is stock-based compensation. which is totaled at $42.6 million. This is entirely noncash. This figure represents the equity cost of attracting and retaining the talent to execute a merger, integrate 2 fleet acquisitions entering 4 new states and close the company's first energy infrastructure contracts, all in a single year. It is also the primary reason for adjusted EBITDA -- that our adjusted EBITDA as a fundamental different story than our net loss. Interest expense was $17.3 million. This includes $9.6 million in noncash amortization of debt discount, a GAAP accounting charge that does not represent current cash paid. The remainder reflects interest our outstanding borrowings used to fund the company's growth in working capital. We are committed to reducing our reliance on high-cost short-term debt as operating cash flow continues to scale. We also recorded an $8.5 million impairment charge. This is a onetime nonrecurring noncash accounting adjustment related to assets recorded in connection with our merger [indiscernible]. As part of the year-end process, those assets are evaluated under GAAP, and we recorded a write-down based on that assessment. This does not reflect any deterioration in customer relationships, contracts or operating assets. and impact the reported net loss, but has no effect on cash or how the business operates going forward. When you strip out these items, the noncash stock compensation interest inclusive of that discount amortization, depreciation, amortization and the onetime impairment, you get to adjusted EBITDA loss of [ $7.1 million ] for 2025 compared to $8.9 million in 2024. Net cash used in operating activities was $16.7 million in 2025. We continue to the company's growth through operating cash flow and equity capital market activity and debt facilities. Our February 2025 equity raise of $50 million provide critical working capital that supported the execution you see in these results. We are a growth company in intensive industry, and we continue to invest into expanding our energy infrastructure pipeline. Fuel business provides operational momentum. The energy business provides long-term upside. Net, they represent a company that generated [ $8.8 million ] in revenue and $6.9 million in gross profit in its first full year as a combined entity. I will turn it back to Michael for closing remarks. Michael Farkas: Thank you, Joel. I want to close with this. The energy market in the United States is fragmented, inefficient and expensive. Businesses that consume enormous amounts of energy, commercial fleets, logistics operators, hospitals, distribution centers are managing that energy the same way they have for over 20 years working across multiple vendors with very little integration, visibility or control. We built a platform that changes that, on-demand fueling with real-time dispatch optimization, on-site microgrids that eliminate fragmented utility dependence and replace it with intelligent integrated infrastructure, a unified operating system that let's say, business team, manage and optimize all of its energy needs in one place to our proprietary NextNRG dashboard. The fuel side of the platform works. We established that in 2025. The energy side is just now starting to convert pipeline into contracts, and those contracts are long-term, high-value and destined to compound. The progression is already starting to show up in the numbers and in what we have executed so far. $27.8 million to $81.8 million in revenues in 1 year. Gross profit nearly quadrupled 7 consecutive months of record revenue. Our first energy infrastructure contracts signed and a pipeline at over $750 million. This is the year we just had. We are more focused on the next one. Thank you for all being here. I'll now hand it back to Sharon to take us through the Q&A. Sharon Cohen: Thank you, Michael. We'll now move to questions that were submitted in advance. The first question is for Joel. You recorded $42.6 million in stock-based compensation in 2025. Who received that compensation? What was it tied to? And how should investors think about dilution going forward? Joel Kleiner: Well, 2025 was not a normal year for this company. We did a merger brought 2 suites, built an executive team and Advisory Board and launched an energy infrastructure business. I remind you all in the same year. The equity issue was tied to that buildup. A lot of that work was compensated in equity, and that's what's reflected in that figure. It's not something you should expect to see at this level going forward. As things stabilize, those numbers have come down. And yes, we're very aware of what dilution means to our shareholders, and that's always a part of the conversation and the decisions we make. Sharon Cohen: Okay. Thank you, Joel. Here's another one for you. Cash at year-end was $384,000 and the working capital deficit since approximately $25 million. The company has been relying on high interest instruments to fund operations. How does NextNRG get through this next year, 2026? And what does the financing plan look like? Joel Kleiner: Look, the cash position at the end -- at year-end does not tell the whole story of where we are liquidity-wise. Our cash position reflects the timing of debt facilities and operating cash flows working capital, and it doesn't give the full picture of available liquidity. We have active debt facilities in place, and we continue to have access to capital markets and as we have demonstrated, like in our February 2025 equity raise. As the infrastructure contracts close and move towards construction, they bring project level financing structures that are standard in the industry and don't rely solely on corporate balance sheet funding. We are not managing this business on $384,000. We're managing it on a combination of operational cash flow, debt facilities and the capital markets act as we've consistently demonstrated. The goal for 2026 is to reduce our dependence on high cost short-term debt by growing operating cash flow, increasing working capital and closing contracts that carry their own financing. That's the plan, and we're going to execute against it. Sharon Cohen: Thank you, Joel. Michael, the following questions I will direct to you. The Energy Infrastructure business is described as a long-term growth engine of the company. When those contracts do start generating revenue, what does the margin profile actually look like? And how does it compare to the fueling business? Michael Farkas: It is a completely different margin profile. The fueling business operates on fuel margins. We buy fuel, we deliver it and we earn the spread plus the service fee. Those margins are in the high single digits to low double digits and they improve as we optimize routes and density. The energy infrastructure business operates on a contracted rate over a multi-decade agreement. Once those assets are deployed and operating, the ongoing cost structure is largely fixed. You have maintenance, monitoring and debt service on the project financing and the revenue is locked in by contract with annual escalators. We expect the margin profile on a stabilized microgrid to be significantly higher than what we generated fueling. The fueling business is a strong, scalable cash generator. The Energy business is a different kind of assets completely. And when those contracts start producing revenue, we believe it has the potential to meaningfully change the financial profile of this company. Sharon Cohen: Thanks, Michael. Here's the next question. Given the current cash position and working capital deficit, what does the path to cash flow breakeven look like? And what are the 2 or 3 things that need to happen operationally to get there? Michael Farkas: There are 3 things. First, the fueling business needs to continue scaling its gross profit and it is. We went from $1.8 million in gross profit in 2024 to $6.9 million in 2025. In Q4 margins tell us there is more improvement ahead. Second, we need to close and monetize NextNRG infrastructure contracts. Each one that closes and moves towards construction is expected to represent significant revenue and significantly improve our cash position. And third, we need to rightsize our operating expenses relative to where the business actually is today, not where we are building to. We've been spending ahead of this revenue on the energy side. And that's just the nature of how the business works. But as those contracts start closing and revenue comes in, that ratio flips. That's what we're focused on. Sharon Cohen: Great. For our final question, as the fueling business matures and energy contracts begin to close, how is management thinking about capital allocation? Where does investment get prioritized and what guardrails exist to prevent a company from overextending on either side of the business? Michael Farkas: Great question. The fueling business funds itself at this point, it generates positive operating cash flow and the capital requirements are largely tied to fleet expansion, which we can pace based upon demand. So the capital allocation question is really about the energy side, and there, the discipline is built into the structure of how we develop projects. The capital to build each project comes with the project through project financing, not from corporate balance sheet. What we invest corporately is in the development and sales process, engineering work, permitting customer relationships. And that's a deliberate contained investment. It's not open ended. The more projects we close, the cheaper and faster the next one gets. The guardrail is the model itself. Sharon Cohen: Okay. Thank you. That concludes our Q&A. Michael, any final words from you? Michael Farkas: No. I just want to say thank you. We are hedged down and focused on execution, and we're looking forward to seeing you next quarter. Operator: Ladies and gentlemen, thank you so much. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

33天前Insight Analytics约5分钟阅读

CFG 2026 Q1 财报电话会议

Operator: Hello everyone, and welcome to the Citizens Financial Group First Quarter 2026 Earnings Conference Call. My name is Ivy and I will be your operator today. [Operator Instructions] As a reminder, this event is being recorded. Now I will turn the call over to Kristin Silberberg, Head of Investor Relations. Kristin, you may begin. Kristin Silberberg: Thanks, Ivy. Good morning, everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Van Saun; and CFO, Aunoy Banerjee, will provide an overview of our first quarter results. Brendan Coughlin, President; and Ted Swimmer, Head of Commercial Banking, are also here to provide additional color. We will be referencing our first quarter presentation located on our Investor Relations website. After the presentation, we will be happy to take questions. Our comments today will include forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review in the presentation. We also reference non-GAAP financial measures, so it's important to review our GAAP results in the presentation and the reconciliations in the appendix. And with that, I will hand it over to Bruce. Bruce Van Saun: Okay. Thanks, Kristin, and good morning, everyone. Thanks for joining our call today. We're pleased to start the year off strong, notwithstanding geopolitical tensions and uncertainty in the macro environment. We delivered good financial performance in a seasonally soft quarter with year-over-year EPS growth of 47%, positive operating leverage of 7% and NIM expansion of 24 basis points. Our balance sheet position continues to be robust with CET1 at 10.5% and our allowance for loan losses at 1.52%. Credit trends continue to be favorable across our portfolios, and we continue our loan mix shift towards deeper relationships with lower credit risk. Execution on our strategic initiatives continues to track well. The Private Bank and Wealth business showed further growth in customers, balance sheet and profitability, now accounting for roughly 10% of our pretax income while delivering an ROE in excess of 25%. During the quarter, we opened 3 more PBOs, bringing the total to 9. Reimagine the bank is off to a solid start, and we reaffirm our $450 million P&L target by the end of 2028. We estimate about $100 million in 2026 exit run rate benefits at this point. Our positioning with private capital continues to be excellent. We anticipate a strong year for private equity sponsor activity, which should provide a balance sheet and fee opportunities for us. We've reviewed all of our lending to private credit vehicles at a granular level and we feel good about our credit exposure. The New York City Metro initiative also continues to show further progress. We are growing across retail, small business and middle market. We are in the process of analyzing Citizens' existing branch footprint for net new investment and optimization with New York City likely to see growth in branches in coming years. We should have more details to share with you on this midyear. We're also focused on an initiative we call One Citizens, which is systematically finding ways to work across the enterprise to deliver valuable solutions to our customers. Now that we have stood up the private bank and continued the build-out of our corporate bank, we have the capacity to provide both personal and corporate services to successful business owners investors and entrepreneurs. We will report more on this as the year progresses, but we're already gaining real traction. As we look ahead to the second quarter and the full year, we remain cautiously optimistic that we'll be able to navigate through external challenges and still deliver the strong results we projected coming into this year. So far, markets have behaved rationally despite the war with equity markets holding in and credit spreads only slightly wider. We intend to stay on our investment plan for the year unless the macro takes a meaningful turn for the worst. We're pleased with the regulatory changes we see coming from Washington, D.C., and we look forward to the upcoming CCAR stress test results, which we're hopeful will give a more accurate result for citizens than what we've seen in the past. So to sum up, a good start, well positioned with a great strategy and a great team and optimistic for a strong 2026. With that, I'll turn it over to Aunoy for the financial details. Aunoy? Aunoy Banerjee: Thanks, Bruce. Good morning, everyone. As Bruce mentioned, Citizens has started the year well. Referencing Slides 3 and 4, we delivered EPS of $1.13 for the first quarter with ROTCE of 12.2%. Results were paced by strong NII, reflecting both continued net interest margin expansion and solid loan growth. We also deferred our best-ever first quarter fee result, led by strong performance in our commercial bank. With solid revenue performance and expense discipline drove more than 700 basis points of positive operating leverage year-over-year notwithstanding continued investment in the private bank and our other strategic priorities, along with ramping up our [indiscernible] bank program. The Private Bank continued to grow its profitability, contributing $0.11 to EPS, up from $0.10 in the prior quarter as the business delivered another very strong quarter of deposit growth. Now let me walk through the first quarter results in more detail, starting with net interest income on Slide 5. Net interest income was up 1.6% linked quarter, driven by the benefit of an expanded net interest margin and higher interest-earning assets, including strong loan growth which more than offset the day count impact of about $22 million. As you see from the NIM back at the bottom of the slide, our margin improved 7 basis points to 3.14%, driven primarily by the benefits of the reduced drag from terminated swaps and noncore runoff with a 5 basis point of combined impact. The fixed rate asset repricing benefit of 1 basis point. And lastly, the net impact of 1 basis point related to improved funding cost and mix, largely offset by lower acetyls. We continue to do a good job optimizing deposits in a competitive environment. Our interest-bearing deposit costs were down 16 basis points and total deposit costs were down 12 basis points. The cumulative interest-bearing deposit beta improved to 50% as we benefited from the repricing after the last rate cut. Even with the Fed now expected to hold steady in '26, we are still projecting a high 40s beta for the cycle. Moving to Slide 6. Noninterest income is up 11% year-over-year but down 2% linked quarter. As I mentioned, this was our strongest first quarter fee result ever, notwithstanding heightened geopolitical tensions and an increase in market volatility. Capital markets performance demonstrated the strength and diversity of the franchise with fees up 34% year-over-year and down 4% compared with the strong fourth quarter. M&A delivered a good result in the quarter with our pipeline is strong and continues to build. Bond underwriting was up nicely from the prior quarter. Our equity underwriting performance was stable linked quarter and up significantly year-over-year. Loan syndications were lower given the market volatility. We continue to maintain strong market share ranking fourth in the middle market sponsors book runner deals by volume. This is for both the first quarter and over the last 12 months. Our deal pipelines across M&A, debt and equity capital markets continue to build notwithstanding the unsettled environment. Our Global Markets business was up $10 million linked quarter with increased client hedging activity in interest rate products and energy-related commodities. Our wealth business continues to build with progress in the private bank and strength in our retail network. Wealth fees are up 2% linked quarter and 23% year-over-year. These results reflect higher advisory fees with continued positive momentum in fee-based AUM growth year-over-year. The fourth quarter results reflect positive net inflows partially offset by market impacts on AUM. Mortgage was down 19% linked quarter given a lower MSR valuation, partially offset by slightly higher production and servicing fees. On Slide 7, Expenses were managed tightly, up 2.6% linked quarter, largely reflecting the usual seasonality in salaries and benefits as well as about $6 million of implementation costs to ramp up the reimagined the bank program. On Slide 8, average and period-end loans were up 1% linked quarter. We saw solid loan growth across each of the businesses. Commercial loans, excluding the private bank, were up 1% on a spot basis. This was driven by net new money originations at higher commercial line utilization. This was partially offset by CRE paydowns. We continue to reduce commercial banking CRE balances, which were down about 4% this quarter and 16% year-over-year. The Private Bank delivered good loan growth again this quarter with period-end lows up about $600 million, driven by growth in multifamily and residential mortgage. Growth in retail loans ex noncore on a spot basis was about $300 million, led by real estate secured categories. This was offset by noncore auto portfolio run-up of roughly $500 million for the quarter. Next, on Slides 9 and 10, we continue to do a good job on deposits. with average deposits up 1% or $1.5 billion quarter-on-quarter, primarily driven by the growth in the Private Bank, which reached $16.6 billion at the end of the quarter. This was partially offset by seasonal impacts in commercial. Year-over-year, average balances are up $8.6 billion or 5%, reflecting combined growth in the private bank and commercial of $11.2 billion, partially offset by roughly $2 billion of reduction in higher-cost treasury brokered deposits. On a spot basis, noninterest-bearing balances are up $1.3 billion or 3% quarter-on-quarter and up $4.1 billion or 11% year-over-year, improving the overall mix to 23% of the book. Our total noninterest-bearing and low-cost deposit mix was steady at 43%, and our consumer deposits are 64% of our total deposits. This compares to a peer average of about 56%. Moving to Slide 11. Credit continues to trend favorably with net charge-offs coming in at 39 basis points, down from 43 basis points in the prior quarter. Nonaccrual loans are down modestly linked quarter, reflecting a decrease in commercial, largely driven by C&I, which was partially offset by an increase in market. Turning to Slide 12. The allowance was essentially stable this quarter with ACL coverage ratios of 1.52%. This reflects the continued improvement in our portfolio mix with noncore runoff, the reduction in CRE and strong originations of lower loss content C&I, residential real estate secured and private loans. The economic forecast supporting the allowance contemplates a mild recession with a slight deterioration compared with the last quarter, reflecting the potential impact of higher energy prices. As we look broadly across the portfolio, the credit outlook remains positive though we continue to carefully monitor the macroeconomic environment. Moving to Slide 13. We maintained excellent balance sheet strength, ending the quarter with CET1 at 10.5%. We returned about $500 million to shareholders in the first quarter with $198 million in common dividends and $300 million of share repurchases. Moving to Slide 14. The private bank continues to make excellent progress. The Private Bank delivered strong deposit growth again, ending the quarter at $16.6 billion. Importantly, the overall deposit mix and cost continues to be very attractive. We also delivered solid loan growth in the quarter, adding about $600 million of loan at a healthy spread of 4% over deposit costs to end the quarter at $7.7 billion of loans. We ended the quarter with $10.1 billion of total client assets with modest net inflows partially offset by market impacts. We have more runway here as we plan to continue adding top quality teams in key geographies. We opened offices in Malmo Park and Laurel Village in the first quarter, and we expect to open at least 2 more offices this year in Weston Beach, Florida and Greenwich, Connecticut. Moving to Slide 15. Our reimagined the bank program is off to a great start. The objective is to position Citizens for long-term success by embracing a host of new innovative technologies across the bank and simplifying our business model. which will reshape our customer experience and drive a meaningful improvement in productivity and efficiency. The program is well underway with work commencing on several key work streams. For example, on the technology front, we are leveraging AI to assist in writing code and expect to have material productivity improvements in software development, cutting down cycle times. We are also using AI to improve our interactions with customers, which we expect will materially cut call volumes and improve the overall customer experience. We expect to exist 2026 with an annualized run rate of about $100 million of pretax benefit. Now moving to Slide 16. We provide our outlook for the second quarter. We expect net interest income to be up in the range of 3% to 4%, driven by continued expansion in net interest margin and earning asset growth. Noninterest income is expected to be up 3% to 5%, led by capital markets with some risk if market volatility moves higher. Other fee categories such as FX and derivatives, wealth and card should also provide lift for the quarter. We are projecting expenses to be stable to up 1% and incorporating a step-up in implementation costs associated with reimagine the Bank and continued investment in other key business initiatives. We expect expense saves from reimagine the bank to benefit second half expenses. The charge-off level is expected to be stable to down slightly. And we should end the second quarter with CET1 in the range of 10.5% to 10.6%, including share repurchases of about $225 million. In addition, our full year outlook remains broadly in line with the guide we provided in January, which contemplated a pickup in business activity over the course of the year. Looking out further, we see a clear path to achieving our 16% to 18% ROTCE target by the end of pending our net interest margin is an important driver, and we continue to project NIM to be in the range of [ 322% to 328% ] in 4Q '26. And in the range of [ 330% to 350% ] in 4Q '27. Slide 17 provides incremental details on our net interest margin progression to the end of '27. This combined with the impact of successful execution of our strategic initiatives and normalizing credit should drive ROI to our target range. To wrap up, we're off to a good start to with results highlighted by strong growth, net interest income and good fee results in a seasonally soft quarter. Our balance sheet is strong and continue to drive forward our strategic initiatives with strong momentum in growing the private bank and in our reimagine the bank program. With that, I will hand it back over to Bruce. Bruce Van Saun: Okay. Thank you, Aunoy. Operator, let's open it up for Q&A. Operator: [Operator Instructions] Our first question comes from Scott Siefers from Piper Sandler. Robert Siefers: Maybe I was hoping you could maybe start by speaking to kind of the capital markets dynamics. Obviously, I see the numbers in the first quarter, but curious how you thought the first quarter actually performed given that you had sort of the interplay between one, the environment played out a lot differently than we all figured it might. But two, I know you all had some deals that were pushed from the fourth quarter into the first quarter. So maybe just sort of results versus expectations then if you could speak to the forward look, things like pipelines, confidence and pull-through, et cetera. Bruce Van Saun: Yes. Scott, let me -- it's Bruce. I'll take it first and then hand over to Ted to provide more color. But I would say all things considered. We're pleased with the performance of the capital markets franchise in an environment that had increased volatility and lots of uncertainty, particularly in March once the war kicked in. But we have good diversification across our different services in capital markets. So we have M&A, we have bond underwriting, equity underwriting and syndicated loans. I think that diversity helped us print a good quarter. There was some leakage, I would say, from March that's geared up to go in April, which now that we have more optimistic tone to the market. We're actually starting to see that come through. So we may be in a situation where our pipelines are very well. We're very optimistic given kind of the strength of the franchise the likelihood that people want to transact. But if there's this external volatility ebbs and flows, you could see people pull to the sidelines, wait for the opportune time, for example, to go to market. And hopefully that cleans up. We're certainly not taking our numbers down for the year. In fact, we feel quite good about that given the level of activity that we see and the pipeline strength that we have. So Ted, over to you. Theodore Swimmer: Building on what Bruce just said, we've seen -- we took a couple of transactions in March that we would have launched into the market and pushed them into April, just given the volatility in the overall markets. But during that whole period of time, we continue to sign up new transactions. And I think what's really exciting about the transactions that we're signing up based on the investments we made in Corporate Finance and industry specialization we now are doing more complex transactions and getting signed up on more complex transactions than we ever had before and feel very good about what that pipe -- what those transactions are and how the pipeline is building. And to more to what Bruce just said, the deals that got postponed in March, especially this week, we've seen them back into the market. We are launching several transactions and part of several transactions that were postponed in March that are getting very good [indiscernible] now in April. So we continue to feel very optimistic about the pipeline, especially on the M&A side. And during this whole period of turmoil, we really actually saw a pickup in new mandates, especially on the M&A side of the business. Bruce Van Saun: Yes. And I'd just close by saying it was a record first quarter for us in capital markets fees, that shouldn't go unnoted. Robert Siefers: Okay. Perfect. That's very helpful. And then I was hoping you all would maybe speak to the private credit portfolio as well. I know there's a lot of good detail in the appendix. Just curious sort of not only for an update on credit quality dynamics, but also given your build-out of the team over many years, I know it's been a focus area and just sort of your appetite to continue to grow the portfolio given sort of certain current sort of industry circumstances? Bruce Van Saun: Yes, I'll start again and flip to Ted. But I would say we've been very disciplined in terms of the kind of counterparties that we select usually they're often a private equity sponsor that's migrated to a broader kind of business model that picks up private credit, and they're moving to be more of an alternative asset manager. And so we've helped them grow and get into this business and provide leverage to many of those names. So client selection is always key and then making sure we have the right structures in place so that we're structurally protected from any issues that could arise in the portfolios. And so we've gone through and looked at kind of our exposure and kind of the broad portfolio, looking at all the underlying factors who has liquidity gates for retail investors who's got software exposure at the end of the day, feel very, very confident that we're structurally well protected from a credit loss standpoint. And I think even though this is in the headlines and there's concerns about private credit, the asset class, if you want to call it that, is here to stay, and they provide a certain amount of leverage and deal structures that exceeds what banks have historically been willing to play, and there's certainly a lot of institutional demand folks or private credit managers are continuing to raise new money. So I think we'll just grow selectively with the market. as we have in the past, but we don't see this turning around and being something that starts to shrink. It's just going to grow. And I think every player in the market will be more selective, and we'll continue to be selective, but we would expect this to be an area that we stay committed to. Ted? Theodore Swimmer: Just adding on to what Bruce said in a number of conversations we've had with private credit since this -- the noise has really started. We really haven't seen a decrease in appetite. In fact, in a lot of the conversations and the deals we're getting ready to launch. We're getting inbound calls from the private credit side of the business. So technology and software is certainly something that they're not all that interested in investing in right now. But for the most part, the majority of their portfolio, they're still very hungry and there's a lot of demand out there. Operator: We'll go to the line of Manan Gosalia from Morgan Stanley. Manan Gosalia: Maybe to start on NII. I know you broadly reiterated the guide for the year, including the NII guide and the exit NIM. But you have noted that Citizens SKU is slightly asset sensitive. In a scenario where rates stay higher for longer, we don't get any rate cuts until the end of the year. Where do you think the NII and NIM is trending? And what's the most likely outcome here? Bruce Van Saun: Yes. So we feel really good about our ability to deliver the kind of NII and the NIM that we gave in the beginning of the year guide. So -- but as you say, the environment is going to have an impact to some degree and a bit of a pause by the Fed. So a little higher rate scenario that we came into the year given asset sensitivity is modestly positive for us. And then a little slightly steeper yield curve, we had assumed 425 to 450 is the 10-year, and we're kind of in that zone. But -- to the extent there's -- that moves up and there's a little more steepening, that's also potentially positive to the outlook. But I wouldn't say it's a game changer. These are kind of marginal benefits that give us even more conviction that we can deliver to the numbers or slightly ahead of the numbers. With that, Aunoy, I'll turn it over to you if you want to add any color? Aunoy Banerjee: Yes. I think Manan, to Bruce's point, we are very confident on getting to the NIM and the NII outlook that we gave I think on the NIM side of it, as you saw from our walk in 1Q, a lot of the benefit is coming from the terminated swaps and the noncore runoffs, which is which is not rate dependent, and that's another 12 basis points for the rest of the year. The front bank -- bank book book dynamic as Bruce strategies would be helpful in this environment. So we remain confident on getting there. And as you saw, we have some good loan, but we have good correction and pipeline on that. So we feel confident of getting there. Manan Gosalia: Perfect. And then maybe to pivot over to capital given the new proposals that we got a few weeks ago, if you could give us your initial thoughts on what the magnitude of the benefit is for risk-weighted assets given your specific business mix? And maybe if you have any thoughts on whether citizens would adopt the ERPA. Bruce Van Saun: Okay. Sure. So it's still early days, and we're going through a comment period. But based on what we see now, this could deliver kind of a 10%-ish reduction in risk-weighted assets, which would translate to in excess of 100 basis points, call it, 110 basis points or so of CET1 improvement. -- the AOCI phase-in, if it happened right today, it would basically mitigate that. But as it phases in over time, some of that drag will dissipate. And so we would expect to be kind of at least 30 basis points to the good net-net, even with AOCI, maybe as much as 50. So we'll just have to see how the rate curve plays out from here. But anyway, it's a good problem to have, and it's probably early days to say kind of what we'll plan to do with that. There'll be a lot of considerations what is stakeholders' expectations, the market, the rating agencies, the regulators, et cetera. But anyway, it's a good issue for us to think about. The other thing is on this ERBA. There's a modest improvement even over the revised standard approach but there's a lot of work that goes into that. So you'd have to step back and decide do you want to do it? One of the things that sticks out as a difference between the 2 approaches is kind of the lesser risk weights under [indiscernible] for investment-grade credit. And we'll have to see if that gets imported into the revised standard approach, so there's no difference or whether there is a difference that might pull you towards wanting to move over and do ERPA approach. So Aunoy, anything to add? Aunoy Banerjee: Yes. I think as Bruce said, Manan, we are going through all the advocacy on some of these things that Bruce mentioned. We are also looking at all the work that needs to be done on ERBA, which says versus standardized for what's there and now with a lot of new technology, things could be really different in some ways. So there's a lot to do here still. But we are -- as Bruce said, we are -- it's in the right direction, and we feel good about it. Operator: We'll go to the line of Ryan Nash from Goldman Sachs. Ryan Nash: So Bruce, you've had 4 straight quarters of sequential loan growth. If I look at the drivers of growth, clearly, private capital call, private credit have all been contributors. So maybe you could just talk about your confidence in loan growth here and what you see as the key drivers. And then second, I know you referenced higher utilization. What's driving that? I know you're expecting to see more of this. Bruce Van Saun: Yes, I'd say that the really impressive thing, Ryan, is that we're getting the growth in each of the 3 main business areas. So private bank being kind of that start-up phase is growing their book nicely and consistently. And I think that leans a little bit more on the consumer side and multifamily side, that should continue. We had actually low line utilization with their client base, which should bounce back. And so we see private bank contributing. I think in commercial as well, we have the growth in NBFI, but also starting to see a little deal activity pick up across the corporate book, and we have our expansion [indiscernible] don't forget. So we brought banking teams into Florida and California and beefed up our New York Metro team. So that's contributing a bit. And then in the consumer bank, we've been kind of a rock star and HELOCs and also consistent growth in mortgage. So it's nice to see it's pretty broad-based. And then some of the drags of the things that we've had in the past, such as kind of the rundown of noncore, some of the commercial BSO thin relationship exits and things like that, the CRE kind of getting back to par where we want to be on commercial CRE after the investors acquisition all that is starting to abate a little bit, which allows the inherent growth to shine through. I think I'll ask maybe go to Brendan first for some color on Consumer and Private Bank. And then Ted, I'll ask you for some color on commercial. Brendan Coughlin: Yes. Thanks, Bruce. Thanks, Ryan. Adding on Bruce, just give you a little more color and data on the retail side of the business. We're up about 4% year-on-year on core loans, heavily driven by HELOC and mortgage Bruce mentioned, you just got the league tables in from 2025. We're the #1 originator in the United States at home equity lending with an incredibly strong risk profile, low LTVs, strong FICO scores, all depository relationship customers. So we're very proud about that, and we expect that to continue. Mortgage originations in this rate environment has obviously been challenged, but prepay speeds slowed too. So we're seeing net positive growth in mortgage and the balance sheet rotating into higher relationship-based lending fueled by the private bank and the retail bank. With our launch of a new credit card products, we're seeing a 50%-plus growth in new credit card originations. It takes a little bit of time for that to translate into the balance sheet as pain activity gets through, but we should see some modest script in credit card as we hit the back half of the year, too. So broadly in retail, we expect the the growth rate that we're seeing to project forward with a lot of confidence and the mixing of the balance is to get strong with higher return and deeper relationships. The private banking side, we've generally been in the range of about $1 billion in net growth each quarter. We were a little bit lighter than that this quarter with some lower utilization rates on the private equity side. But we that to be temporal. And the underlying originations activity is quite strong. We're very confident we'll end the year in the range that we gave of $11 billion to $13 billion, which projects back to about that $1 billion in that growth per quarter returning in the private bank. So both retail and private banking, I would just broadly describe as continued steady momentum with what you've seen over the last few quarters. Ted? Theodore Swimmer: Yes. Thanks, Brendan and Bruce. On the middle market side, we have seen a pickup in utilization over the last 3 months. I think customers are getting -- our customers are getting more comfortable in the economy and overall spending money on CapEx, which has led to a slight increase there on the mid-corporate -- adding on that, what we built out in Florida, New York and California, we're starting to see some real success there with increased loan demand and some increased customer count, which has resulted in higher growth there. On the mid-corporate side, we've reorganized the division a little bit to be more industry focused, less geographic focus. That has resulted in a nice pickup of new opportunities for us on the mid-corporate side of the business, and that was really [indiscernible] in the first quarter for us with significant growth there. NDFI continues to grow somewhere in the range of 5% a year. There's still good opportunities both on the capital call line, the securitization business and on the lending to the direct funds, and we expect that to continue to go around 5%. And then finally, we have really not seen much pickup in the private equity side of the business. The sponsor business has still been, I would say, flattish year-over-year. So most of our growth has been the traditional mid-corporate and middle market space. Ryan Nash: Got it. And maybe just as my follow-up, Bruce. In the slides, you highlighted some of the things that you're doing with reimagine the bank, including corporate and the LLMs and a handful of things. I guess, given the pace of change we're seeing in the markets in areas like AI, are there opportunities to accelerate any of these initiatives or adjust the timing given, again, just the rapid pace of change that we're seeing? Bruce Van Saun: Yes. I'll start and put it to Brendan who's sponsoring and leading that program. But I think that's a really good call out, Ryan, is that the adoption curve, the innovation curve that we're seeing in AI is really -- it's almost mind boggling. It's very significant. And so I think what we did when we set up the program was we took a very systematic approach to say like here's how we do things today, how would we like to do them in the future, embracing the technology as we have it today, recognizing though that over a 2- to 3-year time frame, there's going to be a lot more innovation and a lot of chance to embrace even better tools. And so maybe that creates a higher level of benefit, maybe that creates an acceleration and maybe it just creates new work streams that we haven't even thought or possible. So it's really a living, breathing program it's dynamic. It will incorporate. We'll have our telescope out looking at all the new things that are coming down the pike and figuring out how we can incorporate those in. But I'd say one thing to leave you with, though, is that we've been -- we've demonstrated over the years an ability to take innovation and take new approaches to how we're running the bank and put them into a program and deliver real financial benefits. So we won't create a lot of science fair projects and kind of use some of this new technology in ways that actually don't deliver real benefits. That's kind of our mindset as we go through this. So Brendan? Brendan Coughlin: Yes. Thanks, Ryan. Your question is principally AI, but one point on the non-AI front, you saw from us in the quarter. the remain the bank initiative was principally self-funded by quick wins that were non-AI based. And so we've already got over $30 million in projected vendor saves for the year in the box with an expectation that, that number goes up. We've closed corporate facilities, smaller facilities that's driving savings. So that has offset the investment already. So you're seeing real tangible impact in the program already this early in the year. On the AI front, to say two things. One is, you're right to point out the risk of speed of execution also is the speed of obsolescence as we put these in place, the idea that the best answer could be different in a quarter is very much front of our mind. So we're architecting all the things that we're building to be even more nimble than you might expect from a tech standpoint in the past. So as new models come up, we can easily plug and play and make sure we're taking advantage of the latest and greatest. So that's very much front of our mind. We very much have real AI use cases in market today. in the call center, as an example, we've told you we expect to get 50% of the calls out by the end of the period. It's already in pilot. In fact, we expect inside of this calendar year, by the end of the year, we should have 25% of our calls answered by non-humans with the expectation that will ramp in 27% to 50%. That really should hit in the summer and into the early fall. So this is very real. This isn't a back-loaded program all coming in 2028. And the tech space, as an example, we've deployed [indiscernible] to our engineers. We're already seeing a very material productivity improvement and leverage we're getting on our capital investment and deployment ranging from 30% improvement in productivity that in some tests we've done, it's been a 5 to 10x improvement in productivity. So now we're working on scaling it and engineering it for real scale. So we are moving very, very fast. We're keeping up with the pace and it's live and in production and our confidence is building. Operator: [indiscernible] UBS. Unknown Analyst: Just a few follow-up questions for me, please. So given everything that you've said about a record first quarter in cap markets and very full pipelines, picking up new mandates while some of these deals were pushed into closing in the second quarter or launching in the second quarter, it sounds like we should still subscribe to the 6% to 8% fee outlook growth for '26? Bruce Van Saun: Yes. We're not coming off any of those ranges the full year guide at this point, Erika. L. Erika Penala: Perfect. And then my follow-up question is, thank you for the expansive answer on NIM and NII relative to the current forward curve. I guess this is a 2-part question. First is, I think, Aunoy, you talked about the noninterest-bearing growth in a seasonally tough quarter for that, maybe where that noninterest-bearing growth is coming from? And to that end, if we do have a scenario where we have no rate cuts can Citizens, keep deposit costs stable in light of more robust growth from you guys on both the consumer and corporate. Aunoy Banerjee: Erika, it's Aunoy here. We were quite pleased with our deposit performance this quarter. And as we saw actually good noninterest-bearing deposit growth Obviously, we have a couple of strategic initiatives. One is being the private bank where you saw the good DDA growth that the DDA percentage in the private bank is 30%. So we continue to see that coming. And as you saw the balanced growth we are seeing the DDAs grow along with it. So that's the, that's 1 thing that's really driving the DDA growth. But even as Brendan mentioned, even on the consumer side, there is a lot of growth that we are seeing in the low-cost NTT as we really build the relationships with our clients. So we are seeing a lot of good traction there. And to your second question about where we go deposits from here. Obviously, deposit volume is going to depend on the overall economy, how the GDP goes, how the loan formation goes in the economy. But with some of the strategic initiatives, we believe that we can maintain in the competitive range about where deposits are going to go from here. And as you saw, our deposit betas our 50% this quarter and we have -- we expect it to be in the high 40s, which is in line with the competition. With that, maybe, Brendan, I'll pass it on to you to see if you have any comments. Brendan Coughlin: I'll add a little color on each consumer and private, but out of the $118 billion or so of deposits that sit in the consumer bank, 52% of them are what we call low cost, which is either DDA or checking with interest. And in the retail bank checking with interest is sort of a sub-10 basis point type of cost. So for all intents and purposes, it's very similar to DDA. The COVID period of all those operating balances reducing is firmly behind us, and we're now seeing net growth. So we're up 130 basis points year-over-year and our low-cost deposit categories. That's versus a peer average of about 50 basis points. So we are very firmly in the top quartile in terms of low-cost growth. for the consumer bank, and we project that to continue with confidence in the outlook, which will really help control interest-bearing. Total cost of deposits when you include the interest-bearing side. And then no pointed this up. But in the private bank, we ended the quarter with very strong spot numbers. It's actually 40% DDA over 50% when you add in the checking with interest in the private bank itself as well. So we're expecting that to be in that sort of range in the same range that we've seen in the past. So we're getting this really strong growth in the private bank without breaking the quality metrics and this far in, that's a real positive to see. And broadly, we expect that to continue looking forward. Operator: We'll go to the line of John Pancari from Evercore ISI. John Pancari: Just on the private bank side, just what -- see if you can give us just a bit more color in terms of what are you seeing in terms of the mix of loan growth? How much momentum are you seeing on the mortgage side versus the commercial capital call type of loan generation. And then if you could maybe give us breakout of like where new money yields are that you're bringing on loans in the private bank, maybe on the mortgage side as well as on the other type of lending capital calls included. Brendan Coughlin: Yes. On the loan side, it has -- the longer-term trend line, it's been pretty evenly mixed between mortgage, multifamily, commercial real estate and private equity capital call lines the utilization rates this quarter on the PE lines were down a little bit, so it sort of artificially suppressed the linked quarter growth was more driven by mortgage and multifamily CRE, which is pretty evenly split between those categories. both of those asset classes where we use the balance sheet comes with deep, deep relationship-based banking. And so the net returns on the customers are actually quite high. When you look at our overall loan yields versus our deposit costs, we remain in the range of north of 400, 425 basis points of net spread between our loan yields and our deposit costs, and that has been consistent since we launched. And so the growth that we're seeing is actually deep relationship based, but even just asset asset yields minus deposit costs, it's net accretive to our NIM position. So the return profile of the business overall remains in the mid-20s because of that with high profitability on the balance sheet, and we see nothing that will take us off that trajectory. John Pancari: Got it. And then on the capital front, Bruce, maybe if you could kind of I think you talked about your capital allocation priorities from organic versus buyback and then maybe on the M&A interest side.[indiscernible] I know you've been historically uninterested in whole bank M&A. Just curious if that's changed for any reason at this point. Bruce Van Saun: Yes. Thanks. I would say the capital and priorities are really unchanged. They've been stable. So we always look to make sure that we have a good dividend on the stock and that we can raise our dividend as earnings grow, which be an objective for this year. The second place objective is to make sure we have capital supporting our clients and supporting the growth of the bank. So organic growth is kind of next up. And then the residual, you can look to do potentially some selective acquisitions. For example, in the first quarter, we bought very small but high-quality M&A boutique to, as Ted indicated, we go deeper into these industry verticals. Do we have everything we need to really serve those clients well. And in some instances, rather than hire people. It's faster just to go out and buy an M&A boutique that doesn't use a lot of capital, but we'll certainly look for things like that or maybe some things in the payment space that can accelerate our growth a little bit, but these are generally going to be small. And then whatever we have as the residual, really goes to buying back our stock. And I still think the stock is very attractive here, as you would expect me to say. But in any case, we're -- we bought a lot of stock in, in the first quarter, $300 million. And we gave in our guide that we're looking to buy $225 million here in the second quarter. So we'll have -- if we keep growing our overall results and our earnings will have lots of flexibility to both grow the bank organically plus buyback stock. Operator: We'll go [indiscernible] from [indiscernible] Unknown Analyst: Back on capital, you mentioned the stress tests coming up and the potential to get some relief there. your buffer is 4.5%, it seems like you could see some pretty significant relief this time around. And if you do, does that at all come into play with how you think about the 10.5% level for CET1, especially in the context of seeing some of the larger banks moving their CET1 ratios lower recently? Bruce Van Saun: Yes. So what I would say on that is that we've managed the capital kind of where we think it's appropriate given the environment and stakeholder expectations. And so we've been at the high side of our range of 10% to 10.5% or slightly over the 10.5% for the last several quarters. the SCB has not really been a binding constraint. And I've said in the past, it's to me, more of a scarlet letter I can't believe that we're getting that high of an SCB, which is completely outsized relative to peers. I do think that the Fed is now kind of taking a hard look at why are there some of these inaccuracies that take place. And so we'll see the models aren't really going into this round, but there's other things that I think the progression coming out of where we were in '23 to the strong balance sheet and jump-off point we have today, higher revenue levels. And then the scenario was particularly severe in the last cycle that is better this cycle. So we would expect to see the notional equivalent SCB even though it won't go into effect, we would expect to see that hopefully quite a bit lower and more in line with peers even before we see some of the model changes like the model changes of not picking up this benefit of swaps was really a big miss. But even without fixing things like that, I think we'll see improvement. So I would say we'll wait and see like how the environment shapes up. Right now, we're in a war with a lot of uncertainty and profitability is still increasing. So I think carrying a little extra capital through the course of 2026 makes sense. But certainly, there'll be opportunities to reassess that if we get a positive outcome to the war and the market conditions improve, and we continue to deliver a higher level of earnings it might be possible to start to ratchet that down, but probably that would be a '27 event and not something that you'd see us do in '26. Unknown Analyst: Okay. And then just switching to the Private Bank. You had some great deposit growth this quarter, and you mentioned some of the spread details on that incremental business, which sounded great [indiscernible] 400 to 425 spread. I was just curious what what the rough cost of those deposits were in terms of the growth coming in this quarter? And if you could just give an update on the talent pipeline in that business, that would be great. Brendan Coughlin: Yes. The deposit cost, looking at now to carts 220-ish basis points. the total deposit cost when you blend in the interest-bearing plus [indiscernible] that. Bruce Van Saun: Yes. So it's going to be somewhere is going to be lower than our commercial deposit funding costs but higher than pure retail is one way to think about that. Brendan Coughlin: And remember, the interest-bearing side is mostly still front book. So you've got a heavy piece of DDA and then the interest-bearing side is front book. So the poly is somewhat barbelled. Over time, we can smooth that out as the business builds. Bruce Van Saun: Yes. And the other thing that I would say is we opened 3 PBO offices this quarter, and we have 2 more geared up on this quarter and 1 later in the year. that will bring us up. I think we're at 9%. That brings us to 11 by the end of the year. So that's an important part of the deposit gathering strategy to have an ability to go out to successful people and walk [indiscernible] we call them 2-legged customers in addition to some of the corporate relationships that we have and we get billboard value from having those new locations opened. I would say over the next 3, 4 years, we could see that PBO count get up to 25% to 30%, if you recall, I think First Republic had maybe 80%. I don't think we're going to go near there. But I think we can get into the key markets and kind of have 25 to 30, which will also kind of keep that deposit machine cranking along. In terms of talent, the main needs we've taken the business from about 150 people at launch up to close to 600 today, including all the support dedicated support people. I think the plan for this year is to kind of continue to build out Florida is one of the things on the PB side, but then continue with the wealth lift-outs. And so we have a pretty good pipeline on private wealth lift-outs. None of them hit in the first quarter. We hopefully will catch up here where we want to be in the second quarter, but that's also a real focal point to make sure that we have the wealth professionals co-located with our private bankers so we can deliver kind of total solutions to the customer. Brendan Coughlin: The only thing I would add is our talent pipeline is really robust and attracting talent to this platform. It's not been a problem we -- over the course of the last few years. held ourselves back candidly a little bit for 2 reasons. One is our commitment to the market to deliver the profitability and the results we committed and then just making sure the platform is ready. We've had a lot of investment we had to make to connect all of our products and deliver the service. Our NPS has gone up from 70 to 76. And growth is obviously really, really strong [indiscernible] we're feeling good about the foundation of the platform. So we're starting to think about how we play some more offense on bringing talent in selectively. We want to maintain a really high bar that's really important to us the banking side, we're searching for a talent and a talent only. And so that's what we're bringing in. Bruce Van Saun: I would have said it [indiscernible] Brendan Coughlin: I'll give you the rounding. Aunoy Banerjee: On the deposit side, I would just add that we are also bringing good quality deposits, the lendability of these deposits are good. So just so that we can use it in the broader franchise Operator: [indiscernible] Bank of America. Unknown Analyst: Just 2 quick follow-ups. Maybe, Bruce, in your prepared in your remarks, you talked about looking at New York brand strategy, I guess you plan to open more branches in New York. Just talk to us, is that more private bank related? Or do you see an opportunity to just open more branches in New York and just the size of kind of what you're thinking there? Bruce Van Saun: Yes, sure. I'll start and flip it to Brendan. But I think I referenced this on a prior call is that we see a real opportunity to kind of double down on our footprint. Some of our peer banks are okay, taking the view that our footprint is pretty saturated and we need to go outside footprint to different regions of the country to get more growth. That's not our strategy that we're arriving at its where we're already well known, we can make some investment in the branch system to really optimize locations, optimize the mix between in-store and stand-alone branches and try to pick up the growth rate of deposits just in our footprint. And then we don't -- we avoid all that top of funnel spend advertising in a different region where nobody knows who we are. People already know who we are. So we think that makes sense. My hope is that when we get to the end and we kind of unveil this program that we'll be spending some incremental dollars on the branch network but we'll pick up that growth rate in deposits maybe by 200, 300 basis points over what the normal GDP growth rate was -- and if you look at that over a 10-year period, that's another $20 billion to $30 billion of deposits and deposits, obviously the lifeblood of a strong bank. So this is really important to us. Stay tuned for more details probably at the middle of the year. but New York is clearly an area where proof of concept, we got in on the back of combining 2 franchises that, frankly, were from a retail standpoint in need of some TLC. We put our best people down there and brought our version of banking into a highly competitive market, and we're having great success. It is our fastest-growing region in terms of households and deposits. But we're still not at the full scale with where we would need to be to really penetrate that opportunity. So as part of that broader effort, you would expect us to open more retail branches in Manhattan in surrounding environments, and we're pretty excited by that opportunity. we probably will open another 1 or 2 PB locations in Manhattan, for example. But the focus here really is to optimize what we're going to do on the retail side. Brendan, anything to add. Brendan Coughlin: I guess a sign of an incredibly aligned leadership team you took almost every word out of my mouth. The only thing I would add is just give you a [indiscernible] in New York and then on the rest of the markets. But in a world post-COVID, it's -- there are a lot of questions on the future of retail branches and the importance of them, but it's still very much truth, if you want outsized operating leverage in retail banking, you need 4% plus share of branch density and despite all of our incredible successes in New York, we're still at sort of, call it, 2.25%, 2.5% branch density. So we do think we can build on our momentum by densifying a little bit. And we'll do that thoughtfully over time. As Bruce mentioned, we'll give you more details as we get towards the middle part of the year. We also have some self-funding dynamics that still exist in the rest of the franchise. We still have lot of in-store branches that we'll be able to reposition a bit to traditional branches in the non-New York parts of the footprint that will free up some expense and capital to densify in New York. So we'll bring everybody through the plan here in short order. But really, as Bruce pointed out, the goal really is to drive sustainable market share gains and outsized deposit growth in retail to fund the rest of the franchise. Ebrahim Poonawala: That's good color. And just a quick follow-up, Bruce, for you on the capital plans, like [indiscernible] should benefit Citizens once that gets mark-to-market. When we look at the benefit from the capital proposals, it's something we've begun to think about do you think the tangible common equity ratio then becomes something that you're more mindful for in a world where the RWA density is coming down? Bruce Van Saun: Yes. That's a really thoughtful question. So I do think while that's not a regulatory ratio, it is something that bank investors have focused on over time. And so as I said, we're going to have to triage when this good news comes in, you have the triage as to what our market expectations, what are regulatory expectations, what are rating agencies' expectations. But yes, I think that could happen. I think that TCE ratio could be something that analysts and investors move up in prominence. Operator: We'll go to Gerard Cassidy from RBC Capital Markets. Gerard Cassidy: You guys have done a good job of expanding the commercial banking business. You talked about it on the call already. Can you share with us when you go into a new market like Florida or California, now clearly, you're building your national brand, but it's I don't think it's yet at Bank of America level in terms of recognition. So how do you balance when you go into these markets that could provide growth on the commercial side, how do you balance the risk with growth? And then second, are you leading your balance sheet? Or are you building out treasury products first and then lending to those customers? How do you guys approach that? Bruce Van Saun: Let me start and I'll flip right to Ted. But I would say we have tried to lever an expanded presence in these new markets where we brought a private banking operation or private wealth operations and then kind of magnify that by also bringing in kind of the corporate banking teams. And what we aspire to is to bring very experienced, high-quality bankers onto the platform who kind of have a growth ambition and who are good team players. And so one of the reasons that we're successful overall in the corporate bank is we worked very collaboratively with a coverage banker who has product partners that they work together to come up with good ideas. We call it thought leadership. But at every touch point with the client, we're showing up. We understand your business. We want to get to know you. We have some ideas about how you can be more successful. And that really resonates with customers. So I think there's always room for market participants who do that well. So it's really a combination of the visibility of already being in the market. And now we have like 400 people in California over 400 people. And that kind of works together to raise our visibility and our presence and then staying committed to really high-quality people and staying committed to that 1 citizens collaborative model where we can deliver solutions to the customer. Ted? Theodore Swimmer: Yes. Bruce, the one Citizens model that we've implemented throughout our bank has really gone to differentiate ourselves as we expand into these new regions. So to your question, [indiscernible] we don't necessarily lead with treasury, don't necessarily lead with credit, but we try to lead with his ideas to our customers and where we differentiate ourselves is as we pick what customers we're going to attract we really look at where do we differentiate ourselves versus our competitors. So is it an industry that we have a specialization sponsor, a private equity group that we know better. We are trying to -- and then how do we bring all the parts of the bank together to give the customer an experience that they wouldn't necessarily get from somebody else. And when you have the private bank and all the great people and all the relationships that they have and the ability to interact with people that we normally, if we were just showing up with a balance sheet, we wouldn't have the ability to address those customers, bringing the private banking and combining all those together has really been what we try to achieve as we've been building out in these markets. Bruce Van Saun: And I would say that, look, kind of companies in the regions we're targeting or the industries we're targeting are very receptive to have a new player with a really strong approach that they're not exactly -- some of the bigger players aren't covering themselves in glory when it comes to how they cover middle market and mid-corporate companies. And so it feels like we're pushing on an open door to some extent when we go into these markets. Gerard Cassidy: Very helpful. I appreciate it. And then pivoting over to AI, Brendan touched on it a moment ago, Bruce, and maybe it's for Brendan as well. When do you think we get to the point where you folks and your peers probably as well, are able to go out and tell investors, we just spent x millions of dollars on AI, and this is bottom line impact. Earnings per share improved 2% or the ROTCE number went up 50 basis points because of the x millions of dollars we just spent on AI. Do you think we can never get to something like that down the road? Or is that just too optimistic? Bruce Van Saun: Yes. I think it's going to be hard. It's going to be a very dynamic process, and there's a lot of cross currents that go through the P&L. I think we'll try to do that with reimagine the bank. We're not kind of detailing any notable items for what the cost is of restructuring and investment and consultants and all of that. But I think will certainly delineate it so that you understand what we're expanding. And so just within that program when we get to the $450 million run rate, that's going to be a very good return on what it took to stand that up. So that might be one way that you can kind of get a sniff of how much are they spending and what benefits are resulting. But I do think it's a dynamic process and a lot of things, there'll be a lot of cross currents in the economy and other things. And so you might not have the cleanliness of connection that you're talking about that you're aspiring to. Operator: [indiscernible] the line of [indiscernible] from Autonomous Research. Unknown Analyst: Just one here on expenses. So the first quarter and then the second quarter guide kind of get us to that 4.5-ish, 5% year-over-year cost growth I know a lot of the reimagined the bank benefit comes in the second half as long -- as well as some of the spending. So can you just help us just understand the cadence of expense growth as we kind of see that benefit. And as you balance performance related and investments against that as we move through the second half? And should we just be kind of thinking about that 4.5% overall guide that you gave us in January. Bruce Van Saun: Yes. Ken, so we're not coming off the 4.5%, and there is a seasonal pattern of expense recognition that the first quarter has the FICA and associated payroll items that go with the bonus, paying the bonus. And then the second quarter tends to be where we would bring in people. And after they get bonus. And so any net adds that we want to have, it's a big period for the net adds. So overlay some reimagine the bank onetime costs in the first half of the year, you're going to kind of peak, I would say, in the upward pressures and your merit happens in the second quarter early -- second quarter. So you're kind of peaking in the first half of the year and then it wouldn't be as much net investment spending on ads in the second half of the year and then some of the benefits coming in from reimagine the bank will flow through in the second half of the year. So you could actually see expenses start to dip a bit in the second half. So we'll obviously give you that guidance as we get to the second quarter, we'll tell you what we think in the third quarter. But just to preview it we're still holding to the 4.5% for the year, and it's kind of -- the build is more front-loaded and then kind of levels off or even declines a little Yes. And Ken, I would just add, we are pleased with the expense discipline that we had in the first quarter. Really the growth quarter-on-quarter was all of our -- the seasonality that Bruce mentioned. And as Brendan mentioned, we have good line of sight to some of the savings that are coming. So we mentioned the vendor sales as well as some of the property closures. And so we feel very good about some of the some of the downtick that we will see and the benefit that's come there. And we have very disciplined returns objective on the private bank, et cetera. And I would just add, like if you should remember the 500 basis points of positive operating leverage for the year and we delivered 700 basis points this quarter. So that still remains very much true for this. Operator: [indiscernible] go to Chris McGratty from KBW. Christopher McGratty: Bruce, you expressed confidence getting into the the 16% to 18% range for the ROTCE by the end of next year. I guess, number one, what could make it perhaps a little sooner get into the range and maybe the factors that might push it out a little bit? Bruce Van Saun: Yes. I think it's hard to pull it forward a whole lot. We have some of the time-based benefits of those legacy swaps running off, which is a driver of kind of moving higher in NII and overall kind of revenue. But if we got into kind of piece dividend from the resolution of the Apron war. And then there's a lot of activity in the capital markets. I think we're as well positioned as anyone certainly amongst our peers, maybe better positioned to really capture that upside if that happens. So I think that's one driver that can maybe hope to get us there a little faster. And I'd say, in the private bank, they're on a steady as she goes by design kind of trajectory. If we did start to see more revenues, maybe we could force feed a little more investment there. And we talked a little bit about the potential for pull forward of RTB benefits if some of the new technologies kick in. So there is a case to make that potentially in a perfect scenario, you can pull it in a little bit, but I'm not promising that. And I'm really just focused on making sure we hit that by kind of the end of '27. And then I guess the converse is true, too. If the kind of environment stays volatile and the war doesn't get resolved quickly and energy prices go up and the economy slows down a bit, there's possibilities that, that could extend a little bit. But A lot of this is actually baked in. So to get kind of from 12 to 15 is really these time-based benefits and some of the trajectory we see on the NIM and then kind of getting all the way there is execution of kind of some of the rest of the initiatives, the normalization of credit cost back to the mid-30s. We had a 39 basis point this quarter. I think we're firmly on that trajectory, again, absent something happening in the economy. And then we'll just continue to buy back our stock fairly aggressively as well. Operator: [indiscernible] question will go to David Chiaverini from Jefferies. David Chiaverini: So I wanted to ask about loan pricing, commercial loan growth has been increasing nicely across the industry. So I was curious about how loan spreads are holding up in a competitive environment. Aunoy Banerjee: Yes. Let me start, David, and then I'll pass it on to Ted. As you saw that we had a diversified loan growth and even in the commercial bank, we had in the mid-corporate space, we were little bit on the subscription lines as well. And we expect -- as you think about the spreads, like it definitely came down as the rates came down. But but we are well within the pack. And the one thing I would talk about loan growth is -- and Ted mentioned this, this is not only just a credit relationships. It's a more holistic relationship. So we look at the returns of this loan on a holistic basis to think about what else are we getting, whether it's the deposit relationship or the business, other business activities, fees, et cetera, that we are getting. So there's a very disciplined process in Ted's business that we go through to ensure that we are just not looking at the spreads. Theodore Swimmer: Just to build on what Aunoy Banerjee said. Overall, in the markets in the beginning of the first quarter, we saw more on the institutional side. And on the bond side, we saw some tightening of spreads that obviously widen back out with what's going on in March. As we get specific to Citizens, we are now -- we look at the relationship holistically. So we try to figure out when we make a loan, what are the ancillary business, and this was all part of our BSO that we really completed through the end of last year. We now feel like we have a very good discipline in place that we do not stretch on loans where we do not get an overall suitable return for our customers. As such, we really haven't seen much of a decline in spreads in the last couple of -- in the last quarter. David Chiaverini: And then shifting over to private credit and NDFI. To what extent are you contemplating leaning in as other banks pull back? Or are you comfortable with your existing exposure? Bruce Van Saun: Yes. I would say -- it's Bruce, and I'll let Ted add color. But we've grown that, as I mentioned earlier, that book by very -- in a very disciplined manner, call it, 5% a year, being very selective about who we want to bank and the type of vehicles that we bank and making sure we have the right structure. So I don't really see us veering off of that. That served us well to where we're positioned today. And I think that's the strategy that we'll have going forward, even if some people step back and there's opportunities to do more we'll see. But our baseline assumption is that we kind of keep to that mid-single-digit growth rate. Ted? Theodore Swimmer: Yes. We're going to continue to support our customers. We look at these relationships, not just on the DFI side, but on the private equity side, on the subscription side and then what their portfolio companies are doing. So -- and if some of our customers are the winners and the survivors, we think that they're not survivors, but the winners and make acquisitions, maybe grow with them, sure. ut we're not going to specifically grow NDF. We're going to just continue to go with where our customers go. Bruce Van Saun: Okay. All right. I think that gets to the end of the question queue. So I really appreciate your interest in citizens. Thanks for dialing in today. Have a great day. Operator: That concludes today's conference. Thank you for your participation, and you may now disconnect.

