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ELMTY 2025 Q4 财报电话会议

Luc Van Ravenstein: All right. Good morning, everyone, and welcome to the Elementis 2025 Results Presentation, and thank you for joining us. Great to see you. In terms of agenda, I'll begin with our highlights for the year and Kath, our new CFO, will then run you through our financial performance. Then I'll take you through our strategic progress over the past year and finally, to our outlook for 2026. And we'll then open for questions. It has been quite the year. Looking back 10 months into the job, I'm really proud of everything we've achieved together. We delivered strong profit growth and margin expansion despite soft demand environment, and that's a clear proof of the quality and resilience of our business. From a strategic perspective, the sale of the Talc business and launching our Elevate Elementis strategy were more than milestones. They set the foundation for this company can achieve when we focus and move forward as one team. And we're making solid progress across all of our strategic priorities, such as innovation sales up to a record of 16.4% and 0 lost time accidents. So lots of positive momentum. You might remember a version of this slide from our last half year result presentations. Our portfolio has fundamentally transformed over the past years. We've reshaped Elementis into a pure-play specialty chemicals business, focused on our 2 segments, Personal Care and Coatings. Selling Talc was a major step in making this happen, and it was my first priority when I started as CEO. And with Chromium sold in 2023, we exited these commoditized capital-intensive businesses, and it was absolutely the right decision. It allows us to focus on our core strengths and capabilities. As you will have seen this morning, I'm pleased to share that we've agreed to sell our pharmaceutical business to ABF, and this sale is in line with our strategy as well, further sharpens our focus. More on this on the next slide. In November, we added Alchemy to the portfolio, a fantastic bolt-on right in our personal care sweet spot. It's a fast-growing, high-margin business that strengthens our position in skin care and cosmetics. So this is the new Elementis. We're a company with a unique position built on 3 real differentiators: hectorite, rheology and formulation solutions. And we're really pleased with the shape of the portfolio, and we're well positioned for growth. So we announced today that we reached an agreement to sell our noncore pharmaceutical manufacturing business to ABF. Last year, the business made $35 million in revenue. Our pharmaceutical business was originally acquired as a part of SummitReheis in 2017. It manufactures antacids and pharmaceutical excipients from our Ludwigshafen site in Germany. And while the business has performed well, it's clear that it no longer fits with our strategic focus. And because of that, the sale we announced today is the best outcome for both the Pharma business and for Elementis. It's a straightforward, clean transaction. It will reduce our capital intensity and on a pro forma basis, will deliver an uplift to 2025 group operating margins. We're working towards the completion in Q2. With the Talc business sold, we accelerated the delivery of all of our 2026 financial targets by 1 full year, which is a fantastic result. And with Elevate Elementis, we shared our new targets, mid-single-digit revenue growth, operating margins of more than 23% and 3-year operating cash conversion to be above 90%, ROCE, excluding goodwill, of more than 30%. And our proven track record gives us the confidence that we can meet these targets and be among the top of our peer group. Moving to sustainability. Next slide. Starting with safety, which is fundamental to how we operate. Last year, we achieved our first 0 lost time accidents since 2019. That's a big milestone. On the environment, we continue to make good progress. The divestments of Talc and Chromium have significantly reduced our carbon footprint, which is now nearly 80% lower than 2019. And we continue to transition to a more sustainable and responsible business. For example, at our hectorite mine, we moved to almost entirely renewable energy from a 0% base last year. Finally, on people, we've made a lot of changes in the organization with Fit for the Future, which was a big reorganization for us. And the engagement scores actually improved with voluntary attrition down by 40%. We're well below industry average now. But for me, even more importantly, I see it when I visit our sites, how proud the team is when I visit the Newberry, which is where we have our hectorite site or when I visit the new Porto team. And with that, I'm delighted to hand you over to Kath, our new CFO, to cover our financial performance. Katharina Helen Kearney-Croft: Thank you, Luca, and good morning, everybody. Before I begin, I'd just like to share some initial reflections of my first few months in Elementis. I've been here for 4 months now and 2 months as the CFO, and I've been genuinely impressed and frankly, relieved by what I've seen. I've had a really warm welcome with lots of people taking time out of their busy schedules to help me on-board. And it's clear, everyone is working with real commitment to unlock the full potential of Elementis. I've had the opportunity to visit locations in the U.K., Europe and U.S.A., and I really enjoyed learning about the business. There's nothing quite like the manufacturing environment, seeing products being made and looking to see what we're talking about in the meetings. And the real highlights for me have been hands-on in the Alchemy lab and visiting the hectorite mine. What has really stood out is the passion, dedication, commitment and pride of our people. They care deeply about the company and rightly so. And I'm confident