33天前Insight Analytics约5分钟阅读

PLD 2026 Q1 财报电话会议

Operator: Greetings, and welcome to the Prologis Q1 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Justin Meng, Senior Vice President, Head of Investor Relations. Thank you. You may begin. Justin Meng: Thank you, operator, and good morning, everyone. Welcome to our first quarter 2026 earnings conference call. Joining us today are Dan Letter, CEO; Tim Arndt, CFO; and Chris Caton, Managing Director. I'd like to note that this call will contain forward-looking statements within the meaning of federal securities laws and including statements regarding our outlook, expectations and future performance. These statements are based on the current assumptions and are subject to risks and uncertainties and that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of these risks. We undertake no obligation to update any forward-looking statements. Additionally, during this call, we will discuss certain financial measures such as FFO and EBITDA that are non-GAAP. And in accordance with Reg G, we have provided a reconciliation to the most directly comparable GAAP measures in our first quarter earnings press release and supplemental. Both are available on our website at www.prologis.com. And with that, I will hand the call over to Dan. Dan Letter: Thank you, Justin. Good morning, and thank you for joining us. We entered 2026 with solid momentum, and we saw that continue in our first quarter results. While the geopolitical backdrop has become more uncertain in recent weeks, our business continues to perform at a very high level, supported by resilient demand, disciplined execution and the strength and scale of our global platform. Last quarter, we outlined our top 3 priorities for the business. Let me highlight how our strategy is translating into results across operations, value creation and capital formation. First, we delivered another quarter of record leasing with 64 million square feet of signings supported by both strong retention and healthy new leasing activity. Occupancy exceeded our expectations, and we are raising our full year outlook. Second, we are putting our land bank to work across logistics and data centers with $2.1 billion of starts in the quarter, of which $1.3 billion was data center build-to-suits. The depth of customer interest for our data center offerings is significant, and we believe our ability to bring together land, power and development expertise is a key differentiator for our business and positions us to capture a growing share of this opportunity. And third, we are expanding our strategic capital platform. We announced a $1.6 billion joint venture with GIC and subsequent to quarter end, a $1.2 billion joint venture with La Caisse. These partnerships reflect strong investor demand for our platform and our ability to deploy capital into high-quality opportunities worldwide. Taken together, these initiatives reinforce a simple point. We are building a broader, more resilient platform, one that is positioned to compound growth over time. Before I pass the call to Tim, let me briefly address the geopolitical backdrop. The conflict in the Middle East has introduced yet another source of economic uncertainty, most directly through higher energy prices and renewed pressure on inflation and interest rates. Rather than speculate, I'll focus on what we are seeing in our data, what we're hearing from our customers and how we are operating the business. Our lease signings, proposal volume and build-to-suit pipeline point to continued strength in underlying demand. In fact, March was a very active month for new leasing. By comparison, when our business faced abrupt tariff-related uncertainty in April of 2025, the pause in leasing activity was relatively immediate before flowing out in the following weeks and months. At the same time, our customer insights are grounded in direct ongoing engagement with hundreds of real-time interactions each quarter. Seven weeks into this conflict, most are actively monitoring the situation and they are telling us 2026 business plans are unchanged. The risk today is that uncertainty slows customer decision-making. We have not seen meaningful evidence of that to date. That said, we're operating with a heightened level of awareness guided by the same discipline that has defined our business for decades. This is a time-tested platform and the structural drivers of growth across logistics, digital infrastructure and energy remain firmly in place. And with that, I'll hand the call to Tim to walk you through our results and outlook. Timothy Arndt: Thank you, Dan. Turning straight to our results. We delivered a solid quarter, executing well against our strategic priorities in a dynamic environment. First quarter core FFO was $1.50 per share, including net promote expense and $1.52 per share, excluding this expense, each ahead of our expectations. We ended the quarter with occupancy of 95.3%, reflecting the seasonal drop we telegraphed and typically experience each first quarter. Retention remained very strong at nearly 76%. Net effective rent change was more muted this quarter at 32%, driven primarily by market mix. Our expectation for full year rent change to approach 40% on a net effective basis remains unchanged. Our lease mark-to-market ended the quarter at 17% on a net effective basis. The rate of decline has slowed meaningfully, due in part by an uptick in market rents this quarter, the first increase in 2.5 years. Our lease mark-to-market represents approximately $750 million of embedded NOI at spot rents, which, of course, do not reflect the replacement cost rent upside, which should materialize over time as occupancies improve. Same-store NOI growth was 6.1% on a net effective basis and 8.8% on cash. In addition to the year-over-year occupancy increase and the growing contribution of rent change, the period also benefited from unusually low bad debt. In terms of capital deployment, we had a fantastic quarter. We started $2.1 billion of new development, including $850 million in logistics and $1.3 billion in 2 data center projects. Within logistics, approximately 75% of the starts were speculative, reflecting improving fundamentals and our confidence in the need for new supply across many of our markets. Our data center starts totaled 350 megawatts between 1 ground-up development at an existing campus and 1 conversion out of our portfolio. Both projects are pre-leased on a long-term basis to leading technology companies with strong investment-grade credit. Customer interest in our powered sites is exceptional with 1.3 gigawatts under LOI and all of our power pipeline in some level of discussion. We ended the quarter with 5.6 gigawatts of energy either secured or in advanced stages which reflects the stabilization of another 150-megawatt facility during the quarter. Simply assuming a power cell format at $3 million per megawatt, our current pipeline could provide well over $15 billion of investment and multiples of that in a turnkey format, creating significant potential for value creation. Continue to scale our solar and storage business, meaning customer demand and completing 42 projects during the quarter, bringing us to a total of 1.3 gigawatts of installed capacity. In terms of capital recycling, we sold or contributed approximately $1.2 billion of assets during the quarter. This included initial activity within the U.S. Agility Fund announced last quarter as well as seed assets for our new venture with GIC. Before turning to our markets, I'd like to take a moment to highlight that we marked the 10-year anniversary of Prologis Ventures, our corporate venture capital arm. We've now invested $300 million across more than 50 companies providing visibility to emerging technologies and solutions in the supply chain to stay ahead of disruption, drive innovation and discover new opportunities. Overall, we progressed further through the stages of inflection with demand strengthening vacancy topping out and an increase in the number of markets providing positive rent growth. Our U.S. markets absorbed 45 million square feet, a solid result on a seasonally adjusted basis, slightly ahead of our forecast and consistent with our own leasing experience in the quarter. The U.S. vacancy rate was flat sequentially at 7.5%, aided by lower completion levels as the construction pipeline remains favorable at just 1.7% of stock compared to a 10-year average of 2.6%. We still expect a relative balance between supply and demand, which would allow vacancy to drift lower over the year. Globally, market rents grew 30 basis points during the quarter. And barring an economic slowdown, we expect growth to continue, although it may be uneven quarter-to-quarter as conditions firm. In the U.S., the strongest growth remains in many of our Central and Southeast markets, while Latin America, Western Europe, the U.K. and Japan stand out internationally. Southern California is performing in line with our expectations, which is to say it is improving but will lag other markets. We're seeing stronger leasing activity and a more constructive tone from customers and vacancy has increased modestly and rents have declined slightly, again, both consistent with our outlook as the market continues to progress through its earlier stages of inflection. Moving to our customers. Our recent leasing has been supported by a broader mix of transactions across both size category and geography. Even after delivering record leasing in the quarter, our pipeline has not only replenished but in fact, reached new highs reflecting strong underlying and ongoing demand. With large space format now essentially sold out in our portfolio, we're seeing activity broaden into other unit sizes alongside strength in our build-to-suit demand where our pipeline continues to be healthy. From a segment perspective, demand remains strong in essential goods and e-commerce, with increasing momentum among data center suppliers. Decision-making is marginally slower, the leasing activity remains robust, and we have not seen any meaningful evidence of pullback. In capital markets, transaction volumes have increased with an encouraging amount of product currently in the market across core, core plus and value-add strategies and spanning both single asset and portfolio transactions. What stands out is the pricing premium for quality. Assets with strong locations, functionality and credit are attracting the deepest buyer pools with cap rates on market rents around 5% and unlevered IRRs in the mid-7s. Turning to strategic capital. We closed commitments for 3 additional vehicles, including a new venture with GIC, which will develop and hold U.S. build-to-suit opportunities and an expansion of our relationship with La Caisse through a pan-European venture focused on both development and acquisition strategies. We also launched a new acquisition vehicle in Japan. Between these ventures as well as the Agility Fund and CREIT closings announced last quarter, we've raised over $2.6 billion of third-party equity, aligning capital with growing investment opportunities in a more accretive format. And finally, on our balance sheet, we raised $5.5 billion in new financing during the quarter at a weighted average rate of approximately 3.75%. This includes the $3 billion recast of one of our 3 credit facilities at a spread of just 63 basis points, the lowest of any REIT. Turning to guidance, which I'll review at our share. We are increasing our forecast for average occupancy to a range of 95% to [indiscernible]. This increase, together with our first quarter outperformance drives our expectations for net effective same-store growth to 4.75% to 5.5% and cash growth to 6.25% to 7%. And Strategic capital revenue is now expected to range between $660 million and $680 million, and G&A is expected to range between $510 million and $525 million. As for deployment, we are increasing development starts to $4.5 billion to $5.5 billion, this on an own and managed basis with approximately 40% allocated to data center build-to-suits. Acquisitions will continue to range between $1 billion and $1.5 billion, and our combined contribution and disposition activity will range between $3.5 billion and $4.5 billion, all at our share. Putting it together, our strong start has us increasing our outlook on earnings. Net earnings will range between $3.80 and $4.05 per share. Core FFO, including net promote expense will range between $6.07 and $6.23 per share, while core FFO, excluding net promote expense will range between $6.12 and $6.28 per share an 80 basis point increase from our prior midpoint. In closing, the strength of our business is evident against the backdrop of ongoing volatility. We are anchored by a portfolio of irreplaceable assets generating durable and growing cash flows, a disciplined approach to capital deployment, a scaled asset management platform and a fortress balance sheet. At the same time, we continue to expand in our adjacent businesses in energy and data centers, providing additional avenues for growth. We're excited by the strong start we've had, are proud of our team's execution and are well positioned to deliver excellent results over the balance of the year. With that, I'll turn the call back to the operator for your questions. Operator: [Operator Instructions] And your first question comes from Ronald Kamden with Morgan Stanley. Ronald Kamdem: Great. Congrats on the record leasing in the quarter. And I think I heard you mention that the pipeline is also back at record. I guess my question is just on the leasing spread. That looks like slightly [indiscernible] in the quarter. Just any comments there and how you guys are thinking about occupancy versus pricing going forward for the rest of the year? Timothy Arndt: Ron, yes, the quarter, I mentioned there was some mix going on in the numbers you see about 40% of the role by happen stands happen to be in our West region in the U.S. where we have some softer conditions and lower lease mark-to-market, as you're aware. So that impacted both rent change and things like free rent that you'll see in the SEP. In terms of balancing around occupancy and rent change, it's really not only market by market, it's really deal by deal. I would say out there, we have a pretty wide mix of market conditions, as you know, some exceedingly tight and some still soft, and that can happen at the submarket or even the unit level. So I'd say, in aggregate, we are in a mode of pushing rents in a number of markets and situations. But still preserving for some occupancy. Operator: Your next question comes from Michael Griffin with Evercore ISI. Michael Griffin: Just wanted to ask on the data center development leasing front. It obviously seems like some good news announced in the quarter. But mean is there a worry we've heard things in the news around data center development opportunities around the country, getting shelved the local municipalities pushing back. Is that a risk for this pipeline? Or do you feel for these projects you've got underway even with the secured power that you're able to go forward and lease these and ultimately create that value that you've been talking about? Dan Letter: Michael, this is Dan. So our pipeline in the build-to-suit for data centers is very strong. You saw these 2 starts that we announced this quarter. We've been guiding for the year for the first time on what we expect to see. We've got 1.3 gigawatts of deals under LOI, and we're making further progress converting the pipeline I feel really good about what we have going. And I think that accounts for the next 3 years' worth of business and everything we're hearing from our customers is they need the space. Operator: The next question comes from Craig Mailman with Citi. Nicholas Joseph: It's Nick Joseph here with Craig. I appreciate the added disclosure on the data centers what we assume development margins on the new starts this quarter? I think in the past, you've talked about 25% to 50% margin. So how do these starts compared to that range? Dan Letter: So when you look at our start volume for the quarter, then obviously the blend of both our logistics that includes build-to-suits. It includes spec, where we've more spec going on this quarter than we've had the last several quarters. And then on the data center front, I would keep it within the range that you've heard us talk about the last few years, it's 25% to 50% better or higher than what you see in our typical logistics margins. Operator: Your next question comes from Blaine Heck with Wells Fargo. Blaine Heck: It seems as though average occupancy outperformed expectations during the quarter. I know you guys raised the guidance slightly, but given that the occupancy guidance doesn't lead much upside from Q1, is there anything kind of timing related that happened such that where we could see some more downside in Q2 than was initially expected? Or is there just maybe some conservatism in that guidance since we're still early in the year. And as Dan mentioned, visibility is somewhat more challenged. Timothy Arndt: Blaine, we outperformed average occupancy by around 20 basis points in the quarter. You see a lift in our full year using the midpoint of our guidance of around [indiscernible] points. So in excess of that, that reflects 2 things. There is one, some pulling forward of occupancy, mainly that's going to manifest in the form of surprise renewals, that kind of thing. And then also reflects the strength of the pipeline. As I mentioned, we had a lot of activity both in signings. That's half of it, but then the overall size of proposals standing today is large enough that gives us the confidence for the rest of the piece of that race. Operator: Next, we have Andrew Berger with Bank of America. Unknown Analyst: It sounds like 1Q net absorption was a bit ahead of your expectation. Can you just share your latest views on the fundamental outlook for 2026? Christopher Caton: Sure, it's Chris. So our view is unchanged. We're moving through the inflection phase, as Dan and Tim described in the script. There's very little change to our view. That's net absorption on pace to approach 200 million square feet and completions, 190 million square feet this year. So that will see rents and occupancies, market rents and occupancy is improving over the year. So like you proposed there, like you described, Q1 was modestly better. And -- but we're going to hold our core assumptions. This is a macro landscape that's going to evolve over the course of the year. It will be shaped by the magnitude and duration of the conflict in the Middle East. And so our outlook is balancing that risk against what we see which is resilient customer demand, as Dan described in his prepared remarks, we also leveraged the economic consensus. And they have been marking to market their view, taking it down sometimes 40 basis points in the back half of the year. But look, stepping back, the baseline view is intact, and there is ongoing momentum in the marketplace. Operator: Next, we have Nicholas Yulico with Scotiabank. Nicholas Yulico: I just want to turn back to some of the market commentary on -- which was helpful. Wanted to see if we could get a little bit more details on some of the U.S. laggard markets. I know you already talked about Southern California, but perhaps New York, New Jersey, other markets that maybe aren't outperforming what kind of needs to change to get better rent growth there. And then in terms of the Europe exposure, if you could just also talk about non-U.K. countries and sort of latest feeling you're hearing from customers since there is a lot of questions about how energy prices in Europe could affect the economy over there. Christopher Caton: It's Chris. I'll jump in. So first off, in the U.S., there are 3 or 4 things to reflect on. Number one, there is a growing range of healthy geographies in the U.S. Places like Texas generally, South Houston and Dallas are either strong or healthy, Atlanta and increasingly some of the Midwest markets, something about Columbia, something about Indianapolis. So there's that strength that Tim described in his prepared remarks. Yes, specifically after soft markets, the 2 softest markets are probably L.A. County and Seattle in the United States. Those are areas where vacancy rates are very elevated relative to history. The pace of incoming demand is muted. And so the recovery is yet to play out there. In terms of some core markets, you asked after New York, New Jersey, I'd also throw in San Francisco Bay Area. These are areas where we're upgrading our views. In general now, we're entering a phase where we're upgrading our assessment of markets and New York, New Jersey is a great example of it. Is it time for rent growth there? No, not quite yet. This is a year where we're going through a transition phase like we've talked about, but it's just worth knowing that we have a bias to upgrading areas. Vacancy rates have peaked are beginning to come down toning customer demand is positive. Turning to Europe. So first off, the Western European geographies of like Germany and the Netherlands are leading that marketplace. And we have the dialogue that was described in the prepared remarks, we have it globally, and that includes your Euro and the tone there is positive. Business plans are intact and customers are moving forward with their real estate requirements. Dan Letter: Maybe one thing I would add on here is just focusing on the unit size or building size, anything over, call it, large format, 500,000 square feet or above, we're nearly sold out. We're 98% leased across the globe at that size. So you'll start seeing rent growth there, certainly. Operator: Next, we have Vikram Malhotra with Mizuho. Vikram Malhotra: Congrats on the strong quarter. Just 2 clarifications. So I think last quarter, you had said as we enter the back half of the year, we'd like to see some markets where annualized rent growth could maybe eclipse your rent bumps I'm just wondering if you can give us a bit more color, like what -- which markets are you seeing real rent growth on an annualized basis? And then if you can just clarify on the same-store NOI outlook, the cash outlook, given the number you had in it does suggest a decel. So what's sort of driving that? Or I guess, what drove the big pop in 1Q versus the guide? Christopher Caton: Vikram, I'll start with market rent growth, and Tim will take some of the same-store questions. I like the way you worded the question there trying to get really specific numbers out of me. I don't recall that we would have put it that way. But let me just tell you the healthiest geographies including in Atlanta, Dallas, Houston, Columbus, also outside the U.S. places in Latin America like Sao Paulo and the Mexico City, these are the leading geographies for rent growth. Timothy Arndt: And Vikram, on the cash piece, yes, our guidance reflects our expectations clearly, the first quarter is benefiting from some occupancy comps a bit more favorable in the first quarter about the cadence of 2025. We built occupancy over the course of that year. So those comps get to be a lesser effect and then rent change, of course, is powerful rolling through the portfolio. But on a year-over-year basis, as spreads get a little bit more relaxed, that contributes lesser to quarter-over-quarter -- well, sorry, year-over-year for the same quarters in terms of same-store. Operator: Next, we have Tom Catherwood with BTIG. William Catherwood: Excellent. Maybe going back to the data centers for a second. Even when power is secured, it seems like there's a supply chain crunch on the equipment side, which is creating bottlenecks, especially with turnkey developments. Are you able to get ahead of that by preordering material and equipment similar to what you did during the pandemic? And if so, is it giving you an advantage when it comes to your build-to-suit negotiations? Dan Letter: Thanks, Tom. The short answer is yes, absolutely. Procurement, our fortress of a balance sheet and ability to get out in front of these long lead items is absolutely a differentiator for us. And what I'd say is just overall, this machine we've built and that we focused on so much over the last 3 years around building these capabilities across this company, whether it be procurement, data center expertise we've built in a big way over the last few years. It's leading to this pipeline that you see and the confidence that we have in putting these numbers out there and I'll actually correct something I said earlier on today and an earlier question around margins. Margins are actually 25% to 50%, not 25% to 50% better than logistics. And these are very profitable deals. Keeping in mind, our pipeline is built on the foundation of logistics basis, buildings and land. Operator: Next, we have Caitlin Burrows with Goldman Sachs. Caitlin Burrows: You might have touched on this a bit in the prepared remarks in terms of 3 points of focus. But Tim, you mentioned the new GIC and La Caisse JVs the acquisition vehicle in Japan, the Agility Fund. It just seems like a lot. So I'm wondering if there's some new increased focus on the strategic capital business, are those coincidental timing? Or is there some bigger push kind of on the fund side? And is there any core differences between these new funds and the existing ones? Timothy Arndt: Kate. Look, we're really proud and excited of the number of vehicles. We've launch now in the last 2 quarters, 5 new vehicles, spanning geographies and formats, but also risk appetite. One thing that you see between the U.S. Agility funds launched last quarter, as well as the venture announced here is spanning into some development activities. And it's very purposeful. We're getting ahead of what we see as growing deployment volumes on one part in logistics, you see us ramping up our guidance there as markets are improving. This is a machine that ought to be able to do $5 billion to $6 billion pretty easily, I would say, with our land bank and the size of our platform. But that's being matched up with this incredible data center opportunity that Dan is speaking to. And we are looking at the capital needs there and finding the right ways to get to all of those opportunities. actually in a smarter, more capital-efficient format that can yield fees and promotes. So you're seeing that branching now to exhibited in the announcement of these vehicles. Operator: Next, we have Michael Goldsmith with UBS. Michael Goldsmith: Lease proposal pipelines picked up quite a bit in the first quarter here. So can you provide a little bit more context around it? What's driving it? What sectors is coming from, what sizes and how should that translate to actual leasing in the current quarters. Christopher Caton: It's Chris. So what's underpinning that is customers have been deferring growth requirements sitting through -- sitting on their net needs and they're increasingly responding to the growth in their businesses, the opportunity to invest in their supply chains and as far as slices, it's diverse. So there are a couple of different ways we can look at it, whether it's by size. And so there's growth, say, for example, both above and below 100,000 square foot unit sizes. There's growth, for example, in terms of organizational types. So say international scale customers versus our local scale customers. Those are both growing as well as both renewal and new requirements. So there is diversity there. Operator: Next, we have Vince Tibone with Green Street. Vince Tibone: I wanted to follow up on your comment that data center suppliers are increasingly taking down logistics warehouse I just wanted to get your perspective on how material this demand driver could be in the coming years and also how sustainable? Like is it all tied to construction and this could be shorter-term leases? Or is this about servicing existing data centers as well. So I just -- yes, I'm trying to get a sense of like how -- is this a new structural demand driver for the space, what percentage of new leases maybe it's represented in last quarter or 2, if you're able to share. I just wanted to kind of pick your brain on that kind of seemingly new side of warehouse demand. Christopher Caton: Yes, Vince, you're right. It is a new structural driver of logistics real estate demand. It has gone from, say, less than 5% of new leasing a year ago to now 10% of new leasing, and it's an even greater share of the forward-looking pipeline. So there's absolutely upside over the near term as a consequence of this driver. In terms of the breadth and duration, I suppose, number one, we see them signing deals with really healthy term. There is a shift in their own supply chains going from -- I think you could think about it as unbundling manufacturing and distribution to having distribution, a more regionalized and close than production of the data centers. And so there's really solid momentum here, and you're right to describe it as a new structural driver for logistics real estate. Operator: Next we have Michael Carroll with RBC Capital Markets. Michael Carroll: With regard to the data center opportunity, how do these tenants discussions progress when deciding between pursuing a power base or a turnkey build-out I'm assuming these are different tenants that would want the power base builds. Is that fair? And how much of the opportunity that you kind of quoted in your prepared remarks could potentially be turnkey. Dan Letter: Every discussion, every deal is different, let's put it that way. And different users have different mindsets at different periods of time. So -- what you see from us, we were heavily focused on the powered shell side of this as you start these discussions. And then we've -- you've seen us deliver some powered shell plus really, we're trying to just work through the customer what they need from us and about how we capitalize this business longer term, maybe you see some more turnkey from us over time, but really, it's just a matter of who your -- what customer you're talking to and what's on their mind at the time. And... Timothy Arndt: Yes. And yield, what is their respective cost of capital is the other thing I see us coming up against because the migration up to turnkey can be expensive. Operator: Next up, we have Nick Thillman with Baird. Nicholas Thillman: Tim, I wanted to circle back on some of the commentary you had on the acquisition side and cap rates. Obviously, varying degrees of demand from a fundamental standpoint and the leasing side. understand your comments on just core portfolio transactions and quality buys, but it seems historically relative to historical trends, just cap rates by market or historically tight. I'm wondering if you guys could provide a little bit more commentary on markets where maybe you're seeing cap rates expand a little bit more? Or maybe you're seeing a little bit more compression on the transaction side. Dan Letter: Nick, I would say cap rates certainly expanded over the last few years. They've been holding pretty steady for the last 5, 6 quarters or so. We obviously dive deep into this volumes. Volumes themselves are actually, I would say, normalized. And so -- and those cap rates at a market it's going to be a range between 5% and 5.5% depending on the location quality. You're seeing more of a divergence of Class B and C than obviously that collapsed during the last cycle. And when you look at -- when we look at it, what we are an IRR-based investor, we're not focused necessarily -- of course, we're focused on it, but we're looking at the total return of these assets, quality, total return location. And so cap rates can be a bit confusing at times. Operator: Next, we have Mike Mueller with JPMorgan. Michael Mueller: For GIC and La Caisse. Can you give some color on how you determine what developments will be done in those ventures versus on your balance sheet? Timothy Arndt: Mike, we go through an allocation policy that is long-standing at the company. Now as you can imagine, our 40 years as an asset manager. We've had overlapping vehicles with mandates that need to be managed, so we have an allocation policy in that regard that deals will cycle through. It could find any of those vehicles, including the balance sheet has been the ultimate developer of some of these assets, and it's dependent on a variety of conditions that are run with good governance I think that makes your lives difficult if you were left only that which is a way of saying you're going to be increasingly reliant on the PLD share of these development volumes. So that will cut through all that noise for you because ultimately, that's the thing that's going to matter economically for the company. Operator: Next, we have Brendan Lynch with Barclays. Brendan Lynch: It looks like turnover costs per square foot are coming down, I think now about 7.3% of lease value, but free rent has ticked up a bit. So how should we think about the evolution of concessions going forward? Timothy Arndt: Well, I'll start. Concessions are still a bit elevated right now. We've seen free rent, as you highlight, stepped up. I said earlier, so I'll say it again, some of that influenced by the greater amount of roll out of the west where those conditions are softer and concessions are a bit more elevated. We do expect concessions to normalize as occupancies build, which that's on the free rent metric would be more in the order of something like 3% of lease value versus a little bit of a bulge that you see at the moment. Operator: Next, we have John Kim with BMO Capital Markets. John Kim: On data centers, I wanted to see if there was an update on the timing of your data center vehicle. And also if you can just clarify the 5.6 gigawatt of capacity, is that on growth or leasable power? Dan Letter: Sure. So let me start with the capitalization fees, maybe hand it to Kim -- or Tim, for some color. But bottom line is we've had very constructive conversations with global investors over the last 2.5 quarters or so. And interest remains very strong. We feel like we're in a very good position with multiple options. And we're just taking the time to evaluate what makes the most sense for us right now. Our current model of building on the balance sheet and then selling these stabilized assets has worked really well the last couple of years, and we see it working quite well going forward. I'd like to actually step back at this point and realize what we've done over the last few years, and I already mentioned it at the front end of the call, but the pipeline we've built, the capabilities we've built and the progress we've made since we embarked on this officially call it Investor Day 2023 has been tremendous. So feel great about what we're putting in front of these investors and where we're going to take it from here. But Tim may have some additional color on the capitalization piece. Timothy Arndt: Look, I think you covered it well. Happy to take other questions. I think the second part of your question dealt with clarification on the megawatts that is utility load that we're reporting out, and there's going to be -- probably 2/3 of that will be critical, so you can apply math based on those numbers. Operator: Next, we have Todd Thomas with KeyBanc Capital Markets. Todd Thomas: I just wanted to go back to the discussion on market rent growth, and I appreciate some of the color and good to see the first increase in, I think, 2.5 years, as you said. Do you expect market rent growth to persist just given where conditions are at this point in the cycle? And then I know you touched on SoCal, but can you share a little bit more detail on that market and a bit of a real-time read on what you're seeing and how conditions are currently and how the market is performing relative to expectations so far this year? Christopher Caton: It's Chris. I'll start and Dan may add remarks as well. So first off, on market rent growth, one, underline the word stability. We did have a bit of growth in the first quarter is pretty incremental. And that is really a market-by-market exercise, with most markets enjoying stable to slightly rising. But with there being pockets of real strength like we discussed earlier on the call, as well as some pockets of softness like we also discussed. So I think what you should think about is our call is unchanged, but we're passing through an inflection. Rent growth is still a little bit uneven, and it's just a bit too early for broad-based and sustained growth. I'll offer a few details on Southern California. That is a market that is moving through the bottoming process. We're seeing the demand pick up. Vacancy is near a trough, but it's just a bit too early for rents to increase on a broad base. but there are pockets that are firming. Dan Letter: Yes. Let me just pile on a little bit here in Southern California. I feel like I've said this quite a bit over the last 1.5 years or so in various meetings. But I think it's really important to emphasize just how big of a market Southern California is and what are Os in these markets. We're focused on being close to the end consumer. There are 24 million consumers in Southern California. It's a $2 trillion economy down there and it's just getting more and more difficult to build down there. So the supply backdrop is really shaping up for that market quite well. And so we're -- we feel good about the projection we've made about Southern California kind of tailing the overall market by 2 to 3 quarters. That was the last question. So thank you all for joining the call. Just a big thank you to our colleagues around the world for another exceptional quarter. We look forward to seeing you all at upcoming conferences and speaking again at the next quarterly call. Thank you. Operator: Thank you. And with that, we conclude today's conference call. All parties may disconnect. Thank you.

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BK 2026 Q1 财报电话会议

Operator: Good morning, and welcome to the 2026 First Quarter Earnings Conference Call hosted by The Bank of New York Mellon Corporation. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without The Bank of New York Mellon Corporation's consent. I will now turn the call over to Marius Merz, The Bank of New York Mellon Corporation Head of Investor Relations. Please go ahead. Marius Merz: Thank you, operator. Good morning, everyone, and welcome to our first quarter earnings call. I am here with Robin Vince, our CEO, and Dermot McDonogh, our CFO. As always, we will reference the quarterly update presentation, which can be found on the Investor Relations page of our website at bny.com. I will note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. Information about these statements and non-GAAP measures is available in the earnings press release, financial supplement, and quarterly update presentation, all of which can be found on the Investor Relations page of our website. Forward-looking statements made on this call speak only as of today, 04/16/2026, and will not be updated. With that, I will turn it over to Robin. Robin Vince: Thanks, Marius. Good morning, everyone, and thank you for joining us. I will begin with a few broader comments before Dermot takes you through our financial results. Referring to page two of the quarterly update presentation, The Bank of New York Mellon Corporation has started the year with a strong performance in the first quarter. Earnings per share of $2.24 grew 42% year over year, both on a reported basis and excluding notable items. Record revenue of $5.4 billion was up 13% year over year, reflecting broad-based growth across our Securities Services and Markets and Wealth Services businesses. We delivered over 800 basis points of positive operating leverage while making meaningful investments in new products, capabilities, AI, and critically, our people and culture. Taken together, this combination of strong top line growth and significant operating leverage resulted in pre-tax margin expansion to 37% and improved profitability with a return on tangible common equity of 29%. The Bank of New York Mellon Corporation’s position at the heart of global financial markets, with platforms across custody, security settlement, collateral, payments, trading, wealth, investments, and more, supports durable financial performance for our company, enabling us to power our clients' growth as they navigate an increasingly complex landscape. While the path of global markets is difficult to predict with certainty, what is clear is that the underlying trends—higher levels of activity, greater complexity, new technologies, and a resulting need for scale, efficiency, and connectivity—are more relevant than ever for our clients. As I mentioned in my shareholder letter earlier this year, the portfolio of The Bank of New York Mellon Corporation’s businesses is unique, but it is how we are embracing new ways of working, our adoption and integration of new technologies, and our strong culture that allows us to create truly differentiated solutions. Clients are increasingly recognizing the value of holistic solutions that support the full life cycle of their activity, whether it is managing liquidity, optimizing, supporting higher trading volumes, or getting ready for the future of financial market infrastructure. Our work to operate together as one The Bank of New York Mellon Corporation, through both our platforms operating model and our commercial model, better enables us to bring the full breadth of our capabilities together in service of our clients. A good example of this from the first quarter is our work with Allianz Global Investors, one of the world's leading active asset managers. AGI has selected The Bank of New York Mellon Corporation to support optimizing their investment operating model, leveraging the breadth of our global capabilities. This integrated model will help AGI deliver exceptional experience front to back while placing AI and modern data infrastructure at the heart of their operations to enhance productivity, enable faster work, clearer insights, and better outcomes for their teams and clients alike. Another example, PayPal has selected The Bank of New York Mellon Corporation to provide institutional-grade digital asset custody, supporting their digital payments wallets, financial services for millions of users globally. And just last week, the US Treasury Department announced that they have selected The Bank of New York Mellon Corporation as financial agent for Trump accounts, the US government's investment savings initiative for children aimed at building a strong financial foundation for our next generation. The Bank of New York Mellon Corporation will manage the national infrastructure for the program and collaborate with Robinhood, which will provide brokerage and initial trustee services. These examples illustrate our strategic evolution toward deeper integration between our products delivered with the technology and scale of The Bank of New York Mellon Corporation’s differentiated platforms. Over the next phase of The Bank of New York Mellon Corporation’s transformation, one of the most significant enablers of being more for our clients and running our company better is AI, and so we felt that this was an opportune time to spotlight how we are going about AI at The Bank of New York Mellon Corporation. Turning to slide three of the presentation, as a reminder, our work to set the foundation for reimagining our company has included intentional and consistent investments in AI over the past several years. We took a very deliberate approach to AI through the lens of integration, adoption, and importantly, our people and culture. We embraced the platforms approach to embedding AI across the company, creating our AI Hub in 2023, so we could develop the enterprise capabilities, strong governance framework, and training to empower every employee to embrace AI. More than two years ago, in collaboration with NVIDIA, The Bank of New York Mellon Corporation became the first global bank to deploy a DGX SuperPOD, and in the same year, we launched Eliza, The Bank of New York Mellon Corporation’s AI platform. Outlined on page four, our vision for AI at The Bank of New York Mellon Corporation is that it is for everyone, everywhere, and everything. As is the case with many things, the key to making it work is culture. We took a people-first approach. Over the last year, we focused on broad adoption. We made Eliza available to 100% of our employees, and supported advanced learning and development through a series of training programs. This approach to enterprise-wide enablement has already allowed us to develop more than 200 AI solutions and to introduce digital employees, multi-agentic solutions that operate alongside human colleagues. In 2026, we are doubling down on depth, moving from AI point solutions to using AI to enhance end-to-end processes, reducing manual touch points, improving cycle times, strengthening control outcomes, and building more connected intelligence by linking data, workflows, and expertise to enhance the service and value proposition for our clients. On page five, we show just some of the initial outputs—tangible results of AI enablement and impact across improved business and operating performance—driving greater efficiency and product innovation. None of these metrics individually show a complete picture of AI at The Bank of New York Mellon Corporation, but taken together, they show something important: that we are systematically embedding AI in our workflows across the entire company. Already, AI is helping us increase the pace at which we innovate our technology, accelerate onboarding, improve client service, and streamline processes. In combination with our broader efforts to run our company better, AI is starting to contribute to the improved financial performance trajectory at the bottom of the page. Building on our deliberate strategy and the solid foundation we have laid over the past several years, we are confident that AI will enable us to evolve our business model and enhance how we deliver for clients. Our commitment, not just to deep AI enablement but the full reimagination of our company, combined with the role that we play in global financial market infrastructure, the breadth of our businesses, and our trusted and deep client relationships together, represents a powerful competitive advantage. Taking a step back and reflecting on the operating environment, while AI was an ever-present theme in markets over the past few months, the first quarter also presented a dynamic market backdrop. Significant volatility was driven by shifting expectations for the paths of growth, inflation, and interest rates amid geopolitical conflicts and evolving policy outlooks. Within this constantly changing environment, our diversified business model, combined with our strong balance sheet, allows The Bank of New York Mellon Corporation to serve as a pillar of strength for our clients and for global markets. Before I hand it over to Dermot, I want to take a moment to recognize our employees around the world for rising to the challenge to execute on our long-term plan to unlock The Bank of New York Mellon Corporation’s full potential for our clients and shareholders. We have had a strong start to the year, supported by increasing client engagement and continued progress on our strategic priorities. I would like to thank our clients for their trust, our employees for their commitment and hard work, and our shareholders for their continued support. With that, over to you, Dermot. Dermot McDonogh: Thank you, Robin, and good morning, everyone. I will pick up on page six of the presentation with our consolidated financial results for the first quarter. Total revenue of $5.4 billion was up 13% year over year. Fee revenue was up 11%. This included 10% growth in investment services fees, reflecting higher client activity, net new business, and higher market values. Investment management and performance fees were up 6%, primarily driven by higher market values and a favorable impact of a weaker US dollar, partially offset by the impact of the mix of AUM flows. While not on the page, I will note that firmwide AUCA of $59.4 trillion increased by 12% year over year. This reflects net client inflows, higher market values, and the favorable impact of the weaker dollar. Assets under management of $2.1 trillion were up 6%, primarily driven by higher market values and the weaker dollar, partially offset by cumulative net outflows. Foreign exchange revenue was up 49% year over year on the back of higher volumes resulting from elevated market activity and supported by new products and capabilities. Investment and other revenue was $271 million in the quarter, including approximately $135 million of investment-related gains and $50 million of net securities losses. Net interest income increased by 18% year over year, primarily driven by continued reinvestment of investment securities at higher yields and balance sheet growth, partially offset by deposit margin compression. Expenses of $3.4 billion were up 5% year over year, both on a reported basis and excluding notable items. This was primarily driven by our commitment to higher investments in our businesses, higher revenue-related expenses, the unfavorable impact of the weaker dollar, and employee merit increases, partially offset by continued efficiency savings. Provision for credit losses was a benefit of $7 million in the quarter, primarily driven by improvements in commercial real estate exposure, partially offset by changes in macroeconomic and other factors. On the back of significant positive operating leverage of 833 basis points, pre-tax margin expanded to 37%, and return on tangible common equity was 29%. Taken together, we reported earnings per share of $2.24, up 42% year over year. On to capital and liquidity on page seven. Our Tier 1 leverage ratio for the quarter was 6%, flat sequentially. Tier 1 capital increased by $532 million, primarily driven by preferred stock issuance and earnings retention, partially offset by a net decrease in accumulated other comprehensive income. Average assets increased by 2% on the back of deposit growth. Our CET1 ratio at the end of the quarter was 11%, down 89 basis points sequentially. Our CET1 capital remained approximately flat; this decrease was primarily driven by higher risk-weighted assets reflecting a single-day increase in overnight loan balances on the last day of the quarter along with higher client activity in agency securities lending and foreign exchange. Over the course of the first quarter, we returned $1.4 billion of capital to our shareholders, representing a total payout ratio of 87%, and our Board of Directors authorized a new $10 billion share repurchase program. Our consolidated liquidity coverage ratio and net stable funding ratio were 111% and 131%, respectively. Turning to net interest income and balance sheet trends on page eight. Net interest income of $1.4 billion was up 18% year over year and up 2% quarter over quarter. Like the year-over-year increase described earlier, the sequential increase was primarily driven by the continued reinvestment of investment securities at higher yields and balance sheet growth, partially offset by deposit margin compression. Average deposit balances increased by 3% sequentially, reflecting 2% growth in interest-bearing and 6% growth in non-interest-bearing deposits, and average interest-earning assets were up 2% quarter over quarter. Cash and reverse repo balances were flat. Loans increased by 6% and investment securities portfolio balances increased by 2%. Turning to our business segments starting on page nine. Securities Services reported total revenue of $2.7 billion, up 17% year over year. Total investment services fees were up 10%. In Asset Servicing, investment services fees grew by 11%, reflecting higher market values and broad-based client activity. ETF AUCA were up 33% year over year, on the back of higher market values, client inflows, and net new business. And our Alternatives [inaudible] 20%. I want to highlight that, consistent with our strategy to deliver the breadth of The Bank of New York Mellon Corporation to our clients, over 50% of the clients that awarded Asset Servicing new business in the first quarter also awarded new business to at least one of our other lines of business. In Issuer Services, investment services fees were up 4%, reflecting growth in both Corporate Trust and Depositary Receipts. I will note that for the first time in our history, Corporate Trust reached $15 trillion of total debt serviced, and we are particularly pleased with our continued market share gains in CLO servicing. Once again, the breadth of our capabilities is a powerful differentiator. Our clients clearly recognize the superior value proposition of a single provider for Corporate Trust, Asset Servicing, collateral, liquidity solutions, and more. In Securities Services overall, foreign exchange revenue was up 44% year over year, reflecting higher client volumes. Net interest income for the segment was up 20% year over year. Segment expenses of $1.6 billion were up 5% year over year, primarily driven by higher investments and revenue-related expenses, the unfavorable impact of the weaker dollar, and employee merit increases, partially offset by efficiency savings. Securities Services reported pre-tax income of $1.0 billion, a 46% increase year over year, and a pre-tax margin of 39%. Investment-related gains added three percentage points to pre-tax margin in the quarter. Next, Markets and Wealth Services on page 10. Markets and Wealth Services reported total revenue of $1.9 billion, up 11% year over year. Total investment services fees were up 10%. During the quarter, we formed our Wealth Solutions business by realigning Archer’s managed accounts solutions from Asset Servicing to Pershing. This integration further strengthens our capabilities to serve wealth advisors by adding Archer’s market-leading distribution and managed accounts expertise to deliver fully integrated end-to-end solutions across the entire wealth ecosystem. In Wealth Solutions, investment services fees were up 6%, reflecting higher market values and client activity. Net new assets were $22 billion in the quarter, representing an annualized growth rate of 3%, and AUCA of $3.3 trillion were up 14% year over year. In Clearance and Collateral Management, investment services fees increased by 19%, reflecting broad-based growth in collateral balances and clearance volumes. Average collateral balances of $7.8 trillion increased by 18% year over year, reflecting higher market activity and growth on the back of a robust environment for financing with US Treasury securities, strong money market fund balances, and increasing client demand for non-cash collateral. Ahead of the central clearing mandate for US Treasuries, we are engaging with central counterparties and our clients. We are delivering innovative solutions from across The Bank of New York Mellon Corporation that help them find new ways to access the market, clear transactions, and manage collateral and margin. In the quarter, we also saw strong growth in clearing volumes reflecting net new business wins, particularly in international clearance and from expanding wallet share with existing clients doing more with The Bank of New York Mellon Corporation. In our Payments and Trade business, investment services fees were up 5%, primarily reflecting net new business. Payments and Trade delivered another solid quarter with continued sales momentum, including numerous multi-line-of-business wins, particularly with FX and Global Liquidity Solutions. Net interest income for the segment overall was up 15% year over year. Segment expenses of $937 million were up 6% year over year, primarily driven by higher investments, employee merit increases, higher revenue-related expenses, and the unfavorable impact of the weaker dollar, partially offset by efficiency savings. Taken together, our Markets and Wealth Services segment reported pre-tax income of $961 million, up 18% year over year, and a pre-tax margin of 51%. Turning to Investment and Wealth Management on page 11. Investment and Wealth Management reported total revenue of $825 million, up 6% year over year. Investment management and performance fees were up 6%, primarily driven by higher market values and the favorable impact of the weaker dollar, partially offset by the impact of the mix of AUM flows. Segment expenses of $726 million were up 2% year over year, primarily driven by the weaker dollar, employee merit increases, and higher investments, partially offset by efficiency savings. Investment and Wealth Management reported pre-tax income of $90 million, up 43% year over year, and a pre-tax margin of 11% versus 8% in the prior-year quarter. As I mentioned earlier, assets under management of $2.1 trillion increased by 6% year over year. In the first quarter, long-term active flows were flat, reflecting net inflows into fixed income and LDI strategies, and net outflows from equity strategies. We saw $10 billion of net outflows from cash and $7 billion of net outflows from index strategies. Wealth Management client assets of $339 billion increased by 4% year over year, reflecting higher market values. Page 12 shows the results of the Other segment. I will close with an update on our financial outlook for the year. In light of our strong performance in the first quarter, we are raising our outlook for total revenue, excluding notable items, for full year 2026 and now expect approximately 6% year-over-year growth. That includes our expectation for full year 2026 net interest income to be up approximately 10% year over year. We expect full year 2026 expense growth, excluding notable items, to be at the top of the 3% to 4% year-over-year growth rate range that we provided in January. We continue to expect a quarterly tax rate of approximately 23% for the remaining quarters this year. I want to leave you with three important points. First, we delivered a strong financial performance in the first quarter and continue to serve as a pillar of strength for our clients amid a dynamic market environment. Second, the combination of our unique portfolio of businesses, our role in global financial market infrastructure, our deep and trusted client relationships, our diversified business model, and the strength of our balance sheet represents an exceptional client value proposition and a powerful competitive advantage. Finally, what truly differentiates The Bank of New York Mellon Corporation today is our ability to mobilize all of the above for the benefit of our clients and shareholders. With that, operator, can you please open the line for Q&A? Operator: As a reminder, we ask that you please limit yourself to one question and one related follow-up. We will take our first question from Brennan Hawken with BMO Capital Markets. Brennan Hawken: Good morning. Thanks for taking my questions. I wanted to start with deposits. The deposit trends were stronger than expected. I was hoping maybe you could speak to quarter-to-date trends and around betas. Specifically for the euro and pound deposit betas, given we have hikes now in the forward curve. How should we be thinking about the betas for those currencies? Thanks. Dermot McDonogh: Okay. Thanks for the question, Brennan. Let me start with overall balances and trends. As you will recall from our call on January 13, we finished last year with strong momentum on deposits and, with the macro uncertainty and just how events of the quarter played out, we saw clients holding higher levels of liquidity. As a consequence, you see the overall balance being a little bit elevated, and then you saw the mix between interest-bearing and non-interest-bearing. We attracted more non-interest-bearing than anticipated. Overall, on the US dollar side, it really was the balance and the mix that drove the NII outperformance in the quarter. Within particular businesses, it really was in Issuer Services and Asset Servicing specifically and Corporate Trust that were the two businesses that saw the notable benefit. As it relates to the non-dollar side of things, euro and sterling is really a smaller part of our overall portfolio. It only accounts for roughly 25% of the overall book, so it is not a meaningful contributor to NII. For euros and sterling, the betas roughly peaked at 80% on the way up, and for dollars and non-dollars, we expect betas to perform in a symmetrical fashion going up as well as going down. That is how we see it. Brennan Hawken: Great. Thank you for that. And then on, I guess, the artist formerly known as Pershing, we had really robust year-over-year both DARTs and AUC growth, but the revenue growth was not quite as robust as those two metrics. So could you maybe help unpack the primary drivers of the revenue growth and help us understand how we should model that going forward? Dermot McDonogh: Wealth Solutions, as we now are going to call it going forward, will be as good as the artist formerly known as Pershing. You saw net new asset growth in the quarter of roughly 3%, and I would just like to reaffirm our belief and commitment that we can grow the business’ net new assets at mid-single-digit growth over the coming years. Also, for the first time in a few quarters, it is pleasing that we have not had to talk about a deconversion, so it was a relatively clean quarter with lots of volume. With macro uncertainty, we did see a lot more volume as clients were rehedging and rebalancing their portfolios, so it was more of a volume-driven quarter. To highlight the point about Archer, we really feel that Archer, in Wealth Solutions, will be able to drive more capabilities and more product innovation for our clients. We feel really good about the outlook and what Archer can do in the Wealth Solutions space. Brennan Hawken: Great. Thanks for that color. Operator: We will move to our next question from Alex Blostein with Goldman Sachs. Alex Blostein: Hi, good morning, everybody. Thank you. Obviously very strong performance in the quarter underscoring the benefits of various verticals within The Bank of New York Mellon Corporation, and part of that, I guess, is sort of transitory. I was hoping we could unpack that both on the fee side and NII—perhaps how much of the benefit the elevated market volatility contributed this quarter to think about the right baseline? And then for NII, the non-interest-bearing performance was obviously quite strong, and it feels like in your guide you are largely kind of mean reverting that. It does not sound like you are assuming much of that is going to stick around, but I was hoping you can unpack what is baked into the NII guide and the drivers. Thanks. Dermot McDonogh: Okay. For your first question—that was a lot of questions, Alex—here is what I would say. Robin spoke about it well on Squawk Box this morning. We are setting the firm up for a diversified revenue stream and durable performance. What was very pleasing from a CFO lens this quarter was the diversity of the revenue stream, the mix between fees from balances and fees from volumes. There was a lot of uncertainty in the market over the course of the first quarter, and our clients were doing a lot of rebalancing, so we were there to help and support that. Volatility can be a good enabler for The Bank of New York Mellon Corporation in terms of the business model because it generates volumes. You saw that across all of our platforms, and then you saw the mix was roughly 50/50 between balances and volumes, which was pleasing to see. The balance between equities and fixed income was also pretty balanced. Overall, it was very pleasing to see in terms of the backdrop. To be honest, we hope that continues, and we have scaled platforms that we have invested in over the last couple of years. With the record sales quarter, you are beginning to see the proof points of clients coming to the platforms wanting to do more with us across multiple lines of business. It really is clients doing more against a macro backdrop that was uncertain that generated the volumes. Overall, very pleasing quarter. As I said in my prepared remarks, there are a few one-offs; we particularly highlighted that in Securities Services, which is a 3% contributor to the margin of 39%. But if you back that out, it is a 36% margin—still a pretty exceptional quarter for that segment. Alex Blostein: Got you. And then just a follow-up on non-interest-bearing and what you are assuming is sort of temporary deposits given the volatility that could reverse itself over the next quarter or so, and how does that inform your 10% NII guide? Dermot McDonogh: We expect deposit balances to revert to more seasonal patterns from here. We expect Q2 to be moderately down from Q1. Q3 is usually our weakest quarter, with Q4 being our strongest quarter. Over the balance of the year, we expect balances to be modestly higher relative to 2025. We have run a bunch of scenarios—different rate environments, different levels—take the feedback from the businesses, and that gives us confidence around the 10% guide. Alex Blostein: Perfect. All right, thank you. I will leave it at that. Marius Merz: Thanks, Alex. Operator: We will take our next question from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: Good morning. Maybe, Dermot, following up on your response to the previous question, I want to make sure we get this right. Very clear on deposit and NII outlook. On fees, the guidance implies like 2% to 3% growth for the rest of the year. Is that right? What are the puts and takes—do we need a materially better or worse macro for the 2% to 3% to be much higher or lower? What are the market assumptions you are making in the guidance for the rest of the year on the fee revenue side? Dermot McDonogh: It is a tricky question you ask, Ebrahim. If you go back to January 13, when we gave the guidance for full year, we went with 5% on top line growth. When I was pressed on that, we said a little bit higher on NII, a little bit lower on fees. We are one quarter into it. Under the hood, we said this on the call in January—we continue to believe that we are grinding organic growth higher than where it was. It was 3% in 2025. You will remember way back to 2022 it was flat, and 2023 it was 1%. We are very focused on it and, as Robin said in his remarks, record sales quarter this year in the first quarter and two record sales quarters last year. That is going to drive into the organic growth. We feel pretty good about the outlook for the year, but we are only one quarter in, three quarters to go, a lot of uncertainty, so we are not really changing our outlook on the fee at the moment. Ebrahim Poonawala: Got it. And then a bigger picture question for Robin. You talked about the use of AI and other efficiency improvements at the bank. I would argue there are few banks deploying AI more efficiently than The Bank of New York Mellon Corporation. Is there a risk that you are underinvesting? When we look at the pre-tax margin, could you be doing more in terms of investing in the business using some of these revenue tailwinds? There are a lot more productivity boosts the firm should see due to AI. Why not invest more to further improve the growth algorithm for the firm? Robin Vince: Sure, Ebrahim. Let me split it in two. First, investments versus operating leverage: it is very important to do both. We are investing in growth, and we are driving positive operating leverage and margin expansion. We have said we are going to do that consistently. We are setting ourselves up for peer-leading levels of operating leverage while also investing in the long term. Sometimes people ask whether we are investing enough. The flip side is whether we have full control of expenses if the environment changes. We are very careful about both—leaning in when there is space to do so, but not setting ourselves up with such expense momentum that it becomes problematic if we want to calibrate later. We feel like we are doing that well. On AI, we have been investing for three years in a meaningful way. We have a lot of investment heft with our $4 billion technology spend. Five years ago, that spend was heavily geared toward infrastructure as we rewired our underlying infrastructure to build more modern technology and applications on top. Now we have the gift of AI exactly when we are leaning into those capabilities. We wanted to give you a sense of breadth. We are not going to sit here and talk about all the leading-edge AI things we are doing, but we do want to show the breadth so you can sense it is everywhere. We have 218 AI solutions in production right now across the company—up four times year over year. We have digital employees working side by side with our teams, and we have a lot in pilot. We feel very good about our AI investments. If we felt we needed to do more, we could and we would. Ebrahim Poonawala: Got it. Thank you both. Operator: We will take our next question from Mike Mayo with Wells Fargo Securities. Mike Mayo: Hi. I guess AI is the topic of the day. You brought it up front in the deck—AI for everyone, everywhere, and everything. You talked about doing this for three years and you have 200 solutions. You said you are starting to see the financial benefits. It all sounds deliberate, thoughtful, and clear, but the big question is: what will the financial benefits be? What are the financial benefits now, and in five years what are your financial expectations as the end result of all these efforts? Robin Vince: Sure, Mike. It is a critical topic. We see AI as a catalyst for real transformational change. We have said from the beginning that the technology would move incredibly rapidly and scale in an exponential way. We are seeing that now. Adoption and integration risk being the limiting factors. As a user of AI, it is incredibly important that we embed it and have our people pulling it in, as opposed to pushing it away. Foundational investment in culture and technology allows it to be the superpower that it is and a capacity multiplier for our people. We would like a 47,000-person company to deliver like one many times larger. Our $4 billion technology spend gives us the scale to deploy AI properly, which is incredibly important. If you are a smaller spender, you risk lock-in to someone else’s ecosystem and become subject to token price wars and other unpleasant consequences. To your question, we think the financial outcomes show up in different ways. First, productivity for our people—47,000 people doing more and delivering more for clients—will show up over time in revenue per employee and pre-tax per employee. The progress so far has been driven by the platforms operating model, rewiring, and the commercial model; the next leg of growth is the maturing of those programs, powered by AI wrapped around everything. Second, capabilities and features of our software and platforms as we deliver for clients—we are already seeing that with client wins. Our AGI win in Europe—an inside look at what we are doing on AI made them excited about joining us; they saw AI was not just for our productivity but for theirs, viewing us as an extension of their operating model. Third, there are things we can do in an AI-enabled world that did not make sense before—things at the edge of profit, things clients asked for that did not warrant resources. With AI creating an abundance of capacity, we can start doing things that previously sat below the line. So we see a triple play: capacity creation, revenue enablement, and expanding the firm’s perimeter. Collectively, those excite us for the future. It is early days, and that is fine. Mike Mayo: Understood, and it is clear you are in the debate—are banks, or The Bank of New York Mellon Corporation, an AI beneficiary or victim—obviously you are saying beneficiary. But the other side is the bad actors with these AI superpowers. Bank CEOs have been summoned to DC due to new tools out there and the big risk of cyber. I have a tough time dimensioning the new cyber risk given the new AI tools. How should investors think about this type of risk? How do you think about that? Robin Vince: It is an important question. Cyber defense is something that, as one of the world’s leading financial institutions and a GSIB in the US, we are clearly very focused on. Defending our clients and our role in the financial system has been important for decades. As the technology evolves, so do the defenses. This is a team sport—doing it with AI providers and other technology partners is incredibly important. We have Mithos in-house—we are running it—so it joins the team of defense for us, as does the early access preview capability that OpenAI announced a couple of days ago—again joining the team. AI is a superpower, and it can be used for good or for evil. We are pulling the superpower into our environment to use for good in order to defend ourselves. We view this as an entirely predictable evolution of technology on an exponential curve—there will be step functions. We have accustomed ourselves to this acceleration and work constantly to stay ahead of the curve. It goes back to culture, humility, and being very focused on our role in the system. All of us have to be vigilant. As an investor, think about this across all industries, not just financial services. Bad actors can use AI in bad ways across industries. One of the privileges in financial services is that we have been alert to this topic for a long time. Operator: We will take our next question from Analyst with Morgan Stanley. Analyst: Hey, good morning. Very clear message on AI. It sounds like with the investment spend already in the run rate and a lot more of the benefit to come, there is actually a lot more benefit here on the expense side. You are already at a 37% margin even before the full benefit of the platforms operating model. Is the rationale for keeping the medium-term targets at 38% plus/minus that there may be some of these economics you have to share with your customers, and that will get you more market share in the future? Dermot McDonogh: I will take a stab at that first. It goes back to one of the previous questions about investing in capacity. We just updated our medium-term targets in January. We are one quarter into that. The medium-term targets were based on a three- to five-year horizon, and we feel good about where we are on the decade-long journey. We are continuing to invest, and we are continuing to harvest efficiencies. We think the margin targets and the ROTCE targets that we gave in January were stretch for the firm, notwithstanding the Q1 we have experienced. It is too early to say. If we see opportunities, like Robin said on AI, we may invest more. We are at the high end of our guide for expenses this year. We believe we have earned credibility with the market on being financially disciplined and good stewards of the expense base. It is something that we actively review continuously. If we see more opportunity to invest, we will, and at the right time we will update you on how it is turning out for the medium term. Robin Vince: Let us talk for a second about where the value accrues, because this is quite important. Over the long term, we see great value creation with AI, and it is going to accrue to clients, to employees, and to shareholders as well. We think AI over time becomes table stakes and ubiquitous, and to some extent, you are right—some of it will get priced out through the value chain. But companies that have an edge on using and deploying the technology will have an advantage, and there is a benefit to being a bit ahead in terms of product development and cost of doing business. We see this early-adopter benefit and believe we are one. Strategy matters here—three things. First, culture is an enabler in AI. We have made a lot of investment, and having a team at The Bank of New York Mellon Corporation who see the power of AI and want to use it is a meaningful advantage. Second, our platforms operating model and commercial model laid the groundwork for being a better adopter of AI, because we brought like things together and did the rewiring, data organization, and other work that is incredibly useful when deploying AI. Third, scale. Do you have the ability to manage yourself such that you are not just providing a ton of revenue to the AI companies and losing control of it? Escalation of token usage and costs—same story we have seen before with cloud. If you allow yourself to get locked in and do not have breadth of access, you take a real risk on the pricing power point you raised. For us, the “how” of AI is a strategic advantage. We made a bet on AI three years ago; so far, that has been the right strategy, and we are leaning in. We think this accrues well to our company over time. Analyst: Very clear. Appreciate all the detail. Maybe just on the capital side, given the new rules a few weeks ago, it would seem to me that The Bank of New York Mellon Corporation would benefit on the GSIB surcharge side. It is not entirely clear to me what the benefit would be on the RWA side. Can you comment on that and whether this changes how you are thinking about the capital targets? Dermot McDonogh: Thanks for the question. The recent rule is broadly favorable for The Bank of New York Mellon Corporation. Before, when we talked about it on previous calls, we gave a preliminary estimate of up 5% to 7% based on the original proposals, and now we expect flat to a modest reduction. It reinforces what we say about our balance sheet—the strength of a clean, liquid balance sheet and the low-risk nature of the balance sheet. We feel good about where we are and about the current proposals. Robin Vince: Great. Thank you. Operator: We will take our next question from Ken Usdin with Autonomous Research. Ken Usdin: Thanks. Good morning. Two environment-related questions. Given the real big sharp period-end balances, the capital ratios went down. Obviously, you have plenty of room. Assuming that being temporary, you would not have any change to your outlook for your expected total capital return for this year? Dermot McDonogh: That is correct. It was really spot balance sheet on the last day of the quarter, and that returned to normal levels on April 1. As you will see from my remarks, the Tier 1 leverage ratio—which is what we are bound by—remained steady at 6%. Ken Usdin: Okay. Also, given that it was a very volatile quarter with a lot of benefits from the environmental shift, how does organic growth feel, especially given a little bit more uncertainty out there? You spoke last quarter about trying to be better than the 3% last year. Any changes in terms of business wins and decision-making out there from your client set? Dermot McDonogh: I would reemphasize the point Robin made in earlier answers and in his prepared remarks. We saw three really nice client wins in Q1 across different types of clients, which demonstrated the strength and breadth of the franchise. I highlighted in my prepared remarks that 50% of client wins in Asset Servicing in Q1 also included awards to other lines of business. Clients doing more with us across multiple platforms is becoming more of a thing. With the record sales quarter, we feel good. We are not guiding on organic growth. It was 3% last year; it was zero four years ago, and we have been working the order book higher. We expect it to grind higher over the balance of this year. We are excited about the opportunity. Ken Usdin: Okay. Got it. Thank you, Dermot. Operator: Our next question comes from Glenn Schorr with Evercore ISI. Glenn Schorr: Thank you. When we all look at the banks, there is a lot of focus on the NDFI lending into a bunch of the funds out in private credit land. As the biggest servicer of a lot of these products, how much of lending into the funds is an integral part of the servicing relationship? Do you have any dimensionalizing of size and composition of book and how much it has grown for you? Dermot McDonogh: Our exposure from a balance sheet perspective is de minimis and well managed. We feel very good about our risk in that dimension. I would point you over to our Corporate Trust. As I said in my prepared remarks, we went through, for the first time, $15 trillion of total debt serviced, and that is where we service a lot of those clients. We feel very good about that business, the momentum, and the investments we have made. While it has been noteworthy with other banks in the news cycle over the last several weeks in the private credit space, it has not been materially showing up in our business, and there are no bumps there that I would highlight. Glenn Schorr: One other one that catches my attention is periodically you will see a certain fund or even stock get tokenized. There are a lot of investments and, I do not know, experiments being done, and I think you are investing in part of it too. Maybe update us on where we are and why—what are we doing? Money market funds I get a little bit. Why does the world need everything tokenized? What would that mean for your businesses if we do go down that path? Robin Vince: Thanks. I do not think the world needs everything tokenized. But there is no question that global financial market infrastructure is transforming and moving toward more of an always-on operating model. That is not just about blockchain technology immediately replacing traditional systems; it is about the two working in concert, and in some cases unlocking new possibilities that have not been possible before without the always-on model. We are in the business of moving, storing, and managing money, creating interoperability—all of that is what we do today. We are advising clients to use the right tool for the job. If they want to do real-time payment systems in the United States, we have real-time payments in the US. Same in Europe—they are even more advanced, which is why stablecoin usage in traditional financial markets has not taken up as much in Europe. In some emerging markets with high inflation, a 24/7 dollar-based stablecoin has advantages to sidestep inflationary friction. It is very much about the use case. Our strategy is to be a bridge and be in both places. We are doing business with traditional clients who want help with careful selection of what to do in digital assets—launch new funds, launch a new share class for digital-asset-focused investors, or Bitcoin custody for ETF providers—we announced one recently with Morgan Stanley. We are helping clients bridge to the new. New, digital-asset-native clients also need traditional capabilities—cash management, investment management, custody. A stablecoin provider would need all of those. We have invested across the ecosystem and stood up a bigger team with our head of product and innovation and digital assets to deliver against these use cases. You are right—an S&P 500 on-chain may not add as much value as bringing an asset deeper into the financial system or making an asset a lot more efficient today. S&P 500 equities are pretty efficient; money market funds work well. In loans and commodities, there are opportunities to improve and bring assets deeper into the financial system. Glenn Schorr: Sounds like evolution, not revolution. Thanks. Operator: Our next question comes from David Smith with Truist Securities. David Smith: Hi. You highlighted some big wins with clients working with you in multiple lines of business. Anything you can share on the progress in the percentage of clients with multiple products or lines-of-business relationships at The Bank of New York Mellon Corporation today versus a year or two ago, or the average number of products per client, or any metrics along those lines? Robin Vince: A couple of things, David. We set out in our commercial model to do several things. There are new products to be created; we have a lot of micro-innovation across the company that excites us because those are new opportunities. We have surprised ourselves with the number of new logos we are able to attract to the platform—about 10% of our sales were new logos in recent times, which is exciting. Dermot highlighted that half of our Asset Servicing wins were not just Asset Servicing—they also came to at least one other line of business. The blocking and tackling of delivering more of who we already are to existing clients is a big opportunity. Some stats: We had a record sales quarter in Q1 last year and another in Q2; it was a record sales year last year; we had another record sales quarter this quarter. We have had three consecutive years of year-over-year growth in core fee sales. We have had more than 60% growth in the number of clients buying from three or more businesses over the past two years. We have had a 20% annual increase in sales productivity per salesperson. All of these show traction in our commercial model. Remember, we are only 18 months into that journey; we launched it in 2024. We are excited about that. That is one reason why at the beginning of the year we aimed to grow our organic growth rate from the 3% last year, and we are very focused on growing from that. I want to add one other thing. There is an underlying theme that regular organic growth is somehow completely disconnected from the market. We push back on that for our company because we deliberately aligned our platforms over the past three years to participate in more environments and be a compounder of value largely irrespective of the environment. Of course, there are always some environments that are not great for us, but it is deliberate. We want to tap into megatrends: scaling with trusted providers, sophistication in wealth markets, private markets demand (you can see AUCA growth there), capital markets transformations, participating in digital assets, and connecting traditional ecosystems with new digital ones. Inputs to diversification: equity market values up; fixed income market values up; cash balances; issuance activity; M&A activity; private credit; public credit; volatility; transaction volumes; equity; fixed income; collateral. We have created diversified, global, strategic, recurring, durable attachment to different markets so that we can participate across them—wrapped with AI. For us, that strategy is an “as well as” relative to traditional organic growth. David Smith: Would you say that dampens the upside for The Bank of New York Mellon Corporation in a really strong market environment, or is there a way you can have your cake and eat it too? Robin Vince: We think it gives us better exposure to more markets. Take NII as a proxy—Dermot talks about cutting off the tails in NII. Out of a thousand scenarios, can we create one that is not great for NII? Sure—massively inverted curve or zero interest rates across the curve are not ideal. Those scenarios do not feel super likely right now. The same will be true in other environments. Yes, we give up some growth if equity markets are up 50% and you want to be all-in on that scenario—I would tell you to buy somebody else’s stock over ours because we represent a more diversified long-term compounding durable play. Operator: Our next question comes from Steven Chubak with Wolfe Research. Steven Chubak: Good afternoon, and thanks for taking my questions. A bigger picture question getting more attention that could impact the Wealth Solutions business, pertaining to AI and its growing adoption in the wealth space. There has been talk about the importance of greater control over infrastructure, tech stack, data, and the ability to offer more customized tools. Some believe this may compel more scale firms to transition to self-clearing models over time. Recognizing you service the largest RIAs and IBD platforms, what are you hearing about this potential structural shift that could take place over years, and how do you ensure you can keep those customers within your ecosystem? Robin Vince: It is an important question. Coincidentally, I was speaking with one of our largest clients yesterday about this. They reaffirmed how excited they were to be on our platform for the reasons you listed. They want to grow and have finite investment dollars. They want to spend on roll-ups, organic growth, and advisors—the core of their business. They do not want to spend on cyber defense and platform, nor try to compete at our scale—more than $3 trillion—in investing in core capabilities we provide. If you are a $3, $4, or $5 trillion RIA, you have your own scale. But if you are $50, $100, or $200 billion, you do not. Take AI as an example. If you go it alone, you have to pick a provider, live in their ecosystem, subject to their pricing power and models. You cannot have the cross-platform AI scale that gives you more control over deployment. There is a theme of scaling with trusted providers that applies to Pershing as it does to our other businesses. As we combined Wealth Solutions and aligned pieces for Pershing, clients continue to tell us they like scaling with us. Steven Chubak: Those are great insights, Robin. If I could squeeze in one more—double-click into Glenn’s earlier question on tokenization and implications for the ADR business if tokenized securities become more widespread? Robin Vince: People have been predicting the decline of the Depositary Receipts business for twenty years, but it is a very defiant—and for us growing—business which has performed well. Here it is really about connectivity and services: connections with exchanges and settlement rails. An AI agent cannot just turn up and offer that connectivity because providers do not want to provide that type of access. It is one thing to ask, “What was the price of the ten-year yesterday?” It is entirely different to give an agent full autonomy over how you connect to infrastructure and control assets. We think there is trust benefit we derive that is relevant in places like this. We will use AI ourselves to make the process more efficient across the lifecycle of many of our products. We are not competing with AI; we are competing with other people who use AI better than us. Operator: Our final question comes from the line of Gerard Cassidy with RBC. Gerard Cassidy: Hi, Robin. Hi, Dermot. Dermot McDonogh: Hi, Gerard. Gerard Cassidy: Two questions. First, in the Securities Services area, specifically Issuer Services—there was a sequential decline from the fourth quarter in revenues, though up year over year about 4%. What were the factors that caused that? Second, is there an opportunity for the Depositary Receipts business to pick up if international equity issuers come into the US capital markets later this year? Dermot McDonogh: On the quarter-over-quarter, Gerard, Depositary Receipts is a seasonal business. It speaks to seasonality rather than any noticeable trend. Corporate Trust, as I said in my prepared remarks, continues to grow—we are growing the revenues and margin. We are investing in the business, and we have grown the margin quite substantially over the last three years. It is the business where the platforms operating model is most mature—we are beginning to see the most benefits. It is three years in the model. We like what we see in terms of leadership, technology investment, and how we are showing up for clients. It is not an accident that we went through $15 trillion in Q1 in terms of total debt serviced. Overall, great momentum in that part of the world, and we expect it to continue. Gerard Cassidy: Thank you. And then, Robin, coming back to the AI commentary—can you frame out when AI becomes ubiquitous to your business as well as others? If you turn back the clock and look at the introduction of the internet or digital banking after the iPhone, how long does this take to ramp up AI so that five or ten years from now we say it is just normal operating business and something that everybody is doing? Robin Vince: I think the answer is that it has to be a lot less than those time frames for it to become ubiquitous in a company. If you do not make it ubiquitous inside those time frames, I do not know how you are going to keep up and compete. It is such a powerful technology and accelerating so quickly—we are talking about 10x capabilities in many cases. If you are behind the 10x curve by any meaningful period, you will be in trouble, which is one reason we are so focused on it. You have to make it ubiquitous, which goes back to culture, integration, and deep embedding—our principles at this point. We aim to make it well inside those time frames. Gerard Cassidy: Thank you. I appreciate that. Operator: That does conclude our question-and-answer session for today. I would now like to hand the call back over to Robin for any additional or closing remarks. Robin Vince: Thank you, and thanks everyone for your time today. We appreciate your interest in The Bank of New York Mellon Corporation. Please reach out to Marius and the IR team if you have any follow-up questions. Be well. Operator: Thank you. This does conclude today’s conference and webcast. A replay of this conference call and webcast will be available on The Bank of New York Mellon Corporation Investor Relations website at 3 PM Eastern Time today. Have a great day.

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HOMB 2026 Q1 财报电话会议

Operator: Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. First Quarter 2026 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. Company presenters will begin with prepared remarks and then entertain questions. Please note that if you would like to ask a question during the question and answer session, please press star then 1 on your touchtone phone. If you decide you want to withdraw your question, please press star then 2 to remove yourself from the list. The Company has asked me to remind everyone to refer to the cautionary notes regarding forward-looking statements. You will find this note on Page 3 of their Form 10-K filed with the SEC in February 2026. At this time, all participants are in listen-only mode. This conference is being recorded. If you need operator assistance during the conference, please press 0. It is now my pleasure to turn the call over to Donna J. Townsell, Director of Investor Relations. Thank you. Good afternoon, and welcome to our first quarter conference call. Donna J. Townsell: With me for today's discussion is our Chairman, John W. Allison; John Stephen Tipton, chief executive officer of Centennial Bank; Kevin D. Hester, president and chief lending officer; Brian S. Davis, our chief financial officer; Christopher C. Poulton, president of CCFG; and Scott Walter of Shore Premier Finance. Our first quarter sets a strong tone for 2026. Results demonstrate sound expense control, consistent operating performance, and attractive returns, including record-setting metrics of book value per share of $22.15 and tangible book value per share of $14.87, which is a $1.72 per share increase year over year for a 13% increase. CET1 at 16.7%, leverage of 14.3%, and Tier 1 capital of 16.7%. In today's economic environment, that is a meaningful accomplishment, and our team is pleased to walk through the quarter's results with you. Our opening remarks today will be from our Chairman, John W. Allison. John W. Allison: Thank you, and welcome to Home Bancshares, Inc. for the first quarter 2026 earnings report to shareholders. Thank you for joining us today, and I think the headline and the quotes pretty much summarize the first quarter. I want to thank our team for getting us off to a great start in 2026. For those of you who are not already Home shareholders that are interested in a better understanding of Home, I think it is important that you look at the strength of the balance sheet, couple that with the monthly and quarterly consistent level of performance over the last several years as primarily showcased by the last five quarters. The prior year has reminded us of the highest interest rate cycle in the early eighties, where almost all banks struggled because of poor balance sheet management, and the same story has been even more visible today, i.e., lack of liquidity by investing in long-term securities trying to stretch for yield. I am proud of Home. We did not suffer those problems during that time and were reporting record earnings while others were struggling. S&P Global just ranked Home's performance for 2025 as number two of all banks in the U.S. over $10 billion. We are honored by this elite ranking by one of the world's best and most respected experts. We were barely edged out of the number one position last year. Maybe we will get it this year. We are happy to have completed the merger with our acquisition of Mountain Commerce and look forward to a successful combination. Due to the back-office computer upgrade that was already in progress before Mountain Commerce, we will not be able to start converting Mountain Commerce until November. As a result, the MCB anticipated savings will not be realized until probably late 2026. Once accomplished, we believe our new partners can soon begin helping us to continue the outstanding performance that Home Bancshares, Inc. is known for in the U.S. and worldwide. Home is proud of our reputation—one of the strongest, safest, most conservative, and best performing banks in the world. We will continue to try to make our shareholders proud and happy to be part of this outstanding company. We know who we work for, and that is our shareholders. If you loan money, we all know problems can and will arise from time to time that have to be worked through. We have a $110 million Texas credit that we decided to place on nonperforming status this quarter. This is the same credit we have been talking about for a year and a half or two years. The credit remained current until this quarter. It has been one we have been monitoring intensely for about eight months. We entered into a short-term forbearance agreement with multiple deadlines and requirements. We are advised by legal counsel not to discuss in depth. I can say we are either going to get paid off or we will liquidate the existing collateral. We do not anticipate any additional loss, but if things were to result in some loss, Home's story puts us in a position to deal with whatever comes. Because of the conservative balance sheet, we are running right at $300 million in loan loss reserves—one of the highest reserve percentages in the world. Couple the strong reserves with a consistent quarterly pretax, pre-provision net revenue of $150 million to $160 million, and we are confident in our ability with whatever happens and do not expect this loan to have any major impact on earnings, if any at all. It is our belief that there are more than sufficient assets and personal guarantees to properly resolve this issue. I am pleased with the results comparing Q1 to Q1 last year. The first quarter only had 90 days, and if we had the two extra days in a normal quarter, plus just a little touch of wind, we would have been even stronger. We had no wind this time. This quarter, we got zero wind, Brian. You always come up with wind. You did not come up with any juice this time. Well, we did have that FDIC assessment, but we got a reduction. Okay. Well, we had to write off the balance now, so that is evident in the noninterest income category being the lowest since December 2024. Maybe next quarter will be the best. On M&A, I want to congratulate the administration and the Fed along with the Arkansas State Bank Department for the fast approval process. The speed of approval may possibly give time for another deal this year. We are certainly in the market and looking for another good fit. We continue to repurchase stock as the volatility of an uncertain world—with a war count that makes it uncertain—has provided opportunities for us to purchase more recently. That is before we were in a blackout period. However, we did file our normal 10b5-1 for this time. If the volatility continues, we will be very active on the repurchase side. I think we have essentially bought back, if not all, of the shares issued in the Happy Bank transaction, and I will endeavor to do the same for the Mountain Commerce Bank transaction, particularly if volatility continues to create opportunities. The repurchases will take some time, but once MCB is converted on our system, the additional share reduction should have a positive impact on earnings. We are being very careful on the loan side because of the uncertainty of the war, the consumers, business, asset classes, and what this cycle may ultimately evolve into. Talking heads have all said rates are coming down, but we have cautioned that possibly they will go back up before they come down. Inflation is not dead. Let me say that again. Inflation is not dead. And as Jamie Dimon would say, that is a major cockroach in the mix. The question is how high and how long do they remain high? It depends on how aggressive the Fed is going to be with escalating interest rates to try to get a handle on inflation. Remember the late seventies and the early eighties? 21%. It is not going to be that high, but it has to be corralled. Christopher C. Poulton, who runs our New York office, has a great saying: the year of the lender is followed by the year of the collector. I think our early Texas experience confirms some of Chris' statements. I think it is a time to be very careful. The normal structure of some asset classes that worked in the past may not work today. It is our job to watch and hopefully recognize in advance these loans that we think may be infected with what Jamie Dimon would say are cockroaches. You will hear from Christopher C. Poulton today about his attitude on private credit and the changes made because of it. His call on private credit was outstanding. The good news—market pricing on acquisition deals is more in line with the correct value and slows the shareholder dilution at least for a while. One of the CEOs that did a fairly flagrant—delusionary may be the word—trade sometime back came up to me at a bank conference and said, “I am here to get my butt chewed out.” And I proceeded to do just that. Then I gave him a hug, and we discussed the pros and cons and the impact of the damage done to long-term loyal shareholders, and agreed that dilution is not the friend of the shareholder. Enough said. With all the attention that dilutive transactions are getting, maybe the publicity and management embarrassment has slowed the shareholder damage. At least, I certainly hope so. I hope it is finally the start of a sea change that forces management to do the right thing for the shareholders. Donna, great quarter. I am pleased with the strong continuation of Home's earnings. I will hand it back to you, and since I have teed up Chris, let us go to Chris first. Let him comment and turn it forward, and then we will go to Steven and Kevin and Brian, and back to you to wrap up. By the way, you all need to know Donna takes a pen away from me and gives me a rubber ball to speak with so that way I do not make any noise. So she stole my pen and gave me a rubber ball. So thanks, Donna, for looking out for me. Donna J. Townsell: My pleasure. Okay. Sounds good. Thank you, Johnny. Up next, we have a report on CCFG from Christopher C. Poulton. Christopher C. Poulton: Thank you, Donna. Today, I will provide a brief update on CCFG's first quarter, and then, as Johnny said, I will share some perspectives on the private credit market. During Q1, we grew the portfolio to approximately $2.1 billion. This represents roughly a $60 million increase supported by $370 million in new loan production. Loan production remains steady, and this number is in line with prior year levels. Payoffs for the quarter totaled just under $200 million, which is also consistent with historical averages. We do expect slightly higher payoffs in Q2, though I think our pipeline should allow us to replace those balances either this quarter or the next. Over the past several years, I have discussed declining balances in our corporate lending portfolio. This is an appropriate time to provide some additional context, particularly in light of recent news around private credit. CCFG has long participated in the private corporate credit market. Our exposure has varied over time, but we have maintained a consistent presence and have long-term experience in the space. Our private credit balances peaked at just under $500 million in 2022, and today outstandings are $87 million. That is a reduction of over 80% in the past three years. Why did we make the choice to reduce our private credit exposure? Beginning in 2023, we observed several trends that influenced this decision. First, we saw new bank entrants. As some banks looked to reduce their reliance on commercial real estate, many chose to lend into the growing private credit space through participations in structured facilities. This led to broad yield compression across the private credit market and, as often happens, some loosening of credit structures and underwriting standards. At the same time, we saw significant equity inflows from individual investors or retail investors into these sponsored vehicles. We have seen this movie a few times before, and we have not always enjoyed the ending. We have historically maintained an intentional focus on the shorter-duration position—typically under three years—and as a result, we were able to actively exit credit facilities as they reached the end of their reinvestment period. In total, we exited eight corporate lending facilities through repayment during this time. Our remaining exposure is limited to a few facilities, primarily within AA-rated structures. Our attachment point is approximately 58% of par value of the underlying loan, which provides 40% sponsor equity support beneath our senior position. While market dislocation often creates opportunity, we believe it is still early in the cycle. As a result, we are remaining cautious, and at present, our bias is toward further reduction while continuing to monitor this closely. With that, Donna, I will turn it back to you. Donna J. Townsell: Thank you. Great call, Chris. Thank you for keeping your eye on the ball with private credit, Chris. Next, we will hear a few words from John Stephen Tipton. John Stephen Tipton: Thanks, Donna. Chris, we appreciate your approach and discipline over the last eleven years with us. As Johnny mentioned, 2026 was a good start to the year: $118.2 million in net income, a 2.09% return on assets, and a 16.56% return on tangible common equity. Q1 earnings were in line with the prior quarter despite two fewer days, and were up $3 million or 2.6% from 2025. The reported net interest margin was 4.51%, down 10 basis points from Q4, as there was zero event income in Q1, and up seven basis points from the same period a year ago. The core margin, having no event income, was 4.51% versus 4.56% in Q4. The overall loan yield declined by 15 basis points to 7.08%, while interest-bearing deposit costs declined by 12 basis points to 2.35%. Total deposit costs were 1.83% in Q1 and exited the quarter at 1.82%. Deposit balances increased $258 million driven by all of our Florida regions. I would expect some headwinds in Q2 from tax payments, but we are pleased to start the year strong. A highlight from the quarter was that noninterest-bearing balances grew by $126 million to almost $4 billion and now account for 22.5% of total deposits. As we typically see in Q1, loan production softened coming off of a very strong fourth quarter. We had total loan production of $917 million with over half of that coming from the Community Bank footprint. Switching to capital, we repurchased 507 thousand shares of stock during the quarter for a total of $1.314 billion, and as Johnny said, we will continue to be active with our share repurchase plan. Capital levels continue to build with common equity tier 1 capital ending at 16.7% and total risk-based capital at 19.5%. Lastly, we are thrilled to have the Mountain Commerce employees, customers, and shareholders on board and look forward to growing the Tennessee franchise for Home. With that said, I will turn it back over to you, Donna. Donna J. Townsell: Thank you, Steven. And to close out our prepared remarks, Kevin D. Hester has a lending report. Kevin D. Hester: Thanks, Donna. Given our strong showing in 2025, it could be easy to look at this quarter as boring. I think that shows the high bar that we have set for ourselves, because any quarter that posts a return on assets of 2.09%, maintains solid asset quality, and is an earnings beat over the same quarter a year ago is not an easy task and should be inspiring. As I anticipated last quarter, ending loan balances dropped by a little over $50 million, but it happened very late in the quarter, which resulted in average loan balances actually being up $174 million on a linked-quarter basis. I see this downward trend continuing in the legacy bank into the second quarter because Q2 and Q3 projected payoffs are very high. The MCB acquisition will, however, add over $1.4 billion in loans to the balance sheet. Based on my meetings with their lenders, I expect them to settle into our credit culture quickly and be accretive to loan production in short order. Johnny mentioned the nonaccrual of the Texas C&I credit that we have been wrestling with since 2024, and this increased nonaccrual balances significantly. But we have made recent progress with the executed forbearance agreement, which leads us to a couple of ways to exit this credit during the next quarter or two. We are continuing to work with the same small set of issues that we have been dealing with for a while now. We took our medicine in 04/2024, but maximizing the exit sometimes takes more time and effort than you would like. It is wonderful to have the level of capital and reserves that we have, which allows you to maximize recovery on this limited set of problems. To that end, criticized assets were flat on a linked-quarter basis and early-stage past dues were below 50 basis points. Even with the large increase, the reserve coverage of nonperforming loans is still over 160%. As a point of reference, our loan loss reserve would cover 15 years of our historical charge-offs if you use the last five years of average charge-offs as a base—and that base includes the large 04/2024 Texas cleanup quarter. There is nothing wrong with a workmanlike quarter where you meet expectations. I expect that a majority of banks would trade results with us. On that note, Donna, I will send it back to you. That is accurate. Donna J. Townsell: Kevin, thank you for that report. Before we go to Q&A, does anyone have any additional comments? John W. Allison: Well, I thought about deposits. We had good deposit growth, and then tax time comes up. I think I said the same thing last year. It is good to have real customers. That is right. And we do have real customers, as evidenced by the tax checks we are seeing go out right now. That is good and bad, but they are our customers. They are not transactional. They are relationships. So I am proud of that. We will take a little up and down business, Kevin. I mean, Steven, you grew up. John Stephen Tipton: I agree 100%. John W. Allison: I am pretty pleased overall. Brian, you got any comments on the quarter? Brian S. Davis: I agree with you. I am pleased with the quarter. There is not really any noise to it, so it is just kind of good core earnings. John W. Allison: That is really it. We just kind of rolled on from what we have been doing. I think we have said in the past, we need more assets, and that is what Mountain Commerce has done for us. We have been consistent. Our earnings have been consistent quarter after quarter through this process, and we do need more assets. Right? So we will get this under wraps and Steven and Bill will get the savings out of Mountain Commerce. We will see that come to the bottom line, and maybe we will have another deal before then. So, Donna, I will let you have it. By the way, you all need to know Donna takes a pen away from me and gives me a rubber ball to speak with so that way I do not make any noise. So she stole my pen and gave me a rubber ball. So thanks, Donna, for looking out for me. Donna J. Townsell: My pleasure. We will now open the call for questions. Operator: Thank you. If you would like to ask a question, please press star then 1. When prepared to ask your question, please ensure your device is unmuted locally. Our first question comes from Stephen Kendall Scouten with Piper Sandler. Your line is open. Please go ahead. Stephen Kendall Scouten: Good afternoon, everyone. Appreciate the time. I guess, Johnny, maybe if you can talk a little bit more about how the progress is going to acquire even more assets on top of Mountain Commerce. I mean, like you said, your returns are phenomenal, so it just feels like you need to be able to multiply that on a larger balance sheet. What have conversations been like and how aggressive would you be? And within that, would you ever think about loosening—the triple accretive mantra—to get a deal done? John W. Allison: I think we hold pretty tight to our philosophy around here. My fear is they will say, “Well, he lied.” I can hear the market saying, “Oh, he lied. He broke it. He diluted the deal.” So I just do not believe in doing that. I am the largest individual shareholder, and I am not interested in diluting myself. I think it hurts our shareholders. You know my philosophy on that. We stretch as much as we can on the trade, but people have joined this company because we do not dilute, and if I diluted now, I think it would be kind of—as I am getting older in my career—people would say, “He got weak and gave up.” I have not as of yet, and I think it is known when we are talking to a prospective seller: we say, we do not dilute. We need you to understand we are not going to be your highest price. But if you are going to sell the stock tomorrow, it does not matter—just do a deal and the buyer dilutes the hell out of himself. If you sell stock tomorrow, it does not matter, just get out and get going. But if you are going to ride with them for a while, it makes lots of sense not to do a dilutive deal. So if you want to hold the stock and keep it for a period of time, I think our sellers appreciate the fact over the years that we have not diluted. I know there is another deal out there right now they are getting bid up on, but I am not going to bid up on it. We will bid it to the maximum we can bid it, and if we do not get it, we do not get it. A lot depends on the seller—what the seller wants to do. Do they want to stay and be part of it, or do they want to go to the house? If they want to go to the house, just get the biggest best price and sell the stock tomorrow. Otherwise, if you want to be in it for a period of time, you need to have a good partner that is not going to dilute you. I know I rambled a little bit, Steven, but anyway. Stephen Kendall Scouten: That is helpful. And in terms of the pipeline of conversations, what is that like? We have not seen as many deals here in the first part of the year get announced. Are sellers just kind of not interested because the environment is pretty good? Or is it just the volatility in the stocks? What are you seeing in terms of conversations? John W. Allison: There are conversations going on—not only with us, but elsewhere. Bankers have called us and said, “Hey, what about this and what about that?” I said, we are not ready right now. Let us get Mountain Commerce, get our arms around it, and then we will be ready to go. But we are having conversations. At a bank conference recently, we ran into a couple of people, and I said we ought to talk sometime, and they followed up since then. Just a conversation in a bar. I said, “Yeah.” They were sitting at one table and said, “We will visit sometime.” That brought a banker out of the woodwork to talk to us about these two possible options. I actually think people are embarrassed to dilute the hell out of the shareholders right now. They have been called out for the dilution, and we see what has happened to the market prices of bank stocks. We went from 22.5x projected earnings to 11x earnings, or 10.5x. Where did the money go in bank stocks? My contention is we ran all the good investors out by beating them up—dilute, dilute, dilute. I want to get back to the old days where we were 21.5x earnings, and everybody was happy. Everybody made lots of money. It is a different world now, and I think it is directly a result of the dilution. Stephen Kendall Scouten: Valuations are crazy. We have to start calling you homebankai.com or something like that. One other question is around loan yields. There was a pretty big move in the loan yields this quarter. Can you give some color on how much of that was core decline versus where new loan yields are coming on, and how much the NPA affected reported loan yields quarter over quarter? John Stephen Tipton: Hey, Steven. This is Steven. First, on the impact from the nonaccrual—we do not have any of that in our margin for the quarter. Had we had it on the books, the impact was about 5 basis points to the loan yield and about 4 basis points to NIM. So the 4.51% that we reported—had it been on accrual for the full quarter—it would have been 4.55% versus 4.56%. A little color there. Some of the other decline in loan yields was really just a function of variable rate resets from the Fed moves last year that occurred January 1 and at other frequencies. If you normalize for the nonaccrual, we would have been down 10 or 11 basis points and matched what occurred on the deposit side. Production yields—I think we averaged 7.25% to 7.25% for the first quarter. We were at 6.99% or 7% in the Community Bank footprint—so, north of prime and getting our fair share. Stephen Kendall Scouten: Great. Appreciate all the color. Everyone, thanks for the time. John W. Allison: Thanks, Steven. Appreciate you. Operator: We now turn to David Rochester with Cantor Fitzgerald. Your line is open. Please go ahead. David Rochester: Hey. Good afternoon, guys. I just wanted to talk about the loan trend real quick. It sounded like you mentioned paydown activity being a little bit elevated in 2Q and 3Q. How are you thinking about the organic loan trend? I know you got the deal closed this quarter, so that will bump things up a bit. Just trying to understand the underlying organic trend, and what part of the book are you seeing those paydowns in? Is it more of the same? Anything new? Any difference across the different geographic regions? Kevin D. Hester: Hey, Dave. This is Kevin. I will answer that. It is going to be a little bit of a long answer because I am going to give you some color on the pipeline process. Our pipeline process likely has more visibility into the payoffs than the new loans that are coming on. We know because of CCFG's portfolio being a two-to-three-year turn, and a lot of what we are doing on the large side is construction deals, and we know when those are finishing. So we probably have a four-to-six-month lead time on a payoff, whereas we might have 30 to 45 days to put something on the pipeline for a new credit because we do not put new credits on the pipeline until they are fully approved. For Chris' group, CCFG, they may close it in 15 to no longer than 30 days, and in the Community Bank footprint, it might take 45, but it is probably closer to 30. So our pipeline process is more highly skewed toward knowing our payoffs. That said, we do see second- and third-quarter payoffs being higher than they have been the last couple of quarters. Will we have some production that will offset that? It is possible, but it is going to come in over the next 45 to 90 days. It is not on our pipeline yet because it has not gotten fully approved. Second piece is MCB is not yet in our pipeline process. So I really do not have a good feel for what they might contribute in the second and third quarter. I will know that probably in the next week to two weeks. So the short answer is: it feels a little soft in the second quarter. Could we outrun it? We could, but we are going to have to get the production in here and get it on the books. David Rochester: Okay. Great. Appreciate all the detail there. Maybe switching to the margin. What do you think is going to be the rough margin impact from the close of the deal, and if we have a stable Fed funds rate through the end of the year, how does the margin trend after the 2Q change from the deal? John Stephen Tipton: Hey, Dave. This is Steve. We are still finalizing the purchase accounting. I do expect a little pressure on the margin—obviously, it is additive to NII and EPS—but expect a little pressure at least initially on the margin. We landed for the quarter at 4.51% and, thinking about the nonaccrual, we were 4.49% for March—still fairly in line with where we were. Maybe it ticks down slightly with MCB, and then we hope to build on it from there. I talked to Bill today, and their story over the last year or so has been the ability to reprice deposits at maturity as they come through, and that appears to be what is taking place over the next 45 days and over the course of the year as some of the wholesale deposits either reprice or go away. David Rochester: Appreciate that. One last on M&A. I know you are open to deals in all your markets, but with Tennessee in the mix, are you prioritizing any markets now? John Stephen Tipton: Always Florida and now Tennessee. Kevin D. Hester: We could entertain those markets. David Rochester: Sounds good. Thanks again. Appreciate it. Operator: We now turn to Brett D. Rabatin with Stonex. Your line is open. Please go ahead. Brett D. Rabatin: Hey, good afternoon, everyone. Wanted to start on expenses. You kept expense growth pretty limited last year—like 3% growth—and I know Mountain Commerce will create a little noise, but is there anything you are going to spend money on either as a result of that deal or as you get bigger? And any thoughts on maybe core growth this year relative to 2025? John Stephen Tipton: Hey, Brett. This is Steven. Core expenses were about $115 million for the quarter. We will have some normal raises throughout the year with merit increases and contracts here and there, but that is a decent base today. Mountain Commerce probably adds $7 million to $7.5 million a quarter to that number right now, until we get to the latter part of the year and get their conversion in and begin to recognize the majority of those cost saves. There will be some cost saves along the way throughout the year, but the majority will come in the middle of the fourth quarter. Brett D. Rabatin: And then, Johnny, thematically, I know you are interested in M&A, and you have historically had a term for people that hire lenders from other banks. In Tennessee, with disruption due to big deals, would you let Bill hire some folks on the lender side in Tennessee, or is that still not part of the equation? John W. Allison: That is not the way I think about it, but Bill may think differently about it. We really have not discussed it. We are headed over next week to meet their customers and shareholders and talk about Home Bancshares, Inc. and Mountain Commerce and the partnership together. I will visit and catch up with you later on Bill's thoughts. I am not aware of any teams that he is talking to. Not saying it would not be out of the realm of possibility in the Nashville or Knoxville market. If it is due to disruption, that is a little different premise than just going in and taking away folks that are happy where they are. I get the disruption concept, and there could be something there. But we will see. Brett D. Rabatin: Lastly, on the pipeline—any of the pipeline trepidation related to competitive pressures? It seems some banks are being more competitive on rate. Is the competitive landscape impacting what you want to do in the back half? Kevin D. Hester: Some markets are harder than others. It is not the same players in every market. There is some rate pressure. There is even some underwriting and structure pressure that people have given into a little bit over the course of 2025 and early 2026. That is always a challenge. We fight that because we are pretty consistent in what we do. Brett D. Rabatin: Fair enough. Appreciate all the color. Operator: We now turn to Catherine Mealor with KBW. Your line is open. Please go ahead. Catherine Mealor: I have a follow-up on deposit costs. You mentioned the 1.82% exit deposit rate, which is similar to where you were for the average in the quarter. As you think about the rest of the year—if we do not have any more rate cuts—do you feel like deposit costs will start to increase as we move through the year, especially maybe once we get past second quarter and growth improves? How are you thinking about incremental deposit costs? John Stephen Tipton: Hi, Catherine. This is Steven. With MCB, we mentioned what they have coming through the maturity pipeline and certainly expect theirs to come down. On the legacy Home portfolio, we have some deposits tied to the short-term T-bill—91-day T-bill—which trickled up a little bit in the first quarter and put some pressure on other changes we were able to do. CDs will continue to mature that we will try to reprice down. I am still optimistic that we can inch out a basis point or two as we go throughout the year, but I will caveat that with competition. We are still seeing banks offer 4% for CDs and 3.75% to 4.05% on money market. We will defend our customer base both here and in Tennessee. John W. Allison: I am getting excited—4% might be cheaper if they do what I think they are going to do. It looks silly when you see people doing that, and we are still seeing some 6% too. When you think about that, how ridiculous that might turn out to be—we obviously have not stopped inflation. It depends on how aggressive the Fed is. If they have to be aggressive to slow inflation, it may take 200 basis points to stop it. If they lower significantly, I think that would be a huge mistake. Catherine Mealor: Johnny, you have been right on the rate trade the past couple of years. Is there anything you are doing in your balance sheet to prepare for the risk of higher rates? John W. Allison: Not really. We are just careful with our pricing. I was mad at myself last night when I said what was going to happen and then I did not bet it. I ran into a friend who said, “I heard you, Johnny. I went out and bought $4 million worth of money cheap, and I still have it.” I said, “Good for you.” He said he did it because of what I said. I did not do it, and that is a good thought—maybe to take a look at stretching out there a little bit. This is almost a ditto of the seventies and the eighties. We have this war now. We have oil, and we know what that does. We saw PPI at 4% annualized—we have not seen those numbers in a while. It could get a little crazy. I just do not have the answer yet. Hopefully, it will come to us. Catherine Mealor: And then on the credit side, anything you are seeing? I appreciate that you do not want to talk about the $92 million credit that moved to NPA this quarter until you get it resolved, but outside of that, any other trends or weakness across the book? Kevin D. Hester: Criticized assets—which includes all of our OLEM and below—were flat quarter over quarter, and early-stage past dues are as low as they have been, at below 50 basis points. We are working with the same set of issues that we have been working with for the last few quarters. I said a couple of quarters ago that the small group might get worse before it gets better, and that is what happens when you have to put it on nonaccrual and start working it out. We have already taken what we believe is our maximum loss, and we would expect to recover some to all of that depending on the way it resolves and which path it goes through. Talking about the larger credit now, we at least have good visibility into how that happens, and it could happen as early as this quarter or next. We feel good about that. It is the same set of problems. I am not seeing anything of materiality that we are concerned about. John W. Allison: I do not think we are going to lose any money on this deal. I like the guarantors. I like the assets—these are in-demand assets. They are not scrap assets. The assets are being leased as we speak. We sold some of these assets in the past on a 70/30 basis—we got 70% and the customer got 30%—and they paid down perfectly. Assuming the rest bring the same value, we are going to take 100% of the proceeds from this point forward. If we get the sales schedule, I think we will be fine. If there is any hole left, these people have honored everything they have ever said to us. It is a very wealthy family. Maybe if there is $10 million left, we put them on a $10 million ten-year note or something. I think they will honor it. Catherine Mealor: Has the price in oil had any impact? John W. Allison: If anything, it might help, quite honestly. Catherine Mealor: That is what I was thinking. Thank you so much for the color. Appreciate it. John W. Allison: Thank you. Appreciate it. Operator: We now turn to Michael Edward Rose with Raymond James. Your line is open. Please go ahead. Michael Edward Rose: Hey. Good afternoon, guys. Two follow-ups. First, on the large Texas loan—was there any interest reversal this quarter, and what was the impact on the margin? John Stephen Tipton: Hey, Michael. It is Steven. The 4.51% margin does not have any accrual in that number. The impact was about $1.6 million for the quarter, which is about 5 basis points to the loan yield and about 4 basis points to NIM. If we had had it on accrual for the whole quarter, 4.51% would have been 4.55% compared to 4.56% last quarter. Michael Edward Rose: Really helpful. And on scheduled payoffs, can you quantify what the expected payoffs and paydowns are over the next quarter or two? Kevin D. Hester: It looks to me like the second quarter is close to $1 billion, and third quarter could approach that. Those include abnormal paydowns and principal paydowns too. That is what you would have to do to stay even in each of those quarters. John Stephen Tipton: For some context, payoffs in Q1 were about $650 million, but they were $950 million in Q4—$750 million to $800 million in quarters prior to that. It sounds big, but that is the range we run, depending on seasonality. Kevin D. Hester: And that does not include MCB—none of what I am quoting includes MCB because they are not in my pipeline yet. Michael Edward Rose: Got it. Any loans with MCB identified that maybe do not fit your standards that you plan to run off? Kevin D. Hester: I am not aware of anything. We looked at every loan in due diligence. I do not remember anything I would say to run off. Their credit culture is pretty close to ours. They may be a little higher leverage in some areas—we will work on that over time. They have opportunities with us that they have not had, as they have not been willing to do much construction. Any decisions we make to go a different direction than what they have done, I think, will be more than offset by opportunities to do things they have not done before. I look at them as a positive. As I said, I would expect them to hit the ground running pretty early. We have already had pipeline discussions over three or four credits as of last week. I told Bill: nobody cares what you make this quarter—get ready for the future. If you have anything you need to write down, write it down. Get rid of it. Get it going. Get it out of here. I think we are coming in with a pretty clean check coming in the front door. Michael Edward Rose: Appreciate all the color. Thanks. Operator: We now turn to Analyst with RBC. Your line is open. Please go ahead. Analyst: Just a couple of things to follow up on. Johnny, did you say in your prepared comments that you think deal pricing has moderated somewhat? John W. Allison: Deal pricing—acquisition deal pricing—yes, I think it has lightened up a little bit. I do not see the urgency out there that I did. However, people are talking and continuing to want to do something, and some of them want to do it with Home. I think it is out there. It is just a matter of whether we are ready to do that. We are probably getting close to ready to look at something else, but we are not going to be able to convert it about the same time we convert Mountain Commerce in November. We have been pushed a little bit ourselves. We have had people calling us outside of investment bankers and saying, “We met your company two or three years ago, and we are thinking about doing something and wanted to talk to you.” That happened with a couple—one Florida and one Tennessee—that came at us. We are going over to see Bill and his team. We will have an opportunity to talk to Bill when we get to Tennessee and see where we are going and what we are thinking. We are looking at a Tennessee deal—there is some water out there. We will see how they work out. Analyst: Related to that, how do you feel about being more aggressive on the repurchase plan? Do you have an optimal capital level in mind, or are you warehousing capital for future acquisitions? CET1 of 16.7%—those are high levels. John W. Allison: I do not know if we can spend it as fast as we are making it. That is a pretty good position to be in. We made $118 million—pretty nice. We have so much capital right now that we like our position, but I am ready to buy stock. I am looking at it today. We cannot buy today. Tomorrow we can. We filed our 10b5-1. I want to buy back all of Mountain Commerce—it is about 5.5 million shares. I think we bought essentially all of Happy back. I want to buy all of Mountain Commerce back and go out there. We can do it pretty quick with the capitalization we have. I like to buy stock. Analyst: So it is not an either/or—you can do both? John W. Allison: That is correct. John Stephen Tipton: Yep. Analyst: Thanks. Appreciate it. Operator: We now turn to Matthew Covington Olney with Stephens. Your line is open. Please go ahead. Matthew Covington Olney: Sticking with M&A, you mentioned some potential bank targets in Florida and Tennessee. Can you speak to the appetite of doing M&A in existing markets versus expanding into new markets? Is the bar set higher if you were to expand the franchise into new markets? John W. Allison: There is no comparison to me. If there is a Florida deal out there that we can do, we have management from Key West to Pensacola—management all over the state. We can just add it to someone. You have heard me talk about pouring into one of those guys' buckets. They are great managers. The performance of our Florida operations is outstanding. Those guys know what to do and how to do it. It makes it simpler and easier. We made the big move to Tennessee because we like Bill and his team. We need to grow there and build that and muscle up Tennessee because I think there is opportunity—there is a little disruption over there. I think it will give us an opportunity to pick up and build some muscle in that state as we have done in Florida. The reason being, you get more consolidation savings. If you can close some branches, that is a big savings. We will continue to focus more on where we are than outside of that. When we look outside, one of those deals I am talking about that your banker was calling me about is outside of that. I really like the operator. We like the guy. We like his company. We like what he does. They do not have the growth that Florida has, but he runs a good, clean operation. Why would we go there? Because it is simple and clean, and they do a good job running their company. It kind of fits Bill’s math. If you are going outside the market, you better get somebody like Bill that knows what to do and knows how to run it. Matthew Covington Olney: Appreciate it. As a follow-up—Chris is still on the line—question about private credit. You noted the bias for further reduction. Can you expand on your outlook over the next few years, and when do you expect to see opportunities for growth for CCFG? Christopher C. Poulton: Thanks, Matt. Two things. One, right now the uncertainty is: what do the underlying loans look like and where do they go? It feels early because I think you are going to see a false bottom—some price expansion or markdowns in notes, people say “that is it,” and then there is the third shoe to drop. We are not seeing a lot of capitulation on price, and there should be, and we are also not seeing much activity. Nobody is pricing a new facility today if they do not have to. We look a lot at whether these loans have been marked appropriately—what is happening to the other line of credit, has EBITDA expanded or not, have the loans been marked, etc. We would like to see a little more of that before we get comfortable. We have had people come to us and say, “I would like to get out of some positions; what would the price be?” Our answer: price does not fix credit. An extra 50 basis points is not going to save me when I need credit support. Right now, we are biased toward “let us figure this credit thing out.” This may turn into nothing—maybe all these things are fine—but I do not think you should take that risk today. We would want to see more capitulation before we would expand again. We have been in this market for ten-plus years. I think people that came into the market need to take some losses before I would feel comfortable—that is how you get discipline. New entrants thought they were getting something risk-free, they priced it that way, and then it turned out not to be, and then everybody gets religion again. We will look for that, and when we see signs, we might consider expansion again. We also have facilities that will roll off, and right now if a facility rolls off, we probably would not replace it. On the C&I side, that is the posture. Real estate—we continue to see good pipeline growth. We are going to have elevated payoffs, but one is a credit we have had that I have been saying is two weeks from payoff for six months—I think it is paying off today. Not a worry for us on credit—they have been in the sale process and it dragged on. We like the credit, but we get nervous when things stay too long; stuff is supposed to move. We continue to see great opportunities. The pipeline is strong. It might take me more than a quarter to replace what comes off, but not a lot more than that. Matthew Covington Olney: Helpful, Chris. Thank you. John W. Allison: Thanks. Operator: We now turn to Brian Joseph Martin with Bryn Capital. Your line is open. Please go ahead. Brian Joseph Martin: Hey, guys. Just one follow-up, Chris, if you are still there. On your outlook for the year—you talked about a payoff last quarter; it sounds like that maybe got pushed back a bit. Is your outlook for growth still mid-single-digit this year with the puts and takes? Christopher C. Poulton: I think that is right. That is what I would like to see. If we do not have that, I would be a little disappointed. We really look at it on a rolling basis—over the next rolling twelve months, will we grow? I think so. We booked quite a bit last year; we had really good production; not all of that is funded, so we expect some of that to roll through. I like where we are on pipeline. We are in constant contact with customers; most of our business is repeat. Some of it moves around—you get a call on something hot, then they pass, then it is back on. We are flexible, and because we are flexible, we get a lot of looks. Generally speaking, on a rolling three to four quarters basis, I can say we are probably going to expand. Brian Joseph Martin: Perfect. Thanks, Chris. A couple follow-ups from me. Johnny, any change now that you have Mountain Commerce—in terms of sizing—would you look smaller or bigger, or just what is available? John W. Allison: Somewhere in the size of, or larger than, Mountain Commerce would be nice. But we would probably do a smaller deal if it fits Bill. If it is in a market where Bill is not, and it fits him, we would step down and do a smaller transaction. Tennessee is a pretty good size, and we are in about four or five locations—six, seven, eight—we have room to go in that state. Brian Joseph Martin: Got it. Steven, on the margin—you talked about opportunity on cost of deposits at MCB and maybe not as much room on legacy. On the asset side, what is the opportunity for what is remaining to be repriced this year for Home, and any impact from MCB? John Stephen Tipton: I do not think any impact necessarily from Mountain Commerce on the asset side. What we are seeing most recently on what is maturing, given where competition is, is essentially trying to blend with overall where it is maturing from to keep it on the books. The benefit that maybe banks thought was there a year ago—given loan pricing competition and other areas—it is kind of hold on to what you got. Brian Joseph Martin: Gotcha. On production—you said around $900 million this quarter. In recent quarters, has production been similar? John Stephen Tipton: It is a little light for Q1. The $917 million this quarter—Q4 was a little over $2 billion. Seasonally, Q4 is higher. Prior quarters have been a little north of $1 billion. John W. Allison: And some of this is not funding day one. A fair portion is construction that will not fund until six months from now when it starts to fund, so it is hard to pencil all at once. Brian Joseph Martin: Understood. On credit quality—the Texas one you talked about, and the Dallas/Fort Worth apartments and the boat credit—are those still being worked through with no real update on timing? John W. Allison: We work those credits every day. The boat—we are going to a trial in June. We have the boat. It just keeps going before the judge; now we have a third judge and are going to trial. It is a $5 million boat. It is $5 million owed. It may be $7 million to $9 million—by the time we get it sold, it may be $3 million if it takes too long. I have never seen anything quite like that—very frustrating. The apartments in Dallas—we will get it sold eventually. We have had five, six, seven buyers. We will get it sold. There is no loss in that for us. Kevin collected a couple million dollars on it a while back. It is just a matter of getting it out. There were some obstruction problems. It is in receivership, and the receiver has to correct some safety issues. We may find somebody to take it where it is at. We are working leads all the time. Realistically, we may have to work through the issues that need to be completed before you find the right buyer. There is opportunity there. If we find the right person, we will get it sold and moved. Brian Joseph Martin: And the outlook on charge-offs near term—still pretty benign? Christopher C. Poulton: I would agree with that. John W. Allison: I do not anticipate any more losses on the boat credit or the apartment credit. Those are the ones we are working through. They are marked and written down. If the $100 million credit had some loss, I would be shocked. I have been fooled before, but I think we are fine. It would just be a bump in the road for us. We have the PPNR, and we have reserves. We have 15 years’ worth of charge-offs in our reserve—based on our history, including the Texas cleanup. Brian Joseph Martin: Last one for Brian. Fee income seemed pretty clean around $44 million. Is that a decent level to think about going forward? Brian S. Davis: You are right. Over the last four quarters, we have had somewhere between $4 million and $5 million every quarter drop down in the other income line item—different events ranging from $5.7 million in the third quarter of last year to $3.9 million in the first quarter of last year. This quarter, we did not have any of that. Brian Joseph Martin: So a good baseline to work off, with hope to trend upward. Perfect. Congrats on the quarter, and thanks for taking the questions. John W. Allison: Appreciate you. Thank you. Operator: We have no further questions. I will hand back to Mr. Allison for any final comments. John W. Allison: Thanks. It is a long day. A lot of questions. A lot of interest. Thank you for your support. We will continue to do our part, and hopefully we will continue to run the 2% ROAs. They beat us up a little bit on the stock today—kind of hammered us on the stock. I do not think we deserve to be off 3%, but it is an opportunity to buy. It is a great opportunity to buy. Timing would be good for us. That is it. Thank you very much. Talk to you in 90 days. Operator: Ladies and gentlemen, today’s call has now concluded. We would like to thank you for your participation. You may now disconnect your lines.