that we can continue to build on these strong foundations, demonstrating that we have opportunities to grow revenue and profit and continue to generate strong cash and returns. When I look at the macro backdrop for 2025, we could be standing here looking at a very different set of results, and I'm definitely glad that I don't have to present that. Despite the challenging market, we have made good progress in 2025, and the team have done a fantastic job. And it's in this context, I'd like to cover the results for the prior year. Following the sale of Talc, the 2024 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to show a brief overview of the metrics for 2025. Most of these will cover in the following slides, so we won't go into detail here other than highlighting. Despite a small decline in group revenues, we delivered strong growth in adjusted operating profit and a 150 basis point improvement in margins. In combination with lower net finance costs and a lower number of shares following the buyback, adjusted earnings per share was up 14.2% to $0.137, an outstanding performance considering the challenging operating environment that Luc referenced earlier. And as we turn to look at group revenue, you'll see that despite the backdrop, we delivered a resilient performance with overall revenue down 1% on a reported basis and 1.9% on a constant currency basis to $597.5 million. Bridging from 2024, we had a favorable FX tailwind of approximately $5.2 million. Volumes were down $5.6 million due to the weak demand environment in Coatings, resulting in a reduction of $14.1 million, and this was partially offset by volume growth in Personal Care of $8.5 million. On pricing, we delivered $7.8 million across both businesses, a testament to the specialty nature of our portfolio. Of note, a combination of proactive pricing, procurement agility and supply chain optimization actions helped us to fully offset the direct impact of tariffs in the year. And we believe the latest news on this topic, at least of Saturday, 21st of February, will continue to leave us in a neutral position. Turning lastly to mix. This was down $13.7 million, primarily due to a combination of one-off sales in Coatings of $3.4 million in 2024, not repeated in 2025, along with the continued softness in industrial coatings and decorative end markets. And AP actives saw strong growth in lower-priced but margin-accretive products as well as a consumer-driven shift from aerosol to roll-on formats in LatAm. As we turn our eyes to adjusted operating profit, we delivered strong growth, which increased 4.6% to $126.7 million. Within this, we benefited from favorable FX of $1.9 million. Lower volumes had an adverse impact of $1.9 million and the net price impact after offsetting inflation was $10.5 million. These headwinds were mitigated by the ongoing delivery of our self-help initiatives, which led to $18 million of total cost savings in the year and more to come on this shortly. As noted earlier, our strong profit performance helped drive higher margins, increasing 150 basis points to 21.2%, so let's take a look deeper into the reporting segments. Starting with Personal Care. Revenue was up 2.4% to $224.5 million with strong growth in skin care and cosmetics, offsetting a slight decline in AP actives. Looking at the regional performance, we saw higher revenues in EMEA and Americas with Asia flat compared to last year. Adjusted operating profit was up strongly at $72.8 million or 16.9% and importantly, brings the absolute profitability of the Personal Care segment in line with the Coatings segment. This improved profitability was driven by improved volumes and pricing alongside cost savings. The higher profits in turn helped to drive higher margin, which is up 410 basis points to 32.4%, including the benefit of one-off volume and cost savings in H1 previously noted at the half year. And lastly, on this slide, I wanted to highlight that our results in 2025 included the pro rata contribution from the recent acquisition of Alchemy, a small quantum for the year given the late acquisition timing, but meaningful strategically. And now moving on to the Coatings segment. We delivered a resilient performance with revenue of $373 million compared to $386.4 million last year, with a decline in Coatings partially offset by strong performance from our Energy business. The year-on-year decline was impacted by the benefit of high-margin one-off sales in Q4 2024. The drop-through from the lower revenue led to a lower adjusted operating profit of $70.4 million. However, the combination of higher pricing and our self-help actions supported the operating margins, finishing the year at 18.9% compared to 20.3% in the year before. You will recall at H1, we highlighted some operational challenges at St. Louis that were holding back our Coatings performance. Whilst there's still progress to be made, I wanted to share positive news that the debottlenecking program at St. Louis is progressing well and leading to improved performance, which Luc will cover more fully later. Last year, we successfully completed the balance of our 2-year $30 million cost savings program by delivering $12 million via our Fit for the Future restructuring and supply chain initiatives. In addition to this, we announced in July a further $10 million in savings that we were aiming to deliver over the remainder of 2025 and 2026. These are net of planned additional R&D spend, which will increase our total spend from 2% of revenue to 3% over the next 2 years. As we announced this morning, we have delivered $6 million of savings already, and we will deliver the balance of $4 million by the end of 2026. Our cost saving programs have reduced complexity and improved operational efficiency. We will continue to proactively identify opportunities to streamline our cost base and capture further efficiencies as we deliver on our growth agenda and become a simpler and leaner company. Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation. And I'm pleased to report that we generated good free cash flow of $41 million in 2025 compared to $51 million in the prior year. Looking at the key components, higher adjusted EBITDA was more than offset by the working capital outflow in the year, driven by higher receivables due to lower debt factoring and strategic inventory build. We also had higher CapEx as we increased our investment to support adjacent market growth and capital investment in support of the St. Louis improvement program. As a result of these movements, our adjusted operating cash flow was $104.7 million compared to $123.2 million in the prior year. As we move down the cash flow statement, it's worth calling out 2 items. Firstly, our cash taxes were lower by $4.4 million, primarily due to an IRS refund received relating to a 2024 claim to utilize net operating losses for prior periods. And also adjusting items were $6.7 million lower as the Fit for the Future program finished during the year. Our balance sheet remains robust. And whilst leverage ticked up to 1.3x, this was after acquiring Alchemy and returning cash to shareholders. Looking at the key movements from left to right, we started the year with a net debt balance of $157.2 million, adding back the free cash flow of $41 million as well as the proceeds from the Talc sale of $52.5 million, we had an increase in cash available for distribution of $93.5 million. Of this amount, we returned $79.1 million through our first buyback program and the 2024 final dividend and the 2025 interim dividend. The share buyback program led to the purchase and cancellation of approximately 4% of our issued share capital. In October, we completed the disposal of the disused Eaglescliffe site for a negative cash consideration of $11.1 million. I would like to specifically note the strategic divestment of both Talc and the Eaglescliffe site have enabled us to significantly reduce our environmental liabilities and provisions. In November, we completed the acquisition of Alchemy for a total upfront consideration of $20.1 million. Taking off the FX of $11.4 million, we ended the year with a net debt balance of $185.4 million and a net debt-to-EBITDA ratio of 1.3x. Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CapEx program will be focusing on investing in growth and productivity. We will also invest in R&D and have plans to increase total spend here from 2% to 3% of revenue. To complement these organic growth investments and as we demonstrated with the acquisition of Alchemy, we will selectively pursue bolt-on acquisitions whilst maintaining a strong balance sheet. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings. And as we announced this morning, the Board has recommended a final dividend of $0.03, taking the full year dividend for 2025 to $0.043, up 7.5% from last year and represents a 31% payout ratio. In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business and our desire to maintain a leverage around 1x net debt to EBITDA over time, which we anticipate we will achieve on an organic basis in 2026. In light of the announcement of the pharmaceutical manufacturing business disposal, our expectation is to distribute the net proceeds to shareholders following completion. and we will provide a further update upon closing. And lastly, for your reference, we've included some technical guidance for 2026 on Slide 19. So with that, I'll now hand over to Luc, who will take you through our strategic progress over the last 12 months and the outlook for the year. Thank you. Luc Van Ravenstein: Thank you, Kath. For those less familiar with Elevate Elementis, this is our new strategy. We presented that in July. The plan is simple. We have 3 strategic priorities. First, top line growth, and this is about focusing on what we do best in the areas that make Elementis unique without the distractions of Talc and Chromium. Our objective is to grow revenue by mid-single digit over the medium term. And in the next slides, I'll share a view of our growth opportunities and our progress in 2025. The second priority is about service delivery. Our ambition is to be best-in-class and the first choice for our customers. We've made some great progress, and I will show that later. Third, simplification and agility. We're building a simpler and leaner Elementis that empowers colleagues, makes us more agile and allows us to execute at pace. Delivering against these 3 priorities is what will drive value creation and will help us to deliver the new medium-term targets. So looking at our first priority. For us to grow and unlock our full potential, it is important to focus on what makes Elementis unique and what will allow us to win. We call these our winning differentiators, and let me briefly touch upon them. Hectorite, this is a very special asset. It's a white mineral that comes from our mine with long-term reserves. It has really unique properties because of its chemical composition and its platelet structure. We don't just sell hectorite. We modify it, add value to it, for example, by making preformulated gels for cosmetics, and our customers love its efficiency. You only need a tiny amount to get a big effect. It's natural, and it delivers the kind of premium skin feel that consumers are looking for. Rheology, this is the science of flow. It's what's needed to stabilize ingredients in a paint can. It's also what makes sunscreen spread evenly on a skin. And here, Elementis is the global leader. Formulation Solutions, this is our expertise built up over the years of our customers' formulations. It's how our people work together with our customers to improve the performance of a paint or a skin care product day in, day out. And our