33天前Insight Analytics约5分钟阅读

SLG 2026 Q1 财报电话会议

Operator: Good day, everyone. Our conference call will be starting soon, within approximately two minutes. Thank you for standing by. Thank you everybody for joining us, and welcome to SL Green Realty Corp.'s first quarter 2026 Earnings Results Conference Call. This conference call is being recorded. At this time, the company would like to remind listeners that during the call, management may make forward-looking statements. You should not rely on forward-looking statements as predictions of future events, as actual results and events may differ from any forward-looking statements that management may make today. All forward-looking statements made by management on this call are based on their assumptions and belief as of today. Additional information regarding the risks, uncertainties, and other factors that could cause such differences to appear are set forth in the Risk Factors and MD&A sections of the company's latest Form 10-K and other subsequent reports filed by the company with the Securities and Exchange Commission. Also, during today's conference call, the company may discuss non-GAAP financial measures as defined by Regulation G under the Securities Act. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at slgreen.com by selecting the press release regarding the company's first quarter 2026 earnings and in our supplemental information included in our current report on Form 8-K relating to our first quarter 2026 earnings. Before turning the call over to Marc Holliday, Chairman and Chief Executive Officer of SL Green Realty Corp., I ask that those of you participating in the Q&A portion of the call please limit yourself to two questions per person. Thank you. I will now turn the call over to Marc Holliday. Please go ahead, Marc. Marc Holliday: Thank you for joining us today at the conclusion of what was an excellent quarter here at SL Green Realty Corp. We achieved nearly all of our objectives and then some. I know there is some misunderstanding in the analyst community about the cadence of our quarterly earnings, but internally, we were right on our numbers for Q1 and advanced many of our objectives for the year. The headline news starts with our leasing, where we had the single biggest first quarter in the 28-year history of this company. We signed 51 leases totaling 930,000 square feet with a mark-to-market that was 16% higher than the previously fully escalated rents on the same spaces. The takeaway is pretty clear and consistent with what we have been saying for some time now: there is a massive imbalance in the prime office market. At its core, we lease premium space to sophisticated users, and right now demand far outstrips remaining supply after so many years of lease-up both in our portfolio and the city at large, especially in East Midtown. The vacancy rate for trophy buildings dropped again to 3.4% at the end of the first quarter, which is essentially saying there is no space at all in that segment of the market. As a result, we are seeing continued escalation of rent levels for these buildings and significant improvement in net effective rents, which greatly benefits our portfolio, which, as you know, is mostly centered in this area, and I do not expect this situation to abate anytime soon. On the one hand, the business climate in New York remains really good. Look at some year-end 2025 stats that came out in the first quarter. City tax revenues reached $80 billion in 2025, 16% higher than pre-pandemic, and that is a record level. Real estate tax collections grew by almost 3% year-over-year. Personal income taxes were up nearly 12% year-over-year, which shows you the enormity of the bonuses and compensation being paid out in the primary business sectors of New York City. There were $65 billion of record Wall Street securities industry profits in 2025. The prior record was $61 billion back in 2009. There are 160 unicorn startups in New York City—private startups valued over $1 billion—and that is the second largest startup ecosystem behind Silicon Valley. $31 billion was raised in venture capital last year, up 25% from the prior year. And New York City ranked number one as the talent hub for 2025 graduates, where one in nine college graduates came to New York City. On top of a fundamentally strong local economy, we hope and expect to see macroeconomic improvement in the coming months that will simply add to the momentum in the leasing market. After leasing more than 1 million square feet of space in our portfolio year-to-date, we still have a pipeline of approximately 900,000 square feet of space, most of which we expect to consummate. The demand continues to be there. On the other side of the equation, there is really no end in sight to the supply crunch. There are zero new space deliveries anticipated for the next three years, with recently completed projects like the Rolex building, 525 Fifth Ave, now in the rearview, and new projects like 343 Madison and 625 Madison not expected to complete until sometime around 2029 or 2030. It is simply physically impossible for any other new construction to be delivered between now and 2029 in Midtown Manhattan. This presents us with one of the most favorable dynamics we have seen in quite some time. Therefore, we are proceeding at a very rapid pace on our very own project at 346 Madison, our next great office tower. We just closed on the site in the fall, and already we are issuing a 100% schematic design on May 1, just six months from the acquisition, and proceeding immediately into design development. We expect to be filing the project into ULURP, the city's land use approval process, by the end of this year. That is a much faster pace than we achieved with One Vanderbilt. I am also very happy with the way the design programming of the building is progressing. We have already been out talking to select potential tenants and top brokers, presenting the project and getting extremely good feedback confirming we are heading in the right direction with this new development. I expect on the next call to be able to give you some financial details after we price the project with our construction manager and obtain some major trade feedback in the coming months. Our other big development project at 7 Times Square/53rd Ave is also making great progress. As we said last quarter, we now have an agreement with our final remaining tenant for full vacant possession, which enabled us to start fully mobilizing and commencing execution of contracts for work. We are now in the early stages of procurement, and so far we are tracking on or below budget by successfully navigating tariffs and inflation. Work is far advanced on interior demolition, and in the coming months we hope to finalize our arrangements for debt and equity capital. We also made progress on our disposition goals this quarter, entering into contract to sell the residential and retail components of our 7 Dey project and closing on the sale of 690 Madison Avenue with our JV partner. More to come in the ensuing months as we progress our way through the $2.5 billion disposition plan. We also took advantage of compelling opportunities in the credit market via our debt fund, which is really performing well thus far. We put out $226 million since our last call, including a transaction closing today, bringing total committed to about $567 million out of a total $1.3 billion fund. All of this positive activity is propelled by a very strong city economy, and we do not expect a summer lull this year as sometimes occurs in years past. In fact, we are expecting a big summer with FIFA World Cup events and the nation's 250th birthday celebrations bringing big crowds and lots of economic activity to the city in June and July. We are forecasting a big boost and shot in the arm, which bodes well for SUMMIT, in particular, for our restaurant venues, and for the city generally. We feel good about the city and state budget situation as well. The rating agencies did send a message to the new administration about wanting to see some efficiencies in the budget being negotiated now, and the budget that will be in place at the city level by June, and I have every confidence the budget gap will be solved through revenue enhancements, expense control, and support from the state. As has been reported, one piece of that sounds like it will be a new pied-à-terre tax the governor announced yesterday with the support of the mayor and the city council speaker. Once you get past the notion that we need to find some revenue enhancements as part of this budget process, give credit to the governor for taking a pragmatic and surgical approach to ensure that all New York City residents are paying a fair share. This is a concept that has the support of many New Yorkers because it narrows the focus and impact to the highest earning non-New York City residents who otherwise pay no New York City income tax and benefit from New York City's exceptionally low residential real estate taxes. Last but definitely not least, since we last met, we announced the promotion of Harrison Sitomer to President and CIO. When Andrew Mathias left the President's seat after twenty-five years of service, we did not rush to find his permanent successor. Instead, we took a measured approach to filling this important position. I wanted someone who truly represents our culture, ethos, and excellence, which is what distinguishes and defines who we are, and Harry is all of those things. As our company turns 30 years of age in 2027, this promotion is a big step towards identifying, growing, and supporting the next generation of leaders here, and I hope to have more announcements in the years to come about the continued ascension of our rising stars. To wrap things up, I think this was a great quarter and we have made significant early progress on our goals. But when we get together in three months, my instinct is that we will have a lot more to talk about next time on the leasing front, the transaction front, and the company performance front. Thank you. We will now open the call for questions. Operator: To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Steve Sakwa with Evercore ISI. Your line is open. Steve Sakwa: Great, thanks. Maybe Steve or Marc, could you just comment on the pipeline activity that you quoted, Marc? I think you said it was 900,000 feet. How much of that is kind of new or expansion tenants? How much of that is just maybe pull-forward renewals? And maybe just talk a little bit about tenant expectations on expansions and space and how they are thinking about space usage? Marc Holliday: Well, look, I have the pipeline in front of me. It is predominantly consistent with last quarter, mostly a large number of medium-sized tenants, which is really good and what you would expect because we do not have a lot of big blocks of space left now that One Madison is fully leased. You have to remember, the nature of our pipeline does not necessarily tie into the nature of the pipeline generally for tenants in the market. What it relates to is what is available in our portfolio, and what is available in our portfolio right now—where I think two-thirds of our buildings are projected to be at 98% or better by the end of this year—we are really just doing new leasing in some of the projects that still have more than that kind of vacancy: 420 Lexington, 1185 Avenue of the Americas. Those are the two most prevalent buildings I see in this pipeline, along with a little bit at 1350 Sixth Avenue, a little bit at 100 Park, and then everything else is a deal here or there—45 Lex, 500 Park, etc. I would not extrapolate that that is the market because there are a lot of big tenants in the market, and Steve can talk about that. There are tenants in that 150,000 to 250,000 to 500,000 square foot range and 1 million square foot users, but you have to have the inventory, which is why we are leasing up the portfolio so rapidly, and why we launched so quickly on Madison, where we will have 850,000 square feet of brand-new state-of-the-art space to deliver right across the street from One Vanderbilt. Anything you want to add to that, Steve? Steven M. Durels: Of the pipeline, of the 900,000 square feet, 30% of that pipeline is leases out, so we are on a path to wrap those up in short order. As we have seen throughout the year, financial services, professional services, and tech tenants are predominantly driving the market. And I think Marc makes a strong point, which is our pipeline is not dominated by only the best-of-the-best buildings; versus a year or two ago, we are seeing real velocity in the mid price point buildings where we are seeing exceptional rent growth as well. Graybar, by way of example—and I have been involved with that building for longer than I want to admit—is at the high-water mark in the building's history as far as rents that are being achieved. Lastly, on the concession side, we have clearly seen rents rise, but TIs have flattened and, in some cases, particularly where we have a lot of leverage, they are coming down modestly, but free rent is clearly starting to come down. In particular, on our renewals, we are having a great deal of success in controlling our concessions. Steve Sakwa: Great, thanks. That is good color. Maybe, Marc, just on the transaction front, I am curious what feedback or data points you are getting from some of the overseas investors. To what extent any of the Middle Eastern investors are either distracted or have other uses of capital that may not want to come to the U.S. at this point? Any thoughts you could share about overseas investors looking at the U.S. market and New York in particular? Marc Holliday: Our counterparties, for the most part—whether it be partners, co-lenders, groups that are giving us special servicing assignments, groups we have some management for—the predominant countries of origin tend to be Asia, Europe, Canada, and domestic. We do not have a lot of partnerships or counterparties in the Middle East, so I cannot really give you any direct feedback there, only anecdotal feedback, which is as you would expect: sovereigns from Saudi Arabia, Qatar, and the UAE are definitely, I think, pulling in their horns at the moment while they assess that which they are committed for versus how they look at deployment of new capital. But that is really just there. We are not seeing that in the other markets. If anything, we are still seeing what we talked about three months ago, where I think Harry gave you good color on the feedback we were getting, particularly on the heels of the last trip we did to Asia—in Japan, Korea, and elsewhere. There is still, to this day, strong appetite in both credit and equity, but equity for well-located assets of the highest quality, and generally relationships we have, factoring in our sponsorship. We feel very good about executing the joint ventures and financings that we have scheduled for this year with counterparties from those parts of the region, and we have not seen any material shift in those folks. Albeit, if you are dependent on Middle East capital, I am sure it is a different story. Harry? Harrison Sitomer: The only thing I would add is that in moments of macroeconomic uncertainty, proven hard assets in proven locations continue to demonstrate resiliency. We saw that with the One Madison Avenue financing that we got done. I think we met with some of you down at Citi as we were pricing that deal in the early days of the Middle East conflict. That deal ended up having 44 investors across all of the classes. Certain classes in that deal were seven times oversubscribed. One piece that our business specifically is going to benefit from is that over the past few years we have not been heavily reliant on private credit, so we have not seen big valuations boosted up by big private credit loans. As a result, we are far more resilient to what is going on right now than most, if not all, other industries. Steve Sakwa: Great. Thanks for the color. Operator: Thank you. Our next question comes from John P. Kim with BMO Capital Markets. Your line is open. John P. Kim: Thanks. You are at 94.4% leased occupancy. Your target for the year is 94.8%, and you have a 900,000 square foot pipeline. Is there upside to that target for the year? And same question on leasing spreads, given you had 16% for the quarter and your target figure is around 10%? Matthew J. DiLiberto: We increased, in our press release last night, our year-end same-store occupancy target from 94.8% to 95%. So we have gotten the upside there. On mark-to-market, we had a healthy objective. It was clearly a very healthy number in the first quarter. We still have nine months to go, but we are well on track for our objective. We typically do not revisit leasing objectives after just three months—we want to get at least six months in before we do that—but obviously the momentum we have coming out of the first quarter puts us on a great track to meet or even exceed the objectives we laid out back in December. John P. Kim: And then on your economic occupancy, it went up sequentially to 85.9%, which is positive, but it is still below your guidance or target for the year, which is around 89%. Can you talk about how the cadence of economic occupancy goes for the remainder of the year and the impact that will have on same-store NOI? Matthew J. DiLiberto: The flippant answer—but it is the truth—is it is obviously going up sequentially over the next three quarters to get to that 89% objective that we set out for the end of the year, and we are on the path for that, which then sets us up for our 10% same-store cash NOI growth objective for 2027. All in all, the first quarter on every metric we look at was on or ahead of our expectations. The leasing metrics speak for themselves—a record quarter not just on volume, but on starting rents. The trajectory from earnings to spend was as good or better than what we expected. So great cadence into the back three quarters of the year. Operator: Thank you. Our next question comes from Alexander David Goldfarb with Piper Sandler. Your line is open. Alexander David Goldfarb: Harrison, first, congrats. A question following up on your comments to Steve on private credit. As you talk to lenders and capital providers, do you feel comfortable that private credit is not going to infect real estate? Private credit has its own issues in, say, software, but this is not like the second coming of the GFC. Do you feel, in talking to people, that there is some concern it could broaden? Harrison Sitomer: The simple answer is we are just not seeing it. If anything, the inverse: some private credit investors have felt their pain through the software cycle right now, and they are looking for hard assets. One of the first places they will look is, as I said earlier, proven locations and proven assets. Right now, I see no sign of any direct impact to our industry or our capital markets environment. We are the beneficiary of having not seen that run-up and big private credit demand into our space, so now there is not a lag hangover effect of those groups pulling out of certain markets. We did not feel one ripple effect of any private credit lender in the market when we priced One Madison in what was probably the toughest week you could imagine—between a conflict in the Middle East and all the redemptions you saw in the news. We had 44 distinct investors and certain classes seven times oversubscribed. Alexander David Goldfarb: And the second question is for Steve. You mentioned the strength of the more value proposition. Do you see an opportunity for you to acquire B buildings, especially around your core Park Avenue/Grand Central, to create more density in your target submarkets? Marc Holliday: Alex, it depends on how you define B assets. We are buying assets to convert or to develop. We are not buying B assets to hold and operate if B is defined as real commodity space, even though there is probably, on a relative basis, a lot of upside in those assets. You are not wrong—there will be a tail effect here and you will see B asset rents go up—but we are trying very hard and intentionally to deal not just in a sector where we think rents are going up, but where we think net effective rents can be maximized. For that, you are really looking mostly for the highest nominal head rents—whether they be $100, $150, $200 a foot or more for new development. Even at $90–$100, if you are dealing with assets where rent points might be in the $50s–$70s, even though you may experience pretty good nominal rent growth, you still have concessions for those leases that are relatively the same—free rent and TI per foot construction costs—as for the much higher nominal rents. We think there is a lot more margin in dealing in the $90-and-up, $100-and-up rents, and that drives us—for hold assets or redevelopment candidates—into that sector. Unless we feel we can ultimately execute a program and drive rents into those upper categories, you will not see us participate, even though rents and prices are moving in the B assets. It is not a bad play; it is just not our focus. Operator: Thank you. Our next question comes from Nicholas Yulico with Scotiabank. Your line is open. Nicholas Yulico: Thanks. First question, going back to the idea that there is really not much new supply coming to market in the city for four years or so. Can you talk more about how that plays out relative to your portfolio and submarkets? It sounds like it should be a benefit. In some cases, new supply is being looked at by tenants with lease expirations four years out, so there is no real benefit today to buildings from that. Can you unpack that dynamic a bit more? Steven M. Durels: Two takeaways. One, tenants are getting smart to the market and seeing rents rising, and that is driving those paying attention to do early renewals. In some cases, we are in front of tenants with expirations three to four years out in time, which is great. It is a smart landlord play to do early renewals and take downtime or vacancy risk off the table. Two, there is a spillover effect where tenants need to go farther afield or one avenue over from where they wanted to be, and that is giving lift to some other buildings. Within our portfolio, the best example is 1185 Sixth. We are seeing some pretty heavy rents by comparison to historical rents in that building, with a tremendous amount of leasing velocity. It had a lot of tenants vacate over the last several years, and we are on a path to that building being fully stabilized this year with rents in the mid-$80s to mid-$90s per square foot. Nicholas Yulico: Thanks, Steve. Second question for Matt on quarterly FFO. I know you do not plan to give guidance and there are moving parts in a quarter that create volatility, but if we think about the first quarter number and then getting back to the full-year guidance range, can you talk at a high level about some components that will accelerate FFO throughout the year? Matthew J. DiLiberto: Our quarterly results can be choppy and people tend to read too much into a quarterly result. The reality of our first quarter numbers is that we were not even a penny off from our internal expectations—property NOI was better than we expected, offset by SUMMIT, which had a tough weather quarter and underperformed our expectations. Net-net, we landed right on top of what we expected. As we look out over the balance of the year, we are headed right to the midpoint of our guidance range as well. FFO results quarter to quarter might be choppy, driven less by NOI and more by fee income. Our third-party fee businesses are growing, and a lot of those fees come in big chunks rather than ratably—success fees out of special servicing, fees from transactions. We did not close big transactions in the quarter, to say nothing of DPOs that we still have in our projections for the balance of the year. We feel comfortable about where we are in the guidance range, with a bias to the higher end. Marc Holliday: I would add to that on SUMMIT. SUMMIT is an enormous success. Every year we are pushing ahead the envelope on the earnings capacity of SUMMIT. For 2026 over 2025, we had another big increase baked into our expected performance. It was off a bit in Q1, but it was far and away the leading attraction in the first quarter among all the attractions in the city. Where other decks might have been down a percent or more, SUMMIT held its own. I am completely confident, based on what I have seen in April alone as the weather has improved and heading into what is going to be an extraordinarily good summer for the reasons I mentioned, that we will end up the year at SUMMIT ahead of our ambitious targets. We are extending our hours more than budgeted in response to excess demand we are seeing for May and June, because we are pre-selling those tickets. In terms of future ramp in FFO for the company, SUMMIT will be a contributor. Operator: Thank you. Our next question comes from Anthony Paolone with JPMorgan. Your line is open. Anthony Paolone: Thanks, and good afternoon. First, on your 95% targeted leased rate for year-end versus where your economic occupancy is—the gap is pretty wide and assumed to be narrowing. Can you give us a sense of where a normal spread between those two should be over time for the portfolio? Matthew J. DiLiberto: We only started reporting economic occupancy last quarter, so we do not have perfect history. Clearly it is at the wides right now. It will narrow substantially over the course of the year to probably half as wide as it was at the end of last year by the end of 2026. On a stabilized, normalized basis, it is always going to lag leased. If you are in a fully leased portfolio—95% plus—with limited roll, which is the period we are headed into, I could see that being roughly 200 basis points of difference on a recurring basis as space rolls and you re-tenant space. That seems like a comfortable place to be—maybe tighter—but 200 feels about right. Anthony Paolone: Thanks. Second, on capital markets: can you characterize liquidity broadly in the market right now—are a lot of buyers back, a lot of product for sale, cap rates for the best versus more commodity product? Just a broad sense of liquidity and capital markets at the moment. Marc Holliday: I will break it into equity and debt. On equity, we always have our head down focused on our business plan. The plan is on track and we feel good about executing it this year. As a data point, we have 11 transactions in the business plan for this year. On the last earnings call I said we had four dispositions we were working on. When I went to Citi, I said we had five. Now, where we sit today, that number is six. Two of those six were the already announced deals at 690 Madison and 7 Dey, and the other four transactions are progressing very well. I would expect all four of those to close or be in contract in the second quarter. Those were the six identified for the first half of the year, and they are on plan, on target, and expected to get done in the first half. With respect to the credit markets, the market is very strong right now, especially because of the CMBS market and the SASB market that we just experienced at One Madison. Harrison Sitomer: Two data points there: One Madison was the largest office deal done in the U.S. since January 2025, and the bottom of that deal—priced in a very complicated and difficult week—was the tightest new-issuance office spreads at the bottom since when we did One Vanderbilt in 2021. We continue to see new capital coming into the credit markets. We are not feeling any of the lag effects of private credit pullback, and liquidity continues to get stronger in the credit markets as we are seeing. Operator: Thank you. Our next question comes from Seth Berge with Citi. Your line is open. Seth Berge: Thanks for taking my question. First, going back to some of the SUMMIT commentary and the demand you are seeing there—are you seeing, with the strong demand, opportunity for premium experience upsells? How is the pricing side coming along? Marc Holliday: Q1 is not a good representation of what the next eight and a half months will look like. Tourism in the city was off a bit, which may translate into a slightly different mix of domestic versus foreign visitation. Domestic accounts for about 30%, which is quite high. It is a very popular local attraction as much as a tourist attraction—we worked hard to transcend both markets from an observatory, cultural, and nightlife perspective. Looking at the advanced sales we are booking now, tourism is picking up, and we expect to recoup whatever slight diminution there was in Q1 over the next nine months. We expect a typical profile to last year, with the summer months seeing a lot of international travel. There is expected to be over 1 million people coming in for FIFA World Cup games at MetLife Stadium and 8–10 million people coming in for the Semiquincentennial around Independence Day. We are strategically situated to sell out those months. On upsells, the only one is the Ascent elevator rides. When the weather is very cold and winds are high, we do not run that as often; those ticket sales were down a bit in Q1 but have completely bounced back and more. SUMMIT is hitting on all fours, and we are opening SUMMIT next summer in Paris. It is going to be an extraordinary day for SUMMIT and for the company when we have our first global location accepting visitors, with an additional announcement pending in the coming months. Seth Berge: Thanks. As a follow-up to Harrison's capital markets comments, specifically with equity markets and dispositions, can you talk about the profiles of who the buyers are for office and residential? Is there a core bid for office, or is it value-add/opportunistic? And any impact on willingness to buy/sell office from thinking about long-term AI impact on employment? Harrison Sitomer: The composition of investor groups has not changed from what Marc outlined earlier. We spent a lot of time early in the year on our first show in Asia and are in the process of closing out a handful of transactions I mentioned earlier. Those buyers are looking at a range—our disposition plan includes everything from ground-up office buildings to core office to value-add office, and that market continues to be there for all of those product types. On residential, you can look at our latest comp: the sale we did at 7 Dey to a buyer that is a core residential buyer continuing to accumulate more product through a public listing they have. On AI, the investors we speak to are looking at the same stats we listed at the beginning of the call. It was the best first quarter for New York City office leasing since 2014. Some of that leasing is driven by AI tenants, some of which we have announced, and investors are optimistic about what they are seeing. Operator: Thank you. Our next question comes from Ronald Kamdem with Morgan Stanley. Your line is open. Ronald Kamdem: Two quick ones. First, on the postmortem on the dividend cut. Can you talk more about what went into cutting it to that level—taxes or cash flow—and why not cut more, given high interest costs and limited flow-through? Why not cut the dividend even more to offset that? Matthew J. DiLiberto: We spent a lot of time discussing the dividend. Ultimately, taxable income is what, above all else, drives the dividend, and our business plan for this year was consistent with the dividend level we established. We can maneuver within taxable income to some extent, but if we are going to execute on the business plan—and we are on a path to do that—then you have to pay the dividend at a certain level, and that dividend is where we established it at $2.47. At the same time, it allows us to retain almost $50 million of incremental capital that we can put to other accretive uses—DPOs, maybe buybacks. Capital spend will go down such that, in the back half of 2027 into 2028, there is a big shift in cash flow to the positive. We will reevaluate the dividend every year based on taxable income. Ronald Kamdem: Thanks. Second, I know FAD is not cash flow and it was a bit down in the quarter. As you think about the ramp on NOI as you get commenced occupancy, any sense of the magnitude of dollars that are going to flow to FAD? Matthew J. DiLiberto: As I said last quarter, the spend in 2026, like in 2025, is the funding of a lot of leasing—9 million square feet of leasing we did over a three-year period. That assuages in 2027 into 2028 and will drive same-store cash NOI growth north of 10% next year and enhance earnings and FAD. We will talk magnitudes as time progresses. Marc Holliday: I only see one way to look at it: we are leasing the hell out of this portfolio. With that comes leasing capital that we will muscle through in 2025, 2026, and 2027, but we are going to try and get this portfolio to 96–98% leased. That would be unprecedented for 31 million square feet. Getting beyond what I would call the frictional vacancy point of 97%—we are vastly outcompeting and getting more than our fair share. We will pay for that tenancy because there was a lot of out-migration for unnatural reasons in 2020–2024. By this time next year, to the levels I think we are going to get, we will already be working on 2027, 2028, 2029. We want to get this portfolio to full occupancy. There will be a cost to that, but when you attain it and then you are living in a world mostly of renewals, there will be an enormous rightsizing of the capital, like we experienced in the past and will experience in the future. That is our business plan. We are not just on track; we are ahead of track. Our average rents are going up significantly faster than expenses, which are up about 2% a year. Steve is starting to rein in capital, first on renewals and then on new tenants. This is what shareholders want us to be doing: redeveloping our buildings, having a premium Class A portfolio, leasing it to its fullest, and investing in a portfolio with unparalleled residual value in 2027–2028. From my vantage point of 36 years in the business, I have never seen a market as good as this one. Operator: Thank you. Our next question comes from Blaine Matthew Heck with Wells Fargo. Your line is open. Blaine Matthew Heck: Great, thanks. Following up on dispositions: Harrison, you mentioned you would have closed or be under contract on six of the 11 targeted sales by midyear. In rough terms, would those proceeds put you at about half, or a little more than half, of the targeted $2.5 billion of sales this year, or are those six skewed smaller or larger than the remaining five? Marc Holliday: Approximately half. Blaine Matthew Heck: Great. And, Marc, we are several months into the new mayor’s time in office. Beyond the budget, can you talk about anything that has been a positive or negative surprise relative to your initial expectations, and whether you see any risks or opportunities for your business arising from policy changes? Marc Holliday: It is still very early—it is too early to assess any mayoralty in the first hundred days. This is measured over years, not months. I look to the opinions of stakeholders: condo buyers—Q1 was a record for $10 million-and-up condo sales, up about 47%; Wall Street profits; expansion by tenants. I am seeing tenants who are, on a scale of five or six to one, expanding rather than contracting. Tech is back. The key issue is affordability. Different mayors will tackle it in different ways, but we agree it is best for the city to make the city more affordable. The current administration’s focus seems to be on getting more production in housing to help stabilize or even bring down rents. You see cutting through red tape on “City of Yes,” SEQRA/land use revisions, support for conversions under 467-m, and a program to try and reduce insurance premiums for affordable/rent-controlled housing. Having that focus is productive as long as there is appreciation that tax collections make all this work, and our industry drives tax collections. Our industry is firing on all cylinders. If left unimpeded, and if we can exceed tax receipts this year on top of record receipts last year, there will be money to take care of administration priorities—mass transportation, affordability, cost of goods. Objectives align, and I see a city poised for a very good year. Operator: Thank you. Our next question comes from Peter Dylan Abramowitz with Deutsche Bank. Your line is open. Peter Dylan Abramowitz: Hi, thank you for taking the question. Matt, you mentioned being biased towards the high end of your guidance range. You talked about fee income impacting the ramp throughout the year. In terms of potentially getting to the high end, can you talk about the specific items that could get you there? Is it NOI? Other items? And any commentary on underlying guidance assumptions and whether those have changed? Matthew J. DiLiberto: In Q1, NOI was running ahead of our projections, and that flowed through to earnings and same-store cash NOI. The 2.6% positive same-store cash NOI was 300 basis points higher than what we expected for the first quarter, so NOI will be a contributor. Marc discussed SUMMIT and the momentum we are seeing already in April and expect over the balance of the year to make up any small shortfall in Q1. Fee income—our third-party fee business is growing. If we can exceed our initial projections, that is very high-margin, high-multiple business. We have a DPO in our guidance; if we can source more, that is upside. Momentum from Q1 biases us to the midpoint or higher. Peter Dylan Abramowitz: Thanks. And maybe a question for Marc on the new administration. You mentioned the pied-à-terre tax that was reported yesterday. I believe the estimate for incremental revenue is around $500 million, which still leaves a budget shortfall. From the first hundred days or so, there have been talks of taxes on higher-earning households and higher property taxes that have not gotten a lot of support. With a gap to fill, what else is possible from a legislative perspective to fill that, and how could that impact your business? Marc Holliday: The City Council and the new City Council Speaker, Julie Menin, came out thoughtfully with their own budget. The mayor has a budget; the council has a budget. Their emphasis will be on cost-cutting. Last year’s budget was about $115 billion; this year is projected at $127 billion. You are not going to get all $12 billion of increase—that is the initial stab. There will be efficiencies and reductions achievable. If you assume the state is going to solve $500 million to $1 billion of it, you are talking about a 3–4% gap to be closed, with revenue projections likely reassessed higher based on the first quarter’s tax receipts, plus the new pied-à-terre tax, plus council proposals on modifying PTET, and a modification of UBT/UBIT. They are going to close that gap. By June there will be a balanced budget through incremental tax, some revenue reforecast, and some expense reductions. The city has gotten there every year since the 1970s. We will get there again. Operator: Thank you. Our next question comes from Vikram Malhotra with Mizuho. Your line is open. Vikram Malhotra: Good afternoon. Thanks for taking the question. Marc and Matt, pushing a bit more—you have done a lot of good work getting up occupancy, TIs are coming in, you have less to lease, and you are dealing with 2027 expirations. Can you give guardrails on how this ultimately translates to a measure of cash flow—FAD or cash flow from operations? You said 10% same-store next year, but it would be nice to get some broad guardrails rather than wait nine to twelve months. And can you clarify TI spends in 2026 and 2027—do we wait until 2028 before growth picks up? Marc Holliday: When you say guardrails, I am not exactly sure what you mean beyond what we have given. We gave it in December, and our projections have not changed. There is plenty in the supplemental and our other disclosures to get a handle on the amount of capital necessary for leasing—it is arithmetic. You see every quarter how much we spend on TIs, commissions, and free rent based on quantum of leasing. As we approach 96–98% occupancy, there are going to be spend years for the balance of this year and next, but we have said—and I thought we were clear—that by 2028 we expect our FAD to be in line with our dividend that we recently recalibrated to, and then hopefully more. We will get there with that kind of guidance in 2027, but not today. Vikram Malhotra: Just to clarify: by 2028, you think FAD will be similar to the dividend? Marc Holliday: If you look at my commentary on the dividend and what Matt said in the release when we came out with the new dividend level after our last board meeting, we said the new dividend level was set where we expected to be able to cover that dividend and more by 2028. I am reiterating that. That is our belief and how we got to that very specific number—it is based on our models and calculations. We try to be very conservative on NAV and growth projections, but we are headed to a great spot both in earnings and cash flow. Vikram Malhotra: Thanks. Going back to SUMMIT, makes sense the World Cup should drive a nice uptick. Any update on other projects and regions—when could we see the next SUMMIT driving NOI? Marc Holliday: We expect to open Paris in summer of 2027. I will come out in December with monetary guidance on that. In 2027, it will only be open half a year, but I expect a seismic, popular, well-attended opening. What we have designed is like SUMMIT 2.0 with lots of new features. It is thrilling to work with Kenzo and Rob Schiffer on these projects now coming to life, with more beyond. The next locations would not be 2027—they will be announced this year with future openings thereafter. Paris is first next year. Operator: Thank you. We have a question from Brendan Lynch with Barclays. Your line is open. Brendan Lynch: Great, thank you for fitting me in. Matt, you got a nice reduction in your spread to SOFR with the new revolving line of credit, and you have been bringing down your cost of debt for the past year. Macro-dependent, but do you see other opportunities within your control to reduce your weighted average cost of debt further? Matthew J. DiLiberto: Great execution on the credit facility—appreciate the work of our team and the participating banks. The financing backdrop was strong and the institutional support was extraordinary. We have about $3 billion left of our $7 billion financing plan for the balance of this year, and then not a lot thereafter. We talked in December about increasing some floating-rate exposure because we expect the curve—maybe not at the pace we would like—but eventually to come down. We will let some of our fixed-rate derivatives burn off and take advantage of a lower SOFR curve overall. Harrison can speak to the financings in our pipeline and what we are seeing in the market. Harrison Sitomer: We have three financings left in the business plan for this year, the largest of which is 245 Park Avenue. We just started that process yesterday, so we will see it play out through the second and third quarters. More to come next call. On pricing, we have no influence over base rates, so we will monitor SOFR and Treasuries. On spreads, we are optimistic about tightening, especially in CMBS. Especially at the bottom of the deals, we are seeing spreads tightening even from where we saw One Vanderbilt price. Each deal will depend on asset quality and execution, but we definitely expect a strong execution at 245 Park. Brendan Lynch: Great, thanks. The press release alluded to turning more active on share repurchases. Matt mentioned that earlier as well. What conditions would incentivize you to be more active on executing the existing authorization? Marc Holliday: I have been clear in the past: I think the stock is terribly mispriced. You do not have to look hard to appreciate the magnitude of the discounted valuation relative to a fairly liquid and active market where it is not hard to get price and value discovery on assets we own, especially well-leased assets where the debt and equity cost of capital is well known. I look at buybacks as a significant opportunity that we will take a very hard look at with incremental liquidity to the business plan. Our plan includes investment in new development projects and reduction in indebtedness—both secured and unsecured. With incremental liquidity above and beyond that plan, share repurchases get the first and hardest look. Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Marc Holliday for closing remarks. Marc Holliday: Thank you, everyone. We ran longer than usual, so thank you for all the questions. We look forward to speaking in three months’ time. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

33天前Insight Analytics约5分钟阅读

NFLX 2026 Q1 财报电话会议

Spencer Wong: Good afternoon, and welcome to the Netflix, Inc. Q1 2026 earnings interview. I am Spencer Wong, VP of finance and capital markets. Joining me today are co-CEOs, Theodore Sarandos and Gregory Peters, and CFO, Spencer Neumann. As a reminder, we will be making forward-looking statements, and actual results may vary. We will now take questions submitted by the analyst community, and we will begin on the topic of our results and outlook. The first question comes from Robert Fishman of MoffettNathanson. This question is: Can you speak to your full-year margin guidance and how it compares to prior guidance? With the Warner Brothers deal costs and beyond content spending, where else are you accelerating investment in 2026? Gregory Peters: Perhaps I can kick this one off and step back with a high-level framing. Of course, it is early in the year. There is still plenty of time to go and plenty of work left to do. But we have seen really good progress so far in this first quarter that builds on the solid momentum and results from 2025. Given that, we are maintaining our guidance and strong outlook for organic growth that we established for 2026: revenue growth of 12% to 14% and operating margin at 31.5%. That includes roughly doubling the advertising business to about $3 billion. We ended last year with more than 325 million paid members, and as that number continues to grow, we are entertaining an audience that is approaching a billion people, which is an exciting milestone to strive for and to achieve. Even given that number, we still have plenty of room to grow into our addressable market. From an addressable household perspective that have good data and a smart TV, we are still under 45% penetrated. We think that number is roughly 800 million, and it grows every year. We have captured about 7% of addressable revenue in countries and categories that we currently directly participate in. We now estimate that is $670 billion as of 2026, and that number grows year over year as well. We estimate that we account for only 5% of TV view share globally. By pretty much any measure, we have tons of room for growth still ahead of us. Theodore Sarandos: I would add, looking ahead, we are focused on three big priorities. Number one, deliver even more entertainment value for our members, and we do that by continuing to strengthen our core offering—series and films, originals and licensed. We are also pushing into new categories that are really exciting, like our further expansion into podcasts—we announced a few exciting new ones today—adding more regional live sports events, like the incredible event we just did in Japan with the World Baseball Classic, and growing our games offering, including the brand-new kids gaming app. Number two, we are leveraging technology to improve the service—from how it is delivered to how to find great things to watch, and now even how content is created and produced. Number three, we are improving monetization through a combination of broad distribution—mostly organic, supplemented with some great partners— increasingly sophisticated pricing and pricing plans, and a great and growing ad business as Greg just said. These features help position us to deliver multiyear growth beyond the 12% to 14% that we expect to deliver this year. At Netflix, Inc. we embrace change, thrive on competition, and stay focused on constant and consistent improvements—the things that make us faster and better than the competition in whatever form it takes. We feel great about the business and the organic growth opportunity ahead. We are as energized as ever to achieve our mission to entertain the world. Spence, maybe you could talk a second about the WB deal cost and the guide. Spencer Wong: Yeah. Sure. Thanks, Ted. So with respect to the Warner Brothers deal. Spencer Neumann: And those costs and how it impacts the guide: you may recall back in January, our initial forecast or guidance for the year was carrying $275 million of cost for M&A-related activity. That was not just Warner Brothers, actually. One item we were carrying was the Interpositive acquisition. It was not announced yet, but it was in our guidance, and that carries through our OpEx, which impacts operating margin. For Warner Brothers specifically, even though we walked away from the deal, some of our initially planned costs for the deal will not fully materialize, but some that we were planning to carry into 2027 were pulled forward into 2026. When you put all that together, we are still in the ballpark of the total we were projecting for M&A-related expenses in the year. There is no material impact on our operating margin outlook. As a result, there is no reflection of some increase or acceleration in other expenses in the year. Spencer Wong: Thanks, Spence. Thanks, Ted. Thanks, Greg. Following up on that question, we have one from Sean Diffely of Morgan Stanley. His question is: What have been your biggest learnings from the Warner Brothers experience, and does it in any way change your appetite for M&A or capital structure going forward? Theodore Sarandos: At the risk of being a broken record, we said from the beginning that the WB deal was a nice-to-have, not a need-to-have. We are very confident in the core business. Going into it, our biggest risk was losing focus on our core business while working on the transaction. As you can see from our Q1 results, we did not lose focus. We are very encouraged by the team’s ability to stay focused on our core business while exploring this opportunity. Historically, we have been builders, not buyers, so there were questions about our ability to do a deal of this size. We learned that our teams were more than up to the task. We learned a lot about deal execution and early integration. We are proud of the teams that did the work. We are proud to have won the bid. We were confident in our ability to get to the finish line with regulators for the approvals we needed. Mostly, we really built our M&A muscle. The most important benefit of this entire exercise was that we tested our investment discipline. When the cost of this deal grew beyond the net value to our business and to our shareholders, we were willing to put emotion and ego aside and walk away. Doing it at this level sets up our teams to understand that is the expectation of them day to day. We met a bunch of great people in WBD during this process, so if there is any emotion in all of this, it was the disappointment of not getting to work with those folks. We do come through this with no change in our capital allocation philosophy. We invest in the business, both organically and opportunistically with M&A, like you just saw with Interpositive. We do that while maintaining strong liquidity and returning excess cash to shareholders through share repurchase. M&A remains a tool to help us achieve our goals, and as you can see with the WB deal, we will remain very disciplined in how we approach it. Spencer Wong: Thank you, Ted. I will move us along now to the next topic, which is engagement. The question comes from Vikram Kesavabhotla of Baird: Last quarter, you shared that your primary quality metric for engagement achieved an all-time high in 2025. How is this metric performing so far in 2026? What are some examples of the data points that inform your measurement of quality? Gregory Peters: I will take this one. First, volume of engagement is still relevant. We track it and seek to grow it. In Q1, view hours were up at a similar rate of growth to what we saw in 2025, despite having the Winter Olympics—17 days of robust streaming competition—land in Q1 as well. But while view hours are important, they are just one of several metrics we look at, and we are increasingly making that a more sophisticated view. Member quality is an important part of that sophistication, with several associated signals, and in Q1 that primary member quality metric hit another all-time high. I am not going to detail how we compose our metrics; they take time and effort to build and prove out, and I am sure competitors would like that cheat sheet. We build confidence in our metrics, and specifically this member quality metric, by evaluating their predictive and explanatory power to primary metrics like retention. That is why we are clear that improving that number improves the business. As we invest in new forms of content, we also have to learn how the new programming provides different kinds of value. Live is a great example. It often drives significant viewing value for members, albeit with fewer view hours than a scripted series, and it has different acquisition characteristics. We continually build models for how that programming matters to our members and supports the business, and then we can bid appropriately. Spencer Wong: Thanks, Greg. Our next question on engagement comes from Rich Greenfield of LightShed Partners. Nielsen adjusted their methodology—the end result was lower streaming viewership and higher broadcast and cable viewership, albeit the trendlines were similar. Nielsen has delayed implementing these changes into its monthly Gauge report until 2026. The base of Netflix, Inc. viewership will be lower but also have more room to take share. How do you think about the coming impact, especially on your advertising revenue? Gregory Peters: Nielsen’s methodology change in the Gauge reporting is a change in how they calculate the national TV universe. It is not a change in how people actually watch TV. It changes Nielsen’s numbers, not actual viewing behaviors. Specifically, the new approach reduces the weight of streaming-only households and increases the weight of linear households, which makes streaming look smaller and broadcast/cable look larger on a relative basis as they measure and report. We, of course, have actual data on how much members stream, and we include that in our engagement report. That methodology is straightforward, and other streamers have started to measure views in the same way. As to advertising, Nielsen Gauge is not the currency for the video marketplace. Given that there is no change in consumer behavior or amount of viewing related to this shift, none of this changes our effectiveness or our aspirations in ads. We continue to expect to deliver $3 billion in advertising revenue this year; we have not adjusted that target. On your point about growth potential, independent of this shift, we still see tremendous opportunity to win more moments of truth—especially the most valuable moments. With our current position of being less than 5% of global TV time, we have a ton of room to grow. Spencer Wong: Thanks, Greg. We have several questions about our content and content strategy. First, from John Hulik of UBS: Any details you can share about the World Baseball Classic viewership? Are there other similar sports and live event opportunities that can appeal to a global audience and drive engagement? Theodore Sarandos: Thanks for asking about the World Baseball Classic, because it was a hit. It was the most-watched program we have ever had in Japan and the biggest global baseball streaming event of all time, with 31.4 million viewers. Events like this are important because, as Greg said, they drive outsized business impact and are proof that all engagement is not created equal. The WBC drove the largest single sign-up day ever in Japan. Japan led our Q1 member growth around the world and had its highest quarter of paid net adds in our history. It was also the first big regional live event for us outside of the United States, and we got to flex a new muscle—streaming multiple games concurrently—so a big expansion of our capabilities. We were excited, the fans were thrilled, and the leagues were excited. Much more to come. Gregory Peters: It was also a great example of how we were firing on all cylinders cross-functionally. Our marketing and partnership teams worked to bring this to Japanese consumers in a friendly way. It was impressive to see everyone organize around that. Theodore Sarandos: And a great shot in the arm for our ad sales group in Japan. One other thing on it—not to dismiss WBC. Spencer Neumann: Think about it more broadly because, as great as it was—and it was great—you may notice that APAC was our strongest FX-neutral revenue growth market for the quarter. It was not just because of this. We had strong performance across APAC: a great quarter in India, a really strong quarter in Korea, and Southeast Asia showed strength. Across the board in APAC, we executed—it was not just one title or one country. Theodore Sarandos: I would add it was exciting to see people pick up recent original series so that viewing went up—you saw some of those shows pop back into the top 10. The success of One Piece on the heels of the WBC created a great halo. Spencer Wong: I will take the next question from Robert Fishman of MoffettNathanson: With the NFL in the market for new packages, do you judge ROI on live event content spending the same way as scripted content, or does adding NFL games give you the ability to drive higher CPMs and ad growth that one-off scripted shows would not deliver? Theodore Sarandos: That is a great question. First, our sports strategy is unchanged. We are most interested in big breakthrough events, less so in regular season packages. Everything we pursue has to make economic sense in the ways you just talked through, and we consider all the benefits from both viewing and the ads business. Sports is an important piece of our live strategy, which also includes other big live events—Skyscraper Live, the Star Search reboot with live voting, the BTS comeback concert. We have had a number of sports successes, including our Opening Night MLB game with the Yankees and the Giants, our Christmas Day NFL games, some big fights, and the WBC in Japan. The NFL is a great property and delivers value as part of our total offering. We are in discussions and think there is an opportunity to expand the relationship—within the same strategy focused on creating big events. We have learned a lot about what works and how to value the NFL and live generally over the last couple of years, and this will inform how we have those discussions and help us be even more disciplined. We announced Tuesday a multiyear deal with CONCACAF for rights in Mexico, in addition to women’s World Cup rights in the United States and Canada, and our first big global M&A event with Ronda Rousey and Carano. We are ramping up our sports events globally and local-for-local, both in volume and profile, because we bring and receive a lot of value—and, most importantly, our members receive a lot of value. Spencer Wong: Thanks, Ted. Our next question comes from Peter Supino of Wolfe Research: Help us better understand your business model in podcasting—think he means your business strategy in podcasts. Theodore Sarandos: We talked about it in the letter, but even in very early days we are seeing data indicating incremental engagement on the platform. How do we know it is incremental? Two things jump out. One is daytime consumption: podcast consumption indexes to daytime hours on Netflix, Inc., which allows us to capture a time when we historically have less engagement. The other is that it indexes much more to mobile. Podcasting is more mobile, and professional TV and film historically make up a small percentage of mobile viewing, so it is great to meet our members where they are—even when they are enjoying other forms of entertainment. We have been building out a great lineup of podcasts, both licensed and owned—shows like The Bill Simmons Podcast, The Breakfast Club, Therapist from Jake Shang (which I have been waiting to say all day), Pardon My Take—all doing great. We have our own podcasts as well, like The White House with Michael Irvin and The Pete Davidson Show. Our companion podcasts have been great for superfans, like the Bridgerton Official Podcast. And today we announced new podcasts from Brian Williams, Evan Ross Katz, Steven Su, Ellison Barber, David Quang—the list keeps growing, and it is very promising. Spencer Wong: Great. We will now shift to advertising. This question comes from Dan Salmon of New Street Research: Can you share more on the growth of your total advertiser base? What proportion of advertisers are being serviced directly by the Netflix, Inc. sales team, and what proportion are buying on Netflix, Inc. through third-party DSP partners? Are you still largely focused on the top 500 brands, or is a mid-market strategy beginning to emerge? Gregory Peters: We will do our best to handle them all. The biggest benefit we got from moving to our own ad tech stack is making it easier for advertisers to buy on our service. Additionally, we have added more DSPs—more ways to buy—and we are seeing significant growth in programmatic, which is on its way to becoming more than 50% of our non-live ads business. Due to those moves, as well as improving go-to-market capabilities, more sales force, and building out our ads products, our advertiser base grew over 70% year over year in 2025 to more than 4 thousand advertisers. That expansion is a key indicator of the health of the business. Today, we are still concentrating on the largest buyers, which are serviced primarily by the Netflix, Inc. sales teams—either directly or with our sales team driving buying behavior through DSPs. Over time, we expect continued growth in the number of advertisers. We are pushing in that direction, and we think the percentage who buy programmatically will increase, and therefore programmatic share of ad revenue will go up. As we scale programmatic and broaden our advertiser base, we can follow the time-tested model of expanding iteratively into larger and larger pools of advertisers. Spencer Wong: Thanks, Greg. Next, a question around plans and pricing from Vikram Kesavabhotla of Baird: What informed your decision to raise subscription prices in the United States recently? What are your early observations regarding the impact on customer acquisition and churn in the region? Gregory Peters: This change was part of our plan for some time. We continually monitor signals from our members—quality-weighted engagement, plan selection, plan moves, and retention, which is industry-leading. We see improvements in value delivered to our members well in advance of making a price adjustment, and those signals informed this and all price changes. Our initial full-year guidance factors in the pricing adjustments we expect to make throughout the year. It is very rare that we have an unexpected pricing change. As for the most recent changes, the early signals are in line with expectations and similar to historical performance with price changes in the United States. The rollout is still ongoing, but indications are consistent with what we have seen before. Our pricing philosophy is consistent: we look to provide more and more value, invest revenue successfully, and occasionally, when we have added more value, ask members to contribute more so we can invest in delivering even more entertainment value. We think we are delivering one of the best entertainment values that has ever existed. As a comparison, in the United States right now, Netflix, Inc. subscribers are paying the least per hour of viewing compared to other SVOD offerings—in some cases, you would have to pay two times per hour to get a competitive service. Our ads plan at $8.99 in the United States is a great, highly accessible entry point and an incredible value. Spencer Neumann: To add to that value and how we see it in the metrics, look at retention and churn. We saw stronger retention across the board this quarter; every region was better year over year. That is encouraging in terms of the value we provide and aligns with the primary engagement value metric Greg mentioned, where we had a record in Q4 of last year and a record again in Q1 of this year, which is playing out in the numbers. Spencer Wong: Thanks, Spence. A couple of questions on gaming, the first from Eric Sheridan of Goldman Sachs: You are in your fifth year of the gaming strategy. What have been the key learnings? How do platform games change user consumption habits? What are the most interesting areas to invest behind gaming in the coming years? Gregory Peters: I think “platform games” here just means games on our platform. At the highest level, we see a significant market opportunity—$150 billion in consumer spend ex-China, ex-Russia, not including ad revenue. That number is getting bigger. A significant part of that market faces issues like new player acquisition or low-friction discovery and play—areas we are well positioned to improve. We have been building foundations: the ability to develop games, bring games onto our service, connect those games with players, and give players high-quality experiences. As with film and series—and as hypothesized—we have learned that gameplay can have a positive impact on member retention, as well as driving acquisition, although the observed acquisition effect has been small to date, which is consistent with our maturity and consumer expectations of us as a gaming platform. A key user dynamic we have repeatedly observed is that delivering a fan of a film or series an interactive experience in that same universe not only extends the audience’s engagement, but also creates synergy that reinforces both mediums—interactive and noninteractive both do better. That further drives engagement and delivers more value. We are investing in games that reflect our other beloved IP or events and give fans interactive experiences that extend those universes; in games on TV, a new canvas for players and developers; and in kids, providing a dedicated experience. While we have been building this for a couple of years, we are still scratching the surface of what we can ultimately do. We have been building infrastructure and core capabilities, and now we are increasingly able to deliver more of the kinds of experiences that move us toward our vision. There is tons more work to do, but it is fun to get to this stage. You will see increasingly interesting releases from us in the year to come. We will continue to ramp our investment—still small relative to overall content spend—based on demonstrated performance and growing returns. Spencer Wong: Great. And, Greg, a follow-up on games from Brian Pitts of BMO Capital: The recent announcement of Netflix, Inc. Playground is seemingly one of your biggest moves into video games to date. Would you help us understand how you will measure success with Playground and the incremental value you expect for your broader subscriber base? Maybe start by explaining what Netflix, Inc. Playground is. Gregory Peters: Playground is essentially a separate app for games for kids. Kids represent one of our four key focus areas for games—kids, narrative, party/puzzle, and mainstream games. Our goal is to become a destination where kids’ favorite worlds come to life through games and interactive experiences. This extends a long history in which we have treated kids as a special audience that deserves special care. We provide kids with a dedicated experience and parents with tools—ratings, parental controls, PIN controls, etc. Playground extends that philosophy into games. It includes a growing collection of kids’ games in one app so they can navigate between them; fully curated, age-appropriate titles based on beloved shows and movies—think Peppa Pig, Dr. Seuss, Bad Dinosaurs—no ads, no in-app purchases. It also fits kids’ natural viewing habits, as a significant portion already happens on mobile and tablet, and it is all added value included in your membership. We are seeing encouraging signals: as we add more kids’ games, we have seen strong growth in engagement through both new titles and improved discovery on existing titles. Ultimately, we see an important long-term opportunity to deliver more entertainment to kids in ways parents feel good about, not just across games but across TV and film as well. Spencer Wong: Thanks, Greg. Next question from Eric Sheridan of Goldman Sachs: Entering 2026, how would you characterize the current competitive landscape for content? Are you seeing any differences in competitive intensity by geography, language, or format? Theodore Sarandos: Competition is not new for Netflix, Inc. Consumers have always had incredible choices in entertainment, and we have continued to grow by offering enormous value. Great projects are immensely competitive, and those are the projects we want. We have been pleased that Bela and the content team have been able to land some of the most competitive projects recently—Strangers with Gwyneth Paltrow attached to star, based on the New York Times bestselling book; Rabbit Rabbit with Adam Driver, directed by Philip Barantini, who directed Adolescents for us—both incredibly competitive projects we were able to land. It is not just about paying the most. Relationships matter, particularly when there are many competitive choices. Providing a great experience for creators, delivering a big audience, and generating buzz are what we do. We are seeing a lot of repeat business, the ultimate sign we are doing our job well. Today, Beef Season 2 starts. The show’s creator, Sunny Lee, did the first season, which was the most honored limited series of the year when it came out two years ago—45 individual awards—and it was a hit worldwide. We just did an overall deal with Sunny; he will be creating for Netflix, Inc. for years. The cast—Oscar Isaac, recently in Frankenstein and Golden Globe–nominated; he has another film this year and another project we just greenlit; Carey Mulligan, who has done multiple projects for Netflix, Inc., including her Oscar-nominated performance in Maestro; she is in Narnia coming up later this year, she was in Mudbound and The Dig; Charles Melton, a Golden Globe nominee for May; Cailee Spaeny, who was just in Wake Up Deadman—the whole cast is Netflix, Inc. family. Running Point comes out next week, another new hit series with Mindy Kaling; we love the relationship. It is not just in the United States. Álex Pina, who created La Casa de Papel, has done multiple projects since, including one he is working on now. If repeat business is a sign of success, I am excited about what we are doing. We also think about competition in terms of those we are competing for projects and members with—and those we are customers of. Running Point is produced by Warner Brothers for us. We license shows like Watson and Mayor of Kingstown from Paramount. We have a Pay-1 deal with Sony; we have one with NBCUniversal that includes DreamWorks Animation and Illumination. Our investment in those films, co-productions, and licensing feeds the entire movie ecosystem around the world. While it is a little unusual to be both customer and competitor, it is not unusual in entertainment, and we manage those relationships well. Spencer Wong: Thanks, Ted. Eric Sheridan from Goldman also has another question, this time on AI: How does the company’s approach to the role AI can play in the creative process continue to evolve? With the announced acquisition of Interpositive, can you discuss the decision around that deal measured against your broader strategy? Theodore Sarandos: In general, we expect GenAI to help make content better—better tools and processes. Netflix, Inc. will remain at the forefront in exploring and innovating AI in the creative process. Given our technology DNA, unique data assets, and tremendous scale, we see great opportunities to leverage new technical capabilities across every aspect of the business. AI will deliver benefits for our members, creators, and employees. On the content side specifically, it takes a great artist to make great art—AI will not change that—but AI will give those artists better tools to bring visions to life in ways we are just scratching the surface on. Today, talent leverages these tools for set references, previsualization, VFX sequence prep, and shot planning—all of which also improve on-set safety, which is not talked about enough. With our acquisition of Interpositive, we think it accelerates our GenAI capability because it is proprietary technology created specifically for filmmakers and filmmaking, different from other GenAI video applications. While our ownership of Interpositive is very new, we have generated interest with creators who have spent time with the tools, and we are seeing momentum build around adoption. Gregory Peters: To pick it up there, the factors that inform where we should be developing technology—where we have a differential or unique capability to invest in generative AI that delivers returns to the business—include data (its uniqueness and scale) and where there are products or business processes at scale to attach this technology and get leverage. Content production, which Ted went through, is a big one. Member experience is another. We have been in personalization and recommendation for two decades, but we still see tremendous room to make it better by leveraging newer technologies. Recommendation systems based on new model architectures not only improve current personalization but also let us iterate and improve more quickly—adding support for different content types much more efficiently. As noted in the letter, in the last quarter these new capabilities drove increased engagement with the service—that is super exciting to see. The better we execute here, the more our product experience acts as a force multiplier to the large content investments we make. The last area I will mention is advertising. We are growing scale there and see an opportunity to leverage AI within our Netflix, Inc. Ad Suite—making it easier to design new creative formats, custom ads, improve contextual relevance, and roll them out more quickly and effectively, allowing partners to leverage them more easily. Spencer Wong: Great. We have time for one last question, from Rich Greenfield of LightShed Partners. He asks about Reed’s decision to not stand for reelection at our upcoming annual meeting: You have talked publicly that Reed Hastings preferred to build versus buy. Was Netflix, Inc.’s decision to pursue Warner Brothers a key factor in his timing of leaving the Netflix, Inc. board this year? Theodore Sarandos: Sorry for anyone looking for palace intrigue—no. Reed was a big champion for that deal. He championed it with the board. The board unanimously supported the deal. We had perfect alignment between management and the board on the Warner Brothers deal. That had nothing to do with it. Spencer Wong: And, Ted, do you want to close us out with some words on the decision? Theodore Sarandos: Absolutely. Reed Hastings, our founder and our board chair, let us know he has decided not to run for reelection to our board at the next shareholder meeting. It is unusual for a founder to step away from the board of the company after succession, but Reed is no ordinary founder. The first time I met Reed in 1999, he said he was building a company that would be around long after him, and that requires succession. When Reed took the first steps in this more than a decade ago, he said he would hang around for about another ten years. It has only been six, but this is Reed’s style—make decisions and move fast. We have a long history of going from brainstorm to scale at breakneck speed. Reed will remain the chairman and a member of our board through his current term. The board and the Nominating and Governance Committee will take the next steps in reshaping the board in the months to come. On a personal note, I have been fortunate to have great bosses who inspired me, coached me, and gave me opportunities. Reed did these things at unimaginable levels. Reed is an economist and an engineer in his head, but a teacher in his heart. He not only shared the spotlight—a rarity in Hollywood—he pushed me into the spotlight, celebrated wins, coached through misses, and made me the executive I am today. I am forever grateful. He built a company of risk takers and a culture where character matters and nobody rests in the pursuit of excellence. I have loved working with and for Reed through amazing twists and turns, and he has modeled what it is to be a leader and a friend. I was reminded of a quote from Max De Pree: “The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader must become a servant and a debtor. That sums up the progress of an artful leader.” Reed Hastings is the ultimate artful leader, and he leaves me and Greg enormous shoes to fill. In the spirit of an artful leader’s work in progress, I say to Reed, thank you. Gregory Peters: Ted, I will join you. From the very beginning, Reed established the standard for what leadership and culture look like at Netflix, Inc. His vision, willingness to take risks, to embrace and motivate change, to be transparent even when it is hard, and his total commitment to our values and to always putting our members and the company first have shaped every part of what Netflix, Inc. is today. The innovations Reed championed did not just build Netflix, Inc.; they helped move a whole industry forward. They expanded what is possible for storytellers and audiences around the world. We bring stories from around the world to audiences in ways that were not imaginable before. We got to this point because Reed has a way of pushing you to think bigger, to be more honest with others and yourself, and to own your decisions—always in a way that made you feel supported and trusted. He would debate his perspective with tremendous passion to get us to the best, most informed answer, then support you in your decision with equal passion even when he personally disagreed—and celebrate you with even greater passion if you ended up being right. That style has shaped who I and many others across Netflix, Inc. are today. A lesson I learned from Reed—perhaps the most meaningful and apropos to this moment—is the realization that while many of us spend tremendous effort building something we believe in, how we hand that work off to someone else is of equal importance. We should put equal effort, thoughtfulness, and planning into that transition as we did into all that came before. When my time to transition comes, I aspire to be as selfless, disciplined, and graceful as Reed has been. Reed, thank you for the trust you placed in us and the example you set. We will carry those principles every day. Spencer Wong: Thank you, Reed. I echo that as well. Spencer Neumann: Same here. You could not have said it better. I get chills thinking about it. One thing standing out for me right now, which is real time, is that big singular red “N” of the Netflix, Inc. logo, because it seems so appropriate—Reed, you are literally an “N” of one, forever in the DNA of this place. Thanks for everything. Spencer Wong: Great. With that, we will conclude the call. Thank you, everybody, for joining us, and we will see you next quarter.

33天前Insight Analytics约5分钟阅读

LAKE 2026 Q4 财报电话会议

Operator: Good afternoon, and welcome to the Lakeland Industries, Inc. Fiscal Fourth Quarter and Full Year 2026 Financial Results Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. During today's call, we may make statements relating to our goals and objectives for future operations, including our goals for revenue and cash flow from operations for fiscal year 2027, financial and business trends, business prospects, and management's expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management expectations based upon currently available information and are not guarantees of future performance and involve certain risks and uncertainties, as more fully described in our SEC filings. Our actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with US GAAP, including adjusted EBITDA, adjusted EBITDA excluding FX, adjusted EBITDA margin, adjusted EBITDA excluding FX margin, organic revenue, organic gross margin, and adjusted operating expenses. A reconciliation of each of the non-GAAP measures discussed on this call to the most directly comparable GAAP measure is presented in our earnings release and/or the supplemental slides filed with our earnings release. A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our company's website at ir.lakeland.com. At this time, I would like to introduce your host for this call, Lakeland Industries, Inc.’s President, Chief Executive Officer, and Executive Chairman Jim Jenkins; Chief Financial Officer, Calvin Sweeney; Chief Commercial Officer, Global Industrials, Cameron Stokes; Chief Revenue Officer, Barry Phillips; and Executive Vice President of EMEA Fire Sales, Kevin Ray. Mr. Jenkins, the floor is yours. Jim Jenkins: Thank you for joining us today to discuss the results of our fiscal 2026 fourth quarter and full year ended 01/31/2026. Fiscal 2026 was a year of meaningful top-line growth and important strategic progress for Lakeland Industries, Inc. Calvin will walk through the financials in detail shortly, so I will provide you with a brief overview here. For the full year, net sales increased $25.4 million, or 15.2%, to $192.6 million, driven by continued strength in fire services. In the fourth quarter, net sales were $45.8 million, down $0.8 million, or 1.7% from the prior period. U.S. sales increased 35.1% for the full year to $81.6 million and increased 7.1% in the fourth quarter to $19.6 million. Europe also grew meaningfully for the full year, increasing $12.1 million, or 28.7%, while fourth quarter year sales were down $2.4 million due primarily to timing on LHD and Jolly orders. On profitability, adjusted EBITDA, excluding FX, was $7.2 million for the full year, and $1.3 million in the fourth quarter. Gross margin was 32.9% for the full year and 32.2% in the fourth quarter. Those results were below our expectations, and I want to be direct about why. We grew revenue at a strong rate, but we did not convert that growth into the earnings we expected. We view this as an execution issue, not a demand issue. The underlying demand environment across our core markets remains intact. We operated in a volatile cost environment during fiscal 2026; freight inflation, raw material pressure, tariffs, and certification timing delays exposed weaknesses in our planning and pricing response that we are actively addressing. Against that backdrop, I want to note something important. The fourth quarter generated approximately $2 million of operating cash. Delivering that level of cash generation on lower revenue than the third quarter reflects improved discipline across the organization, stronger cost control, and better day-to-day execution. We are seeing early signs the actions we have been taking are beginning to work. Subsequent to the fiscal year-end, we completed the divestiture of our HPFR and HiViz product lines to National Safety Apparel, generating approximately $14 million of cash proceeds. This transaction simplifies the business and allows management to concentrate fully on our core fire services and industrial protective product lines, where we see the greatest long-term opportunity. On the product side, we achieved a significant milestone with numerous NFPA 1970 2025 certifications across our brand portfolio. Products including Lakeland structural turnout and proximity gear, Meridian gloves and fire particulate-blocking hoods, Jolly boots, and Pacific helmets are now fully certified, enabling customers to order from a complete head-to-toe NFPA-certified range of products across Lakeland Industries, Inc.’s brands. This certification was a meaningful commercial unlock, and we look forward to showcasing our portfolio at FDIC 2026 next week. We strengthened the organization with several important appointments. Calvin Sweeney was named Chief Financial Officer in February 2026, having served as interim CFO since December 2025, and Kevin Ray was just recently named Executive Vice President of EMEA Fire Sales. You will be hearing more from both of them shortly. We also welcomed Lee Rudow to our Board of Directors in early April. Lee previously served as CEO of NASDAQ-listed Transcat, and his invaluable business and strategic M&A integration experience in the industrial markets with a strong track of execution across both organic growth and acquisition-driven strategies will be a valuable addition to our governance. During the year, we completed the acquisitions of Arizona PPE and California PPE, expanding our U.S. fire services distribution and rental capabilities with ISP locations in Arizona, California, and soon Denver. California PPE also opened a new state-of-the-art facility in Fresno, providing compliant decontamination, inspection, and repair services to California fire departments. These recurring revenue service businesses strengthen our fire platform and build long-term customer relationships. We also completed the $6.1 million sale and partial leaseback of our Decatur, Alabama warehouse property, generating an approximately $4.3 million pretax gain and reducing our fixed cost exposure. And Lakeland Industries, Inc. was added to the Russell 3000 and Russell 2000 in the season June, reflecting our growing market profile. Alongside these actions, we are working to further strengthen liquidity and flexibility through our pending ABL facility, which we expect to close soon, although there can be no assurance that the ABL facility will close on that timeline or at all. The Bank of America covenant waiver has been secured, and we anticipate to be in covenant throughout fiscal 2027. Taken together, these steps reflect a company that is not standing still but one that is actively reshaping its operating model to support improved performance. From a macro standpoint, fiscal 2026 was affected by tariff uncertainty, freight inflation, raw material cost pressure, and certification timing delays across both fire and industrial. Those factors pressured production efficiency, revenue timing, and gross margin. We also saw softer performance in select areas in the fourth quarter; we do not view the issues in front of us as demand destruction. We view them as timing, execution, and cost challenges that are addressable, and that is an important distinction. As we move into fiscal 2027, we are encouraged by the progress already underway and continue to make structural improvements that we believe will strengthen the business over the long term. We are tightening forecasting, strengthening accountability, and putting more structure around sales and production planning. As an example, inventory ended January at $82.5 million and is down meaningfully from October as we continue to better align supply with demand. We are entering fiscal 2027 with a simpler portfolio, improved internal discipline, and a pipeline that continues to build. We are now tracking modestly ahead of budget entering fiscal 2027, and our forecast is clear: convert demand into more consistent, repeatable financial performance, improve forecasting, better align sales and operations, increase utilization, and drive stronger margins and cash flow. Based on the foundation we have built, we are comfortable providing goalposts for fiscal 2027 of single to high single-digit revenue growth and a clear line of sight to positive cash flow from operations. Taken together, these steps reflect a company that is not standing still but one that is actively reshaping its operating model to support improved performance. With that, I would like to pass the call to our Chief Commercial Officer, Cameron Stokes, to provide an update on our industrial and chemical critical environment businesses. Cameron Stokes: Thank you, Jim. Turning to industrial and chemical critical environment. For the fourth quarter, chemical revenue increased $0.3 million to $5 million, demonstrating continued strength in that product line. Disposables revenue decreased $0.9 million and wovens revenue decreased $1 million in Q4, reflecting the headwinds Jim referenced, particularly softer performance in the North American industrial markets late in the quarter. For the full year, these three product lines combined represented approximately 49% of total revenue, with disposables at 27%, chemical at 11%, and wovens at 11%. On the strategic side, the divestiture of our high performance FR and high viz product lines meaningfully simplifies the industrial portfolio. These lines required significant management attention and resources that we are now redirecting towards higher-margin, faster-growing opportunities within chemical critical environment and core industrial protective apparel. The decision to divest was the right one, and it sharpens our focus on the product lines where we have a competitive differentiation and credible path to improving profitability. Within the business, we are seeing differentiated performance across our product lines so far in fiscal 2027. Chemical critical environment is outperforming, driven by continued demand from industrial and pharmaceutical end users, while wovens are tracking to plan with good visibility into the pipeline. Disposables faced the most pressure during the year, driven by tariff-related cost increases and softness in select North American markets, and we have defined specific recovery initiatives underway at the account level to address that gap. From a competitive standpoint, we are not seeing broad-based shifts across the market. The movement we are seeing remains limited and localized, and competitors have generally not responded with meaningful price action to date. At the same time, fuel and logistics instability has become a more relevant variable across the market than tariff uncertainty. That backdrop reinforces our focus on tighter channel discipline, better market segmentation, and more targeted execution by product line and end market. Our strategy for growing these lines is straightforward: continue to develop products and expand the range of certified high-performance offerings, disciplined strategic pricing to protect and improve margins as cost pressures ease, reach a broader set of end users and reduce distributor concentration, while optimizing operations to drive better utilization at our manufacturing facilities. I would like to note that the industrial segment tends to see its highest seasonal activity in the spring, when scheduled maintenance shutdowns at nuclear, coal, oil and gas, and chemical facilities drive meaningful order activity. We are entering that period now, and our teams are positioned to execute on the incoming demand. Looking ahead into fiscal 2027, our industrial priorities are clear. We are tightening demand forecasting and improving the alignment between sales commitments and production planning. We are also actively pursuing pricing actions where cost increases warrant them. We are working to improve manufacturing utilization at our Mexico and Vietnam facilities as we consolidate our footprint and transition production from India into those sites. The tariff environment remains a factor, but we are working through mitigation strategies and believe we can manage the impact without structural disruption to our cost base. Overall, the industrial and chemical business is stable, and we are focusing on converting that stability into consistent, improving profitability throughout fiscal 2027. I will now hand the call over to Chief Revenue Officer, Barry Phillips, to provide an update on our fire services business. Barry Phillips: Thank you, Cameron. Turning to fire services. Revenue for Q4 was $21.7 million, an increase of $0.5 million or approximately 2% compared to the prior year. For the full year, fire service revenue grew $30.6 million, or 48.6%, to $93.6 million. This is a significant milestone. Our fire segment now represents approximately 49% of our total revenue, a significant transformation from where we stood just two years ago when it represented approximately 21%. The full-year growth was supported by contributions from Viridian, LHD, Jolly, and Pacific Helmets, as well as Arizona PPE and California PPE. These acquisitions have expanded our geographic reach, broadened our product offering, and positioned us as the head-to-toe provider in global fire protection, a platform we believe is unique in the market. Fire demand is increasing as certification cycles are completed and tender timelines are tracking on schedule across multiple regions. These have been timing delays rather than structural demand issues. Opportunities remain in the pipeline and have simply shifted later than expected. Our tender pipeline is active globally, and we continue to see strong engagement from the fire departments and procurement agencies across the regions we serve. We also saw meaningful international wins during the year, including significant emergency follow-on orders from the National Fire Department of Colombia, an order from the Fire and Rescue Department of Malaysia, and a fire equipment tender award from ANAC, Argentina’s National Civil Aviation Administration. A particularly important milestone was receiving numerous NFPA 1970, 2025 edition certifications across our portfolio, enabling customers to order a complete head-to-toe certified range across our brands for the first time. These certifications are a commercial unlock that we have been working toward, and we look forward to showcasing the full core portfolio at FDIC 2026. On decontamination and services, our ISP business is growing faster than initially projected, and the greenfielding and ISP M&A pipeline remain robust. California PPE’s new Fresno location opened in January 2026, and our Denver location is expected to open in 2026. This recurring revenue model builds long-term customer relationships, generates predictable cash flow, and positions us well as fire departments increasingly invest in gear maintenance and NFPA 1950 compliance. Fire service margins remain structurally sound; as volume normalizes and tenders convert, margins are expected to recover without requiring broad pricing actions. LHD Germany is stabilizing, and we expect a formal relaunch of the brand at Interschutz 2026 in June, with leadership in Kevin Ray driving momentum across our EMEA brands. Looking ahead into fiscal 2027, we have the strongest backlog in Lakeland Fire’s history. We expect continued success with our head-to-toe offering and anticipated tender wins in Europe and the U.S. Our new NFPA product portfolio rollouts are well underway, and we look forward to showcasing our entire lineup at FDIC next week. I will now pass the call to Executive Vice President of EMEA Fire Sales, Kevin Ray, for an EMEA update. Thank you. Kevin Ray: Before I begin, I would like to provide you with a bit of my background. I have over twenty years of leadership experience in personal protective equipment and fire safety across the U.K. and EMEA. I joined Lakeland upon the acquisition of Eagle Technical Products, where I served as the Managing Director since 2013, and then Vice President of EMEA Fire and Global M&A Integration from 2022 until just recently, having been named Executive Vice President, EMEA Fire Sales, helping to shape Lakeland’s fire strategy across the region and integrate key acquisitions into a unified operating platform. Turning to EMEA, Europe revenue for the fourth quarter was $12.1 million, down $2.4 million versus the prior-year period. This was driven primarily by the timing of LHD and Jolly orders, as well as delayed government tenders and macroeconomic conditions across several markets. For the full year, Europe revenue grew $12.1 million, or 28.7%, to $54.2 million, a strong result that reflects the full-year contribution of LHD and Jolly. The Q4 softness that we have discussed is a timing story; it is not a structural one. The tender pipeline is intact, and underlying demand dynamics across the region remain supportive. On LHD Germany specifically, conditions in that market have been challenging, and we have been direct about that. We are actively restructuring the business to reduce the overhead and to rightsize the cost base for the current conditions. Stabilization is underway, and we are planning a formal relaunch of the LHD brand at Interschutz 2026. This is the largest fire industry event in the world and is only held every five years, so this really is a significant commercial moment for us. Interschutz will serve as our EMEA platform launch for the combined Lakeland Fire and Safety brand. We intend to demonstrate our integrated head-to-toe offering to the European market at this event and show what our portfolio now looks like as an integrated head-to-toe offering. We view it as a pivotal opportunity for LHD Germany in particular, and for our European fire brands broadly. Our LHD Hong Kong and LHD Australia businesses secured new contracts during the year that solidify those operations and build a stronger foundation for future growth in the Asia Pacific region. Late-stage tenders across the region are up, and the quality of the pipeline has improved meaningfully. Integration across the acquired EMEA businesses is beginning to unlock access and scale that we could not if operating these brands independently. We are now seeing what we estimate to be over $5 million of incremental business opportunities flow directly through intercompany collaboration within the group. These are cross referrals, shared supply chain economics, and joint initiatives, and that represents a growing, previously untapped source of revenue. This dynamic is extending beyond EMEA and beginning to manifest in Asia, Latin America, and North America as well, which speaks to the stability of the integrated platform. Our objectives from here are clear: to improve the conversion across our late-stage pipeline, to convert intercompany opportunities into tangible recurring revenue, and to continue building a more balanced and predictable tender pipeline across the region. I will now hand over the call to Calvin to review the financials. Thank you, Kevin, and hello, everyone. I will provide a brief overview of our fiscal 2026 fourth quarter financials before diving into the details. Calvin Sweeney: Net sales were $45.8 million for Q4 fiscal 2026, a decrease of $0.8 million, or 1.7%, compared to $46.6 million for the prior-year quarter. Adjusted gross profit for Q4 was $15.4 million, a decrease of $4.4 million, or 22%, compared to $19.8 million for the prior-year quarter. Adjusted gross margin was 33.5% in Q4, compared to 42.4% in the fourth quarter fiscal 2025. Adjusted operating expenses, excluding FX, were $14 million, up from $13.7 million in the prior year. Net loss was $166.2 million, or $0.61 per diluted share, compared to a net loss of $18.4 million, or $2.42 per diluted share in fiscal 2025. Adjusted EBITDA, excluding FX, was approximately $1.3 million for the fourth quarter, compared to $6.1 million for the prior-year quarter. Adjusted EBITDA, excluding FX margin, was 2.9%. Turning to the full fiscal year, net sales were $192.6 million for fiscal 2026, an increase of $25.4 million, or 15.2%, compared to $167.2 million for fiscal 2025. Adjusted gross profit was $66.4 million for fiscal 2026, a decrease of $4.7 million, or 6.6%, compared to $71.1 million for fiscal 2025. Adjusted gross margin was 34.4% for the full year, compared to 42.5% in fiscal 2025. Adjusted operating expenses, excluding FX, increased 10.2% to $59.2 million for fiscal 2026 from $53.7 million for fiscal 2025. Adjusted EBITDA, excluding FX, was approximately $7.2 million for fiscal 2026, compared to $17.4 million for fiscal 2025, with an adjusted EBITDA excluding FX margin of 3.7%. Net loss was $25.3 million, or $2.63 per diluted share, compared to $1.8181 billion, or $2.43 per diluted share for fiscal 2025. Looking at the fourth quarter in more detail, geographically, U.S. revenue increased $1.3 million, or 7.1%, to $19.6 million for Q4. Europe revenue decreased $2.4 million to $12.1 million, reflecting timing of orders from LHD and Jolly. Asia revenue increased $0.7 million, or 19.4%, to $4.3 million. Latin America revenue was $3.8 million, down modestly versus the prior-year period. Adjusted EBITDA excluding FX for Q4 fiscal 2026 was approximately $1.3 million compared to $6.1 million for the prior-year quarter. The decrease was primarily driven by the decline in gross margin related to the factors I just mentioned. Adjusted operating expenses, excluding FX, were $14 million in Q4 and declined sequentially across the prior three quarters, demonstrating that our expense discipline has held at the business scale. The key driver of the year-over-year adjusted EBITDA decline was gross profit compression, not expense growth. As gross margin recovers through utilization improvement, pricing discipline, mix management, and supply chain optimization, EBITDA will follow with meaningful operating leverage. Adjusted gross margin decreased to 33.5% in fiscal 2026 Q4 from 42.4% in fiscal 2025 Q4, a decrease of approximately 890 basis points. The primary drivers were product mix shift as fire services grew as a proportion of revenues at lower initial margins, manufacturing underutilization in Mexico and Vietnam, raw material cost pressure, elevated inbound freight and duties, and execution gaps in production planning. Partially offsetting these headwinds, Q4 showed sequential improvement in freight and duties versus Q3 and a more favorable sales mix within the quarter. Adjusted EBITDA excluding FX decreased from approximately $6.1 million in the fourth quarter fiscal 2025 to approximately $1.3 million in the fourth quarter fiscal 2026, a decrease of $4.8 million or 78%. Gross profit compression was the dominant driver. Operating expense changes were minimal year over year, confirming that expense discipline has held. The path to EBITDA recovery runs primarily through gross margin improvement, which we are addressing through utilization improvement, pricing discipline, mix management, and supply chain optimization. For the full year, adjusted gross margin was 34.4% compared to 42.5% for fiscal 2025, a decrease of approximately 810 basis points. The full-year bridge reflects three primary themes. First, mix: our fire acquisitions entered the portfolio at a lower gross margin profile than our legacy industrial lines, and as fire grew to approximately 49% of revenues, blended margin came under structural pressure. Second, cost headwinds: raw materials, tariffs, and elevated freight costs impacted the full year. Third, underutilization: manufacturing capacity in Mexico and Vietnam was sized for higher volumes; the fixed-cost deleverage in a period of below-target output was significant. We are addressing all three through manufacturing footprint consolidation, supply chain restructuring, and targeted pricing actions. Reviewing our revenue mix over the past three fiscal years is clear on both the geographic and product basis. On the geographic side, Europe grew from approximately 13% of revenues in fiscal 2024 to approximately 25% in fiscal 2025 and approximately 28% in fiscal 2026, a direct result of our LHD and Jolly acquisitions expanding our European fire platform. The U.S. has remained at approximately 42% in fiscal 2026, reflecting the growth of Viridian, Arizona PPE, and California PPE offsetting softness in industrial. This geographic diversification provides broader exposure to the global fire protection market. On the product side, fire went from approximately 21% of revenues in fiscal 2024 to approximately 38% in fiscal 2025 to approximately 49% in fiscal 2026. To us, this is the clearest illustration of our strategic pivot to the higher-margin, higher-growth global fire protection sector. Disposables moderated from approximately 40% to 27% as fire grew. The divestiture of HPFR and HiViz further simplifies this picture heading into fiscal 2027. As our acquired businesses integrate and fire gross margins recover toward their structural potential, our growing fire concentration should become a meaningful margin tailwind. Now turning to the balance sheet. Lakeland Industries, Inc. ended the fiscal year with cash and cash equivalents of $12.5 million and working capital of approximately $96.5 million. This compares to $17.5 million in cash and working capital of approximately $101.6 million as of 01/31/2025. Cash decreased $5 million versus the prior year reflecting $15.8 million of operating cash usage and $1.2 million of net investing outflows, offset by $12.5 million provided by financing activities. As of 01/31/2026, we had total borrowings of $32.3 million, with $28.5 million outstanding under the revolving credit facility, with an additional $11.5 million available under the revolver. Net investing activities included $6.2 million for the Arizona PPE and California PPE acquisitions, offset by $5.7 million proceeds from the Decatur warehouse sale, of which we used 100% of those net proceeds to repay our revolving credit facility. Importantly, Q4 generated approximately $1.8 million of operating cash, demonstrating that our focus on cost discipline and working capital management is beginning to yield results. We are in advanced stages of negotiating an ABL facility, which we expect to close soon, although there can be no assurances that the ABL facility will close on that timeline or at all. A Bank of America covenant waiver has been secured, and we anticipate to be in covenant throughout fiscal 2027. We expect the ABL facility to further strengthen our financial flexibility and support growth initiatives in fiscal 2027. Subsequent to year-end, the divestiture of the HPFR and HiViz product lines generated approximately $14 million in additional cash proceeds that are not reflected in year-end cash balances, further reinforcing our liquidity position. At the end of Q4, inventory was $80.5 million, down approximately $5.4 million from $87.9 million at the end of Q3 fiscal 2026 and essentially flat on a year-over-year basis despite revenue growing approximately 15%. That year-over-year stability reflects meaningful progress on our supply-demand alignment initiatives. The quarter-over-quarter decline in inventory is broad-based: organic finished goods were $36.3 million, down from $38.8 million in Q3; organic raw materials were $30.9 million, down from $33 million in Q3. Reductions were also achieved across Meridian, LHD, and Jolly as integration and planning processes improved. Our immediate priorities have been in the U.S. industrial, Jolly, and LHD’s regions where we saw the greatest opportunity to align balances with demand and improve working capital efficiency. Inventory optimization is one of the key levers in our path to improved free cash flow generation. As inventory levels normalize further, carrying costs decrease and working capital is released. This helps our business become more efficient operationally, and we see opportunities to continue this strategy to drive inventory lower in fiscal 2027 in a disciplined, demand-driven manner. With that, I would like to turn the call back over to Jim before we begin to take your questions. Thank you. Jim Jenkins: Fiscal 2026 was a year of significant transformation. We grew revenue 15.2% to $192.6 million driven by 48.6% growth in fire services, built a head-to-toe global fire protection platform through multiple strategic acquisitions, and made meaningful progress simplifying and strengthening the business, even as we navigated a challenging cost and operating environment. We are entering fiscal 2027 with key financial metrics showing sequential improvement over Q4 2026. The fourth quarter demonstrated that our operational discipline is improving. We generated positive operating cash flow, held expenses essentially flat, and delivered adjusted EBITDA despite lower revenue versus Q3. These are early but tangible signs of the operational improvement we have been working toward. As we enter fiscal 2027, our priorities are clear: we will continue executing margin recovery actions across logistics, operations, and pricing, including manufacturing footprint consolidation; continue efforts at cost containment across logistics and operations, including in the face of the Iran conflict and its potential impact on freight and supply chain costs; tighten forecasting accountability and implement a stronger structure around sales and production planning; revise the ERP rollout plan with our new implementation partner targeting 2027; actively drive greenfielding in the M&A pipeline within our ISP space—we opened our Fresno facility in January and Denver is expected to open in summer 2026, as Barry had mentioned; capitalize on the fire tender pipeline, including expected tender wins in Europe, and showcase our full NFPA-certified portfolio at FDIC 2026; and leverage our balance sheet to execute on our acquisition strategy focused on fire turnout gear decontamination, rental, and services. Today, as we are now almost through fiscal first quarter 2027, I am very optimistic about our business trajectory, given the recent customer wins around the globe, enhanced product development and differentiation with our new Firefox Elite L100 structural firefighting boot, and a recently achieved full head-to-toe range of NFPA 1970 2025 certified product offerings across our brand portfolio. Customer interest and demand are strong. Operationally, we are correctly positioned. The core team is in place, and we are ready to capitalize on an amazing opportunity that is on the horizon for Lakeland Industries, Inc. Based on these factors, we believe fiscal 2027 will see high single-digit revenue growth and a clear line of sight to positive cash flow from operations. We are grateful to our customers, distribution partners, and team members worldwide for their continued trust and commitment, and especially to those first responders around the world who risk their lives every single day to protect all of us. We will now open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from the line of Gerry Sweeney with ROTH Capital Partners LLC. Please proceed with your question. Gerry Sweeney: Hey, Jim and team. Thanks for taking my call. Jim Jenkins: Hey, Gerry. Gerry Sweeney: Wanted to start with the fire side. I think in some of the prepared comments, the comment was largest pipeline in history. And I want to see—you know, some of this was definitely pushed out from 2025 due to government shutdown, NFPA standards, etcetera. So I think we sort of anticipated a building pipeline, but the question is, how do we unlock this, and maybe some more detail on the size of the pipeline and how does it flow through for this year? Jim Jenkins: I think I am going to have Barry, who has been working closely on that, respond to that, and then I will chime in. Barry Phillips: The comment was the largest open orders for Lakeland Fire in the company’s history, so our open book of orders coming through, scheduled for production and having a C-sale and invoice, that is the largest. The pipeline is the clearest view that we have been able to develop as we have been working through integrating our CRM software and program Salesforce globally, and our sales operations team structuring it for a full view across the business. We now actually have over $130 million in open pipeline that is visible to us, over $22 million of that in higher probabilities over half, and we have that view that we are working diligently with our teams to keep active. What we are seeing now is the opening of the spigot, so to speak, with the certifications coming through. Departments have been waiting for that certification approval, and then they start to look and bring things through. FDIC is the key component next week, where most of the NFPA push is through North and South America. Then we will be rolling things out with the rest of the world at the big show in June. On the FDIC show next week, generally, it is not an order-writing show, but it is a very visible show. It is Fire Department Instructors Conference, the longest-standing fire show in North America, and one of the globe’s largest ones other than Interschutz, which is once every five years and more global. Departments will come and, in a sense, kick the tires. Some of them have already started to have input for a field trial or user trial; those sorts of things take place. Sometimes you will get orders for commodity items, whether it is helmets or boots. If it is a larger department conversion, it is going to generally have some sort of a tender relationship or RFQ that will come into play or a wear trial. Gerry Sweeney: Got it. That is helpful. And then, switching gears slightly to the cleaning, the PPE opportunity. Obviously expanded in Arizona, sounds like it is going well. You are going into Denver. How big is that business in terms of revenue today, and how quickly can you grow that? Or do you have a target that you want to grow to in the next couple of years? Jim Jenkins: The goal is to get, in the services space, up to $30 million by fiscal 2028. We are ramping up rapidly, and I would be very disappointed if it was not much sooner than that at this point. When we acquired Cal PPE and Arizona PPE—Calvin, correct me if I am wrong—maybe $4.8 million, $4.7 million in annualized revenue. They have significantly ramped that up. They are winning customers; they are doing it the right way. The reason we are opening in Denver is we are not going to just open it and hope they come. We have active customers who have said, we need you to do this for us, and we need you to do it quickly. So when we open Denver, we would expect several fire brigades to be providing services for the moment we open that up. Fresno, we have seen similar. What happened with Fresno is that we had so much activity at our Riverside facility, it was busting at its seams. Having Fresno in Central California allowed us to shift some of those opportunities to Fresno while we were continuing to grow our opportunities in Southern California. While Fresno was working on some of that offload of capacity, they are also finding additional opportunities within Central California, adding to the Fresno mix. Arizona PPE—we are having a dialogue as a team now about expanding that footprint or increasing its warehouse capacity because they are bursting at the seams right now. As opposed to last year, Gerry, where we were pulling stuff in from quarters on the fire front, now we are trying to figure out how to make sure we can service it properly. Barry talks about the outstanding order flow that we have. That is driving us to do things. We have our North American manufacturing leader camped out right now at Meridian. Because Viridian was so slow last year, we had some personnel issues where we had to move on some sewing folks. We have since added capacity to that plant and individuals to that plant so that we can fulfill order flow for the first and second quarter. We have got visibility into order flow now into the second quarter and parts of the third quarter. We went from three and a half weeks’ worth of work at a place like Meridian to eight and a half or nine, and that has created challenges because we have to make sure the customer gets that delivery in a timely way. That is how we differentiate. In some of these ways, some of this happened very quickly, and we do not anticipate that momentum moving in the other direction. That is why we feel so optimistic, because for the first time, we have a production problem, not a sales problem. Gerry Sweeney: On your guidance, you said high single digits. On the chemical/woven side, the commentary is that it is stable. Is that high single-digit guidance a function of the visibility you are seeing on the fire side today? Jim Jenkins: Yes. It is a combination of that and what we also are seeing on the industrial side. The industrial segment—just as an example, in the United States—I get something called Cleveland Research from our partners at LineDrive. It is a survey of industrial channel partners, large and regional, and their view of where the market is going to be. Cameron’s philosophy has always been about trying to steal market share, which is really important in a business as mature as industrial. Historically the Cleveland Research report was saying half a percent growth in the North American industrial market, maybe 0.8% to 1%. Now it is 5%. When you are racing and being the most nimble in a market, and you have the team in your sales field and regional leaders we did not have historically, that foments a lot of optimism on the industrial space as well. Coupled with what we see in fire both in the U.S. and globally—Kevin Ray’s got his team in play in a lot of different opportunities. We would expect to hear soon on several opportunities in Europe where I think we have such close visibility to it, I would be really docked if we did not win. I look at places like the U.K. and Great Britain; I think we are in really good shape there. Gerry Sweeney: One more quick question. Margins—can you do a quick margin bridge? So it is around 30%; you were at 41% a year ago. You have volume, logistics/input costs, and pricing. Can you bucket those three out quickly as to how much of the downturn in margins each one played? Calvin Sweeney: Gerry, the bulk of that is mix; it is sales mix, followed by freight, duties, and materials cost that get you the rest of the way, but the majority of it was mix. Gerry Sweeney: So if you say mix, would that mean if fire volumes improve, we should see an improvement? Or are the margins in the gear low and you have to up the price? Calvin Sweeney: In fire services, the higher margin is the turnout gear, and then you have lower margin on boots. Jim Jenkins: We are currently in certification right now. We are working on getting certification from UL to be able to manufacture a Viridian product in Mexico. I have talked about this for quite a while. UL has been backed up doing certifications for fire. That backup, I think, has subsided, so I would expect to hear from them sometime in the summer. Then I can start manufacturing Viridian products in Mexico, and that is—Latin America for Viridian is their fastest growing. I am also looking for a certification for Lakeland product at Meridian so that, where needed, I can win departments that require made in U.S. I am now manufacturing LHD in China, and I am currently manufacturing Eagle in China, where we do not have issues with proximity to some regions in Europe where Kevin will still use third-party contractors. Yes, we would expect those margins to improve. As we garner critical mass in the services business—while those services businesses do not necessarily have great gross margin—their EBITDA margins are significant. That is why we have an urgent need to continue to drive growth in those businesses. Gerry Sweeney: Got it. I will jump back in. I apologize—quite a few questions, but thank you. Operator: Thank you. Our next question comes from the line of Michael Shlisky with D.A. Davidson. Please proceed with your question. Michael Shlisky: Yes. Hi. Good afternoon. Thanks for taking my questions. It was a little hard to tell how you feel, quarter to quarter, about the organic growth rate throughout the year. Do you think it might start off the year on a slower-than-high single-digit rate and end up at a higher rate, or could it be somewhat smoother organically throughout the four quarters? Calvin Sweeney: I think historically we start off a little slow in the first quarter of the year, and you will see improvement as we move throughout the year, especially now since we are picking up the certifications and see the demand increase. That happened mid-first quarter, so it is going to take a little bit of time for orders to come through. Michael Shlisky: Got it. On the ISP growth, interesting to see that you are opening in Denver. Any sense as to start to finish—when did you first hear you should be opening in Denver, and what was the time frame from that point to when you actually opened or are about to be opening? And are there any opportunities in other cities or states beyond Denver later on this year? Jim Jenkins: Barry, you are at the heart of the Denver effort right now. Why do you not answer that one? Barry Phillips: The Denver opportunity came to light just a few months ago. Our team and the leaders—our ISP’s Mike Glaze—is very well connected and known across the country. He used to be with Cal Fire; he ran their PPE program for many years before retiring and opening up California PPE. So, well connected. We know who to do and what and where. We were aware of an opportunity because a major competitor pulled out of the region. We know some of the technology providers because we have partnerships with them for the cleaning gear that drives our high efficacy ratings, and we found departments in that area that were looking for us and actually spoke to Mike in particular about coming in and taking care of their products for them. So we acted quickly. We have hired the leader for that site—she comes with a strong background and experience in the industry—and we are in process of getting things up and running. Our Fresno site, for example, as a footprint—we use that as a template to build out our sort of cookie-cutter, franchise-type thought on how to quickly ramp up. We did that in about a month and a half. The longest lead item is, first, securing the site; then after that, it is getting UL certification. The other parts—we know what to do, where to set it up, how to set the flow and process, and what resources we need to fulfill it. And, Mike, to the other part of your question— Jim Jenkins: We have several other opportunities that we are looking at from a greenfield perspective. We are doing some market research. Mike is checking out some opportunities in the Southeast; he has a few meetings next week—he is leaving FDIC for a meeting in the Southeast to look at opportunity there. Obviously, we want to be in the Midwest. I would envision over the course of the next year another three to five add-ons, in a perfect world, for greenfield—so we have another three to five between greenfield and acquired companies. As I said, these acquisitions are much lower cost, much higher rate of return from a pure synergy perspective because they kind of drive themselves and they can scale quite nicely, and Mike knows how to scale them and identify the people within a region to help drive that growth. He has already got a business plan on that front. I would envision three to five additional ones beyond Denver in North America. Kevin Ray has reached out—he wants one in Germany. It would make sense for us to do that. I think three to five in North America is probably the next twelve months of what I would be focusing on, though. Michael Shlisky: Great. And one last quick one for me. Kevin, welcome—glad you are head of EMEA Fire. What is the structure of the sales organization globally? Is someone going to be head of Americas soon that you are going to be hiring? I want to get a sense of the leadership structure. Jim Jenkins: We have a North American sales leader already. He reports into Barry. Everyone—other than Kevin—reports up through Barry. Barry is ultimately responsible for our global strategy. He and Kevin work together on the European side. I brought Kevin on board formally because, frankly, de facto, he had been a member of the management team for at least the last year, helping integrate the Jolly and LHD brands. Michael Shlisky: Just clarifying. Thank you so much. I will pass it along. Operator: Thank you. Our next question comes from the line of Analyst with Lake Street Capital Markets. Please proceed with your question. Analyst: Hi, guys. You have got Alex Donix on the line for Mark Smith today. Thanks for taking my questions. One for me—gross margins have been under pressure all year. Walking into fiscal year 2027, what are the biggest drivers of margin improvement there? What does the sequencing look like—what gets better first versus what takes longer to come through? Calvin Sweeney: It is really going to be the sales mix that drives that, and what we see is with increased demand on the fire side, especially in the higher-value products, we will see that starting maybe in late Q1 but most likely Q2 is where you really start to see the improvement. And you add that to some of the synergies we are driving with manufacturing— Jim Jenkins: —in place for products like Eagle and LHD in China, as opposed to utilizing third-party manufacturers, and the move of Meridian’s fire manufacturing for Latin America into Mexico. We think that, along with selling more turnout gear on the fire front, really adds to the margin. Analyst: That is helpful. And then last one for me. The high performance and high viz sale brought in about $14 million. It sounds like the balance sheet is the priority for those proceeds, but is any of that set aside for bolt-on deals, or any additional color on M&A would be great? Calvin Sweeney: Balance sheet. Jim Jenkins: The M&A opportunities—we are looking at an ABL because we would like a little more availability to do some of these smaller acquisitions. Whether we go that route or others, we will find a way to do it. As I said, they are not expensive deals. Analyst: Perfect. Thanks for taking my questions. Operator: Thank you. Our next question comes from the line of Analyst with Maxim Group. Please proceed with your question. Analyst: Hey. Thanks for taking my questions. I think you mentioned $5 million intercompany sales activity. I am wondering how you expect that to evolve now that you have the head-to-toe certifications, and what do you expect from it in the next fiscal year? Jim Jenkins: We expect it to grow significantly. We have an NFPA boot now for Jolly that we just got certified, so we will be rolling that out. Boots, gloves, helmets, and hoods—those are in-stock products that we need to have. The reception on the helmets right now is significant and has exceeded our expectations in the U.S. markets. That will continue to grow. The boots were very well received in the wear trials, so we will see pickup from that. Kevin has only recently started to drive the sales teams within the Eagle—well, not so much Eagle, he has been doing it with Eagle—but more with LHD and with Jolly, the cross-selling of the brands within other markets. Jolly has been very well received in the Latin American market, and now that we have an NFPA boot—where Latin America likes to have the choice of an NFPA offering—we would envision the ability to sell into that market as well. Do I have a dollar amount on that? I do not. But it is going to be, in my perspective, very easy to drive some of the growth in brands within a market like the U.S. that, until these certifications were standardized and finalized, we were not able to sell. Kevin Ray: Across the globe, the brand recognition—Lakeland Fire and Safety in the last twelve to eighteen months—is becoming a much higher-profile brand. It is getting credibility across the categories that we are supplying, so we are seeing more inquiries of a higher quality because of that. Barry Phillips: And to add to that, these brands that were regional manufacturers that worked through distribution globally with limited sales resources now have the full Lakeland sales team around the globe representing them. They are getting in front of end users and key channel partners that they did not have the opportunity to reach in the past, and that is where it is growing. Analyst: Great. Thank you. Operator: And we have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Jenkins for his closing remarks. Jim Jenkins: Thank you, operator. Thank you all for joining us for today’s call, and thank you to our customers and distributor partners worldwide for trusting us with your lives and safety. Lakeland Industries, Inc. continues to be well positioned for long-term growth, and we look forward to sharing our continued progress on the next call. We will also be attending FDIC 2026 in Indianapolis from April [inaudible], so please stop by and say hello if you are there. If we were unable to answer any of your questions today, please reach out to our IR firm, MZ Group. We will be more than happy to assist. Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.

33天前Insight Analytics约5分钟阅读

GSBC 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Great Southern Bancorp's First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, [ Christina Maldonado ]. Please go ahead. Unknown Attendee: Good afternoon, and thank you for joining Great Southern Bancorp's First Quarter 2026 Earnings Call. Today, we'll be discussing the company's results for the quarter ended March 31, 2026. Before we begin, I'd like to remind everyone that during the call, forward-looking statements may be made regarding the company's future events and financial performance. These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected. For a list of these factors, please refer to the forward-looking statements disclosure in the first quarter earnings release and other public filings. Joining me today are President and CEO, Joe Turner; and Chief Financial Officer, Rex Copeland. I'll now turn the call over to Joe. Joseph Turner: Okay. Thanks, Christina, and good afternoon to everyone on the call. We appreciate you joining us today. Our first quarter 2026 results reflect a solid start to the year in a continuing competitive operating environment. Both credit and earnings metrics remain strong, allowing for continued progress in our pursuit of meaningful per share tangible book value growth. This progress was underpinned by disciplined expense management, careful balance sheet structuring and a continued emphasis on relationship-based banking. In the first quarter of 2026, we reported net income of $17.5 million or $1.58 per diluted common share compared to $17.2 million or $1.47 per share in the year ago quarter. Compared to the fourth quarter of 2025, net income was up from $16.3 million or $1.45 per diluted share. Overall, results for the quarter reflected a resilient net interest margin, prudent asset liability management, thoughtful capital allocation and stable loan balances. Net interest income totaled $48.3 million for the quarter. That was down about $1 million from the first quarter of '25, primarily as a result of the absence of the income from our now terminated interest rate swap. That was, I think, about $2 million in Q1 of '25. Despite this lost income, our ability to strategically manage funding costs while maintaining attractive asset yields allowed for strong net interest income for the quarter. Additionally, we benefited from the collection of $483,000 in unbooked interest this quarter, which further supported our net interest income. Our annualized margin was 3.71% compared to 3.57% in 2025 first quarter and 3.70% in the fourth quarter of '25. And I think the -- if you pulled out the $483,000 of somewhat unusual interest income that might have knocked 3 or 4 basis points of the margin number. Total loans increased almost $100 million during the quarter. Loan growth was primarily in construction, commercial real estate lending, though that growth was partially offset by a decline in the multifamily category. While this balance sheet growth supported earnings in the quarter, period-to-period loan trends are influenced significantly by loan repayments from our borrowers. In the first quarter of '26, our loan repayments were less than our quarterly average during the -- during 2025 and definitely during the last half of 2025. As such, we remain committed to measured loan origination and disciplined underwriting. From a credit standpoint, we remain mindful of the volatility and the macroeconomic challenges affecting our borrowers. Asset quality metrics in the first quarter of '26 remain very strong for our bank with nonperforming assets to total assets of 0.18% with virtually no charge-offs. But we continue to monitor isolated examples of slower lease ups on projects, along with broader credit concerns as markets remain volatile. We did not record a provision for credit losses on outstanding loans in the first quarter of '26. Given lower unfunded balances and mix changes in the first quarter of '26, we did recognize a negative provision on unfunded commitments of $931,000. On the funding side, total deposits remained generally stable throughout the first quarter of '26. Non-broker deposits were down just $26 million from the start of the quarter and broker deposits were down about $11 million as we use FHLB borrowings to replace certain maturing balances. We saw normal movement across deposit categories. Deposit markets remain competitive across both core and broker channels and we continue to manage our funding mix with a focus on cost, duration and flexibility. Expense management remains a top priority for the bank as well. Noninterest expense for the quarter was $34.8 million, down $30,000 from the first quarter of '25. Part of this decline is related to an insurance reimbursement of $261,000 in legal fees recovered through a loan foreclosure in the quarter. Additionally, several projects that would have increased hardware and software systems costs expected in the first quarter of '26 have been pushed to later in the year. We continue to invest in systems, infrastructure and personnel to support the franchise over the long term. As we move through the balance of '26, we remain focused on maintaining strong credit quality, preserving net interest margin, managing expenses carefully and continuing to build long-term value for our stockholders through thoughtful capital deployment. With that, I'll turn the call over to Rex for a more detailed discussion of the financials. Rex Copeland: Thank you, Joe, and good afternoon, everyone. I'll now provide a little more detail on our first quarter 2026 financial performance and how it compares to both the prior year and the previously linked quarters. For the quarter ended March 31, 2026, we reported net income of $17.5 million or $1.58 per diluted common share compared to $17.2 million or $1.47 per diluted common share in the first quarter of 2025 and compared to $16.3 million or $1.45 per diluted common share in the fourth quarter of 2025. We did have a few income and expense items that impacted our results in a positive manner in the quarter. I'll mention some of those throughout this discussion. Net interest income for the quarter totaled $48.3 million compared to $49.3 million in the first quarter of 2025 and $49.2 million in the fourth quarter of 2025. Compared to the first quarter of 2025, net interest income decreased by about $1 million, as we mentioned, or approximately 2%. And as we said, that decrease was driven primarily by the reduction in quarterly interest income associated with the previously terminated interest rate swap, which ended in October of 2025. Additionally, compared to the prior year quarter, interest income declined due to lower loan balances and lower market rates which primarily impacted variable rate loans and some newer fixed rate loan originations. Those items were mostly offset by lower interest expense on deposit accounts and borrowings due to disciplined funding cost management and the ongoing repricing of deposits and other liabilities. In addition, there was no interest expense on subordinated notes in the quarter ended March 31, 2026 since those notes were redeemed in June of 2025. As Joe mentioned, we have recorded approximately $483,000 of additional interest income related to collection of unbooked interest on 3 separate relationships, 2 of these relationships have recently provided interest payments on a semiannual basis, though we do not have assurance of future payments or amounts going forward. I'll note that we did record additional interest income totaling $744,000 in the first quarter of 2025 on similar circumstances as those in this quarter. These types of cash basis interest recoveries can occur sporadically. Our effective loan pricing and disciplined focus on interest expense resulted in annualized net interest margin for the first quarter of '26 of 3.71% compared to 3.57% in the first quarter of 2025 and 3.70% in the fourth quarter of 2025. Noninterest income for the quarter was $7.0 million compared to $6.6 million in the first quarter of 2025. The increase of $439,000 was driven primarily by stronger commissions from annuity sales. We also benefited from other income in the quarter, $421,000 of which was related to a fee on a newly originated loan with an interest rate swap as part of the transaction and unrelated an exit of a tax credit limited partnership. Those types of fees and payments occur sporadically as part of our operations. Total interest expense for the quarter was $34.8 million, a decrease of approximately $30,000 compared to the first quarter of 2025. As mentioned, part of this decrease related to the reimbursement in legal fees. Further, we noted several projects that were deferred in the quarter due to scheduling limitations, so we expect additional expense will come online in future quarters, and we expect these projects to begin throughout the remainder of 2026. Our regular reimbursement related to qualifying expenses under our debit card program was also recognized in the first quarter, reducing noninterest expense by $453,000. Given our continued investment in upgrades of long-term capabilities and the expense reimbursement as noted above, we do expect noninterest expense levels will increase a bit throughout the year. Our efficiency ratio for the quarter ended March 31, 2026, was 62.85% compared to 62.27% for the same quarter in 2025. The company's ratio of noninterest expense to average assets was 2.47% for the 3 months ended March 31, 2026, compared to 2.34% for the 3 months ended March 31, 2025. Turning to the balance sheet. Total assets ended the quarter at approximately $5.69 billion compared to $5.60 billion at December 31, 2025. Total net loans, excluding mortgage loans held for sale, increased approximately $99.8 million or 2.3% from $4.36 billion at December 31, '25 to $4.46 billion at March 31, 2026. The increase in loans, as mentioned, was driven primarily by increases in construction loans and commercial real estate loans and partially offset by a decrease in multifamily loans. The overall increase in our loan portfolio balance is primarily a reflection of lighter loan repayments in the 2026 first quarter. Had loan payoffs remain consistent with levels in the second half of 2025, our loan balances would likely have ended up $100 million or more lower. Given the continued uncertainty with loan payoffs, we remain committed to measured loan originations with disciplined underwriting. On the funding side, total deposits ended the quarter at approximately $4.45 billion, a decrease of approximately $37.6 million from December 31, 2025. Noninterest and interest-bearing checking combined decreased $9 million in the quarter. Retail time deposits decreased $17 million and brokered deposits decreased $11 million. Though deposit competition remains strong our deposit balances have continued to stabilize throughout the last several quarters. As of March 31, 2026, we estimated an uninsured deposits, excluding deposit accounts of the company's consolidated subsidiaries were approximately $740 million or 16.7% of total deposits. From an asset quality perspective, the bank's credit metrics remain excellent. Nonperforming assets and potential problem loans totaled approximately $11.3 million at March 31, 2026, an increase of about $1.8 million from $9.5 million at December 31, 2025. At March 31, 2026, nonperforming assets were approximately $10.1 million or roughly 0.18% of total assets compared to $8.1 million or 0.15% of total assets at December 31, 2025. During the 3 months ended March 31, 2026 and 2025, the company did not record a provision expense on its portfolio of outstanding loans. Total net recoveries were approximately $13,000 for the 3 months ended March 31, 2026, compared to total net charge-offs of $56,000 during the same period in 2025. Additionally, for the quarter ended March 31, 2026, the company recorded a negative provision on unfunded commitments of approximately $931,000 compared to a negative provision of unfunded commitments of $348,000 for the first quarter of 2025. This negative provision on unfunded commitments resulted from the decline in unfunded commitments, primarily in unfunded construction balances. Our capital position remained a key strength in the quarter. Total stockholders' equity at March 31, 2026, was approximately $633.6 million, representing 11.1% of total assets and a book value of approximately of $58.27 per common share. This compares to total stockholders' equity of $636.1 million or 11.4% of total assets and a book value of $57.50 per common share at December 31, 2025. The slight decrease in stockholders' equity in the quarter was driven by $16.9 million in common stock repurchases, $4.7 million in cash dividends declared and a $2.9 million increase in unrealized losses on investments and interest rate swaps, partially offset by $17.5 million in net income and $4.6 million in increased capital due to stock option exercises. During the 3 months ended March 31, 2026, the company repurchased 268,664 shares of its common stock at an average price of approximately $62.55 per share and the company's Board of Directors declared a regular quarterly cash dividend of $0.43 per common share. Also during the first quarter, the company experienced stock option exercises of just over 80,000 shares at an average price of approximately $50.90 per share. As of March 31, 2026, approximately 419,000 shares remained available under the current repurchase authorization and our outstanding shares were approximately 10,874,000 shares at the end of March. Overall, our balance sheet remains well positioned for sustained success driven by strong capital levels, ample liquidity, solid credit fundamentals and a balanced earning asset and funding profile. That concludes my remarks. We are now ready to take your questions. Operator: [Operator Instructions] And our first question comes from the line of Damon DelMonte of KBW. Damon Del Monte: First question on expenses and kind of the outlook from this point going forward. I know you guys noted that there are some projects that will be underway shortly and continue throughout the year. Could you give a little bit of guidance as to maybe help us quantify what that expense rate would be going forward? Rex Copeland: Well, first, obviously, the items that we called out in the first quarter, the couple of different things that reduced our expenses, we don't anticipate those are going to repeat in Q2. And then it's just going to be a matter of how quickly some of these projects get going throughout the rest of the year. So I don't really have a great firm answer for you on that. I mean it's not going to be huge amounts of money, I don't think in any given quarter, but it's going to build on itself probably over the course of the year a little bit. Joseph Turner: Yes. I think that's right. Damon Del Monte: Can you give a little color on some of the projects? Joseph Turner: I think in total, we're primarily talking about IT projects and they involve data security. They involve some customer-facing technologies. There's some substantial upgrade in our systems that we're investing in and so I think when it's all fully baked in. And as Rex said, we're not sure exactly when that will be, but that will probably happen over the next 3 to 6 quarters, I think it's going to -- I think it could add $200,000 to $250,000 a month to our expense levels. Damon Del Monte: Got it. Okay. Okay. That's helpful. All right. And then I guess with regards to the margin, obviously, I think you quantified 3 or 4 basis point impact from the interest payments this quarter. But as we kind of think about the core margin going forward, if we do see one rate cut later in the year, could you just kind of remind us how you're positioned for the coming quarters? Rex Copeland: Yes. I mean we're pretty balanced, we think, on that. If there's a rate cut down the road of 25 basis points in the near term, it shouldn't be that impactful. It might be a bit impactful for a couple of months or something if we have some of our variable rate loans that were repriced down, most of our liability funding is pretty short. So we've got a lot of overnight advances from the home loan bank. Other items, we got interest rate swaps that would presumably come down in that case too. So we've got a lot of things on the liability side that are fairly short and would reprice pretty quickly. So we don't really anticipate that is going to -- would negatively impact us very much or for very long. So I think we're pretty well matched. If rates stay where they are, we don't anticipate there will be a lot of movement in our net interest margin. And even if they only move by 25 basis points up or down, probably isn't going to move the needle too much on that even. Damon Del Monte: Okay. Great. If I could squeeze one more in on loan growth. You highlighted that the paydowns were slower this quarter. Any visibility into expected pace of pay downs as we progress through the year? Do you have a little bit more optimism that you could kind of get a little bit more consistent with positive growth versus kind of the trends we've seen recently? Joseph Turner: It's just -- this is one of the reasons, Damon, that we don't give guidance is just very difficult to predict. The -- as Rex alluded to, our levels of prepayments, which is really what moves the needle for us. They were probably, I don't know, $180 million less than the first quarter of '26 than they averaged in the last half of '25. So that's a pretty significant number. And so you have to ask yourself, okay, is there may be a reason? Is it a less favorable refinancing market? Maybe so, but we're just not comfortable. It's -- it's too volatile to really give guidance, and that's why we choose not to. Operator: Our next question comes from the line of John Rodis of Brean Capital. John Rodis: Joe, I think you -- I just want to make sure I heard you correctly on expenses. You said IT could add roughly $200,000 to $250,000 a month. Is that right? Or was it a month or a quarter? Joseph Turner: No, that was right. That's right. John Rodis: A month? Joseph Turner: Yes. Yes. Rex Copeland: Not necessarily immediately, but over... Joseph Turner: Not necessarily. I mean, when it's all -- when all these projects are fully operational, which I think will happen over the next 3 to 6 quarters. John Rodis: Okay. Okay. Okay. So I mean, I guess, just back to expenses real quick. I mean when you back out the 2 reimbursements in the quarter, that gets you to like $35.5 million. So it sounds like you're sort of moving closer to that $36 million level, give or take, on a quarterly basis. Am I thinking about that right? Joseph Turner: I think you are, yes. John Rodis: Okay. Okay. Joe, just on the buyback, you've got, what, give or take, 400,000 shares remaining. The stock's moved up a little bit versus your average in the quarter. Are you still a buyer at the current levels? Joseph Turner: I mean I don't want to like exactly say what we would pay or whatever. But I mean, we do still think our stock at an attractive level whatever measurement you choose to sort of value it at. If it's -- if you're looking at tangible book value earn back or whatever, yes, I mean we still think it makes sense. Rex Copeland: And we look at it kind of in a total package to our total capital. We got to factor in if we have continued loan growth and things of that nature. So all those things play into making our determination from time to time whether we'll buy our stock back more aggressively or less aggressively that kind of thing. Joseph Turner: Right, yes. John Rodis: Within fee income, the commissions number, you talked about higher annuity sales, is that something that you think is going to continue? Or sort of what happened this quarter to make them higher? Rex Copeland: They've been higher now for maybe 2, 3, 4 quarters than they typically have run. I don't know if there's anything in particular that's driving it necessarily. I think we've just got some of our customers are interested in that product. And we've got some folks that are well trained in it. And so it may continue on. It's just hard to know for sure if that's going to be something that people will continue to be interested in over the long haul. But I think in the near term, at least, I don't know that it's going to be all that different. Joseph Turner: Yes. It's sort of an alternative to CDs. So it has something to do with interest rates and the -- what interest rates are on comparable CDs versus what they can get on the annuity product. John Rodis: Okay. Rex, just on the balance sheet, the securities portfolio was down a little bit. Would you expect the securities portfolio to sort of be flat to down a little bit going forward, sort of stable? Rex Copeland: Yes, I think it will go down kind of slowly. I mean we've got a lot of products in there that has monthly payments. But they're not like large amounts in total compared to the whole portfolio. So I think for the near term in the next couple of years, unless rates went down substantially, we probably aren't going to see a huge amount of runoff in that portfolio. We do have some things that 3 to 5 years out, probably have some maturities in there and some things that will start to ramp that up a little bit more. But -- but in the near term, I don't think there's going to be a lot of change in the portfolio, probably not much in the way of added to the portfolio. And as far as the payments go, I mean, you're not looking at a big percentage of the portfolio running off in the next couple of quarters here. John Rodis: Okay. And Joe, just one more question, sort of big picture. I think in the press release, you -- you talked about, I guess, moving one location here in St. Louis or to an updated location. Are there any other plans throughout the footprint for new locations or maybe to close some locations or anything like that you're contemplating right now? Joseph Turner: That's something we're always doing, John. We're always looking at customer patterns and usage levels of banking centers, and we got to make sure that every dollar we have deployed is being best utilized. And so -- and the banking centers are -- they're our best delivery channel, but they're also our most expensive delivery channel. So we have to make sure that every dollar we're spending there is wisely spent. So that's something that we're always looking at. Rex Copeland: And looking at some technology as well. So the one location in St. Louis, we were talking about the traffic pattern and everything there and the usage of the location. There's still some folks that will use it, we think. And so we're going to have ITMs there on site, and we've done that in a couple of other locations as well. So we're going to continue to be able to serve our customers with an interactive experience there. There just won't be an inside lobby present. Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Joe Turner for closing remarks. Joseph Turner: All right. Thanks again, everybody, for joining us today, and we look forward to talking to you after this -- after our second quarter earnings come out. Thank you. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

33天前Insight Analytics约5分钟阅读

NKLR 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Terra Innovatum Global Fourth Quarter Fiscal Year 2025 Strategic Business Update Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Giordano Morichi, Founding Partner, Chief Business Development Officer and Director of Investor Relations. Please go ahead, sir. Giordano Morichi: Thank you, operator, and good morning, everyone. My name is Giordano Morichi. I'm the Founding Partner and Chief Development Officer and Director of Investor Relations of Terra Innovatum. Today, we'll provide a business update on Terra Innovatum, including recent progress across the SOLO™ micro-reactor program, regulatory engagement, commercialization activities, technology development milestones, including Mersen Graphite prototype and key supply chain advancements. For today's call, please note that you can follow along using the accompanying presentation, which is available for full download in the Investors section of Terra Innovatum's website at terrainnovatum.com. Before we begin, I want to briefly address timing around our 10-K filing. As announced, we anticipate filing in our 10-K in the near term as we finalize reporting under a new CFO leadership. Importantly, this does not impact our operations, liquidity or strategic process and progress. And today's call is focused on substantial business momentum we are seeing across the platform. Further, I want to also address something we've seen on certain data platforms. It was brought to our attention that one of the SEC filings was reported by a major market data provider, giving the appearance that one of our fundings having sold a portion of their stake in the company. This is incorrect and the data has been corrected. So to be clear, this management team has not sold any of their shares. Moving on then. Today, we're very thrilled to provide an update on Terra Innovatum, including progress across the solar micromodule reactor program, regulatory advancement, supply chain execution, commercialization activity and key technology milestones. I'm joined today on the call by Alessandro Petruzzi, Co-Founder and CEO; and Cathy Williams, our Chief Financial Officer. Please turn to Slide 2 to review cautionary statements. As you're likely aware, during the formal presentation as well as Q&A sessions, management may make some forward-looking statements about our current plans, beliefs and expectations. These statements apply to future events that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from what is stated here today. These risks, uncertainties and other factors are provided in the earnings release as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be also found on our website at sec.gov. Now if you please turn to Slide 3, I'll turn the call over to Alessandro to begin. Alessandro? Alessandro Petruzzi: Thank you, and thank you to everyone for joining us today. I would like to provide a glossary of the key terms and [indiscernible] we use through the presentation including SOLO, FOAK, NOAK, LTE and various reactor types. I won't go through each of them. This is a useful reference as we discuss our [indiscernible] technology, regulatory path and commercialization plans. When we started Terra Innovatum, we're not trying to improve traditional nuclear. There was a different problem we went out to solve. Power is becoming a constraint across the industry and not just hyperscalers. It is a material and growing demand among industrial users for reliable, always on energy that they can operate and grow. [indiscernible] solutions don't fully address that need. Large-scale nuclear is complex and slow to deploy, while intermittent renewable don't provide continuous outlook. So we [indiscernible] something that does that Innovatum is creating a new category. Distributed modular micro reactor designed to deliver renewable energy directly [indiscernible]. This allow us to serve immediate demand today while maintaining a clear path to larger scale deployments over time. Turning to Slide 6. 2025 was a year of substantial progress for Terra. Across all of the core areas that matter most to our success. Operator: One moment please moment. [Technical Difficulty] Please continue, Mr. Petruzzi. Alessandro Petruzzi: Apologies for this disconnection. We start again with Slide #6. So I was saying that 2025 was a year of substantial progress for Terra across all of the core areas that matter more to our success and the advancement of our project. Regulatory execution, supply chain liveness and commercial market development. Starting with the regulatory and licensing, we moved from planning into structural execution. We advanced our engagement with the U.S. Energy achieved accepted bucketing of topical papers and white papers to review and build the foundation for the next major milestones height that include approval of plants or design criteria, construction private application submission and ultimately the operating license [indiscernible]. Just as importantly, we made significant progress on the industrial side of the business. We secured the end-to-end supply chain required for SOLO from 130 initially identified suppliers without selective 30 for contract agreement and initiated procurement activities that support both first deployment and early follow-on [indiscernible]. We also began [indiscernible] manufacturing activity to [indiscernible] and successfully produced the graphite prototype for [indiscernible] together with Mersen, which we view as an important validation of both the design and the manufacturability of key reactor components. And on the commercial side, we continue to demonstrate that market demand is really growing. We ended the year with approximately $4 billion in pre-commercial commitment, while expanding positioning our SOLO is a flexible platform that can sell a broader range of industrial infrastructure and data center application across geographies. So when we look back at 2025, we see a year where Terra materially reduced the execution risk across the business. We have demanded the regulatory path, secured the supply chain and deepened the commercial traction, all of which move us closer to deployment and commercialization. Moving to Slide 7. Here, we would like to highlight the regulatory framework and outline the main U.S. NRC we have completed so far. Our licensing process formally began in January 2025 with the submission of our regulatory engagement plan to the NRC. Since then, we have completed multiple docketed submission, including principal design criteria, our quality assurance plan, safeguards and material control and accounting methodology and [indiscernible] across the sign topical efforts, along with several white papers addressing key elements of the SOLO-60K. We maintain continuous [indiscernible] and engagement with energy staff through workers, shop and technical meetings. Even today, we are going to have a meeting with U.S. NRC. And the pay application phase is now nearing completion as we transition to PSAR in construction permit application readiness. It is important to note that all our submission and meeting with the U.S. NRC public and our progress as well as our peers can be tracked. We encourage our investors to read this report and follow along on our path to deploy. The next Slide 8 highlights the regulatory retail wins. Regulatory nuclear has historically been good as is constraint. What we are seeing now is a different approach. The development of 10 CFR Part 57 represent a structural shift in how micro reactor will be licensed in the United States. For the first time, the framework is being designed specifically around system like SOLO, factory build model and deployable at scale. In our view, this is a clear signal that the regulators expect micro-reactors to play a meaningful role in the near energy future and are actively building the framework to support high-volume deployment. So it's not adapting to this [trend]. It was designed and built for it. And moving to Slide 9. I would like now focus on the supply chain. This is a major execution milestones for Terra. We have secured the end-to-end supply chain required to manufacture and deploy SOLO. That included a critical nuclear grid component such as fuel, the pressure test control system and cost structure as well as our non-nuclear component, plant system, including the turbine heat exchange systems and support infrastructure. And importantly, these are not conceptual revision. We have built area to integrated network of qualified suppliers that can support the rigorous engineering and manufacturing standards this platform demands. This market because supply chain is where many advanced reactor program ramp into delays. Longly components and procurement and certain [indiscernible] deployment even when the technology [indiscernible]. We are working to address that risk early. By securing this input now we have improved our readiness for publication, reducing potential to equipment in bottlenecks and strengthening our ability to move as the regulatory milestones are achieved. That fits directly with our broader execution model, we have licensing, manufacturing and supply chain development are all advancing in part. So the takeaway is now simple. Today, we are not just designing solely, we move it far beyond the early stage of what this product can be. Today, we are preparing to build and position SOLO for deployment to demonstrate what this solution can do. In this industry, supply chain is where time lines break and we have addressed that risk earlier. And now we are able to build, thanks to the -- to our work plan supply chain partners as this is outlined on Slide 10. We have established a strategic alignment with leading partners across fuel components, manufacturing and deployment, including [indiscernible] Mersen, Ameresco and a Fortune 100 energy company and others. This partner provide nuclear grid systems, feul instrumentation and control and deployment capability that are critical to SOLO execution and scale-up. Moving to Slide 11. We may now turn to an exciting operational update. We are pleased to announce an important manufacturing milestones achieved recently together with Mersen. We have successfully produced a graphite reactor core engineering prototype for SOLO, which marks another step forward in our readiness for first deployment. This is significant because it reflects not just progress on a component. It shows that we are continuing to translate supply chain preparation in actual manufacturing execution, and that is exactly the kind of progress we want investors to see as we move towards the [indiscernible] deployment. As you know, graphite is a critical material within the SOLO rector call, and this component is designed towards key systems and core agents that influence thermal performance, integration and overall system [availability]. So achieving this prototype and the required tolerance is an important technical validation above the design and the manufacturability of the reactor. Just as importantly, this work helped establish the procedure, the quality control and the production standards that are required for repeatable manufacturing. In other words, this is not only about proving we can make the part one but actually helping build the industrial foundation required to scale from NOAK into serialized NOAK production. These milestones also based on our previously announced agreement with Mersen for nuclear-grade graphite and other critical materials. It reinforced that our supply chain strategy is not theoretical. It is producing tangible outcomes and supporting our target path to focus in 2027 and broader commercialization beginning in 2028. So overall, we view this is a meaningful proof point for Terra. It demonstrates progress at the intersection of engineering materials and manufacturing and we support our broader objective of moving SOLO from a completed design into [indiscernible] repeatable deployment platform. Turning to Slide 12. What's critical to understand about SOLO is that this is not a future concept. Our solution was specifically designed for the need to meet current industrial energy demand. We are actively engaging with customers today across a wide range of industry that need reliable carbon-free power in the 1 to 200-megawatt range that we think of as a retailing nuclear market. This is a massive underserved segment made up of thousands of industrial users around the globe who cannot access traditional nuclear but still require [indiscernible] dependable energy. SOLO was designed to serve that market with a standardized, sellable product where bespoke decade long infrastructure project that cost many billions of dollars just are not suitable. Most importantly is that this is the same platform scale from single unit deployment to multi-unit configuration capable of supporting larger loads like data center and industrial campuses. We are addressing immediate demand today while also positioning the platform to meet the much larger energy needs of tomorrow. And now let me introduce you to Slide 13, a fundamental evolution in our service deployed. Historically, one SOLO reactor meant roughly 1 megawatt electrical watt. What we have now unlocked is a configuration where multiple reactors in a period with a centralized power conversion, allowing us to generate 20 megawatts from just 16 costs. That shift [indiscernible] a lot. By decoupling the reactor from the turbine optimizing at the system level, we materially improve efficiency, reduced footprint and lower overall and complexity and cost. And importantly, this is not theoretical. We are developing this configuration and on-site and measure global turbine partner validating both the personal and the path to the deployment. SOLO NOAK, a model of product into a scalable application optimized power system. From an investor perspective, this is meaningful because we are providing an innovation now that directly lowers cost per megawatt, reduce physical footprint and expand the range of commercially viable deployment. In other words, it improved both unit economics and total addressable market at the same time. And the second innovation is how SOLO actually operate once it is deployed. And what you are seeing in Slide 14 is our ability to cover the full demand spectrum from [indiscernible] base loads to seasonal variation and short-duration peak spike all within a single system. What -- we do that by combining constant nuclear assets with a small amount of integrated capacitor storage, allowing us to respond dynamically without having incremental reactor capacity, that's a meaningful advantage. Traditional system requires significant overbuild or large-scale battery infrastructure to handle variability. We are achieving the same outcome with a fast, simple and more capital-efficient approach. The result is a system that can operate autonomously, adapt to real-world demand and deliver consistent power with new added complexity. For investors, that means we can deliver good quality, dispatchable power without the cost and scale of traditional storage solutions. That drives a structurally lower cost curve and position SOLO as a true replacement for both baseload and flexible generation. Turning to Slide 16. Our strategy has been consistent from day 1, build a system that is simpler, faster to deploy and scalable by design. At the center of that strategy is a fundamental different approach to conventional construction and deployment. Rather than building a nuclear project from scratch at each customer site. We are producing SOLO as a standardized factory build system. Units are assembled in one location under control condition and then delivered to the customer site for installation and connection. That matters for several reasons. First, we support much faster path to market by reducing on-site build complexity compressing deployment time line and enabling a more repeatable installation process. And second, we give out a platform that can scale globally, not one custom project at time, but an industrialized process designed for broader market penetration. This model is supported by the key building blocks we have already put in place, a progress and advancing licensing pathway, republication and construction activities that have been already initiated, a simplifying standardized design and a secure supply chain to support the execution. Today, we have reached a point where our first-of-a-kind [indiscernible] design is complete. Our supply chain is in place, and we are fully funded through our initial deployment phase. From an investor standpoint, what matters is this. We are no longer quoting a concept. We are executing a deployment strategy. Slide 17 introduced the demonstration of that strategy. I want to emphasize here how much more this is just reactive. SOLO is a building block of the energy infrastructure that can be deployed, replicated and scaled. Each unit delivers renewable baseload power and heat operate continuously and is designed to run for decades with minimum intervention. But what makes SOLO truly differentiated is not just the performance. It's how it's built and deployed. This is a factory assembly system designed for repeatability of bespoke construction. And that shift from megawatt project to product is what really allow the scalability of this business. Slide 16 highlights SOLO key differentiators. SOLO is designed to be safe by physics. There is no risk of the [indiscernible] exposure, [indiscernible] risk after [indiscernible] and no requirement for an exclusion zone, which together support deployment across a wide range of commercial and industrial sites. The reactor is a factory build using [indiscernible] component. It uses low enriched uranium fuel that is already NRC licensed and available at commercial scale and offers the stability in output, electricity, process heat and [indiscernible] across diverse end user industry. Our licensing pathway and the FOAK, NOAK design provide what we believe is an industrial-leading [indiscernible] to market with current cash expected to fully fund the FOAK. We also believe SOLO is well aligned with the NRS developing Part 57 framework for micro reactors, which is intended to better accumulate features such as factory fabrication, transportability, model of deployment, automation and remote operation, all of which support a more streamlined and potentially faster regulatory pathway over time. To explain further, FOAK to NOAK means that the reactor we deployed first is the same reactor we intend to commercialize. We are not demonstrating one design and then redesigning for scale. Combined with our licensing power pathway, that design [indiscernible] is a real key differentiator for SOLO and our platform. On Slide 19, we stepped back from the individual units and look at what makes SOLO scalable on global basis. We see 4 core pillars of differentiation here, global market penetration, nonproliferation alignment, power scalability and output versatility. SOLO's low-enriched uranium-based design is aligned with global nonproliferation standards, support deployment across both U.S. and international markets. The SOLO platform is scalable and single-unit application to multi-unit fee deployments depending on the customer needs. And last but not least, SOLO is versatile in what it can deliver, including electricity, fleet and rates across a wide range of end markets. Moving now to Slide 20. One of the most important decisions we made earlier was not to become a manufacturer. Instead, we built Terra as a [indiscernible] company focused on design, integration and deployment while levering a global network of nuclear qualified suppliers. This allows us to remain capital efficient while still scaling of thousands of units. It also significantly reduced educational risk. We are not building manufacturing capacity from scratch. We are activating capacity that already exists. From an investor perspective, this model is what enables both speed and scale with the traditional capital burden associated with nuclear. The benefit of this model includes commercial and regulatory reasons, an asset-light capital structure, scalability to thousands of units and accelerated time to market. Moving now to Slide 21. We have crossed a key threshold as a company. Our design is complete. Our supply chain is secure. Manufacturing has begun, and our regulatory process is now advancing. There is no longer a concept story we are executing towards deploying. And now I'm excited to provide an update on our roadmap to FOAK and commercialization beginning on Slide 23. This slide highlights how our license approach refers fundamentally from traditional nuclear. On the right, you can see the conventional pathway where each step is potential. You complete your initial submission, obtain first-of-a-kind approval and then effectively start over with new licensing and redesigning work to reach commercial deployment. Our approach is different. First, we are pushing a parallel licensing strategy, advancing both the construction permit and creating license simultaneously with [indiscernible]. This allow us to compress some line and avoid the delay inherent in a step-by-step process. Second and critically, our FOAK [indiscernible] design are identical. That means the unit we demonstrate is the same as the one we commercialized in meeting the design and licensing and additional engineering between phases. And third, this leads directly to accelerated commercialization. By combining a simplified design with a regulatory pathway aligned with micro-reactors particularly the low to mid of Part 57, we expect to move from demonstration to fix deployment far more efficiently than traditional nuclear projects. The result is a streamlined pathway where FOAK approval effectively becomes the bridge to commercialization rather than beginning of a new process. And moving to Slide 24. We will keep this at high level for now as we have worked through each of these components already. What is important to note today is how they have all come together. This road map show quite simplistically and evidently that we are no longer advancing isolated work stream. We are moving on to operating in a phase where everything is moving seamlessly in parallel. Our regulatory process is progressing. Our supply chain is in place and ready to scale. And on commercial side, we are moving from evaluation to real site selection and now deployment plan. And those 3 elements, licensing, manufacturing and deployment are aligned and that alignment is what enables the first of a kind. And just as importantly, it's what allows us to move beyond FOAK [indiscernible], where this becomes a repeatable, scalable model, not a one-off project. So rather than thinking about this as a time line on individual milestones, we think about it as a convergence point where years of development transition into execution. And as we move through 2026 and into 2027, that convergence is what positions us to deliver our first deployment and begin scaling from here. And on the topic of scaling, I will now hand it over to Giordano to give an update on commercialization progress. Giordano Morichi: Thank you, Ale. We currently have approximately [ 200 units ] under nonbinding MOUs, representing roughly $4 billion in potential value. While this agreement were nonbinding, they reflect the real counterparties, active site level engagement and growing demand, not early-stage exploration. Customers are increasingly seeking deployable solution to solve immediate power constraints, and that is exactly what's SOLO is designed to deliver. If you look at '27, our commercialization strategy is built around scalable deployment across U.S. and international markets, leveraging SOLO's non-proliferation online design and modular architecture. SOLO uses of low-enriched uranium fuel is aligned with the treaty on a non-proliferation of nuclear weapons and support deployment in both nuclear and nonnuclear weapon states. In the U.S., this enables deployment across government and defense sectors, including the Department of War and on and off federal land. Essentially, it supports deployment in Europe allied jurisdictions and nonnuclear countries under appropriate safeguards. If you look at '28, you will find details on the first deployment site Rock City Admiral Park. Our first-of-a-kind deployment is planned at Rock City's underground Industrial Park, where our MOU includes an option to deploy up to 50 reactors over time or 50 megawatts electric of capacity. The expected initial term is 15 years with potential for up to 45 years of operations through modular core-swap subject to NRC approval. And the 6 million square foot underground site provides an ideal environment for licensing, testing and construction. Rock City will provide a controlled environment for first deployment critical for execution and validation. On Slide 29, Uvation position us directly within the AI infrastructure build-out, where power availability is rapidly emerging as a critical growth constraint. We are planning a 1-megawatt electric SOLO-powered pilot deployment to support next-generation AI with high-performance computing data centers with the ability to scale to 100 megawatts electric to additional SOLO units. It is behind-the-meter, carbon-free solution is designed to address the growing energy bottleneck facing AI and data center expansion, while positioning Terra at the center of one of the fastest-growing and most power-intensive segments of global economy. Moving to Slide 30. Ameresco gives us access to federal and commercial deployment channels at scale. We have entered into comprehensive framework to evaluate siting, deployment, construction, integration, operation and decommissioning planning for SOLO reactors across U.S. federal and commercial sites. The agreement started deployment for up to 50 SOLO reactors focusing on federal customers, such as Department of War, Department of Energy and also enables global outreach leveraging Ameresco's network. Slide 31 illustrates how SOLO addressing key challenges across 4 core segments, data centers and digital infrastructure, infrastructure utilities, medical and health care and industrial factories. Common themes across these customers include the need to meet exponential growth in demand, reduce emissions at competitive costs, secure locally deployable power and, in some cases, support the production of life-saving radioisotopes. With that foundation, I'll turn now to Kathy for financial updates. Kathy? Katherine Williams: Thank you, Giordano, and good morning, everyone. As you know, we previously communicated an expected filing time line of April 15 following our extension period. While we've not made significant progress, we did not meet that date. To be clear, this is not a function of any underlying financial performance or operational issues, whether it reflects the complexity of our structure and the reporting requirements following the business combination. This business combination includes multi-jurisdictional considerations across Italy, the Netherlands, the United States and Cayman. We are currently working through the appropriate technical accounting treatment of certain noncash items with our auditors. We expect to file the 10-K in the near term, but I believe it is more appropriate to take the necessary time to ensure the filing correctly represents the impacts of the business combination and our progress during 2025. As is typical in these situations, we expect to receive a standard notification from NASDAQ related to the timing of our filing. This is a procedural matter, and we intend to address it in the normal course within the prescribed timeframe consistent with NASDAQ's standard process. Giordano and Alessandro have provided you information on the significant progress we are making across licensing, supply chain and commercial engagement. I would also like to share with you our cash balance in the bank as of December 31, 2025. This is shown on Slide 33. Total funds available $100 million plus. As we have communicated before, we estimate it will cost us $70 million to achieve our first of a kind. As we have secured our supply chain, we've been able to confirm that our estimates are aligned with or lower than the $70 million baseline. And of course, as mentioned, NRC is working on simplifying the regulatory process. The potential savings from these actions have not been factored into our $70 million estimate. So in conclusion, we are well positioned from a cash perspective to be fully covered up to commercialization of the SOLO reactor. Alessandro, I'll turn it over to you. Alessandro Petruzzi: Thank you, Kathy. Now to close, moving to Slide 35, we want to step back for a moment. Innovation was built around a simple idea that the future of energy would require fundamental different approach, one that is distributed, scalable and aligned with the pace of modern infrastructure. Over the past several years, we moved from that idea to a completed design, a secure supply chain and advancing regulatory pathway and an expanding commercial pipeline. As we enter 2026, the focus shift from building the foundation to executing at scale. And from an investor perspective, the transition from the development to deployment is where value is created. We believe we are positioned at the front end of that shift. And lastly, on Slide 36, we encourage investors to follow our progress through our public U.S. NRC engagements, where we hold monthly meeting with the U.S. NRC. Even yesterday and today, we are having a meeting with U.S. NRC, our second last meeting held to submit application before entering the construction permit phase. You can access this meeting directly through our profile on the U.S. NRC website or by signing up to our mailing list. Additionally, we keep our stakeholders informed via our investor website and social channels. This channel will provide update on regulatory milestones, commercialization progress and key partnership as we advance towards [indiscernible] deployment. So I say that I really wish to thank you for listening. And operator, we are now ready to open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Sameer Joshi with H.C. Wainwright. Sameer Joshi: Alessandro, thanks for having this call and for the update. You mentioned in closing remarks about your regulatory progress and how we can track it. Can you give us maybe quantitative or qualitative answer in terms of how many topical reports are still outstanding and to be submitted any other -- any white papers in the final stages, because I think the mid-June deadline or sort of deadline you can say is coming up. Just wanted to understand how that works? Alessandro Petruzzi: Yes. Topical reports and white paper are tools that are used in order to anticipate topic and -- important topics and discussion with U.S. NRC. And those are used during the pre-submittal phase just to take the right time to prepare for the construction permit phase. See that we have submitted so far about 10 topical reports, similar number of white papers. You can find again on the website of U.S. NRC. We are today doing the second last meeting. The last meeting will be early May, where we had an additional one topical report and a couple of white papers. And then in June -- June, July, end of June, we will start with the construction permit phase. The work that we have done so far through the use of topical report and white paper will allow us to refer those topical reports and white paper while producing the construction permit. And construction permit will be released in the period between June, July and September. Sameer Joshi: Understood. And then just switching topics quickly. The Mersen announcement was earlier this week. Can you explain the significance of this graphite prototype and how it progresses your development? Alessandro Petruzzi: That's very critical achievement because we have a lot of graphite in our reactor is one of the main components together with [ LEU ] fuel. And the ability of graphite was 2, 3 years ago when we started the project at one of our question concern. This was also cleaned with Mersen. There is enough graphite to sustain even our commercialization phase. But the other concern was not on the ability was on the manufacturability of the graphite adding several graphite in our reactor. Taking into consideration the design of our reactor, we need to do a lot of drillings in this graphite, a lot of holes and the number of holes, the precision of how those holes are publicated is fundamental in order to ensure the physical behavior of our reactors. So these achievements that was done just last week, but actually, we started in October, November last year. So immediately after the -- we become a public company is the fundamental because we know that what we define is achievable, is really achievable also from a manufacturing point of view. So the first piece -- the first 2 pieces actually have been built. The 2 pieces are demonstrated to be inside the expected tolerance limit of the manufacturability and of our design. So now it's question to pass from the 2 pieces. We have produced to the several times that we need for our reactors. But this will be a standardization of the work because also what it was important during the production of these first 2 pieces is to derive the procedure by which to operate the next manufacturing of those blocks of graphite. So now we have the procedure, and we know how to do that for all the blocks inside our reactor. Sameer Joshi: Alessandro, it's good to see the methodical approach of our derisking each and every step of the process. Operator: Our next question comes from the line of George Gianarikas with Canaccord Genuity. George Gianarikas: Appreciate the updates on the commercial traction. I'm wondering if you could talk about any additional traction you may be seeing with hard-to-abate sectors like mining and any competitive updates there? In other words, to the extent you're having conversations with some potential customers in those sectors, what are the alternative approaches that they may be exploring as well? Alessandro Petruzzi: I will start, George, and maybe I will ask Giordano to complement. But mining is definitely one, as we discussed already several times, one of the sector that we look more. And today, in particular, if you come back to our presentation to the slide where we talk about the concept of SOLO nodes, today, even more than yesterday, we know that we are the perfect solution for the mining sector because we can basically scale up, reducing the number of reactors using single or few units of power conversion. So that solution I try to introduce for the first time today is really very important for industry like mining, but in general, for all industry that need a large amount of power and for which we can provide a solution which is higher efficient, less costly and with less also footprint. Giordano, do you have -- can you complement in terms of what we do in terms of mining? Giordano Morichi: Yes, absolutely. I think Alessandro's point is very important, especially when we're discussing 50 SOLO units that can deliver [ 20-megawatt electrics ] with the help of the power conversion units. Some of the conversations that we've been having with across the customers have been going deeper with this type of technical conversations, and we are structuring -- restructuring commitments to proceed to the next phases, we foresee them coming up in the near term. But we're looking at this really as a broad global deployment, right, whether it's in the U.S., whether it's outside of the U.S., thanks also to the nonproliferation and our ability to our technology to deploy it worldwide. But it's definitely an interesting sector. It is definitely something we're very committed to execute on, and we're pushing this as much as the data centers. George Gianarikas: And maybe as a follow-up, here in the past, you've shared a slide talking about [ $19 million ] at a 1,000 units, excuse me, of revenue per reactor in a certain cost profile and margin profile. Now as you continue to work through your supply chain, particularly in light of the recent graphite announcements and especially with some of the shortages in helium that we're reading about, are you still committed to that revenue and margin profile? Have these agreements sort of reinforced that financial profile at [indiscernible]? Alessandro Petruzzi: This is a very nice question that I'd like to take because today, in particular, when we down select from 130 suppliers to 30 suppliers, we have clear -- more clear visibility on the cost of our first of a kind and not only first of the kind, but also for the commercialization phase. When we select those 30 suppliers, we start with a real order. So now we know how much we are going to pay for the first of a kind. But together with that, we did another exercise with all our suppliers with all of these 30 suppliers. We did the exercise to ask them how much that cost can decrease going from the first of a kind to [ NOK ]. So today, better than 1 year ago, we know that our model to build the first of a kind is such that is real. The cost is -- was inside our evaluation. And we have strong confidence that what is also in the plan that was submitted is something that we can follow because this is what basically our discussion with the supplier is confirmed. Operator: Our next question comes from the line of [ Subash Chandra ] with StoneX. Unknown Analyst: So the first question is the site characterization, has that been completed at Rock City? Alessandro Petruzzi: No. What we have done so far is collecting all the information from Rock City in terms of metrology, geography, flooding, seismic, all this data has been collected. We are actively interacting with the owner of the site. We are advancing with the preparation of our environmental plan and this will be submitted in the next few months to [ NRC ] in parallel to the construction permit phase. We identify exactly the point inside the Rock City where the reactor will be located. And we also plan to start interaction with the municipality and the public -- the public people there in the next few weeks, months. But what is the important to your point -- sorry, what is important to your point that I mentioned is that all the data that are needed in order to prepare the environmental impact analysis are available. This is the leading -- the point where that takes more time. The analysis itself is not complicated. You need to do, but it's not complicated. What really requests a lot of time in the identification of the site is the collection of the data that you need for preparing the environmental impact analysis. And this data is available because the Rock Cities and industrial cities in the industrial site. So this means that they have already available those documents, and we received those documents from the owner of the site. Unknown Analyst: Yes. Are there any local permits required? Alessandro Petruzzi: Well, yes, something is needed definitely at the level of local authorization. We are interacting and this will be part of this environmental plan. Unknown Analyst: Okay. Got it. We'll stay tuned. Follow-up is your -- so the commercial strategy is to sell the reactors. And can you sort of clarify it to sell the physical reactors to sell the IP? What are the sort of the revenue streams you're looking for in the final model? Alessandro Petruzzi: So far, our main business model is to sell the reactor. In particular today, we also try to pass the message that there is what we call nuclear retail market. This means a large amount of micro small industry, industry that needed from 1 to 10, 20 megawatts, that may be struggling today with the cost of electricity worldwide. And for each, the SOLO solution might be very beneficial in terms of cost and in terms of reliability of operation. So our business model so far is forced on selling the reactor, but definitely, we have also started to discussion with potential offtakers where we have a different business model where we provide electricity without selling the reactor. This is something that obviously depends on offtakers, depending on the particular nature of the activity of the offtakers itself. Unknown Analyst: Okay. So you're open to sort of a PPA strategy? Alessandro Petruzzi: Definitely, yes. yes. This is not a today business that we are pushing. But definitely, we are engaging in discussion where PPA is considered. Unknown Analyst: And my final one is that do we need any more regulation, so you're going to manufacture the reactor, load the reactor, then transport the reactor in that transport phase, how easy do you think that's going to be? Alessandro Petruzzi: This was exactly the discussion we had yesterday night U.S. NRC. If you go to the website, you can see that one of the topic that was yesterday in the agenda was the manufacturability on site -- in factory and transportation. We are evolving very well from the Italian standpoint, we are in contact with the Italian regulator in order to get all the information on how to transport a fresh reactor vessel -- fresh nuclear reactor vessel where fresh means the fuel has not been used. And from a U.S. point of view, we are interacting with U.S. NRC in order to demonstrate that during the transportation and the rational side, our reactors still continue to be [indiscernible]. So this is to say that there is continuous discussion with U.S. NRC, there is a framework, a legal framework that exist. We are now trying to connect the dots and on those between the Italian regulator, the U.S. regulator, the Department of Transportation, which needs also to be involved. And all those parts have been already impacted, and we are also preparing a white paper on that, but this will have all most of the additional documents that we will submit to U.S. NRC. And this is not even connected with the construction permit itself. It's going more in the direction of the operating license. So we are talking even after September 2026. Operator: Our next question comes from the line of Craig Irwin with ROTH Capital Partners. Craig Irwin: So Alessandro, I was particularly interested in the discussion around the SOLO node, the fact that you haven't got the first of a kind yet. But right now, today, you're announcing basically a 20% lower CapEx or what I would assume is essentially a lower LCOE for 20-megawatt bites. And we get a lot of questions all the time about the long-term cost out profile, the ability to engineer lower costs for nuclear for the next couple of decades. Can you maybe give us a little bit more color on the portfolio of options you have to achieve similar cost out? A lot of people like to make comparisons back to the SOLO industry, where it's been basically 10% a year for the last many, many years. Do you see it as possible for the nuclear industry for Terra to have something similar as production ramps and deployments go global? Alessandro Petruzzi: I'm thinking that we can do better. In that presentation today, we didn't anticipate any reduction in the quantity, any reduction of cost. We were just saying that our $0.07 per kilowatt hour over 5 years is the cost related with the unique SOLO reactor with its own sub-plant. This means the reactor that is coming with the same generator, they have to buy their clear content. This was -- the idea to move to the concept of SOLO node was already part of our design. We just decided to announce today because we are moving quite fast in cooperation with one of the major worldwide buying manufacturing the work. So we had already meetings where we identified the possibility to develop this concept of SOLO node. And in SOLO node, this means we meant that we can have several reactors, nuclear reactors that are coupled with only on power conversion unit. And this is important because, obviously, it's going to decrease the complexity in the number of components, reducing the cost, even though this has not yet been identified and increase the efficiency. So the numbers that we see is there is 16 reactors. This means basically a reduction of 20% in terms of number of reactors. We can get 20 megawatts electric. The other point in the comparison about SOLO staying the other in the second slide that I mentioned today, the capability to do load follow. This is quite unique for the nuclear reactor. This is possible only because we are small, and this is possible because of the granulometry we can achieve with our solution. We can have several units to get 100 basically unique using the concept of SOLO node, maybe you may need 80. If you don't use maybe you need 100 reactors. But depending on that, the cons is that this granulometry give you the possibility to do not follow through the -- a different dispatch of electricity to the customer. So we are not changing the primary side and the reactor itself. The reactor continue to operate 100% power. The fuel stay well quite inside our reactor. But what we dispatch differently is the power. Why this is important? Because in this way, and I can come to point and the comparison with the SOLO, in this regard, our capability to follow the load is connected with the need to couple with SOLO at relatively smaller batteries, batteries that are at the least, we evaluate 10x smaller than what is needed for SOLO application. So the SOLO node concept and the capability to do a variable dispatch coupled with a very small amount of batteries give us a lot of confidence that SOLO can really be positioned for compete against whatever type of source of energy. And again, we mentioned -- we say that our price is such that we have $0.07 per kilowatt hour. And definitely, whenever you put together the SOLO node and this concept of long follow there might be additional savings. Craig Irwin: Understood. That makes a lot of sense. My follow-up question is around NRC's Part 57, right? With the public comment this spring, and the expected formalized rule later on this year, do you see the Part 57 language as potentially having an impact on overall development costs or timeline for development of your system? I know that the safety requirements and engineering requirements are not necessarily going to change, but you use an already existing supply chain where many of these components and features have been qualified already. Is there a possibility that you have maybe an expedited review of different subcomponents and system features? Alessandro Petruzzi: This is a very important question. And Part 57 will be alluded on, I think, 24th of April, so in a few days. What we have already discussed part of it with U.S. NRC, obviously, we don't have access to the full document, but we may know some of the aspects. And what I can say is that it looks like Part 57 was big for SOLO. But actually, I would say that SOLO fits very well with this approach now that the U.S. NRC is taking and considering for macro reactors. I can mention to you 3 topics for which we think we can get the benefit from Part 57 for the commercialization. And this to say also that Part 57 will not affect the first of it kind. For first of it kind, we will continue to follow Part 50. So Part 57 is for the commercialization. And why is it important? Several aspects, but I would list 3. No need for operators so far with Part 50, you need at least 5 operators on site. Multiunit license is very important, in particular from macro reactors that tend to be commercial only if there are more units, obviously. And Part 50 actually you have to do the licensing every time. Part 57 this concept of multiunit licensing. And last, but maybe the most important, Part 57 represent a sort of accelerate of Part 50. In particular, in the case, you licensed the reactor under Part 50, which is identical to the one that you would like to do in Part 57, which is commercial. And this is exactly our case. We are licensing reactor, the first of a kind in Part 50, which is identical to the one that we will do commercial following Part 57. And this will provide based on our understanding with U.S. NRC, a lot of simplification in the process and so a faster time to license the commercial units. Operator: Our next question comes from the line of Ryan Pfingst with B. Riley Securities. Ryan Pfingst: I'll just ask one on the commercial side. Can you discuss potential customer order conversion? Do you think customers will wait for the FOAK to deploy before placing a firm order or could we see those actually come ahead of first deployment? Alessandro Petruzzi: I'll start and then I will leave to Giordano. We are doing our best interacts daily with all possible customers. We had a nice discussion I can mention a couple of weeks ago, for instance, with a company that was present in several European airports also the energy demand is fundamental and is going to increase in the next years. We are doing the simple money. We are doing the same for industry, which are smaller, but they need still a lot of power, if you put all together, like the segments like the [ blast ] industry. So we are doing our best in addition to obviously more -- more today important industry like the data center. We are putting all our efforts to transform close discussion in orders. Obviously, we needed to provide the potential customer, the validation of our technology. And what we think is that -- what we are doing now with the regulators. What we are doing now with the supply chain is something that is very, very important. The supply chain the fact that we build this [indiscernible] on graphite give also a sense of agility of the projects. So it's not a paper work. It's really a project. So what I'm saying is that I'm expecting that in the next few months, when additional outcome in terms of advancing the supply chain will be available, and we can announce. This will give also a lot of confidence to our potential offtakers to transform the interest in real order. Giordano Morichi: What I can add maybe in terms of basis exactly -- I mean what is said is exactly important, and we're taking the approach on commercialization very even if being a methodological way. So when we're considering the offtake agreements, the one that we have, the one that we're exploring, we're getting to the doing really right. We're looking for how do we deploy it the merger of the technologies, how they work. So we're going on hand to discuss the technicalities first and the business operation coming from technicalities. But the most important thing is as we're developing first of a kind, the supply chain is there, we just produced Mersen prototype, the world is realizing a little and steady that as we're doing the licensing and we're executing on the manufacturing, we're shifting to the commercialization, and we're planning to have this order book in the next few months because that will really ramp up the end of the kind. But the conversation has been positive and that they continues, and there's been a lot of back-end work that is not announceable yet, but it's been present, and it takes many hours over weeks to do these technicalities and establish the commercialization strategy for potentially even higher deployments of what we discussed today. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Petruzzi for any final comments. Alessandro Petruzzi: Okay. I would like really to thank you, everybody for attending this call. We would like to keep informed all our investments, all our offtakers. So we encourage again you to follow us on our social and in particular to follow the updates that are regularly occurring on the website of U.S. NRC, which I think is the most tangible demonstration of where we are going. So thank you again to stay with us and look forward to meet you soon again. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

33天前Insight Analytics约5分钟阅读

GLGI 2026 Q3 财报电话会议

Operator: Good day, everyone, and welcome to today's Greystone Logistics Q3 Results Conference Call. [Operator Instructions] Please note, this call is being recorded, and I'll be standing by for assistance. Now I'll turn the call over to your host, Brendan Hopkins. Please go ahead. Brendan Hopkins: Thank you, and thank you, everyone, for joining us today. We have a brief safe harbor, and then we'll get going. So except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Warren Kruger, CEO of Greystone Logistics. Warren Kruger: Thank you, Brendan. I appreciate it. And thanks, everyone, for joining the call today. I wanted to just kind of get down to the nuts and bolts and the reality of it, again, to reiterate from a 30,000-foot level what's transpired in the last 6 months. Our biggest customer for the last 11 years, in November, called and just said, "Today is our last day." And they had tried to sell 3 times -- we went over this last call, but I'm just kind of reiterating where we were, and they apparently have decided to not go in a growth mode, but just kind of stay stable mode. And that world of leasing pallets is a world I like and we are actively -- it's given us actually a starting point to really take advantage of that. Because we couldn't be in that world since we were supplying them, and now that we're not in that world, we're in a better place to provide those services. So let me talk about a few things, the income for the last 3 months, the balance sheet. It affected us greatly. Generally, our December, January months are very slow months regardless, and then February being a slow month, it was a slow month. But the good news is for this quarter, we've got a rhythm down, we've got a lot of new customers that -- new customers and existing customers that are continuing to work. We've also, in years past, some of those longtime shareholders will remember, we used to buy resin and grind it and bead it and sell it, and we got out of that world because we were doing so much for our customers. Well, the good news is we're doing about $150,000 a month in revenue there: grinding, granulating and pelletizing on a contract basis. And it's a beautiful thing because we have the equipment, so we don't have to go out and acquiring equipment. It's just something we do and have done for years. So it's just a great way to generate additional income for Greystone while we wait on some of the big opportunities. We have had Walmart, has been over the last 5 or 6 years. We've done $50 million or so in revenue with them. We, over the last 90 days, I think we've got 80 truckloads of orders from Walmart. We are working with them, as I've mentioned in the past, on a tracking and tracing pilot program where we put cellular devices inside the units. And we can tell them where those units are every single day. We can tell them the temperature. We can tell them if they've been dropped, if there's been an ajar to the unit. So there's a lot of data we can provide that. We've been doing that at a Walmart distribution center in the Midwest. And it is something that we're excited about, and we anticipate that we will be doing some more of that in the future. In anticipation of that, last year before iGPS left us, I did acquire quite a few, probably around -- let me -- 38,000 cellular devices. So the cellular devices are for track and trace. They have a 7-year life once they start to be utilized. And so we're prepared for someone who has an opportunity for us to be in the pooling business for up to 38,000 units at this particular moment. And for us to get those new cellular devices, it doesn't take much time and it's a beautiful thing. There's also some Bluetooth technology that's allowing tracking and tracing, leveraging Apple phones. If there's an Apple phone within the vicinity of a tagged unit, they can track and trace that unit just off existing iPhones that are in the facility. So a lot of new exciting technology going on and we are excited about that. During the last quarter, we've been working diligently on our sales side. Ron Schelhaas, who's worked with me for many, many years, Ron's out there and has done a fabulous job with Walmart and has a lot of great opportunities working. Gary Morris, who has been in the industry for over 25 years, Gary has some wonderful things. We have a big opportunity with the company for 90,000 pallets to be managed. So we -- even this week, they talked about if there are broken pallets, if they lease them, they understood. But if they bought the units, how much credit would they get if we bought them back. So we've got exciting things happening on the sales front. In terms of just the operational, where we are money-wise, we have contracted to sell a piece of property we bought, for $1.675 million, which will allow us to have some cash on hand for any shortfall we might have. I don't anticipate -- I think that cash flow wise, we're closing in on where we need to be just to get to a constant breakeven basis. Our bank has worked with us. IBC has been fabulous. They are -- we've gone to an interest-only. Going into this quarter, they were renewing -- we are renewing our line of credit. And we also had a -- we were out of covenant on a few things. So they're working on that. So we will get those all resolved in the next 30 days. We have a great relationship with them. They know what our business plan is. They see it. They understand we've been doing this for 23 years, and exogenous events do occur in business, and this is one, that we have to -- that we are dealing with. And I'm proud of our staff for doing so. As I mentioned in the last call, last quarterly call, we laid off 140 people. That really hurts me as a person because that's hard. But we had to do the right thing. We've hired some of those people back and so that's nice to be able to do that. And so we've stabilized and we feel very comfortable with that. On one of our pieces of equipment down in Palmyra, Missouri, which is a brand-new machine, we've been outsourcing 1 of those machines for the manufacturing under contract for some garbage cans for someone else, again, just generating revenue to help our cash flows. So I feel very excited about where we're going. It's almost like we're back in time. But going back in time, I didn't have 3,300-ton machines ready to go. And that's where we are right now. We are -- we have the equipment. Our standard business is kind of Steady Eddie. Our nestable business is Steady Eddie. We have tested our Yuengling keg pallet at Yuengling Brewery. They liked it, it worked very, very well. We're just waiting on our first order from them. That same standup keg pallet is something that Budweiser uses. We're working with a group to get in the Budweiser system to show them our recycled plastic standup keg pallet to replace wood. We have also continued to -- we have one other product. It's a mold. We're not making capital expenditures -- we were limiting our capital expenditures. But we did find a great opportunity on a 1-piece sanitized 48X40 pallet that 1 of our customers needed. So we'll be able to acquire that mold probably around 1/3 of the cost that it would if we built it. So I'm excited about that, and that we also have a customer that will immediately take pallets from that. So I know that there's a lot of questions out there. I've kind of gone at 30,000 feet, tried to just give you the basics of where we are. But we have the infrastructure, we have the machinery, we have the tooling and we have great opportunities in the marketplace. Now we just have to bring those to -- bring those home. And that's my job, is to bring them home. And I've done this before, so we're going to do it again. So at this time, I'd be happy to entertain calls from -- or questions from anyone. Operator: [Operator Instructions] Our first question today comes from Eric Nickerson. Eric Nickerson: Just one quick one. What did you have to give up to the bank to get them to loosen their terms to interest-only? Warren Kruger: Nothing. It's a beautiful thing, we have a great relationship with them, we had a great relationship. We've paid them a lot of money over the years and never missed a beat. And immediately when iGPS canceled, the first thing I did was pick up the phone and call our officer and just say, hey, here's where we are. I want to go to interest-only. They understood and really didn't have to do anything. They just said "Fine. We'll take it before the committee." And they took it before a committee and we went to interest-only for a year. So really didn't have to give up anything, just -- they just -- they know that we're going to make it happen. Operator: [Operator Instructions] And we have no further questions at this time, Warren. Back over to you for any additional or closing comments. Warren Kruger: Well, I do want to say, it's funny how business is. And during the last multiple years when we had $10 million, $11 million, $12 million EBITDA every year, we were buying equipment, paying down debt, buying equipment, paying down debt. Last year we felt really good about where we were. We were -- we anticipated moving up to the NASDAQ. We paid off $5 million in preferred stock. We paid -- we bought $1 million worth of shares back -- common shares back. We bought the building that I mentioned earlier for $1.675 million. We did a lot of -- we bought 2 new pieces of equipment because of -- and that took a couple of years by the time we got the machinery and got them installed in Missouri. All those things add up, and you never anticipate really horrific events. You could talk about the what-ifs. But we've done those things and that what it did for us is that it gave us a new equipment and it gave us a new opportunity. The $5 million saved us about $350,000 a year in interest that we were paying for that $5 million. So there's some really good things that came from that, but that's also, we've got a little over $9.5 million in debt. And it's not substantial. I feel comfortable about our cash position. I feel comfortable about where we are. Boy, there's people in our company who really care. And that's what you want. And I have seen what's happened with our shares. And I hold probably, I don't know, 9 million shares myself. So believe me, I want nothing more for us than to do good things for the shareholders, which it raises all -- a rising tide raises all boats. And so that's our goal and that's where we're headed. I don't have anything else at this time, unless we have some further questions. Operator: And we do have a question queued up from Adam Posner. Adam Posner: Warren, a quick question around the resin pelletizing sort of business source of revenue. Do you see this as something that could expand beyond current levels as needed? Or what's sort of the overall, like, revenue opportunity here? Warren Kruger: Well, there most certainly is more opportunity on that side. It is not a focus -- it was not a focus of ours at all until about 90 days ago, we said, let's start utilizing. We have -- we're currently working on a project, it's 13 million pounds of ABS trays that need to be ground and another 6 million to 7 million of high molecular weight that we're grinding under contract. And then we actually, after we grind it, we get paid for taking apart these bins and we get paid for grinding -- granulating them. But then we get paid for beading them, putting them in pelletized form. We do have 4 pelletizing units. I mean our operation is pretty strong on the recycling side. So we have capacity to do more beading. The grinding and granulating, we continue to do that. So we have customers like a Molson Coors who may break a pallet, we buy those things back. And we will grind and granulate those, take the fiberglass rods out and reuse the fiberglass rods and reuse the material. And we -- so to answer your question specifically, we will, if we can continue to add to that and do some contract work for beading and/or grinding, we will do so. Adam Posner: Makes sense. Warren Kruger: And I do want to mention that Adaptive Pallet Solutions, we have done some -- we're doing some wonderful things with them. This whole leasing world is really in their hands. Besides the Walmart opportunity, they are out there and have some really great opportunities. And we look forward to the future of leasing out there in the world of our company. Operator: John Brandenburg has the next question. John Brandenburg: Warren, it seems there's such a disparity between book value and where the stock is. Is there any -- I guess, a couple of questions. Number one, is there any -- are you restricted by your bank in terms of buying any shares back? Number one. Number two, I can't remember, I know you have the million -- you bought $1 million. Can you maybe be more specific about when that $1 million was bought back? And then additionally, the new -- you're all -- you're ready, you've got the equipment, you've got the business cycle. I think once we get through some of this geopolitical stuff that is obviously hampering the business cycle in this country, there's no doubt that you're well positioned. But is that -- that business that you're looking at, without giving up any proprietary information, I assume, is that business going to be more on the leasing side? So those are some of the questions that I have. Warren Kruger: I think some of our new growth is going to -- like I mentioned earlier, iGPS leaving gave us an opportunity to be in that world. And that world is a -- what we want to be in specifically. We've been dealing with Walmart for many, many years, and we believe that pallets as a service is, we believe, that that, on an ongoing basis, it's great to sell pallets, but if we can provide a service for them, and not only provide the pallets but provide them information as to where they are. And if they're damaged, they don't have to worry about them, we take them back and we recycle them and put them back in the system. So they never have to worry about it. Because I will tell you that it's something I've been doing for 25 years, and it's reality. Wood pallets in a warehouse, in a Walmart system -- I just heard from, through Ron Schelhaas, I just heard from a Walmart distribution center about how much money they spend on tires and their fork equipment, [ fork ton ] equipment, from damage due to wood and so forth out there, it's just incredible. And it's -- we've been doing this for 25 years and it continues to evolve, but I think that with Walmart going to automation in all its distribution centers, the equipment demands that you have a better product in there. And we think that that bodes well for our future. And so back to your original question about the $1 million, that was all over $1 -- all over $1 that we purchased that back. And if we could -- if we had a crystal ball back then, it wouldn't have been a -- I thought it was a great bargain back then buying at $1 getting the shares back in. So we are not -- we are restricted from the bank. We can't utilize any of our cash to buy corporately. That doesn't mean that -- you might see some other purchases in the market in the future from others within our organization. Does that -- did I kind of cover it, John, your questions? I think that's it. Any other questions? Operator: Yes, we have one more from Sean Marconi. Sean Marconi: Sorry, I logged in about 9 minutes after the call started. When I logged in, you had mentioned that you guys had laid off 140 people? Warren Kruger: That's correct. Sean Marconi: When exactly did that occur? And maybe just get us up to speed, what exactly happened where the revenues declined as much as they did year-over-year? Warren Kruger: We lost a customer we had for 11 years that provided us about $30 million a year in revenue. And it was iGPS, which is a pallet leasing company. They buy our pallets and then they rent them to people like Procter & Gamble or whomever. And in the world, in the pallet world, you've got 3 big leasing companies. You've got CHEP, which is a blue -- you'll see blue wooden pallets out in the marketplace. You've got PECO, which is a red pallet that you'll see in the marketplace, or if you go to Costco, you'll see blue and red pallets in there. And then you have iGPS, which is a plastic pallet pool -- pallet leasing pool. And they bought, well, over the years, we had as many as 1.2 million 1 year, but generally, they bought about 750,000 pallets from us a year. They're owned by a private equity firm. That private equity firm has gone to try to sell it 3 times over the last 11 years. And I don't know if there's a continuation fund that owns it now. I'm just a little unclear on that. But I think in not selling, I think they decided that they were just going to go in a nongrowth mode and just replace the pallets that are broken with their own manufacturing operation, which precluded us from bringing new pallets into their system. So their growth has curtailed. And what I had mentioned, Sean, is that we didn't go out in the marketplace and attempt to be in that leasing world. And now we are out there knocking on doors, doing the same thing for ourselves, particularly in closed-loop pools. We don't want to compete against CHEP or PECO or iGPS out in the open pallet world where you have pallets going in in California and ending up in New York. That's not our world. Ours are from a manufacturing operation to a retail store and back to the manufacturing operation, that type of a thing. So that's what happened. And it happened overnight. And it was it. Most certainly, you can see it affected our revenue, it affected our earnings. And my job as CEO is to replace revenue. I can tell you the facts on what happened, but now I've got to bring new revenue to the table. And we've got a wonderful infrastructure, as I mentioned. But now is the time to add incremental revenue and add it on top, and we've got plenty of room to do so. Operator: And we have a question from Luke Wheatley. Luke Wheatley: So a quick question for you. I appreciate all the detail that you've given today. Looking back, it just seems like maybe the plant addition and then some of the buybacks kind of happened at a bad time. You've got a lot of debt that's due in the next year and you kind of outlined this layoff plan. What are the internal cash flow projections that you and your team are discussing? Have you spoken to the bank about a possible refinance? Or how are you thinking about that? Warren Kruger: And just so you know, that, yes, everything shows as current, but that's not so. It's an interest-only. We are -- our bank has been very good about our financing. And it will be over -- the financing will be over time. It's not going to be all due within a year. It's just that before this quarter, we didn't get some of the things done we needed to have the bank do. So we have a great relationship with them. We won't have everything due within 1 year. So we're in good shape. Luke Wheatley: So that means you're in the process of refinancing or you've already refinanced... Warren Kruger: No. We are already -- I mean, we've got our working capital line, that's up for renewal. And so we've had those discussions already. That's being done. And then our debt, because we were out of covenant on a few things, it shows -- it made our auditors present all our debt as current. And again, I've had multiple discussions with the bank. This is long-term debt. And most certainly, a certain portion of it will be current, but it will not be what's on our balance sheet now. We won't have $9.5 million plus our working capital line due within 1 year. That won't occur. Luke Wheatley: Okay. So could you tell everyone on the call maybe what percentage will be due in the next year and then what percentage will be due and then when you think that will be due? Warren Kruger: Yes. I can tell you already that by year-end -- that it's interest only. So nothing will be due by -- until after calendar year-end. So nothing due in the next -- until December 31. And then we'll probably be on whatever the original am was, and I can't tell you what that was, whether it's 5 or 7 years. But that's -- probably will continue to be the case. So whatever will be am-ed in that first year, it will be due in that first year. Does that answer your question, Luke? Luke Wheatley: Yes. So essentially, you'll get a 5-year extension, is that how you're kind of thinking about it, at the end of the year? I'm just trying to wrap my head around -- it sounds like there's a disagreement with the auditors. I'm not trying to read too much into it, but... Warren Kruger: Well, I will say that the auditors are -- I mean, I'm not -- the auditors are -- we had this discussion. They said, "Hey, because you've breached the covenant, we have to put it all due." That's the auditors. We -- I can tell you personally, and I'll tell the world, that I've had discussions with our bank. It's an interest-only. We're in interest-only. They feel comfortable with that. They've seen our plan, what we're working on. We probably, we're at -- I don't know where we were last month, but our revenues were considerably up in the month of March and April, through the halfway point of the month, where I'm pretty pleased with where they are. And so what -- with our financial institution, they will -- they'll go back to our original am. And again, I wish I knew the note terms off the top of my head, I'm sorry that I don't remember if it was a -- what the amortization period was. I just don't remember. But it will go back to whatever the terms were at the time that we went to interest-only. So if it was a 5-year am or a 7-year am, that's where we'll go back to. Operator: We have no further questions, Warren. Back over to you. Warren Kruger: Okay. Well, I just want to tell everyone, thank you very much for being a shareholder. As I've said many times in the past, I've been doing this a long time. It is a work in process. And we are working every day hard for our shareholders and we have motivated employees and motivated staff and we have the best recycled plastic pallet in the world. And the world -- we'll continue to sell to this marketplace and we'll continue to get back where everyone, our shareholder base, will be happy. So thank you very much. Operator: That concludes our meeting today. You may now disconnect.

33天前Insight Analytics约5分钟阅读

TRAW 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Traws [Technical Difficulty]. [Operator Instructions] As a reminder, this call is recorded. I would now like to turn the call over to John Fraunces, LifeSci Advisors. John Fraunces: Thank you, operator, and welcome, everyone, to Traws Pharma's Full Year 2025 Financial Results and Business Update Conference Call. This afternoon, Traws issued a press release reporting its 2025 financial results and provided a business update. If you have not yet seen this press release, it is available in the Investor Relations section of the company's website. Following my introduction, we will hear from Traw's Chief Executive Officer, Dr. Iain Dukes; and Chief Financial Officer, Charles Parker. Before we begin, I would like to remind everyone that statements made during this conference call will include forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially. Forward-looking statements speak only as of the date they are made as the underlying facts and circumstances may change. Except as required by law, Traws disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. For more information on forward-looking statements, please review the disclaimer in this morning's press release and the risk factors in the company's SEC filings. With that, I will now turn the call over to Traws's CEO, Dr. Iain Dukes. Iain Dukes: Thanks, John, and thanks to everyone for joining us today. Over the last year, Traws has made substantial progress towards our objective of bringing our differentiated next-generation antiviral candidate for influenza to patients. This morning, Traws announced a private financing of $60 million. The private financing was supported by new and existing health care-focused investors. The capital from this financing positions Traws to advance the flu program through a human challenge study this summer while providing access to additional capital as we achieve further key milestones. Influenza is estimated to be a multibillion-dollar opportunity spanning prophylactic and therapeutic applications, including strategic government stockpiling and pandemic preparedness incentives. The human challenge study trial focused on flu prevention is an important step towards establishing the potential for tivoxavir marboxil as a potential best-in-class prophylactic agent for flu prevention. We intend to initiate the study this summer once we have approval received from the Medicines and Healthcare Products and Regulatory Agency, or MRHA (sic) [ MHRA ] in the U.K. During today's call, we will provide an overview of development of our lead candidate, tivoxavir marboxil or tivoxavir for short for influenza. Tivoxavir marboxil is an exciting next-generation investigational influenza antiviral that targets the highly conserved bioenzyme CAP-dependent endonuclease. We believe tivoxavir is well positioned to become a best-in-class once-monthly oral prophylactic agent with additional potential for pandemic flu, including H5N1 bird flu. We will prioritize development of tivoxavir as a once-monthly prophylactic agent for influenza prevention. Seasonal influenza continues to have a severe public health impact in the U.S., particularly in vulnerable populations. While there are approved therapies and vaccines for flu, with such a number of infections, hospitalizations and deaths, there's still an incredible unmet medical need for improved prophylactic agents and therapies for flu. We envisage tivoxavir's potential use in 2 settings: prophylaxis, where it might be used on a monthly basis to prevent infection, especially during the flu season; and secondly, as an element of the national stockpile for pandemic preparedness. We believe tivoxavir is well suited to be a first-in-class prophylactic agent for seasonal flu based on its emerging profile as an oral once-a-month agent with a favorable tolerability profile and broad activity generally across influenza A and B strains. Cornerstone of our thesis for tivoxavir anchors on 3 items. First, previously reported preclinical studies showed robust antiviral activity against a wide range of influenza strains, including all influenza A and B strains. Second, positive preclinical data reported last year showed a single dose of tivoxavir provided protection against lethal bird flu challenge in 3 species with significant reductions in lung virus burden and pathology in nonhuman primates. Third, Phase I data in normal volunteer and healthy volunteers showed that the first-generation power and capsule formulation of tivoxavir maintained plasma blood levels well above the EC90 for over 3 weeks with good overall safety. Coupled to this, we have developed a next-generation compressed tablet formulation of tivoxavir with an optimized pharmacokinetic profile. Data from preclinical studies show a 30% increase in exposure with this new formulation. These results have given us confidence that the new tablet can provide 28-day coverage against influenza and be an effective once-a-month agent. We are in the process of conducting a Phase I bridging study in Australia to confirm the extended exposure we saw in preclinical studies. The positive bridging data will be shared with the MHRA in addition to the initial filings that we've already made with this agency. And hopefully, this will be used to advance ourselves to the next step in our prophylaxic program, the Phase IIa seasonal flu prophylaxis challenge trial. The Traws trial will be conducted at hVIVO in the U.K. Starting in June, positive results demonstrating protection from viral infection will be a landmark proof of concept for the program, supporting tivoxavir's unique value proposition as a safe and effective prophylactic agent. In the meantime, we continue to continue our conversations around tivoxavir in terms of it being included in the National Stockpile for pandemic preparedness. To support our intention to secure formal consideration by the Biomedical Advanced Research and Development Authority, or BARDA, for inclusion in the U.S. leading stockpile. We submitted our investigational new drug application or IND in January. FDA recently informed us that our IND filing has been placed on clinical hold due to concerns for the toxicology data package. We are actively engaging with the FDA to address its concerns and resolve the clinical hold as expeditious as possible with the goal of advancing the program in the U.S. in late 2026. We are optimistic about the ongoing bridging study and challenge study and look forward to reporting back on our progress through the year. At this point, I am going to hand this over to Charles. John Fraunces: Thanks, Iain [indiscernible] summary of the financial results. Charles Parker: Thank you, Iain. This morning, Traws announced the completion of a private financing that provides up to $60 million in potential gross proceeds. We also issued a press release this afternoon covering our results for the year-ended December 31, 2025. I'll refer you to our recent 10-K filing for a review of the full financial statements. You can also access the press release and the 10-K on our website. First, the recently completed financing. The private placement transaction includes funding of $10 million upfront and 3 warrants, which consist of a Series A milestone-based warrant with an aggregate exercise price of $10 million that becomes exercisable upon receipt of approval from MHRA to conduct the challenge trial. A Series B milestone-based warrant with an aggregate exercise price of $10 million that becomes exercisable following both shareholder approval and the announcement of data from the challenge trial. And a Series C common warrant with a 3-year term to purchase shares of our common stock and providing potential additional gross proceeds of $30 million if fully exercised following shareholder approval. Based on our current plans, the company believes that its current cash balance, including net proceeds from the offering and milestone-based warrants, if fully exercised, is sufficient to support planned expenses into Q1 2027. Turning to our financials. As of December 31, 2025, Traws had cash, cash equivalents and short-term investments of approximately $3.8 million compared to $21.3 million as of December 31, 2024. Revenue for the year-ended December 31, 2025, was $2.8 million compared to $226,000 for the same period in 2024. The increase is attributable to $2.7 million in deferred revenue recognized as revenue in the second quarter related to the mutual termination of a licensing agreement associated with our legacy oncology program in April of 2025. Acquired in-process research and development expense for the year-ended December 31, 2025, was zero compared to $117.5 million for the comparable period in 2024, recognized related to virology programs acquired in connection with the acquisition of Trawsfynydd through a merger. Research and development expense for the year-ended December 31, 2025, totaled $12.1 million compared to $12.8 million for the comparable period in 2024. The decrease of $0.7 million primarily relates to a decrease in expenses related to the oncology program, partially offset by an increase in expenses related to the virology programs. General and administrative expense for the year-ended December 31, 2025, totaled $8.5 million compared to $12.3 million for the comparable period in 2024. This decrease of $3.8 million is primarily attributable to a decrease in professional and consulting fees. The net income for the year-ended December 31, 2025, was $9.2 million, or net income of $0.83 per basic common and $0.82 per diluted common share. This compares to a net loss of $166.5 million or a net loss of $35.21 per basic and diluted common share for the year-ended December 31, 2024. Now I'd like to turn the call back to Iain. Iain Dukes: Thanks, Charles. Before we open the line for questions, I'll briefly summarize the topics we've covered on the call. Over the last year, Traws has made substantial progress towards our goal of advancing our differentiated next-generation potential best-in-class antiviral candidate for influenza. The recent $60 million financing provides us with the resources to drive forward the planned seasonal influenza prophylaxis study for TXM and supports Traws future growth. For influenza, we are poised to advance the evaluation of tivoxavir marboxil as a prophylactic agent, supported by completion of a bridging study for the compressed tablet formulation and initiation of a challenge trial in the U.K. this summer. As we begin the Q&A session, I want to thank everyone for joining us today. Now we'll open up the call for questions. Operator, please go ahead. Operator: Comes from the line [indiscernible] with Cantor Fitzgerald. Unknown Analyst: Hopefully, you can hear me. Great. I wanted to just work through a few points of clarification here, if I could. Just first on the FDA's questions. Do you have a sense of what, if any, new experiments you might need to conduct to satisfy their questions on the toxicology data package? And also based on sort of what we know from Xofluza, is there any plausible concern or risk around immunogenicity in the prophylaxis setting for tivoxavir, just given it's structurally similar? Or are you pretty confident that this can be fully resolved? Iain Dukes: Thanks for your question. So the structural similarity of tivoxavir to Xofluza is an important point that you bring up because baloxavir has a clean immunogenicity label. It was negative in [indiscernible] and has shown no immunogenic potential since it's been approved several years ago. So we think this is very strong evidence that the data that was generated in our initial package of information submitted to the FDA could have some flaws associated with it. So our plan is actually to repeat some of these assays and submit new assays as well and using Xofluza as an additional control in the assays that we submit to the FDA. So there's no reason a priority why we should be any different to Xofluza. And so that gives us quite a lot of confidence that the in vitro data suggests immunogenic risk are probably explainable through other mechanisms of action of the drug. Unknown Analyst: Okay. Nice. And then just on the U.K. side. So the -- I was hoping you could just characterize if there's any potential risk or what the various scenarios might be with the MHRA regarding starting that study on time in the summer with the prevailing toxicology data package or if there could be any sort of delays or need for submission of additional data in the U.K. Iain Dukes: Yes. Thanks for that. We actually don't -- we can't really answer that question today. Our package has been submitted to MHRA. They are now under a 30-day clock to review the package that we have sent. It is frequently the case that these regulatory agents come to different conclusions based on identical toxicology packages submitted. So for instance, in Australia, which -- where the regulatory agency saw exactly the same data that was seen by the FDA, we were obviously allowed to proceed with the healthy volunteer studies now twice because initially, our studies were approved and moved forward. And again, [ HRAS ] had access to exactly the same toxicology information that the FDA has today. And then secondly, when we recently got approved to run the bridging study in Australia, again, no concerns have been flagged. So we remain hopeful and optimistic that the MHRA will indeed approve the study as submitted. Unknown Analyst: Okay. Terrific. And just forecasting this out, thinking about sort of the value proposition for tivoxavir and flu prevention. It sounds like given the pharmacokinetic profile, like once monthly is possible here. But once you do the challenge study and you have the data in hand, if it turns out that twice monthly or even once weekly sort of optimizes efficacy, do you think that's just as viable commercially and something you would contemplate testing in a subsequent study? Or are you sort of committed to a once-monthly prophylaxis regimen here just from a commercial adoption and sort of competitive standpoint? Iain Dukes: No, not at all. We've done some initial market research on this point. And to your point, once weekly could still be a very attractive formulation for an oral compared to an injectable. So we will obviously very carefully evaluate the results from a challenge study, and we will be assessing the degree of protection at 1 week, 2 week, 3 week as well as 4 weeks in the study, and we'll make a decision based on what we see in terms of how we want to proceed forward into a Phase IIb/III in terms of the optimal dosing frequency that we would adopt. Unknown Analyst: Okay. Last question for me, just a quick clarification on the final $30 million tranche of the financing announced today. Is there any event that triggers that? Or is that sort of like at your request for shareholder approval, you can access that capital within that 3-year window? Charles Parker: Yes. I'll handle that... Iain Dukes: Charles, do you think... Charles Parker: Yes. Thanks for the question. The final warrant C, $30 million has an accelerated feature. If our stock trades at 2x the deal price, which was $1.67, then for 30 days consecutively, then we can -- there will be a 10-day window to force exercise that warrant. So that is the accelerated feature within the warrant. Otherwise, it's a 3-year term. Operator: I'm showing no further questions in the queue. Ladies and gentlemen, thank you for your participation on today's conference call. This concludes today's event. You may now disconnect.

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HAYPY 2026 Q3 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Hays plc Trading Update for the quarter ending 31st of March 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead. Kean Marden: Good morning, everyone, and thank you for joining us on a busy reporting day for the sector. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q3 '26 results. Before we begin, please be aware that this call is being recorded, and the replay is accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call regardless of whether these statements are affected by new information, future events or otherwise. I'll now hand you over to James. James Hilton: Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and consequently exclude our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. Group net fees decreased by 8% with Temp & Contracting down 6% and Perm down 12%. I'm pleased to confirm that strong consultant net fee productivity growth and cost discipline continues to offset lower net fees. Although near-term market conditions are likely to remain challenging, and we remain mindful of heightened global economic -- macroeconomic uncertainty, we currently expect FY '26 pre-exceptional operating profit will be in line with consensus. I would like to highlight the following key items from the results. Temp & Contracting net fees decreased by 6% as we saw a modestly stronger return to work in the U.K. and Ireland and ANZ and the year-on-year decline in volumes and average hours worked in Germany was in line with our expectations during the quarter. Group Temp & Contracting volumes decreased by 5% year-on-year, including Germany, down 9%, UK&I down 8%, ANZ down 6%, and Rest of the World up 2%. Perm net fees decreased by 12%, driven by a 15% decline in volumes as conversion of activity in UK&I and ANZ reduced modestly versus Q2. This was partially offset by a 3% increase in the group average Perm fee supported by our actions to target higher salary roles. We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions delivered 7% year-on-year growth in average consultant net fee productivity in Q3, including notable increases in the UK&I and our Rest of the World businesses. On a seasonally adjusted basis, productivity has now increased for a sector-leading 10 consecutive quarters. Consultant headcount reduced by 3% in the quarter and by 14% versus prior year. We've continued to make strong progress towards our structural cost saving program with a further GBP 15 million per annum savings delivered in Q3. We've now achieved GBP 30 million annualized savings in FY '26, making excellent progress towards our target of GBP 45 million by FY '29. In total, we've now delivered GBP 95 million annualized cumulative structural savings since the start of FY '24. Our non-consultant headcount exited the quarter down 7% year-on-year. And the group's net debt position was circa GBP 15 million, which is in line with our expectations and reflects normal seasonal cash flows. I will now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 11% year-on-year. Temp & Contracting fees decreased by 11% with volumes down 9% and a further 2% impact from negative hours and mix. Temp & Contracting volumes remained solid overall with return to work in line with prior year and the year-on-year decline in average hours were during the quarter predominantly in our public sector and enterprise clients was in line with our expectations. These sectors hired in anticipation of fiscal stimulus, hence, our placement volumes have remained resilient, but hours work remained softer in the quarter after federal budget approval was delayed. Perm was sequentially stable through the quarter and the year-on-year decline in net fees eased to 10%. At the specialism level, Technology and Engineering, our 2 largest specialisms, were flat year-on-year and down 27%, respectively, the latter impacted by ongoing subdued performance of the automotive sector. Accounting & Finance was down 22%, but Construction & Property performed strongly once again with 37% net fee growth, driven by our focus on infrastructure and the energy sector, and it now contributes 9% of our net fees in Germany. Consultant headcount decreased by 6% in the quarter and by 15% year-on-year. Net fee productivity increased by 5%, driven by our ongoing focus on resource allocation, and we made strong progress with our structural cost-saving initiatives. In U.K. and Ireland, fees decreased by 10% with a modestly stronger return to work in Temp & Contracting down 6%, but Perm remained subdued and was down 15%. Fees in the private sector declined by 8%, while the public sector was tougher, down 13%. At the specialism level, Technology was flat versus prior year, while Construction & Property and Accountancy & Finance decreased by 8% and 6%, respectively. Enterprise fees declined by 4%, while office support was flat as our actions just to target higher salary roles offset lower volumes in our junior roles. Consultant headcount decreased by 4% in the quarter and 16% year-on-year. Consultant net fee productivity increased by 11%, and we made further good progress in improving operational efficiency. Once again, a key driver has been our greater focus from our consultants on high skilled roles, consistent with our Five Levers strategy. As a result, year-on-year growth in average candidate salary remained at 8% for Perm in Q3 and accelerated to 9% in Temp & Contracting. As expected, our sustained focus on cost discipline, including ongoing initiatives to optimize our office portfolio and delayer management has driven a further structural improvement in costs. We've made good progress towards building a higher quality focused business and consequently anticipate improved profitability in the second half. In ANZ, fees decreased by 2% year-on-year with modestly improved momentum in Temp & Contracting, but Perm was more subdued. Temp & Contracting decreased by 1% year-on-year with a Return to Work modestly ahead of previous years. Perm net fees down 6% slipped back into modest year-on-year decline as conversion of activity to placement became more challenging. The private sector decreased slightly by 1% with the public sector down 6%. At the specialism level, Construction & Property, our largest specialism at 21% of ANZ net fees increased by 6% with office support and Accountancy & Finance up by 7% and 5%, respectively. Technology declined by 11%. Australia net fees were down 2% with New Zealand at minus 11%. ANZ consultant headcount was up 2% through the quarter but decreased by 4% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity grew by 7%. As with U.K. and Ireland, the key driver of our profit recovery has been greater focus from our consultants on higher-skilled roles. As a result, year-on-year growth in our average salary of our Perm placements was maintained at 5% in Q3. In our Rest of World division, comprising 24 countries, like-for-like fees decreased by 6%. Temp moved back into positive year-on-year growth and fees were up 3%, but Perm declined by 12%. As a reminder, our total actual growth rate includes the impact of our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. In EMEA ex Germany, fees decreased by 8%. France, our largest Rest of the World country, remained tough and loss-making with fees down 17%, but our actions to address productivity and costs are being delivered on plan, and we continue to expect an improved performance in H2. Southern Europe performed strongly with Spain and Portugal again achieving record quarterly net fees, up 17% and 6%, respectively, and Poland grew by 2%. In the Americas, fees decreased by 7%. The U.S. and Canada were down 8% and 2%, respectively. We have previously highlighted a substantial bid pipeline with large enterprise clients in North America, and I'm pleased to share that several contracts have now reached final close with mobilization anticipated over the coming quarters. Brazil, down 12%, was again challenging. Asia fees increased by 8% with activity -- improved activity overall through the quarter. Japan grew by 33%, driven by strong growth in our Temp & Contracting business and an easier comparable. Mainland China grew by 16% and Hong Kong by 9%. For the Rest of the World as a whole, consultant headcount increased by 3% in the quarter and by 14% year-on-year. Before moving to the current trading, I wanted to take a few moments to update you on our strong strategic progress during the quarter. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms through our Five Levers and structurally improve our cost base will be key drivers of profit recovery. Amidst challenging markets we are executing well and continue to make significant operational progress. We continue to invest in high potential and high-performing business lines and scale back or exit those with low performance and potential. As previously communicated, we have exited 4 countries over the last year, and we'll continue to review our country portfolio in the medium term. Consultant fee productivity up 7% in the quarter has increased for a sector-leading 10 consecutive quarters, driven by careful allocation of consultants to business lines with the most attractive productivity and long-term structural growth opportunities. Greater focus from our consultants on high skilled roles and our investments to provide them with the best tools. Within Temp & Contracting net fee growth was positive in 3 of our 8 focus countries in Q3. And at the group level, Temp & Contracting now contributes 65% of net fees. In Enterprise Solutions, we've recently signed several new contracts which we expect to contribute to fees over the coming quarter. And our programs to structurally reduce our cost base performing well with GBP 95 million per annum aggregate structural savings now secured since the start of FY '24. We continue to make strong progress with our initiatives and expect the full financial benefits to build over time. Moving on to current trading and guidance. To date, we have observed minimal impact from developments in the Middle East, but we remain vigilant. Although we have limited forward visibility given the heightened levels of global macroeconomic uncertainty, we expect near-term Perm market conditions to remain challenging but expect greater resilience in Temp & Contracting to continue. We were pleased once again with our net fee productivity through Q3 and believe our consultant headcount capacity is appropriate for current market conditions and therefore, expect it to remain broadly stable in Q4 as we balance focused investment in high-performing and high-potential business lines with improving productivity in more challenging areas. We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover and expect to make further substantial progress in Q4. As a result of the acceleration of our cost program, we have incurred around GBP 20 million of exceptional restructuring costs to date in fiscal 2026. But finally, there are no material working day impacts anticipated in Q4 '26. I'll now hand you back to the administrator, and we're happy to take your questions. Operator: [Operator Instructions] We will now take the first question from the line of Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. Two questions, please. Firstly, I'm sure you've scrutinized all the forward indicators all the ways that you can. So have you seen any signs of client activity changing at all since the start of the Middle East conflict? Then secondly, within enterprise clients, can you say what the net fee trend here was excluding those 2 large RPO contracts you lost? And you referenced a growing pipeline and improving win rates. Can you just talk more about any sectors or countries that are driving that and what your hopes are for that fee pile going forward? James Hilton: Thanks, Rory. I'll start off with the first one around the impact in the Middle East. And look, standing back from this the first an immediate priority for us has been the safety and the well-being of our 70 or so colleagues over in the region, specifically in the UAE I mean as I put in the statement and in the script, we have seen to date little to no impact at all in our -- either our fees or in our forward indicators. But clearly, we remain highly vigilant given the level of uncertainty that's building around the world. And as you would expect, we'll watch every piece of data like a hawk. And if and when we see any change, we'll react accordingly. But as we stand here today it's business as usual. We're continuing to focus on our priorities, which is optimizing our resource allocation for the best long-term opportunities versus -- and managing it versus the current level of demand and activity. We're fully focused on our cost programs, and we expect to make good progress through the next quarter, and we're continuing to invest in our technology and our people and position ourselves for the long term. So as a team, Rory, you know us well, we've been through choppy times in the past, whether that's GFCs, whether it's pandemics. This is the next thing to come along to the world of geopolitics, but we'll manage it accordingly, and we'll stay very, very close to it. And as and when we see anything, we'll let you know. Second question was around Enterprise and really the trends in that business. I think if we just look through the impact of 2 large losses that we had in Q4 last year, actually, excluding those, we were about flat year-on-year in the Enterprise business. I mean, bearing in mind this time last year, it was an all-time record performance for our Enterprise business. So we're up against a relatively tough comp. We were down 5% in the quarter. But if I adjust for those 2 contracts, it's about flat. In terms of the pipeline, it's been encouraging, actually. We've been talking a little while now around the efforts we've had to sharpen our focus on the bid pipeline and what we've had is some really successful conversions of that and now getting those deals over the line in the last quarter have been -- should be beneficial for us in the coming quarters ahead. In terms of where those are concentrated, we've had several wins in the North America and in the U.S., in particular in the tech sector as well. So that's where a lot of our focus has been, as you know, in terms of investment and really pleasing to see some of those efforts coming through. And I think that will help that business going forward over the next 6 to 12 months. Rory Mckenzie: Great. Maybe just one more to follow up on the kind of the business repositioning in these tricky markets. You're having to manage some areas that are up strong double digits right now and other areas that are still down strong double digits. So I know you've closed 4 country operations, and there's lots of kind of repositioning in the group. But can you talk about how you -- are you still in a process of a very active portfolio management? Could there be other countries or practices you might be closing to redeploy? Or how far through the evaluation of all the mix do you think you are right now? James Hilton: I mean the way we run the business, Rory, is not just at a country level. We -- as you know, we run it at a business line level. So whether that's a specialism or the contract form within that specialism. So we may be investing in tech contracting in a country while we're disinvesting in Perm because we see deeper levels of demand and activity, and we have to make appropriate decisions. And you're absolutely right. If you look at our consultant headcount at a macro level in the last quarter, we were down 3%. But actually, several of our countries, we were strongly investing in, and I'd highlight Japan, Spain has been 2 good examples there where we're seeing relatively benign macroeconomic conditions, we see really good long-term opportunities to structurally grow our businesses there, particularly in the Temp & Contracting area, and we really made some investments in both of those markets, which are really coming through quite nicely. So the way we run our business, as you know, is really to map our resource allocation to both the long-term opportunities for us to grow, but also we have to manage it within the markets we're in and have to respond to current levels of demand and activity. So that's how we do that at an overall group level, Rory. In terms of the portfolio, clearly, we've had 4 countries we've withdrawn from over the last 12 months or so. There's a couple more that we're looking at. I expect us to think about that more strategically going forward and think about the long-term opportunities and the major markets that we need to focus on. But we'll update on that in due course. I mean -- but as today, business as usual, we're very much focused on making sure we've got the right consultants on the right desks in the right markets. Operator: We will now take the next question from the line of James Rowland Clark from Barclays. James Clark: My first question is just in France. You commented it's loss-making at the moment. Are you able to update us on a potential time line for turning profitable at this level of activity in the market? And then my second question is on Australia and New Zealand. It slipped a little bit in this quarter to mind, the private sector was down 1%, it was up 2% last quarter. Just interested to know what's happened there? And a similar comment on Germany and Technology, which has done the opposite. It's materially improved to flat from down 10%. I just wondered if that was complicated or anything else to draw out. James Hilton: Great. Thanks, James. I'll kick off with France. And clearly, it's been a challenging market for us and for the sector overall to be fair, over the last couple of years. Clearly, we've not been happy with the performance there. And as you know, we were loss-making in the first half of the year. We're very much focused on turning that business around, both in terms of the markets that we're focused on increasing our exposure to Temp & Contracting away from junior clerical roles and moving further up the food chain and at the same time, bringing some of the structural costs down in that business. We're well on with our plan. Our current plan at the levels of demand that we've got today would see us back into a breakeven position or even slightly profitable in our Q4. So we're very much focused on that. But clearly, as all our markets is subject to current levels of demand. But other things being equal, I'd expect to be back into a positive position there. As we exit the financial year, which is important for us because France is an important market for us. Not so long ago, we were making GBP 15 million plus of profit there. Let's not forget. So it is an important market for us. It's been through an incredibly challenging time, talk about instability and the broader impacts on business confidence, that's right in the heart of that. The team have had a real battle on their hands, but I think we're coming through that now, and I expect to be in a better position as we exit the year. Question on Australia is a fair one. And actually, we talked last quarter about some positive momentum. As you mentioned, the private sector was up slightly. We were back in growth in the Perm business. And we've seen that slightly inflect actually whereas our Temp & Contracting business has continued to move forward. And I think overall, I look at Australia and we're pretty consistent with where we were 6 months ago. But I would say that the Temp & Contracting business has probably been slightly ahead of where we expected to be and have good momentum and good trends through the quarter as we've highlighted in the returns to work. But on the other hand, Perm has been a little bit softer. And it's interesting because we -- the top of funnel activity is actually pretty good. And I look at the number of job registrations, interview numbers, it's consistent with where we were in September and October. We just haven't seen that conversion come through at quite the same level. As we had 6 months ago. And hence, the Perm fees have come in just slightly short, but it's relatively small deltas both ways, but just a subtle shift there. But overall, it's a pretty stable trend in Australia and actually a pretty similar picture in the U.K. actually, not dissimilar in the trends that we've seen there. Germany tech is predominantly underpinned by our contracted business. So if you think about the weightings of our businesses, the Temp business is heavily weighted to the Engineering sector and the Automotive sector more broadly, whereas the contracting business is the largest business there is in technology. And that's been pretty stable. We've had reasonably pretty solid performance in terms of the number of starters there over the last 3 months post-Christmas. The hours has been stable, which is helpful. The team are doing a really good job of pivoting that business and finding growth within our clients, not everywhere is difficult in Germany. There are pockets of opportunity, and I think the team are doing a good job of finding that. So Technology being flat was a pretty decent result overall for the German business. Hopefully, that covered everything, I think, and please forgive me if I missed anything. Operator: We will now take the next question from the line of Karl Green from RBC Capital Markets. Karl Green: Just a quick question to see if you've got anything incrementally, you say, around a permanent CEO appointment in terms of how the process is unfolding there? And secondly, just technically, an update on what you'd expect exceptional restructuring charges to look like in the second half. You said that you expect to incur increased charges in H2. I just want to check how that compares to previous comments, please. James Hilton: I think I got it, Karl. You were a little bit faint. So if I miss anything in your questions, just please just shout. I think the first question was around the permanent CEO appointment -- clearly, Mark stepped into the role in February on an interim basis. And it's very much BAU. As you can imagine, we're focused on driving performance on making sure we've got the right business line allocation. As you're aware, we've cracked on hard with the structural cost program and better positioning ourselves from that perspective, and we expect to make good progress through Q4 as well. So very much making sure that we deliver and best position the business as strongly as possible. While the Board are clearly running their process, evaluating both external and internal candidates. So that's their process to run and they'll update in due course. But working with Mark, it's very much business as usual, and we're very clear on what we're doing, and we're cracking on with that. The second question was around the restructuring work that we're doing and any update on restructuring costs in the second half. We had about GBP 10 million or so of restructuring charges in H1. And I expect a similar level in Q3, bearing in mind, we've accelerated the delivery of the cost program, but I expect similar levels in this quarter. Clearly, we've got another quarter to go, and as I mentioned, we expect to make good progress. So there's highly likely to be some further costs coming through. in Q4. But clearly, we'll update, Karl, in due course when we're closer to the time, and we know what the actual numbers are. Operator: We will now take the next question from the line of Steve Woolf from Deutsche Bank. Steven Woolf: Just one for me. On the Enterprise Solutions business, down overall, mentioning the contracts you previously flagged on North America and Switzerland. And also down in the U.K. So I was just wondering whether there was any sort of knock on those contracts were global contracts that were lost or whether this was anything specific to the U.K. James Hilton: Yes. Thanks, Steve. Yes. No, it's a fair question. And what we've seen in the last quarter is a little bit of a drop in some of the Perm contracts that we have in the Enterprise Solutions business in the U.K., notably in the construction sector. We've seen a little bit less demand coming through, which has been the driver of that being slightly down year-on-year. But as I said before, I'd highlight that this time last year was an all-time record quarter for that business. So pretty tough comp to go up against. But the Temp & Contracting side with the MSP has been pretty solid overall, but we have seen a little bit of a drop in demand in some of the Perm RPO parts of the business. Operator: [Operator Instructions] We will now take the next question from the line of Tom Burlton from BNP Paribas. Thomas Burlton: Sorry, my line did cut out, so apologies if any of these have been covered, but 2 for me. First one is on Asia, which was particularly strong, and I guess, especially Japan. Just wondering if you could dig a bit more into exactly what the drivers of that were? And then on -- second one is on headcount plans for Q4. I know you touched on the Middle East and limited impact there, but you did mention sort of heightened vigilance. I'm just curious if any of that heightened sort of awareness of what's going on there is feeding into headcount decisions as we think about Q4? James Hilton: Thanks, Tom. I'll kick off with Asia. So 8% growth in the region was pleasing. And as you highlighted, Japan, was the standout performance in that region. Underpinning that, has been really quite rewarding is the return on investment that we've made over the last couple of years in our contracting business, that's now a good -- about 25% of our business, actually probably close to 30% of our business is in the contracting space in Japan. And the investments we've made both in Engineering and in Technology contracting have really started to come through and that business was growing at north of 40% year-on-year, which is really pleasing. So the team are cracking on there and doing a really good job. I'm really pleased with that. We see it as a priority business for us. We think we can grow a big business there, and we're making good headway. So congratulations to the team over in Japan. It's been a really, really good quarter, and I expect to see another one in Q4. Moving on to the headcount question. And again, looking out to next quarter, we put the guidance in the statement as we expect it to be pretty flat overall. I think there was an earlier question that talked around resource allocation and how we manage that. So it doesn't mean that we won't be investing in some parts of the business and maybe scaling back in other parts. But I think net-net, we expect it to be broadly flat over the next quarter based on where we are today. And look, that's as I said at the outset, we haven't seen any significant impact on our forward KPIs and then trading in the business. But we remain vigilant and we'll react to that if we see it. So as we stand here today, we look forward to the next quarter, we think it will be pretty stable overall. But as I said before, there'll be lots and lots of moving parts under the covers where we're scaling back or we're doubling down. Operator: There are no further questions at this time. I would now like to turn the conference back to James Hilton for closing remarks. James Hilton: Thank you. That's all for questions. Thanks again for joining the call today. I look forward to speaking to you at our next Q4 results on the 10th of July. And should anyone have any follow-up questions Kean, Prash and myself will be available to take calls for the rest of the day. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

33天前Insight Analytics约5分钟阅读

PLXNF 2026 Q2 财报电话会议

Operator: Good morning. Thank you for standing by, and welcome to the Pluxee First Half Fiscal 2026 Results Presentation. [Operator Instructions] I advise you that this conference is being recorded today on Thursday, April 16, 2026. At this time, I would like to hand the conference over to Ms. Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for our fiscal 2026 H1 results. So I'm Pauline, I'm Head of Investor Relations for Pluxee and I'm joined by Aurelien Sonet, our CEO; and Stephane Lhopiteau, our CFO. Let me guide you through today's presentation agenda in the next slide. So Aurelien will start with the key highlights and figures for H1, followed by a focus on our commercial performance, and then Stephane will take you through our financial results. Finally, Aurelien will then conclude with our outlook, including an update on the regulatory situation in Brazil before we open the floor for the Q&A. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm pleased to be back with you today to present our first half fiscal 2026 results, starting with our key highlights. We are pleased to share that we delivered overall solid H1, which puts us well on track to meet our full year objectives. First, commercial momentum remains strong and resulted in sustained revenue growth driven by our core employee benefits activity. Again, profitability delivered ahead of plan. Recurring EBITDA margin expanded strongly, supported by the operating leverage embedded in our business model and the strong execution of our efficiency initiatives. Lastly, it translated into strong earnings growth and cash generation, reinforcing further our net financial cash position. Overall, H1 performance strengthens our confidence for the full year and allows us to enter H2 from a position of strength amid a more uncertain macro and geopolitical environment. Let's now focus on the key figures for the semester on Slide 5. Despite the increasingly challenging environment, we continue to deliver sustained top line growth with total revenues reaching EUR 655 million, up plus 5.6% organically. This was supported by the continued strength of our core business with Employee Benefits operating revenue reaching EUR 500 million at a 9.4% organically. And I'll come back on this in the incoming slides. At the same time, profitability delivered strongly. Recurring EBITDA reached EUR 242 million, up plus 12.9% organically, and recurring EBITDA margin expanded to 37%, up plus 229 basis points organically. And finally, recurring free cash flow reached EUR 210 million, corresponding to 86% cash conversion rate. In a world, we delivered a strong and well-balanced performance across growth, profitability and cash generation. And this is exactly what the next slide highlights over time. Beyond quality of execution, the performance delivered in one also reflects how our business model structurally convert top line growth into margin expansion and cash generation. At its core, Pluxee benefits from a resilient growth engine anchored in Employee Benefits. Combined with the operating leverage embedded in our platform, and the continued efficiency gains, this translates into higher profitability with EBITDA growing at twice the pace of top line growth. In turn, this profitability translates into strong cash generation, confirming the robust cash conversion capacity of our model. Let me now focus on our core growth engine, Employee Benefits in the next slide. As part of our growth engine is Employee Benefits. This core business represents the vast majority of our revenues and continue to deliver high single-digit organic growth across regions in H1. In Latin America, Employee Benefits grew by plus 11.5% organically, driven by particularly strong commercial dynamics across products and further supported by favorable face value trends underpinned by local inflation cost. In Continental Europe, growth reached plus 5.1% organically. In the current geopolitical and macroeconomic environment, this represents a solid performance and illustrates the resilience of our core offering across European markets. Finally, in Rest of the World, growth was particularly strong at 16.8% organically, illustrating the favorable dynamic that we observe in terms of market penetration in those countries. Overall, Employee Benefits once again demonstrated this semester the relevance of our pure-play positioning. I will now turn to other products and services in the next slide. Even if other products and services is facing temporary pressure in specific activities, the long-term value creation story remains unchanged. Looking first at Public Benefits in Continental Europe. Current performance mainly reflects the effects related to the contract cycle and order phasing, which are inherent in this business. At the same time, by leveraging our merchant network and payment capabilities, these large-scale programs structurally enhance group scalability. On top of that, our highly selective approach and close monitoring of contract performance ensures that Public Benefits remains sustainably accretive to growth and profitability overall beyond short-term phasing impact. As base effects unwind, performance is expected to progressively regain momentum from H2. Switching to the U.K. and the U.S., where we are strategically refocusing our activity towards employee engagement, a structurally growing segment in both countries. We now operate fully digital scalable platforms and are progressively exiting noncore, lower return activities. Together, these countries account for less than 5% of group revenues. And while they are expected to continue weighing on group's revenue growth in H2 2026, they should return to a positive contribution from fiscal 2027. More broadly, we continue to actively manage the portfolio and allocate capital and resources selectively toward activities and markets offering the most attractive long-term returns. Let's now look at the key drivers of the group's substantial margin expansion in the next slide. H1 marked another strong EBITDA margin increase with operating EBITDA margin expansion accelerating at plus 268 basis points compared to plus 235 basis points last year. It comes first from the operating leverage embedded in our model. Our one platform architecture allows us to absorb incremental volumes with limited additional costs, generating structural scale effects and synergies across the group. This sharp expansion also reflects the structural cost efficiency that we've been progressively delivering since the spin-off. It mainly comes from the streamlining of our product range and processes across countries. The accelerated automation, notably through the increasing use of AI as a key optimization enabler alongside technology and data and a clear prioritization of projects and initiatives based on rigorous value creation monitoring. Cost discipline has become an increasingly important margin driver for Pluxee, complementing volume growth and reinforcing our ability to sustainably improve profitability. Let's switch now to the commercial traction delivered in H1 on Slide 11. Our commercial trajectory remains solid in H1 and positions us well on track to deliver on our full year business targets. First, we achieved a record level of new client wins, generating EUR 0.9 billion of new annualized BVI across all client sizes and geographies. Second, net retention proved resilient despite a more challenging macro environment impacting end-user portfolios in some markets. Lastly, face value remains a structural growth driver of business volumes. In fiscal '24, we have generated EUR 2.9 billion of cumulative incremental BVI from increases in face value, bringing us very close to our 3-year target of more than EUR 3 billion. Let me now detail each of these levers, starting with new client development. New client development was particularly strong in H1. We generated a record EUR 0.9 billion of annualized BVI from new client acquisition with positive momentum across all 3 regions. It reflects our strong commercial execution tailored to the specific dynamics of each local market. Just as importantly, performance remained well balanced across client sizes with SMEs making a substantial contribution and accounting for more than 30% of new development over the semester. In addition, recent M&A contributed significantly, notably in Latin America, where the Santander partnership continued to perform at full speed. The acquisition of Beneficio Facil has also been a step change for our employee mobility business in Brazil, driving more than 50% volume growth year-on-year. This momentum is to be reinforced by the ongoing integration of Skipr in Belgium and in France. With a strong diversified and actionable pipeline, we are confident in our ability to deliver ahead of our full year development target, supported by disciplined execution in the second half. Now beyond new client acquisition, let's now look at net retention, another key driver of our commercial performance. Over the semester, client loyalty remains consistently at high level, underlining the strength of our value proposition to our clients. This provides a solid foundation to actively manage our revenue per client through 2 key levers: First, increase in sales values, which remain a key contributor, driven by inflation trends in Latin America and rest of the world as well as the progressive implementation of recent legal cap increases across Europe. This dynamic is expected to accelerate and continue to support BVI growth in H2 and beyond. Second, the cross-selling, which gained momentum, reflecting our strategy to stand up as a multi-benefit partner for our clients, illustrated as an example, by the accelerated deployment of our employee mobility solutions, as highlighted on the previous slide. At the same time, end user portfolio remained under pressure in some markets. A more challenging macroeconomic environment continued to weigh on labor market dynamics in some countries, leading to a temporary contraction in the covered employee base. As a result, net retention stood at 99% in H1, excluding the temporarily delayed large employee benefit program in Romania. It demonstrated solid resilience in the current environment, confirming the stickiness of our solutions and the effectiveness of our commercial and portfolio management strategy. And with that, I will now hand over to Stephane to take you through our financial performance in more detail. Stephane Lhopiteau: Thank you, Aurelien. Good morning, everyone. It is a pleasure to be with you today to present our financial performance for the first half of fiscal year 2026. Let's start this financial review with the business volumes issued on Page #15. Total business volumes issued or BVI reached EUR 12.9 billion in H1 '26. Employee Benefits remained the growth engine, reaching EUR 10.1 billion of BVI in H1, representing a plus 5.9% organic increase over the semester. It is worth noting that these figures include the deferred rollout to H2 of a large employee benefit program in Romania. Excluding this temporary phasing effect, Employee Benefit BVI grew plus 6.8% organically in H1. This performance reflects robust commercial execution driven by Latin America and Rest of the World as anticipated, which both delivered double-digit organic growth in Employee Benefits BVI over the first semester. Looking now at other products and services, business volume issued declined by minus 20.9% organically in H1. As already mentioned by Aurelien, this performance reflected temporary headwinds in Public Benefits due mostly to anticipated contract cycle and phasing effect of certain large Public Benefit programs across Continental Europe. Let's now see how such business volume issued translated into total revenues on Slide 16. Total revenues reached EUR 655 million in H1 '26, up plus 5.6% organically or plus 3% on a reported basis, including a minus 3.6% currency impact, mainly due to activities in Turkey, partly offset by a plus 1% scope effect. In Q2, total revenues increased by plus 2.8% organic. Operating revenue reached EUR 573 million in H1, up plus 5.7% organically and plus 3.9% on a reported basis, driven by Employee Benefits, which continued to deliver high single-digit organic growth as introduced by Aurelien earlier. Focusing on Q2 '26. Operating revenue reached EUR 306 million, delivering plus 2.8% organic growth. As expected, growth moderated, mainly reflecting nonrecurring effects in other products and services, which I will detail on the next slide. When stripping out these one-offs, we continue to see a strong and sustained momentum with operating revenue organic growth running at plus 6.1% in Q2 and plus 8.8% in H1, confirming the quality and resilience of our core business. Lastly, float revenue increased by plus 5.3% organically, reaching EUR 81 million in H1 '26. On a reported basis, it was slightly down by minus 2.5%, including a minus 7.9% currency impact. I will come back to the float revenue growth drivers in more detail later in the presentation. Before that, let's focus on the key drivers behind operating revenue performance over the semester as shown on Page 17. Employee Benefits operating revenue reached EUR 500 million in H1 '26, delivering a solid plus 9.4% organic growth or plus 7.8% on a reported basis. This high single-digit organic performance was fueled by strong commercial momentum, especially across Latin America and Rest of the World, and it was supported by a solid 5% take-up rate. Focusing on Q2 '26, Employee Benefits generated operating revenue of EUR 266 million, up plus 7.5% organic. Turning to Other Products and Services. Operating revenue reached EUR 73 million in H1, down minus 14.3% organically, of which minus 20.6% in Q2. As Aurelien explained it earlier, this decline mainly reflects first, temporary Public Benefit impact in Continental Europe, combined with the ongoing strategic repositioning of our activities in the U.K. and the U.S., including the exit from selected noncore and lower profitability contracts temporarily weighing on both countries' performance. Let's give a look at the geographical breakdown to see how these operating revenue trends were reflected across regions over the semester on Slide 18. Starting with Continental Europe. Operating revenue reached EUR 250 million in H1 '26, corresponding to a minus 0.7% organic contraction and a plus 0.8% reported growth. The trend, excluding one-off effects in Public Benefit remained solid, delivering plus 3.4% organic growth in H1. Growth continued to be driven by Southern Europe, especially Spain, which was up double digit organically, while France and Eastern Europe were more affected by the macroeconomic environment, notably with regards to end user portfolio trends. With the Public Benefit impact progressively fading, growth trend in Continental Europe should improve in Q3 versus Q2 in a still challenging macro context. Turning to Latin America. Operating revenue amounted to EUR 229 million in H1 '26, delivering a strong plus 12.1% organic growth. The region continued to benefit from strong commercial momentum, particularly in Brazil. Growth was driven by increasing penetration of Pluxee solution across both corporates and SME clients, combined with a continued increase in face values supported by local inflation dynamics. In addition, public benefit activity in Chile remains strong, further contributing to the region's strong performance. As the initial regulatory evolution in Brazil has been affecting the group since the beginning of March, operating revenue growth will turn negative in Q3 in the region as expected. Lastly, in Rest of the World, operating revenue reached EUR 94 million in H1, growing plus 8.4% organically or minus 5.3% on a reported basis, including a minus 13.9% currency impact, mainly related to the depreciation of the Turkish lira. Turkey remains a key growth driver for the group, supported by local hyperinflation environment driving higher face values across the client portfolio as well as by continued penetration through new contract wins. As already indicated, performance in the region also reflected the ongoing transformation of our activities in the U.K. and the U.S. Excluding this impact, operating revenue grew plus 16.9% organically, highlighting the strength of the momentum. Before contributing back to growth from fiscal 2027, this in-depth transformation is expecting to weigh more heavily on Q3 than on Q2 as the cleanup of legacy activities continues. I will now come back to the contribution of float revenue to the top line growth in H1 on Page 19. Float revenue reached EUR 81 million in H1 '26, still delivering a plus 5.3% organic growth, including plus 2.2% in Q2. On a reported basis, float revenue decreased slightly by minus 2.5% year-on-year, impacted by a minus 7.9% currency effect, mainly driven by the Turkish lira depreciation. Float revenue organic growth was mainly driven by higher business volumes issued, notably in countries where interest rates remained elevated such as Turkey or Brazil. This was partly offset by lower interest rates across most geographies, particularly in Europe, following successive interest rate cuts by the European Central Bank. Mitigate interest rate volatility and secure float revenue over time, the group continued to actively deploy a flexible investment strategy, increasing exposure to longer tenor and fixed rate instruments tailored to local financial market conditions. As a result, the average investment yield reached 6.1% in H1 '26, up plus 10 basis points year-on-year. Looking ahead for the full year, given, one, the current geopolitical environment and the implied volatility on interest rates; and two, the still uncertain impact from regulatory evolution on float balance sheet position in Brazil, visibility remains limited. As a consequence, our growth expectation for fiscal year '26 float revenue are now fluctuating from slight decrease to slight increase organically. After reviewing the top line performance, let me walk you through the significant profitability improvement delivered over the semester, starting with Slide #20. Once again, this semester's profitability performance clearly highlighted the strong value creation embedded in our business model and supported by our continued cost discipline. Recurring EBITDA reached EUR 242 million in H1 '26, up plus 12.9% organically and plus 7.7% on a reported basis. Recurring EBITDA margin stood at 37%, increasing by plus 229 basis points organically and plus 159 basis points on a reported basis. This strong margin expansion well spread across regions was largely driven by operating performance. Indeed, recurring operating EBITDA, I mean, here excluding float revenue contribution grew by plus 17.3% organically, translating into a plus 268 basis point organic uplift in the recurring operating EBITDA margin up to 28.1%. This performance reflects, as Aurelien already explained, strong operating leverage as well as strict cost monitoring discipline and continuous operational improvement implemented both locally and at group level, combined with top line and cost synergies from acquired businesses. This strong growth in recurring EBITDA contributed positively to the full income statement all the way down to net profit as disclosed on Page 21. Below EBITDA, first, depreciation and amortization stood at minus EUR 62 million in H1 '26, showing a slight increase year-on-year, consistent with the specific phasing of our CapEx in fiscal year '25 and the additional contribution from newly acquired companies. Second, other operating income and expenses decreased from minus EUR 13 million to minus EUR 8 million, reflecting limited one-off rationalization costs in H1 '26 compared with residual carve-out costs in H1 '25. For the full year, including Brazil restructuring, OIE are expected to remain broadly stable year-on-year at minus EUR 25 million. Operating profit or EBIT reached EUR 172 million, up plus 9% in H1 '26. Financial income and expenses came in at minus EUR 3 million, broadly stable versus H1 of last year. Borrowing costs remained unchanged and were largely offset by interest income generated from non-Float related cash. For the full year, we expect financial income and expenses to land between minus EUR 15 million and minus EUR 10 million. Finally, income tax expense reached minus EUR 53 million with an effective tax rate broadly stable year-on-year at 31.4%. As a consequence, net profit reached EUR 116 million in H1 '26, up plus 9.3% year-on-year, reflecting the strong expansion in recurring EBITDA, lower other operating items and disciplined financial expense management. Excluding OIE, adjusted EPS group share reached EUR 0.78, representing an increase of plus 6.8%, including the initial accretion from the execution of the share buyback program. Let's now take a look at how our solid operational and financial performance translated into a strong cash flow generation over H1 on Slide 20. Recurring free cash flow reached EUR 210 million in H1 '26, driven by the combination of a significant increase in recurring EBITDA, a disciplined monitoring of CapEx and a favorable evolution in working capital, excluding restricted cash. CapEx reached EUR 44 million in H1 '26 or 6.8% of total revenues, stable year-on-year, reflecting our disciplined capital allocation and the continued shift towards a more OpEx-driven model supported by cloud migration and IT service management. Change in working capital, excluding restricted cash, improved to EUR 85 million compared to EUR 43 million last year driven effective focus on cash collection and management. As a result, recurring cash conversion rates reached 86% in H1 '26, reflecting the quality of our recurring earnings. This performance keeps us well on track to meet our 3-year average objective of around 80% cash conversion despite expected regulatory headwinds in Brazil in the second half. This strong cash generation has also been a key driver supporting the further increase in the group net financial cash position as we see on Page 23. Net financial cash position, excluding restricted cash, reached EUR 1.270 billion as of end of February '26, representing an increase of plus EUR 107 million over the semester. This evolution reflected the strong recurring free cash flow, which more than covered the cash outflows for first, the deployment of our M&A strategy; second, the dividend payment; and third, the ongoing execution of the EUR 100 million share buyback program, of which around 64% had been completed by the end of H1. Gross financial debt remain quite unchanged over the semester at a bit less than EUR 1.3 billion, mainly composed of the 2 long-term bond tranches. During H1, we also entered into fixed floating interest rate swaps on part of this bond fixed rate debt, further optimizing the financial structure as part of our asset liability management strategy in connection with float revenue. And then this Pluxee's strong financial cash position and cash generation is also reflected in our unchanged BBB+ rating and stable outlook from Standard & Poor's. And with that, I will now hand it over back to Aurelien for the outlook. Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook, but starting with an update on recent developments in Brazil and the group's updated action plan. Since the revised framework was announced, we have consistently executed our action plan in Brazil, making tangible progress across our 3 work streams in line with regulatory milestones. So starting with operations. From early March, we have implemented the first measures set out in the decree. And in parallel, we've been preparing the rollout of our best-in-class open-loop solution, leveraging our existing [indiscernible] capabilities with the deployment starting in May. In addition, we've been deploying a multilevel efficiency plan to adapt our cost base and protect profitability, adjusted over time to reflect the different stages of the reform and our business needs. In parallel, we continue to maintain proactive and constructive discussion with Brazilian public authorities, focusing on feasibility, scope and implementation time lines to ensure a pragmatic and orderly transition. And finally, we continue to pursue our longer-term legal actions, keeping all options open to support the sustainable development and proper functioning of the PAT work in Brazil. Overall, we are executing our road map in line with the plan and teams both in Brazil and at group level remain fully mobilized. Combined with our strong H1 performance, this supports our confidence in confirming all our financial objectives for fiscal 2026. As a reminder, our fiscal 2026 objectives assume the full implementation of the Workers' Food program reform for the PAT from H2. It also incorporates the positive impact of our mitigating actions and the progressive adaptation of our operating model in Belgium. Within that framework, we continue to expect stable total revenues on an organic basis for the full year, slight organic expansion in recurring EBITDA margin. This is underpinned by the resilience of our model and by the actions we are taking across the group to protect profitability in a more challenging environment. And finally, recurring cash conversion of around 80% on average over fiscal 2024 to 2026. Overall, our strong H1 delivery, combined with our disciplined execution, reinforce our confidence on full year objectives while continuing to manage proactively in this complex geopolitical and macroeconomic context. To conclude, I would say that Pluxee once again delivered a strong H1 performance with solid revenue growth, margin expansion and robust cash generation. While we are facing a contained regulatory evolution in Brazil, it does not change the fundamentals of our business model, the strength of our commercial momentum nor our discipline on execution. And this is why we remain fully confident in meeting all our full year objectives and focused on long-term value creation for the group. Thank you for your attention. And now with Stephane, we will be happy to take your questions. Operator: The first question comes from Pravin Gondhale of Barclays. Pravin Gondhale: Firstly, on retention, it's sort of 99%, excluding Romania. Could you please give us a sense when do you expect it to sort of return to positive territory? And then secondly, on CapEx levels, H1 CapEx were broadly flat year-on-year, but I remember you chatting -- you talking about FY '25 CapEx being lower on temporary sort of delay in IT and tech CapEx. So given your shift to OpEx-driven model now, what's the right level of CapEx we should be thinking in medium term? And then finally, on Brazil, it's been sort of a few months since the announcement of decree. Since then, have you announced any incremental cost mitigation or renegotiation actions, which should help you to reduce the impact from the regulations? Aurélien Sonet: Thank you, Pravin. So I will start with your last question regarding Brazil. So indeed, as we said during our presentation, we started the implementation of our mitigation plan. And I'd like to highlight the strong commitment from our teams locally. And they've been working on 2 sets of measures. On one hand, the client renegotiation for all our clients who've been using the Workers' Food Program solution. So it has been a very deep work and it's a hard conversation that we've been having with clients, but positive overall. And the second set of measure is much more related to the cost. And as we said, we've been running ongoing cost reduction and optimization actions. And we are doing it in accordance with both our business needs and the evolution of our operating model. What I would mention among other items is that we already conducted a restructuring initiative in February to start streamlining the organization. Regarding the CapEx, maybe, Stephane, you want to take this? Stephane Lhopiteau: As you rightly noticed, this semester, we were consistently with last year for the first semester, a little bit lower compared to the 9% average of CapEx versus revenue that we expect and still expect for this full year. We are right now a bit lower compared to what we used to be 2 years ago with, as you said, this switch to a more OpEx-driven model. However, what happened this semester, there is nothing related to some specific events like what we faced last year with the carve-out. This is more just the pace of our internal project where the pace of activation of the project when they are fully completed was a bit behind. But overall, in the full year, we are fully on track with the more standard 9% over. And then in the medium term, it's likely that this percentage will be reduced by still switching to this OpEx-driven model and also with the higher scale of the group as the group will deliver more growth in the coming years. Aurélien Sonet: Thank you, Stephane. And regarding the net retention, look, we maintain our 100% objective for the full year. So we really aim at reaching at least 100% and we will be helped on that sense by the face value increase. We mentioned it. I mean, we still anticipate stronger contribution from the face value increase on H2. And on the end user portfolio growth, for the moment, for some specific country, we expect a positive inflection. But we also -- we have to remain a bit focused within this challenging macroeconomic and geopolitical environment. Operator: The next question is from Hannes Leitner of Jefferies. Hannes Leitner: A couple of questions from my side. Maybe you can comment on your reference to end user portfolio decline. Can you maybe double-click on that, talking also a little bit in terms of geographic dynamic, especially I would be interested to understand the European dynamic. And then thanks for talking about Turkey. Maybe you can also give us a little bit more detail on your current size of the business operating revenue contribution and how there is the dynamic in terms of market share, et cetera? And then just lastly on Brazil. There's one -- it sounds like the incumbent players are looking for kind of adopting the open loop, but also maintaining the closed loop. Can you just like talk a little bit about that, where -- in which case the closed loop just makes sense to maintain and what's led to the decision? Aurélien Sonet: Thanks a lot. I will start with your question regarding Brazil. So in Brazil, as we were sharing with you, we are still having constructive discussion with the Brazilian government clarifying whether there is an obligation even for the Workers' Food Program, is it a definitive decision to use only an open loop system. So we are currently having those, again, constructive discussion. But it's fair to say that if it's -- this obligation is confirmed, we still have other products in Brazil that will still take advantage of our closed-loop network, meaning a strong relationship with merchants. And on this topic, just to share with you, we still see some very good traction. I mean many -- and when I say many, it's thousands of merchants contacting us every month, close to 10,000 merchants to still onboard into the acceptance network of Pluxee. So that's for the -- regarding Brazil and the open loop and closed loop. Stephane maybe for Turkey. Stephane Lhopiteau: Turkey is as I think we already said, is one of our key countries. It's among our top 6, something like top 6 countries. It's a dynamic country for us where -- and this country contributes well to the organic growth of the group with double-digit organic growth, still strong double-digit organic growth from this country. And we don't share precise numbers by country. So I can't -- I'm not going to tell you -- you asked what is the level of operating revenue. We disclose it for France and Brazil as required by the accounting standard because this country represents more than 10% of group revenue. So you can conclude that Turkey is a big one among the top 6, but lower than 10% of the group revenue. Aurélien Sonet: And regarding the end user portfolio decline, so indeed, overall, at group level, we disclosed quite a negative impact. But it's fair to say that it's pretty different from a country to another, from sector, from industries to others as well. We are still penalized in Europe and mainly in countries such as France, Romania and Austria. And for example, in France, we see companies that are really cautious. Some are clearly putting critical projects and investments on hold, and they remain quite conservative in their approach to systems. And this impact is even more visible in the SME segment. And we saw it even during the Christmas campaign. And yes, after we -- I mean, previously, we are mentioning Mexico is still -- I mean, the situation is getting better, but it's not back to positive yet. And we have other countries where still the SME segment can show some weak signal, I would say. So that's why, again, I mean, we remain very, very cautious for H2 on this specific indicator. Hannes Leitner: I'd just like to explain that because they have been impacted by public social programs. So when you reference that kind of end user portfolio dynamic, is that also because of the expiry of those contracts? And if you now exclude those public contracts, just focusing on the core meal voucher, would you say that... Aurélien Sonet: No, no. I was not referring to those public benefits contract. I was really referring to the employee benefits business. Yes, there are some industries such as the IT, automotive industry that in Eastern Europe are under [indiscernible] at the moment. Operator: The next question is from Justin Forsythe of UBS. Justin Forsythe: Just a couple of questions, if I might. I wanted to come back on Brazil. I think we talked last quarter about some of the puts and takes between the revenue impact that you expect alongside the cost reductions. Just wondered if we could revisit that and confirm the progress there. And maybe talk about the different buckets of cost. I think there's a good portion of cost, which comes out relating to processing. So meaning when you remove some of the back-end processing, as you move to open loop, there is a big reduction in cost as a result of that. I wanted to focus on that other portion of cost, which is the OpEx side. Is there maybe more detail you can give on the specific actions you've taken? Aurélien Sonet: Okay. Thank you, Justin. Stephane, do you want to start? Stephane Lhopiteau: And you might complement? Aurélien Sonet: Yes. Stephane Lhopiteau: Justin, as Aurelien explained during the presentation and answering some of the previous question, in Brazil, I think we need to make a distinction between the potential endgame and the transition period. So the endgame and when I say endgame, there is a lot of uncertainty about this endgame, and we explained that right now, we took an assumption of a worst-case scenario with a full implementation of the reform as currently drafted in the decree. And this is this end game. And based on this endgame, we say that our business in Brazil might be reduced by something like twice. And then in this case, we will target to adapt significantly our business model in the countries by reducing our cost base. And we started to look at it because we are preparing for this situation. And it's almost all lines in the cost base that will be concerned, both processing costs as part of cost of sales or SG&A as well. And we said that, again, with this end game, we would target to keep our EBITDA margin in the country unchanged, meaning that if the top line was to be reduced in the end by twice, we will have to organize things to restructure things so as to be able to reduce our cost base by twice as well in order to keep this EBITDA margin unchanged. Now this is not where we are today. As Aurelien explained, we are in a transition phase. We are -- there are still a lot of uncertainties regarding the scope, the time line, the technical feasibility of this reform with some ongoing discussion with the government as well. So the industry has engaged with the government, and we'll see what will happen. So meaning for this fiscal year '26 and for the second half, we have started to reduce a little bit our cost base as we are going to face some preliminary headwinds, but we also need to protect the top line of the company in case in the end, the reform was to be implemented only partially or in a different way compared to what is currently contemplated. So therefore, there will be an impact in the second half of the year, but the potential 50% decrease in revenue and in the cost base, this is for a much later period in case, again, the full reform was to be implemented as currently started. Aurélien Sonet: And maybe just to complement on the revenue side because you remember that the growth in the business volume and the performance of Brazil remains very strong in terms of business volume growth. Our new sales in H1 were very high. We still benefited from the full impact of our partnership with Santander. We also enjoyed a strong performance in cross-selling, thanks to our new employee mobility benefit product. And talking about H2, we still anticipate similar dynamic in terms of business volume growth than in H1, i.e., double digit. And for us, this is extremely important and positive. Operator: The next question is from Andre Juillard of Deutsche Bank. Andre Juillard: Two questions, if I may. First one about the amortization. Could you give us some more color about the evolution of the amortization during H2 and the year after because you have -- correct me if I'm wrong, that you have 2 components. First one about the general evolution of the amortization regarding the CapEx and the OpEx. And secondly, the plan on M&A. And this is my second question. Your cash net position is even stronger than what it was at the end of last year. Do you have any new plan about the use of this cash or still not clear? Stephane Lhopiteau: Andre, regarding -- so this is Stephane speaking, but I guess you recognize my voice. Regarding your question about depreciation and amortization, no surprise for us. This is fully consistent with the pace of our CapEx in the last 2 years. If you look at it over the last 2 years, we capitalized in average, there are some differences year-on-year, but close to EUR 110 million per year. It was a little bit more than this in fiscal year '24. It was a little bit less in fiscal year '25. It will be a little bit more in this year, fiscal year '26. So this is the pace. And after a while, we are likely to reach the same level of depreciation year-on-year, and this is what we are seeing today with a little bit of contribution from the newly acquired company. If you think about companies like Pobi or Skipr, which have some tech assets, of course, we now consolidate the depreciation of the tech platform of these companies. And at the same time, in terms of amortization of intangible assets as identified as part of the business combination, no surprise, this is fully in line again with we were expecting. Regarding your question on the net cash position, I think it's worth differentiating 2 cash position. You have the overall net cash position. And we also disclosed clearly in our activity report, what we call this net excess cash position, making a clear distinction between the contribution of float related cash to cash and this excess cash. And if you look at this excess cash -- excess cash in the first half of the year with no surprise, we don't benefit from an improvement, but we faced a decrease of about EUR 140 million in the first half, which is fully related to the payment of dividend, the execution of the share buyback program, the cash out of program, interest cost, which is happening at the beginning of the year, in the beginning of September every year and all this kind of things. So therefore, the first half of the year for us is always and if you look at what happened in fiscal year '25 or fiscal year '24, it was the same. The first half of the year for us in terms of excess cash, this is a period where we burn some cash, a little bit more this year with the share buyback program, while in the second half of the year, we don't have the significant cash outflows and building again a strong excess cash position for the full year. So I just wanted to make it clear, this EUR 107 million improvement in the overall net cash position is the combination of EUR 140 million decrease in excess cash and EUR 240 million improvement overall on the float related tax position. Aurélien Sonet: And maybe even regarding the question, any new plan on the use of this cash. Just to confirm that M&A remains a key pillar of our growth strategy. We saw it the acquisition that we completed last year had a material impact on our first half [indiscernible] delivering 1% scope effect, delivering also some growth synergies and Beneficio Facil in Brazil has been a very good example with this plus 50% BV growth in 1 year. So we see the acceleration. And we -- the integration of the more recent acquisition is progressing well. So we -- now we have a good track record, and we believe that we are well positioned to continue executing on our M&A road map. And we have a solid pipeline and -- but we -- again, we want to execute this road map in a very rigorous and disciplined manner. So we'll come back to you when it will be. Operator: [Operator Instructions] The next question, gentleman, is from Mahir Bidani of UBS. Mahir Bidani: Just wanted to kind of confirm around the EBITDA guide. You reiterated it, but that's given -- that was reiteration despite a pretty strong beat in the first half. Is that just implying conservatism? Or do you expect perhaps the sort of downward trajectory in 2H in the EBITDA? And in terms of the macro environment, is there a bifurcation between, I guess, the sectors you're seeing the end user portfolio reduction? Is that more the automotive versus the tech? Have you -- the conversations that you've had with some of your clients are reducing the end user portfolio, is that because of AI fears and then stopping hiring for that reason? Or is it more because it's like concentrated towards blue-collar macro jobs? So can you just provide a little color there on that? Aurélien Sonet: Yes. So regarding your second question, so indeed, we start having -- and we are engaging even proactively with our clients because most of them are wondering what would be the future of their organization. Not many of them have very clear answers. But what makes Pluxee so resilient is the diversity of our clients portfolio because we are serving small but also very large clients in the private sector, in the public sector and all of this in 28 countries. So that does explain the resilience. And within this range of clients, we have also, let's say, the future giants, the one who will take advantage of AI, I mean, in order to grow with them. So this is what I can tell you. But I mean, if we look at industry by industry, it's fair to say that at the moment, indeed, the automotive industry, the IT industry and part of the interim industry are currently under pressure because their clients are reading some of their budgets that are related to their own activities. And concerning the EBITDA? Stephane Lhopiteau: Regarding your question about our guidance on the EBITDA. So this is not specifically conservative, the slight improvement in the EBITDA margin. Of course, all the teams are already focusing on doing their best in order to always do better, but this is what we currently have in mind. And if I have a bit more color, we expect all the regions to go on improving the EBITDA margin with a similar trend compared to what we delivered in H1 with one exception, one big exception, which is going to be Brazil. And as I explained, in Brazil, we are not engaging right now in a pool of restructuring. We are making sure that we are able to benefit from all potential scenarios. So there is a little bit of cost reduction, but the reform for the short term and for the second half of the year will weigh a lot on the EBITDA margin of the group. And this is because of Brazil that in the second half of the year, we will face a lower EBITDA margin compared to the previous year. So overall, -- but the improvement, the uplift we delivered in H1 is going to be offset by a deterioration of the EBITDA margin in the second half of the year, not as big as what we delivered in H1. So there will be, in the end, the remaining small improvement in the EBITDA margin for the full year. Operator: There are no more questions registered at this time. Back to you, Mr. Aurelien, for any closing remarks. Aurélien Sonet: Thank you, and thank you for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by a strong first half and reiterate as well our continued focus on disciplined execution and long-term value creation. And with that, I wish you all a very good day. Goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

33天前Insight Analytics约5分钟阅读

2330.TW 2026 Q1 财报电话会议

Jeff Su: Good afternoon, everyone, and welcome to TSMC's First Quarter 2026 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. TSMC is hosting our earnings conference call via live audio webcast through the company's website at www.tsmc.com, where you can also download the earnings release materials. [Operator Instructions]. The format for today's event will be as follows: First, TSMC's Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2026, followed by our guidance for the second quarter 2026. Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the company's key messages. Then we will open the line for the Q&A session. As usual, I would like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. So please refer to the safe harbor notice that appears in our press release. And now I would like to turn the call over to TSMC's CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance. Jen-Chau Huang: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the first quarter 2026. After that, I will provide the guidance for the second quarter 2026. First quarter revenue increased 8.4% sequentially in NT supported by strong demand for our leading-edge process technologies. In U.S. dollar terms, revenue increased 6.4% sequentially to USD 35.9 billion, slightly ahead of our first quarter guidance. Gross margin increased 3.9 percentage points sequentially to 66.2%, primarily due to cost improvement efforts, a high capacity utilization rate and a more favorable foreign exchange rate. Operating margin improved 4.1 percentage points sequentially to 58.1% due to operating leverage. Overall, our first quarter EPS was TWD 22.08 and ROE was 40.5%. Now let's move on to revenue by technology. 3-nanometer process technology contributed 25% of wafer revenue in the first quarter, while 5-nanometer and 7-nanometer accounted for 36% and 13%, respectively. Advanced technologies, defined as 7-nanometer and below, accounted for 74% of wafer revenue. Moving on to revenue contribution by platform. HPC increased 20% quarter-over-quarter to account for 61% of our first quarter revenue. Smartphone decreased 11% to account for 26%. IoT increased 12% to account for 6%. Automotive decreased 7% and accounted for 4%, and DCE increased 28% to account for 1%. Moving on to the balance sheet. We ended the first quarter with cash and marketable securities of TWD 3.4 trillion or USD 106 billion. On the liability side, current liabilities increased by TWD 256 billion quarter-over-quarter, mainly due to the increase of TWD 129 billion in accrued liabilities and others and the increase of TWD 82 billion in accounts payable. On financial ratios, accounts receivable turnover days was flat at 26 days. Days of inventory increased 6 days to 80 days, reflecting the ramp-up of our 2-nanometer technology and strong demand for our 3-nanometer technology. Regarding cash flow and CapEx. During the first quarter, we generated about TWD 699 billion in cash from operations, spent TWD 351 billion in CapEx and distributed TWD 130 billion for second quarter 2025 cash dividend. Overall, our cash balance increased TWD 268 billion to TWD 3 trillion at the end of the quarter. In U.S. dollar terms, our first quarter capital expenditures totaled USD 11.1 billion. I have finished my financial summary. Now let's turn to our current quarter guidance. Based on the current business outlook, we expect our second quarter revenue to be between USD 39.0 billion and USD 40.2 billion, which represents a 10% sequential increase or a 32% year-over-year increase at the midpoint. Based on the exchange rate assumption of USD 1 to TWD 31.7, gross margin is expected to be between 65.5% and 67.5%, operating margin between 56.5% and 58.5% Also, in the second quarter, we will need to accrue the tax on the undistributed retained earnings. As a result, our second quarter tax rate will be around 20%. We continue to expect the full year tax rate to be between 17% and 18%. This concludes my financial presentation. Now let me turn to our key messages. I will start by talking about our first quarter 2026 and second quarter 2026 profitability. Compared to fourth quarter, our first quarter gross margin increased by 390 basis points sequentially to 66.2%, primarily due to cost improvement efforts, a higher overall capacity utilization rate and a more favorable foreign exchange rate. Compared to our first quarter guidance, our actual gross margin exceeded the high end of the range provided 3 months ago by 120 basis points, mainly due to a higher-than-expected overall capacity utilization rate and better cost improvement efforts. We have just guided our second quarter gross margin to increase by 30 basis points to 66.5% at the midpoint, primarily driven by a higher overall utilization rate and continued cost improvement efforts, including productivity gains, partially offset by dilution from our overseas fab. Looking ahead to the second half of the year, given the 6 factors that determine our profitability, there are a few puts and takes I would like to share. As we have said before, the initial ramp-up of our 2-nanometer technology will start to dilute our gross margin in the second half of this year, and we expect between 2% and 3% dilution for the full year of 2026. Furthermore, as the scale of our overseas expansion grows, we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be 2% to 3% in the early stages and widen to 3% to 4% in the latter stages. In addition, given the recent situation in the Middle East, prices for certain chemicals and gases are likely to increase. Based on our current assessment, there may be impact to our profitability, but it is too early to quantify the impact. On the other hand, we will continue to leverage our manufacturing excellence to generate more wafer output and drive greater cross node capacity optimization in our fab operations to support our profitability. Also, N3 gross margin is expected to cross over to the corporate average in second half 2026. Finally, we have no control over the foreign exchange rate, but that may be another factor. Next, let me talk about the materials and energy supply update given the recent situation in the Middle East. TSMC operates a well-established enterprise risk management system to identify and assess all relevant risks and proactively implement risk mitigation strategies. In terms of material supply, TSMC's strategy is to continuously develop multi-source supply solutions to build a well-diversified global supplier base and to improve the local supply chain. For specialty chemicals and gases, including helium and hydrogen, we source from multiple suppliers in different regions, and we have prepared safety stock inventory on hand. We are also working closely with our suppliers to further strengthen the resiliency and sustainability of our supply chain. Thus, we do not expect any near-term impact on our operations for material supply. In terms of energy, TSMC worked closely with Taipower and the Taiwan government to ensure a stable and sufficient energy supply. With the recent situation in the Middle East, the Taiwan government has announced it has secured sufficient LNG supply through at least May. The government has also said it is actively working on securing further LNG supply, diversifying sourcing to other regions and other power backup plants. Therefore, we do not expect any near-term disruption or impact to our operations. Finally, let me talk about our 2026 capital budget. At TSMC, higher level of capital expenditures is always correlated with higher growth opportunities in the following years. With our strong technology leadership and differentiation, we are well positioned to capture the multiyear structure demand from the industry megatrends of 5G, AI and HPC. We now expect our 2026 capital budget to be towards the high end of our range of between USD 52 billion and USD 56 billion as we continue to invest heavily to support our customers' growth. Even as we invest for the future growth with this level of CapEx spending in 2026, we remain committed to delivering profitable growth to our shareholders. We also remain committed to a sustainable and steadily increasing cash dividend per share on both annual and quarterly basis. Now let me turn the microphone over to C.C. C.C. Wei: Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook. We concluded our first quarter with revenue of USD 35.9 billion, slightly above our guidance in U.S. dollar terms, driven by strong demand for our leading -edge process technologies. Moving into second quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies. Looking ahead, we are very mindful of the impact of rising component prices, especially in consumer and price-sensitive end market segment. In addition, the recent situation in the Middle East also brings further macroeconomic uncertainties. As such, we are being prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competitive position. Having said that, AI-related demand continues to be extremely robust. The shift from generative AI and the query mode to agentic AI and command and action mode is leading to another step-up in the amount of tokens being consumed. This is driving the need for more and more computation, which supports the robust demand for leading-edge silicon. Our customers and customers' customers, who are mainly the cloud service providers, continue to provide us with their very strong signal and positive outlook. Thus, our conviction in the multiyear AI megatrend remains high, and we believe the demand for semiconductors will continue to be very fundamental. Supported by our robust technology differentiation and broad customer base, we maintain strong confidence for our full year 2026 revenue to now grow by above 30% in U.S. dollar terms. Next, let me talk about our N2 capacity expansion plan. Our practice is to prioritize the land in Taiwan to support the fast ramp of our newest node due to the need for tight integration with R&D operations. Today, our new node, N2, has already entered high-volume manufacturing in the fourth quarter of 2025 with good yield. N2 is ramping successfully in multi phases at both Hsinchu and Kaohsiung site, supported by strong demand from both smartphone and HPC AI applications. With our strategy of continuous enhancement such as N2P and A16, we expect our N2 family to be another large and long-lasting node for TSMC. Now let me talk about TSMC's global N3 capacity expansion plan. Historically, we do not add additional capacity to a node once it has reached its target capacity. However, as a foundry, our first responsibility is to provide our customers with the most advanced technologies and necessary capacity to unleash their innovations. Based on our assessment, to meet the strong demand in AI application, we are stepping up our CapEx investment to increase our N3 capacity. Thus, we are now executing a global capacity plan to support the robust multiyear pipeline of demand for 3-nanometer technologies, which are used by smartphone, HPC AI, including HBM-based dies, automotive and IoT customers. In Taiwan, we are adding a new 3-nanometer fab to our GIGAFAB cluster in Tainan Science Park. Volume production is scheduled for the first half of 2027. In Arizona, our second fab will also utilize 3-nanometer technologies. Construction is already complete and volume production will begin in the second half of 2027. In Japan, we now plan to utilize 3-nanometer technology in our second fab and volume production is scheduled in 2028. In addition to all the new fabs, we continue to convert 5-nanometer tool to support 3-nanometer capacity in Taiwan. We are also leveraging our manufacturing excellence to drive greater productivity across our fab in all locations to generate more wafer output. We are also focusing on capacity optimization across nodes, including flexible capacity support among N7, N5 and N3 nodes. Thus, we are using multiple levers to do everything we can, wherever we can, however we can to maximize the support to all our customers across all platforms. Also, let me emphasize that while the capacity is tight, we do not pick and choose or play favorites among our customers. Next, let me talk about our mature node strategy. TSMC's strategy in mature node has not changed. Our focus is to build high-yield capacity for specialized technologies rather than just normal capacity. For example, we are increasing our mature node capacity such as in JASM Fab 1 in Japan for CMOS image sensor application and ESMC in Germany for automotive and industrial applications. Meanwhile, we have a plan to wind down our Fab 2, which is 6-inch fab; and Fab 5, which is 8-inch fab; focus on gallium nitride and use available space to optimize the support for leading-edge applications. Even with our Fab 2 and Fab 5, we still have enough capacity to fully support our existing customers. In summary, our strategy will be to continue to optimize our capacity mix within mature nodes and focus on the higher value-added and strategic segment, while ensuring we have a necessary capacity to support our customers' growth. Finally, let me talk about our A14 status. Featuring our second-generation nanosheet transistor structure, A14 will deliver another full-node stride for N2 with performance and power benefit to address the sensible need for high-performance and energy-efficient computing. Compared with N2, A14 will provide 10 to 15 speed improvement at the same power or 25 to 30 power improvement at the same speed and close to 20% chip density gain. Our A14 technology development is on track and progressing well. We are observing a high level of customer interest and engagement from both smartphone and HPC applications. Volume production is scheduled for 2028. Our A14 technology and its derivative will further extend our technology leadership position and enable TSMC to capture the growth opportunities well into the future. This concludes our key message, and thank you for your attention. Jeff Su: Thank you, C.C. This concludes our prepared statements. [Operator Instructions]. Now let's begin the Q&A session. Operator, can we proceed with the first participant on the line, please? Thank you. Operator: First one to ask questions, Haas Liu from Bank of America. Haas Liu: Congrats on the solid results and guidance. I would like to start with your 3-nanometer gross margin outlook. You just mentioned the node is going to cross the corporate average gross margin in second half this year, which is now at mid-60 percentage levels. And we understand the technology is in severe undersupply backed by strong AI demand, and you already forecasted the capacity expansion through conversion and greenfield through 2028. Would you be able to discuss more in detail on what kind of applications are driving such strong business for you and convince you to expand more? And the other thing on 3-nanometer as well is just, the node started to ramp from fourth quarter 2022, which means some of your equipment will be fully depreciated by 2027. Should we expect the node margins to be trending even higher with very solid utilization and also pricing trend? Jeff Su: Okay. So the first question from Haas Liu of Bank of America, it's 2 parts on 3-nanometer. First, as C.C. described, we are executing a plan for expanding 3-nanometer capacity. So he wants to understand what are the applications to drive such a strong multiyear looking ahead pipeline of demand for 3-nanometer since it's already been around in volume production since late '22. That's the first part of his question. C.C. Wei: Let me answer that. I think the application is simple. It's still the HPC AI applications. Does that answer your question? Haas Liu: Okay. Yes. That is the first part. And the second part is... Jeff Su: And the second part of this question is on the gross margin for 3-nanometer. His question is really, what is the gross margin outlook for 3-nanometer? Will it crossover in the second half of this year? To what level? And then once it becomes fully depreciated, what happens to the margin? Jen-Chau Huang: Okay. This is Wendell. We expect the N3 gross margin to reach and cross the corporate gross margin level in the second half of this year. And we don't have a number to share with you, but after the full depreciation as our previous notes, the gross margins are generally very high. Jeff Su: Okay. Haas, I'll take that as a 1.5 questions. So if you have a quick follow-up for your second question? Haas Liu: Yes. And the other, I think, just a 0.5 follow-up is probably just on the CapEx. You revised up to the high end of your guidance for USD 52 billion to USD 56 billion for this year. Compared to 3 months ago, what gives you the incremental confidence when you discuss with your customers and also customers' customers regarding the demand outlook to support your stronger or the upper half of your guidance for the CapEx this year? Jeff Su: Okay. Thank you, Haas. So his second question is he notes that indeed, we have this time guided to the high end of our CapEx range versus January. So what incrementally is driving this revision to the CapEx? What gives us the confidence to go to the high end of the USD 52 billion to USD 56 billion range? C.C. Wei: Well, again, this is C.C. Wei. Let me answer this question. A very simple answer is, the demand are very robust, especially from the HPC and AI applications. And also, we try very hard to speed it up and pull in all the equipment as we can. Still, our supply is very tight. Demand is continuing to increase. And so we continue to work with our suppliers to speed it up. And that's why we are towards our high end of CapEx forecast. Jeff Su: Okay, Haas, does that answer your question? Haas Liu: Yes. Operator: Next one to ask question, Gokul Hariharan, JPMorgan. Gokul Hariharan: My first question on your comments on demand. Clearly, demand is even better than what you predicted back in January, C.C., and you also raised the CapEx. Now all your customers seem to be telling everybody they can tell that wafers still remain the biggest constraint. So given your expanded 3-nanometer capacity plan and faster CapEx, C.C., what is your expectation that how long this supply constraint is likely to last? Do you have any visibility of when you can kind of bring some kind of balance here based on what you hear from customers? And as a strategy, do you also plan to build out a more clean room space, because that seems to be a little bit of a constraint right now to bring on the capacity quickly. That's my first question. Jeff Su: Okay. Gokul, please allow me to summarize your first question. So his question is directed for C.C. He notes that the demand seems to be even stronger than our forecast in January. We have also raised the CapEx, and customers continue to say they need more chip supply. So with our capacity plan, do we have a forecast or expectation of how long the constraint can last? And will we have a strategy to build up clean room space first? Is that correct, Gokul? Gokul Hariharan: That's right. Yes. C.C. Wei: Okay. Gokul, let me answer the question. Again, it's very simple, because demand continues to be robust and the number continues to be increased, and we double check with our customers, customers' customers, or those CSPs. They gave us a very positive outlook, right? And so we have to speed it up with our buildup of clean room and buying the tools. And so we are working with construction and we are working with our equipment suppliers. And so we want the pulling forward of our forecast schedule. That's a simple answer. Because of AI, it's so strong. Gokul Hariharan: Any read, C.C., on when we can kind of meet this demand? Or do you think the next couple of years is still going to be very challenging to meet -- that supply is still going to be running below demand, let's say, into '27 also? Jeff Su: So Gokul would like to know when the supply can meet the demand? Do we have a forecast or a time frame? C.C. Wei: Gokul, you know we are -- it takes 2 to 3 years to build a new fab. And with the current schedule, we believe that '27, we will announce it anyway when we enter '27, but let me say that, it takes time to build a new fab, it takes time to ramp it up. And so we expect this to continue to be very tight. So that's why we just announced that we try to build 3 new N3 fab to meet the demand. Gokul Hariharan: Okay. That's very clear. So '27 is also very tight. My second question on competition. So obviously, you have the traditional competitors, Samsung, Intel. But one of your customers, Elon Musk, also announced Terafab Initiative recently. What is TSMC's perspective on this initiative? They have also been a customer of yours, and they recently signed a deal with Samsung a few months back. So what is TSMC's response here now that they are also trying to kind of build chips on their own? How are you trying to win back this customer? Like, C.C., what is your perspective here? Jeff Su: Okay. So Gokul's second question is on competition. He notes that we have competition and then recently, a competitor, or he notes that this Terafab. So he wants to know what is our perspective on this initiative. This customer has also been a customer of TSMC, but has also signed a deal with one of our other competitors, Samsung. So Gokul would also like to know what is our perspective on the Terafab? And what is our view on winning back this customer's business? C.C. Wei: Well, Gokul, actually, both Intel and Tesla, they are TSMC's customers. But again, they are our competitors, and we view Intel as our formidable competitor and do not underestimate them. But having said that, there are no shortcuts. The fundamental rules of the foundry game never change. They need the technology leadership, manufacturing excellence and customer trust, and most of all, the service, which has been mentioned by Jensen; thank you for his wording. Again, let me say that it takes 2 to 3 years to build a new fab, no shortcuts. And it takes another 1 to 2 years to ramp it up. Again, that's the fundamental of foundry industry. And whether we try to win them back, actually, they are still our customer. And we are very confident in our technology position, and we work very hard to capture every piece of business possible. Gokul, did I answer your question? Gokul Hariharan: Okay. That is very clear. So do you think your faster ramp-up of capacity can kind of win some of these customers back, because the reason seems to be mostly about capacity tightness rather than any other kind of big reasons, right? So is that your evaluation that this is probably the most important thing to win some of these customers back? Jeff Su: Okay. So Gokul's final question is then in winning customers back, his concern is because our capacity is tight. Is that the reason we are losing customers? And so can we win customers back? C.C. Wei: Well, again, let me emphasize, it takes 2 to 3 years to build a new fab. So in this time, we are also building a new fab to meet our customers' strong demand. No shortcuts. So anyway, the capacity is very tight, as I said, but we are working hard to make sure that we can meet customers' demand. Operator: Next one, we have Charlie Chan from Morgan Stanley. Charlie Chan: Congratulations for very, very strong results again. So I think I would also address the competition topic from a little bit different angle. So as you can see that those AI customers, they are developing a much larger reticle size chips, right? And some customers are considering to use eMIPs because it's a kind of substrate base, more suitable for circular larger size of chip design. So I'm not sure what's the TSMC's strategy to address this competition. And more strategically, is TSMC comfortable to open up your compute die to your competitors, for example, Intel to do the package? What's the kind of thought process behind? Jeff Su: All right, Charlie, thank you. So Charlie's first question is also related to competition. He notes that AI customers are seeking for larger and larger reticle sizes. So he wants to know what is our assessment of the competitive threat from solutions such as like eMIP? And what's our strategy to address this competition? Will we be willing to open up our front-end wafer and let someone else do the packaging basically? C.C. Wei: Well, Charlie, today, TSMC is supplying the largest reticle size packaging. And yes, we understand that our competitors also offer very attractive technology, but we welcome that so our customers can have more choices and then we can do more business with our customers. That's our attitude. But saying that, we don't leave any business on the table. We are working very hard to meet all our customers' demand. We also are developing very large reticle size packaging technologies. We are working with all the customers. And so far, so good. Charlie Chan: C.C., I have a follow-up on this. When you mentioned about larger size packaging technology, are you referring to CoPoS or CoWoS-L 3.5D? Or do you think 3D stacking can resolve this kind of panel expansion problem? Jeff Su: So Charlie is asking a follow-up. So he wants us to comment on, for larger reticle size, is it CoWoS-L, is it panel level? What exact detailed solutions are we doing? C.C. Wei: Charlie, so far today, we have very large reticle sized CoWoS. Of course, we are also working on CoPoS. And together, we try to make sure that we give enough capacity to support our customer with a reasonable cost. So that's why we build a CoPoS pilot line right now and expect production a couple of years later. But today, the main approach or the main supplier is still a large-sized CoWoS. And together with System on Wafer technology, we think TSMC gives our customers the best options for their product in the market. Charlie Chan: Got it. So yes, I would take, we don't need to worry too much about this [indiscernible] competition. So my second question is actually about your long-term CapEx plan. C.C., as you said that it takes 2 to 3 years to build a new fab. So you definitely have that visibility, right? So I remember back in 2021, management also provided 3-year CapEx guidance as USD 100 billion given very strong demand. I'm not sure if TSMC can provide a little bit longer-term CapEx guidance? Because as you said, right, the equipment supply is also pretty tight. Yesterday, ASML reported very, very strong results. So you said the EUV supply is an issue. And secondly, would the management provide kind of a long-term CapEx guidance to investors? Jeff Su: All right, Charlie, that's a lot of questions. But the second one then on CapEx and building capacity. Again, Charlie notes C.C.'s comment, capacity is not born overnight, it takes time. So he would like to know, besides this year's CapEx, which we have already said at the high end, can we provide a guidance for the next 3 years CapEx like we did back in 2021 in terms of the dollar amount? Jen-Chau Huang: Okay. Charlie, we don't have a number to share with you. But look at it this way. In the past 3 years, our total CapEx was USD 101 billion. This year, we're already saying CapEx is towards the high end, which is USD 56 billion, which is already over 50% of the past 3 years in total. So we have a strong conviction in the AI megatrend. So we expect the CapEx in the next few years, in the next 3 years, will be significantly higher than the past 3 years. Jeff Su: And then the final part of Charlie's question, with such a long lead time, are we concerned about securing tools or bottlenecks and such? C.C. Wei: Well, Charlie, in TSMC's culture, we're always working with our suppliers, because we view them as our partners. So we continue to work with them, especially for those ASML, Applied Materials, Lam Research, et cetera. So, so far, we are very happy with their supportive. That's all I can tell you. Operator: Next one, we have Sunny Lin from UBS. Sunny Lin: Congrats on the steady results. So my first question is, again, to follow up on CapEx. So if you look at from 2024 to 2026, so in this, call it, AI cycle, TSMC has been able to keep capital intensity at a healthy level of 30% plus, given very strong technology leadership and operating leverage. I understand the company doesn't really have a specific target on capital intensity. But for the coming few years, given the very strong revenue ramp of leading edge, how should we think about the revenue growth compared with CapEx growth? Should we think top line will remain steady and therefore, CapEx could grow in line or even below? What's the best way for us to think about it? Jeff Su: Okay. Sunny, thank you for your question. So please allow me to summarize. Sunny's first question is on, well, I think CapEx and really capital intensity. She notes, in the past few years, we've been able to keep capital intensity around the 30-something percent level. She notes that we don't have a specific capital intensity target per se, but her specific question, looking ahead the next several years, how do we see revenue growth versus CapEx growth? Is it likely to be higher, flat, lower? And therefore, what type of intensity does that imply? Is that correct, Sunny? Sunny Lin: Yes. Thank you very much, Jeff. Jen-Chau Huang: Okay, Sunny. So in the past few years, as you correctly pointed out, the revenue growth outpaced the CapEx growth. That's because if we do our job right, then we will continue to see that happen in the next several years. The revenue growth outpaced the CapEx growth, okay? Now therefore, we do not expect, in the next several years, a sudden surge in capital intensity. Sunny Lin: I see. Maybe a very quick follow-up. A lot of questions on competitions already. But also from a competition point of view, given a very tight supply at TSMC's side in recent years, would TSMC actually consider maybe spending CapEx a bit more, so that clients won't need to diversify given the tight supply? Jeff Su: All right. So Sunny's 1.5 question is, in terms of the CapEx, will we consider accelerating or spending more given the competitive threat from the competitors? If there's not enough capacity, then our customers will go to competitors. That's your question, correct? Sunny Lin: Yes. Thank you, Jeff. C.C. Wei: Well, Sunny, we're repeatedly saying that we prepare the capacity to meet customers' demand, not because of our competitor or not because of other considerations. The most important one is our customers' demand and they work with TSMC and so we plan our capacity and so our capital expense. Sunny, did I answer your question? Sunny Lin: Yes. Yes, very clear. So maybe my 0.5 question. And so if we look at this year, earlier, you just guided a bit higher than 30% growth for top line. But indeed, there's ongoing supply tightness. And so for 2026, how much upside could you realize for top line? And at this point, have you started to see some impact of consumer end demand and therefore, on your demand coming from smartphone and PC? Jeff Su: Okay. So Sunny's second question is regarding 2026 full year outlook. She notes now that we have increased the guidance to above 30%, how much more upside can there be? Well, maybe the first part also, how do we see the impact from the memory price hike to the end market? And how do we see, with above 30%, is there more upside? C.C. Wei: Well, Sunny, memory price hike definitely has some impact to price sensitive end market, especially in PC and smartphone market. We did see a little bit softer market. But to share with you, all the high-end smartphones continue to do better, and this is to TSMC's advantage. And as you're asking about how much higher than above 30% year-over-year growth, we will share with you in July, how about that, that we will have a more accurate or a more precise number to share with everybody. Sunny Lin: No problem. Operator: Next one, Jim Fontanelli at Arete. Jim Fontanelli: So my first question is to do with demand. So you commented earlier in the call that demand continues to outstrip supply for leading edge capacity. And obviously, you just delivered a very strong print and guide for gross margins. So against this backdrop, has management's thinking changed about the sustainable margin structure and what appropriate longer-term returns might be for the business? Jeff Su: Okay. So Jim's first question is asking on the margin structure. He notes, as we said that demand continues to be extremely robust and very strong. So how does this change? I think your question is our view on the long-term margin profile and the return profile. Is that correct? Jim Fontanelli: That's correct. Jen-Chau Huang: Okay, Jim. As we said in the last earnings calls, we've revised up our long-term margin target and ROE target. From 2024 to 2029, we're now saying the gross margins will be 56% and higher through the cycle, and we're looking at ROE of high 20% through the cycle. That's what we're currently looking at, and that's already higher than before. Jim Fontanelli: And that thinking is not changing against the backdrop where other parts of the AI supply chain are clearly starting to print super normal returns? That doesn't impact how you think about margin structure for the next 2 or 3 years? Jen-Chau Huang: Yes, Jim, the long-term planning is an ongoing and continuous process. So we do that all the time, and we will update you when there is a change. Jim Fontanelli: Okay. And my second question is, it looks like the Arizona site is becoming more strategic in terms of leading edge commitment for TSMC, particularly with the recently added second parcel of land. Could you talk about how you see mid- to long-term capacity opportunity and also how confident you are that the U.S. fab economics will match Taiwanese produced wafers? Jeff Su: Okay. So Jim's second question is on our Arizona fab expansion plans. He notes that it is becoming more and more strategic. We have recently, as we said, acquired a second large piece of land. So what is the plan or the purpose behind this? And then what is the profitability or margin outlook as well? C.C. Wei: Well, Jim, let me answer the question. We acquired the second land because we need it. We want to build more fabs in Arizona. And this is actually to meet the multiyear demand from our leading edge U.S. customers. And again, let me emphasize again that we are working very hard to speed it up. We already gained a lot of experience in Arizona. And so now we are much more confident than last year that we can make it a good progress and moving aggressively forward. And we expect we can improve the cost structure, of course. Operator: Next one, Bruce Lu from Goldman Sachs. Zheng Lu: I think I want to follow up on Jim's question for the profitability. I think earlier last year, when I asked why TSMC did not raise the profitable target when TSMC continued to sell the value. I think C.C. told me that to focus on the above version of 53% and above. I think last quarter, we raised it to 56% and above. So the question is that do you believe the current profitability fully reflects TSMC's value? So I'm guessing C.C. might ask me to focus on the higher portion of the profitability target again. So the real question is that given the uniqueness of the dominant position for TSMC, it's not easy to find a perfect benchmark for TSMC's profitability. So can you tell us how we should think the profitability benchmark for TSMC? Or what is the best way to see TSMC value to be fully reflected into the gross margin and operating margins? Jeff Su: Okay. Bruce's first question is, he wants to know what profitability benchmark he should be looking at, and whether we believe our current profitability level fully reflects TSMC's true value. C.C. Wei: Well, Bruce, actually, you asked about our pricing strategy. Let me say that we always view our customers as our partners. Of course, we know our value; of course, we know our position, but we also view our partners as very important business partners, so that we don't change our pricing dramatically or something like that. We just try to make sure that our customers can be successful in their market. And at the same time, we grow together, and we also earn our value, so that we can continue to expand our capacity to support them. That fundamentally is, number one, our customer got to be successful. That's our consideration, number one, and we grow together. And again, there's a keyword please pay attention to. Customer is our partner. Zheng Lu: Okay. So if your customers continue to be successful, maybe in a couple of quarters, we can see the higher profitability target again. Jeff Su: Bruce, what's your second question? Zheng Lu: Okay. My second question is that management has been guiding that AI accelerator revenue to grow about like mid- to high 50s CAGR in (sic) between 2024 and '29. So how does TSMC plan and forecast AI-related demand? I mean, does TSMC incorporate metrics such as total consumption growth in your assumption? Because the recent consumption in the first quarter is definitely accelerated and faster than earlier expectation. Do we see the changes for the AI accelerated revenue growth in the coming years? Jeff Su: Okay. So Bruce's second question is on our AI accelerator long-term CAGR guidance, which, yes, we have guided mid- to high 50s. He notes with the strong token growth and demand for tokens, do we have any changes to this long-term guidance? C.C. Wei: Bruce, actually, I think I say now that it's a very strong demand, and we continue to receive a very positive signal from our customers and customers' customers. And so what you say is whether we change our CAGR on AI accelerator? Actually, we continue to see strong demand, but again, let me say that it is toward higher 50s of CAGR that we observe. Operator: Next one to ask question, Laura Chen from Citi. Chia Yi Chen: May I take more details on TSMC's strategy in advanced packaging? And what will be the business model working with your OSAT partners, as we see that there are various different solutions provided by your peers and also the OSAT makers, yet TSMC is also expanding more in the advanced packaging. So how would TSMC work with your customers' planning on their advanced node wafer demand, but also align with their advanced packaging demand at TSMC? Jeff Su: Okay. So thank you. Laura's first question is on advanced packaging. She would like to know, we work with customers, collaborate with customers to plan our front-end wafer capacity. How do we work with the customers to plan the advanced packaging capacity is what she would like to understand, and also in the context of working with our OSAT partners on the advanced packaging businesses. C.C. Wei: Well, Laura, our priority actually, again, is to support our customers, right? And whenever we can or wherever we can, we want to make sure that their product can be -- the demand of their product can be met by TSMC's front-end and high-end packaging. So we certainly, let me say that our advanced packaging capacity is very tight also. So we have to work with our OSAT partners. We hope that we can increase the capacity to support our customers. Let me emphasize again, we support our customers. So we try very hard to increase our own capacity also. But certainly, it just has been very tight. And so that's what's our situation today. Chia Yi Chen: Sure, sure. Understood. My second question is also about advanced packaging. As C.C. highlighted before many times that AI chips are going into super chips with very large die size and TSMC now working at the biggest reticle in the world. But at the same time, there's potential technical challenges such as warpage. So do you think that the following road map like SoIC or like CoPoS can solve this kind of technical issue? And based on TSMC's technology road map, do we see any technology like SoIC or CoPoS will be a bigger ramp in a couple of years, can solve this problem? Jeff Su: Okay. So Laura's second question is also related to advanced packaging, AI and larger reticle sizes post potential technical challenges such as warpage. So she would like to know how do we see SoIC or panel-level packaging? What's the key to solving these issues? And what is the outlook in the next several years? C.C. Wei: Well, Laura, you are good. Actually, that's all the challenges that we have in advanced packaging technology. Mechanical stress, which is very top challenge to the electrical engineering, like I am. However, we accumulated a lot of experience already today because we have supplied most of the leading edge and in packaging area. And we continue to increase the die size and continue to meet all the challenges from the mechanical stress, like you said, actually the warpage or the thermal limitation. A good challenge. And we like it. The harder the better, because of TSMC's strength in technical engineering, and we have confidence that we can work with our customers to solve all the issues and continue to move on. Chia Yi Chen: So should we expect that SoICs, TSMC may introduce that earlier to solve this kind of a challenge, because we already have the learning curve and already have the products in production. So that should go faster than other technologies, I suggest. Jeff Su: So Laura's question is very specific. Yes, on SoIC, how do we see that developing, I guess? C.C. Wei: Well, we work with our customers, and we meet their demand, and that's all I can tell you. Speed it up or slow down? No, no, no, no. We work with our customers to meet their demand. Jeff Su: Operator, in the interest of time, can we take the questions from the last participant, please? Operator: Next one to ask question, Charles Shi from Needham. Yu Shi: TSMC's definition of AI revenue includes data center GPU, AI accelerator, HBM-based stack. Maybe I left out a few others, but it specifically excludes data center CPU. I think you made that definition very clear for a couple of years now. But with the CPU, there's more and more conversation about CPU now becoming part of the AI infrastructure, especially for agentic workloads. Any chance for TSMC to maybe provide us revised numbers for AI revenue and maybe AI revenue growth, CAGR projection going into 2029, 2030. And maybe hopefully give us some sense of how the historical AI revenue numbers would have been if some of the data center CPU numbers, especially for agentic AI workloads are included there. That's my first question. Jeff Su: Okay. Thank you, Charles. So Charles' first question, please let me summarize, is regarding our definition of AI accelerator, which is, of course, we have said GPU, ASIC and HBM controllers for training inference in the data center. He notes now with the agentic AI, he wants to know, will we start to include CPUs in this definition? If so, can we provide the historical data with CPU included? And what would the AI accelerator guidance be if it includes CPU? C.C. Wei: Charles, certainly, CPUs become more and more important in today's AI data center. But actually, let me share with you -- this is a good question, by the way. Let me share with you that we are not able to identify which CPU goes where, right? It's PC or desktop or it's AI data center. So today, we still not include the CPUs in our AI HPCs calculation. Someday later, we might consider. Jeff Su: Charles, do you have a second question? Yu Shi: Thanks, C.C. Yes. Maybe it's kind of also tied to the recent development in overall AI infrastructure, how things have been evolving. So NVIDIA, of course, they recently added more CPU content to the overall Vera Rubin SuperPOD, but I think that most people are focusing on that brand-new LPU. They recently added -- we understand and appreciate that the TSMC is very strong in CPU and we will definitely participate in that upside in CPU, but the LPU business, the acquired business, well, for historical reasons, it's still at your competitors, Samsung Foundry. And I think Investors are looking at that and seeing that maybe looks like Samsung Foundry finally made the first 2 inroads into AI. So any thoughts from TSMC side, how should we think about whether and how TSMC will win back that LPU business or any future difference chip business coming from your customers? Yes, give us some thoughts there, we would appreciate that. Jeff Su: Okay. Charles' second question is a very specific question about a very specific customer and very specific product, which is we typically do not comment on, but he wants to know for this customer's LPU product, which he notes is made at one of our competitors. How do we see this business going to the competitor? Do we have plans to win this LPU business back in the future? C.C. Wei: Charles, I think Jeff already gave me enough warning, very specific and very specific customer, very specific area. Let me answer your question. We are working with our customer for their next-generation LPU anyway. And we are very confident in our technology position, and we will work hard to capture every piece of business possible. How about that? Yu Shi: Very good. Thank you, C.C. That's very good color. Jeff Su: Okay. Thank you, Charles. Thank you, C.C. Thank you, Wendell. This concludes our prepared statements -- sorry, I should say this concludes our Q&A session. Before we conclude today's conference, please be advised that the replay of the conference will be accessible within 30 minutes from now, and the transcript will become available 24 hours from now. Both are going to be available through TSMC's website at www.tsmc.com. So again, thank you, everyone, for taking the time to join us today. We hope you continue to stay well, and we hope you join us again next quarter. Goodbye, and have a good day.

33天前Insight Analytics约5分钟阅读

TSM 2026 Q1 财报电话会议

33天前Insight Analytics约5分钟阅读

ABDDF 2026 Q2 财报电话会议

Sarah Matthews-DeMers: Welcome to the AB Dynamics 2026 Half Year Results Presentation. I'm Sarah Matthews-DeMers, the CEO, and I'm joined today by our Interim CFO, Andrew Lewis. I'm going to be taking you through the highlights before Andrew takes you through the detailed financial performance. Following this, I'll provide my initial observations from my first few months as CEO and an update on our progress against our medium-term growth strategy before wrapping up with a summary of FY '26 to date and the outlook for the remainder of the year. We set out our medium-term growth ambitions in November 2024, and I remain committed to delivering these. We have continued to make strategic progress in shaping the group to take advantage of the structural market drivers that underpin the significant medium-term growth opportunity. As we had already signposted, revenue was softer in the first half due to the order intake delays in the second half of last year caused by tariff disruption, with only GBP 44 million of orders received. In half 1 of FY '26, it is pleasing to see positive customer activity and order intake recovering to more positive levels with GBP 64 million of orders received. Our closing order book of GBP 47 million, together with revenue delivered in half 1, provides approximately 70% coverage of expected full year revenue. Combined with our confidence in operational execution, this leaves us well positioned to deliver in the second half of the year. We have enhanced our focus on innovation to drive future growth, an area I will cover in more detail later in the presentation. Our second value creation pillar is margin expansion. Our operating margin was maintained at 18.6% as the impact of lower volume was offset by operational improvements, management of discretionary spend and a positive revenue mix. This shows the benefits of the investment made over the last 5 years to make the business more agile and responsive to dynamic market conditions. Our full year margin is expected to show year-on-year progression given the expected half 2 revenue bias. In addition, the lower-margin Chinese testing services business, VadoTech, will now become a smaller proportion of the group, which will also benefit margin. In the operations function, we have a further program of continuous improvement underway to drive our incremental margin growth. And I am confident of achieving our sustainable margin target of greater than 20%. We have a promising pipeline of value-enhancing and strategically compelling acquisition opportunities that we are continuing to develop. Our significant net cash balance of GBP 39.3 million supports further organic and inorganic investment opportunities. I'll now hand over to Andrew to take you through our financial performance. Andrew Lewis: Thanks, Sarah, and good morning, everyone. It's been a privilege to join the group with AB Dynamics pedigree and to work with Sarah and the team over the last 2 months. I found a business with talented people, great products and excellent long-term high-quality customer relationships. On to the business of the day and the results for the first half of 2026. Revenue and profit in the first half were consistent with the previously guided second half bias for the full year in 2026. We expect this to result in a trading performance weighted approximately 55% to 60% towards the second half of the year, set against the context of a greater first half bias in 2025 than typically expected. Order intake in the first half strengthened, showing that the market and customer activity is returning to a more positive level after a more subdued third quarter of FY '25, which was heavily impacted by global trade tariff issues. Looking at the numbers in more detail. Revenue was down 16%, reflecting the previously communicated delays in the timing of order intake and customer delivery requirements, including the weaker-than-anticipated volumes at our Chinese testing services business, VadoTech, which I'll cover in more detail later in the presentation. Operating profit decreased by 16% to GBP 9.1 million. Operating margin was maintained at 18.6% with a negative impact of operational gearing offset by the full year effect of operational improvements, management cost actions and a positive revenue mix. The effective tax rate remained flat at 20% and earnings per share decreased by 15% to 31.3p. On a rolling 12-month basis, cash conversion of 102% and our rolling 3-year average cash conversion of 105% demonstrates that we're consistently able to turn our profits into cash. We are increasing the interim dividend by 10%, reflecting our strong financial position and confidence in the business. The order book at the end of the period was GBP 47 million, of which GBP 29 million is for delivery in the second half. This, combined with first half revenue, provides approximately 70% cover of full year 2026 expected revenue. Moving on and looking at the year-on-year operating profit bridge. The negative impact of operational gearing was offset by a combination of the full year effect of operational improvements, primarily in testing products, Management implemented cost mitigation actions, largely around the timing of discretionary spend and revenue mix, which contained a number of components. In Testing Services, growth in the high-margin U.S. mileage accumulation business, together with lower revenue in the low-margin Chinese testing services business and in simulation, a higher proportion of high-margin RF Pro software. This delivered an operating margin, which was maintained at 18.6%. Looking into the second half, we expect the volume to be higher and thus will benefit from operational gearing. Operational improvements are embedded into the business. Revenue mix is harder to forecast as it is often dependent on the timing of some large individual deliveries. And overheads will be managed carefully to balance financial performance with investment in innovation and our people. Now looking at cash. While in the period, working capital increased due to the timing of customer deliveries falling later in the period than usual, driving an increase in receivables, our rolling 12-month cash conversion of 102% demonstrates a continuation of our track record of turning profits into cash. We have achieved this by maintaining our focus on commercial contracting, inventory levels and ensuring a disciplined approach to cash management. We have reinvested this operating cash into the business with GBP 2 million invested in capital projects, including on new product development in line with our technology road map. After returning cash to shareholders in the form of dividends, we had a significant net cash balance at the period end of GBP 39.3 million available to support strategic priorities. Moving on to the performance of each segment and starting with Testing Products. This segment includes driving robots, ADAS platforms and soft targets and laboratory-based test equipment. Revenue was down 17% as a material delivery of robots to a North American OEM made in the first half of 2025 did not recur in the period. Underlying demand drivers remain strong and order intake was encouraging during the first half of 2026, particularly in Asia Pacific and North America. The increase in margin was driven by operational efficiencies, together with cost control measures focused on the timing of discretionary spend. Testing services includes our proving ground in California, powertrain and environmental testing in Michigan and on-road testing in China. Revenue decreased by 29%, which is very much a tale of 2 geographies. Performance has been positive for our U.S. businesses, where new customer wins for our mileage accumulation business and increased track testing activity on behalf of the U.S. regulator drove good revenue growth. However, our business in China, VadoTech, has seen significantly weaker-than-anticipated volumes under the new contract with a European OEM awarded at the end of last year. The customer has faced challenging local market conditions as its market share as a premium European brand has been replaced by domestic brands such as Geely and BYD and the lower consequent on-road testing activity has resulted in a reduction in our revenue. The VadoTech Testing Services business remains in continuing activities in the half year numbers as a strategic review commenced shortly after period end. This slide illustrates the financial impact of the VadoTech business on the Testing Services segment in the first half of this year with comparatives for last year's half and full year. In light of the performance of the VadoTech business in the first half of this year and customer intelligence about their revised expected volumes, the group recorded an impairment of the VadoTech business of GBP 16.8 million, the majority of which is noncash. The detail on the slide should provide sufficient information to allow modeling of the U.S.-based Testing Services segment, which as can be seen, is a higher-margin segment without the VadoTech results in it. It is important to stress that this is an isolated issue with a single European OEM who is facing challenging local market conditions in China. And has no bearing on the opportunities to sell testing products to Chinese OEMs for local use in China, which has been a strong market for our testing products in the first half of the year. Simulation includes our simulation software rFpro and driving simulator motion platforms. The slight decrease in revenue was driven by lower motion platform sales, where we expect revenue to be more heavily weighted to the second half, offset by higher software sales. Customer activity in this area was buoyant in the first half and included the EUR 9.7 million contract win to supply advanced driver in the loop simulation equipment to a major European OEM, which we announced in December. Margins were impacted by the mix of higher software and lower equipment sales in the period. As a reminder, high-value simulator sales are individually material and 2 further order wins are assumed in our second half revenue expectations. Our key financial enablers are unchanged and include our great people with over 200 qualified engineers and technicians, supported by an experienced team of professionals across sales, operations and finance. Our retention rate, which at circa 90% is above industry averages, is testament to the investment that's been made in our people. Our cash conversion, which we aim to continue at 100% through the cycle, and our strong balance sheet, which gives us flexibility with GBP 40 million of cash and a GBP 20 million revolving credit facility. Whilst we prefer to remain debt-free, our debt capacity at approximately 2x EBITDA is now GBP 55 million, which for the right acquisition, we could use for a short period, then pay down from cash generation. Our capital allocation policy is unchanged, and we're pleased to demonstrate how this is supporting the year-on-year progression of the group's return on capital employed. Our first priority is to invest in organic R&D and the CapEx, then M&A and finally, dividends. We have a disciplined approach to R&D and CapEx, assessing each potential project using structured financial and strategic criteria to ensure alignment with our medium-term growth plan. New product development is critical to our business to ensure our solutions meet the evolving technical requirements of our customers. Our technology road map for testing products is designed to address the opportunities of both regulation and NCAP testing over the next 5 years based on the long-standing deep customer relationships we have with OEM R&D teams and service providers. Our road map covers both hardware improvements such as the speed and reliability of our ADAS platforms as well as software enhancements. In simulation, new product development is targeted at addressing evolving customer requirements and ensuring our product range provides solutions for a range of use cases and budgets across the road and motorsport markets. We have well-invested facilities across the group, but where appropriate, we'll invest CapEx to increase production or service capacity. And we will complete our global ERP system rollout, having now embedded this in our core testing products business and driving margin improvement as a result. In M&A, we will continue to target profitable cash-generative businesses. Any transaction should be EPS accretive and meet or exceed our internal benchmarks on financial returns. Where this is not the case, we maintain a patient and disciplined approach to ensure we only invest where we can create long-term shareholder value. We have a progressive dividend policy, as shown by our track record of consistent double-digit increases over the last 5 years. We will only consider returning further capital to shareholders if we are holding surplus cash and acquisition multiples ever become unattractive. The graph on the right illustrates that we have deployed capital in a number of ways over the last 4 years in a disciplined manner and are now starting to see the benefits in the group's return on capital employed metric, which has increased to 21% in the first half of 2026. I'll now hand over to Sarah, who will provide an insight into the first few months in her new role and to recap on the progress against our medium-term growth strategy. Sarah Matthews-DeMers: Thanks, Andrew. Having been in the CEO role since the 1st of December, I'd like to share my initial observations. We have made a huge amount of progress at ABD over the last 5 years, and it's a very different business to the one I joined. We have great people, great products and a great market position, which underpin my confidence in the future of the business. There is no change to our overall strategy. And going forward, you should expect evolution, not revolution. We have reviewed the portfolio of prior acquisitions and taken early decisive action given the changes in market dynamics for our VadoTech business. I'm passionate about driving the group forward and will focus on innovation, continuous improvement and developing and growing our people. During the last few months, I have visited 9 out of 10 of our business units and personally met around 90% of the group's employees. I've really enjoyed my time visiting our sites and talking to some of our very talented people. We've run innovation workshops attended by all levels of the organization, designed to generate new ideas for innovation, continuous improvement and excellence and to promote a culture of respect. I was delighted that these workshops attracted full attendance and the engagement and enthusiasm of my colleagues reinforced my view that the group is a wash with talented and engaged people. Over 500 ideas have been generated and are currently being reviewed and actioned. A broad range of opportunities have been identified to drive both revenue growth and operational improvements. As a reminder, our medium-term ambition is to double revenue and triple operating profit from our FY '24 baseline, and I am fully committed to delivering the plan. The graph demonstrates how this will be achieved by the compounding effect of delivering average organic revenue growth of 10% each year, expanding operating margins to 20% plus and investment in acquisitions, continuing our disciplined approach against well-defined acquisition criteria. When we articulated the plan in November 2024, we clearly didn't have visibility of some of the geopolitical and macroeconomic issues and challenges that the second half of FY '25 brought or the more recent developments in the Middle East. And we have always said the medium-term progression was unlikely to be delivered in a perfectly linear fashion. As expected, half 1 '26 had a softer trading performance due to the macroeconomic disruption we experienced in the second half of last year, with revenue down 16%. And we expect FY '26 to have a greater weighting towards the second half. Despite the decrease in revenue, we have maintained the group operating margin at 18.6%. And in M&A, our pipeline continues to progress. I will give further detail on each of the 3 elements in turn on the next slides. Our growth is supported by very long-term structural and regulatory growth drivers in 4 main areas: new vehicle models, new powertrains, consumer ratings and regulation. The first 2 relate to the wider automotive market and the third and fourth are linked to the rapid developments in safety technology for assisted and automated driving functions and the increasing regulation and certification requirements in this area. These long-term tailwinds support the growth of the group's end markets across each of its 3 sectors, but have also led to volatility in the wider automotive market that can impact the timing of specific customer procurement activity over a short-term period. At a macro level, in the wider automotive markets, we note a continuation of the regional trends noted previously, whereby traditional European OEMs are losing market share to new entrants and are under pressure to innovate in response. Overall, in 2025, the global automotive market recovered to near pre-COVID highs with growth driven by APAC, where the group has a strong market position. A divergence internationally in terms of the rate of EV adoption following changes implemented by the U.S. administration, which will mean EVs and ICE vehicles are likely to coexist for longer, driving increased platform churn and therefore, testing demand. Rising investment in Level 2 ADAS systems, which provide partial driving automation such as lane keeping assist with premium technologies filtering into more affordable cars. Our product lineup is well suited to continue to capitalize in this area of development and testing. While the development of autonomous vehicles has been well publicized, we do not expect full-scale adoption of AVs until well into the future. With that said, the products and services we offer are critical to AV development, be that in high fidelity simulation or physical track testing scenarios. Our business is resilient against short-term market disruption, and our market drivers support sustainable double-digit revenue growth in the medium term and beyond. We are OEM and powertrain agnostic with over 150 different customers globally, including conventional manufacturers and Chinese EV makers. We sell into R&D functions and the organizations independently conducting testing. We don't sell anything that goes into a production vehicle. Therefore, production volumes are not directly relevant to us. As OEMs seek to innovate and develop faster, more cost-efficient methods of developing new models, this will lead to faster adoption of simulation and further opportunities for our simulation capabilities. In summary, all of these market drivers and our high-quality long-term customer relationships provide resilience against the challenging near-term dynamics in the automotive industry. We have a number of organic growth opportunities. And on this slide, we have broken them down across each of our 3 segments to help illustrate how we expect to sustain increases in both volume and pricing going forward. The key takeaway is that across all segments and product or service offerings, we operate in growing end markets, which in the long term, we expect to drive incremental sales volumes. The timing of this is fluid across different geographies and OEM customers. But as technological advances in safety technology continue, the associated regulatory and certification environment is expected to follow, thus driving demand for our equipment. In addition to this overall market growth, there are further opportunities for growth in areas where the group can increase its market share. For example, in platforms and soft targets, where it competes with 2 other main competitors and has greater scope to win new customers. The group has a strong position in the market and a premium offering, which gives it strong pricing power and has enabled it to consistently increase prices above inflation in recent years. In areas where the group has strong niche positions such as robots and its simulation software, we will continue to maximize this opportunity. Finally, while replacement cycles underpin a level of steady-state revenue, our continued investment in new product development will help to stimulate demand and enhance growth prospects. While opportunities exist across each segment, there are particularly strong opportunities in robots and platforms as our equipment evolves to keep pace with ADAS technology and for driving simulators as we incorporate new customer requirements into new product launches. Operating margin expansion will be achieved through delivering operational gearing as we scale the business, simplifying the business and standardizing our processes and procedures. In our main manufacturing facility in the U.K., we delivered a net improvement of GBP 1.1 million in FY '25 with initiatives spanning supply chain efficiencies, planning and layout improvements and product rationalization. In half 1 '26, the full year effect of last year's initiatives delivered a further GBP 0.3 million. The innovation workshops I have conducted over the last few months will drive the next wave of incremental margin improvement opportunities, which we are working to monetize in FY '27. We have demonstrated a strong track record in delivering and implementing value-enhancing acquisitions, and this will continue to be an important area of focus for the group. Our pipeline includes a range of near-term opportunities and longer-term relationships. There are no changes to our well-defined strategic and financial criteria against which targets are screened. Importantly, we have the resources in place to execute transactions. The market is fragmented, consisting of a high number of small- to medium-sized businesses, which are filtered down into targeted approaches. These are usually off-market opportunities with vendors with whom we have built a relationship over a period of time, but are sometimes structured M&A transactions. We typically have several acquisition opportunities in various phases of the transaction process at any one time. During the year, we have refocused our pipeline of opportunities and continue to develop relationships with a number of targets. We continue to apply our highly disciplined and well-structured approach to deal execution, which led us to withdraw from a potential transaction in the period. In summary, we have a promising pipeline and sufficient resources to take advantage of opportunities that arise. To summarize half 1 performance and the outlook for the remainder of the year, Revenue and profit in half 1 were consistent with the previously guided second half bias for FY '26. Order intake in the first half of GBP 64 million shows that the market and customer activity are returning to more positive levels after a more subdued third quarter of FY '25. Despite the lower revenue, we maintained margin at 18.6% from a combination of operational improvements, cost mitigation actions and positive revenue mix. We have proposed a 10% increase in the dividend, reflecting the Board's confidence in the group's financial position and prospects. Our strong operating cash generation and cash conversion of 102% leaves us with GBP 40 million of cash, which supports further organic and inorganic investment. In terms of the outlook for FY '26, the group is OEM and powertrain agnostic and sells into automotive R&D functions, providing resilience against short-term industry headwinds. The group's geographic diversification and critical nature of its market-leading products and services have created a highly resilient platform that is well positioned to support customers navigating dynamic market conditions. We have good visibility into the second half of the year with an order book of GBP 47 million, of which GBP 29 million is for delivery in half 2, giving coverage of around 70% of expected revenue for the full year. We note the emerging situation in the Middle East. And whilst the group has no operating footprint in the region, we continue to monitor any potential impacts from broader risks to trade and cost inflation. The group has strong pricing power and a proven agile approach to managing the business through changing conditions. And so we remain confident in delivering on our key strategic and operational priorities. Whilst we are mindful of the current geopolitical uncertainty, absent an extended disruption, we expect adjusted operating profit for FY '26 to be in line with current expectations with an expected 55% to 60% revenue bias towards the second half of the year. Future growth prospects remain supported by long-term structural and regulatory growth drivers in active safety, autonomous systems and the automation of vehicle applications, underpinning our medium-term financial objectives. That concludes the presentation. Thank you for joining us. Unknown Executive: So question number one is, how are you maximizing the use of AI in the business? Sarah Matthews-DeMers: In a number of different ways in our products, mainly in our software for AB Elevate. This enables our customers to train and test AV and ADAS using AI, using customizable training data that can generate hundreds of scenarios testing sensors. In our product development, we're using AI for software code debugging and also reducing engineering lead times. And then in the back office of the business, we're using it for efficiencies in terms of customer support, prepare training materials frequently asked questions and meeting minutes, et cetera. One of the things we are looking at is risk of using AI and allowing our IP to leak out into the wider Internet. So we're being very careful about the tools that we're using and ensuring that they are ring-fenced and safeguarding our IP. Unknown Executive: Great. Thank you. Question number two, what is the current state of OEM R&D budgets? And have they been cut in response to end market weakness? Sarah Matthews-DeMers: Well obviously, OEM R&D budgets are immune to falls in production volumes. Actually, what we're seeing in the market is that in the current environment, OEMs can't afford to cut their R&D budget significantly because of the competition from new Chinese entrants that are bringing models to market more quickly and efficiently and the more traditional OEMs having to fight hard to keep up in Europe and the U.S. So we're not seeing that as a significant movement. Unknown Executive: Okay. And following on from that, next question is, do you work with Chinese OEMs? Sarah Matthews-DeMers: We do absolutely work with domestic Chinese OEMs. And we sell testing products and simulators into China. While we sell direct to some of the larger OEMs, there are around 400 start-up OEMs in China who don't have the facilities to do their own testing. So we're selling into the testing providers that they're using to be able to do that testing. Unknown Executive: Great. And then finally, perhaps this is one for you, Andrew. How significant is the growth opportunity from here? Where could this business be in 5 to 10 years' time? Andrew Lewis: Yes. I think we set out the medium-term growth ambition is to double revenue and triple operating profit over the medium term. And Sarah explained the 3 component parts of how we believe we can deliver that. And I guess the growth drivers are structural and long term. And so we see a compounding effect from there that could take that out over the next decade. Unknown Executive: Sure. Okay. Well, that's all we've got time for. I'll hand back to Sarah to finish off. Sarah Matthews-DeMers: Great. Thank you. Thanks for listening, everyone, and we look forward to speaking to you again in Autumn.

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