colleagues in the labs have worked at AkzoNobel or Estee Lauder. They talk our customers' language, and that's a huge benefit. Now we operate in big attractive markets, as you can see here. Our focus, though, is to target these niche areas where our winning differentiators set us apart. And we work together with our customers to improve their products. For example, in skin care, we're replacing synthetic additives by hectorite, giving a more premium texture. And in industrial coatings, we help the transition from solvent-borne to high-performance water-based formulas. I'm not going to go into the detail of all of these here, but the point is we are using our expertise and our unique portfolio to help our customers make better and more sustainable products. So lots to go for in our current markets. And outside of our existing markets, there is a large new adjacent space for us that we're tapping into as well. We're using the same model, and we have entered areas that we're going to scale. One example is hectorite for geothermal energy. And here, because the wells are extremely deep, you're facing ultra-high temperatures at which hectorite is stable. We're using our formulation knowledge and existing customer relationships to grow with this market. We had our first sales in 2025 and have a number of field trials planned for this year in the U.S. and Germany. So lots of exciting opportunities and potential for growth. So we're focusing on the right areas, building on our winning differentiators, but what levers are we pulling to now bring in this growth? First, we're investing more in R&D, 50% more. For example, in application knowledge to support customers, and we're building a hectorite center of excellence. We're already seeing the benefits. Last year, innovation sales reached a record of 16.4%. That has doubled in the last 5 years. We launched 19 new products, of which we sent more than 1,500 samples to our customers. Some of the innovation highlights from last year on the right-hand box. We launched DEOLUXE, our patent-pending non-metal-based active, and this is looking quite promising. Several large customers are testing, and we expect the first sales in the second half of this year. We also launched a number of new hectorite products, BENTONE ULTIMATE, also patent pending. It's a highly active hectorite technology that delivers exceptional skin feel, mostly for lipstick and mascara. And in coatings, we launched THIXATROL 5050W for metallic pigment orientation and waterborne automotive coatings. So lots of excitement around innovation. And next, we're covering more customers directly, also local and regional accounts. We want to understand firsthand about their needs. And we've made good progress last year. We now service about 67% of our customers directly. We're also building a local-for-local footprint, and this reduces cost and increases reliability. More and more customers are demanding local supply, particularly in China. So this is how we're going to look at growing organically. To complement our organic growth, we're looking at bolt-on acquisitions, but in a very disciplined way and only when it fits our strategy, which does not depend on M&A. But the acquisition of Alchemy is a great example. In November last year, we announced the acquisition of Alchemy right in our Personal Care sweet spot. And Alchemy develops innovative rheology modifiers for personal care. They are fully natural and can fully replace synthetic raw materials in cosmetics. And the business has done really well in recent years, delivering double-digit revenue growth and operating margins in line with our Personal Care business. And we're bringing on a team with incredible expertise in this market. We're already working together on new products, including with hectorite, quite a nice synergy. The point is, with Elementis behind it, Alchemy can scale faster, leveraging our global sales network as well as our application capabilities. It's a great example of how bolt-ons can strengthen our core and accelerate growth. To make the most of this growth agenda, we need to be the best supplier to our customers. An important measure is On-Time-In-Full. And in July, we shared our target to deliver a 20% uplift over the medium term. And I'm pleased to share that we're now already halfway, and we'll stay focused on this. Second, we talked about St. Louis in July, one of our largest sites, and we have been dealing with some backlogs there. We had a big opportunity, 30% by unlocking capacity. I've made some leadership changes there, brought some experienced people back, and we're seeing the results, a 20% improvement since the first half of 2025. That puts us 2/3 the way there. At the end of the day, all of this comes down to customer focus and mindset, whether you work in sales, R&D or in the plant. And with some of the changes we've made, we have a new top-notch customer service center in Porto, we've seen a 50% reduction in customer response times. We've also received external recognition that you can see on the screen, which is a great acknowledgment for the team. We're building a simpler, leaner Elementis. And to us, this means driving agility, faster execution and responsiveness, so we can scale and deliver more value to our customers. And we've made good progress. We've streamlined our organization and leadership team. We've eliminated the stranded costs related to Talc. And some of these things were low-hanging fruit like reducing office spaces that we didn't really need. And some things took more coordinated effort like qualifying 50 new suppliers that led to quite significant procurement savings. Looking ahead of 2026, we're not done here. There'll be more procurement savings to come. We're making our supply chain more efficient, and we'll continue to move towards a local-for-local model. This is a continuous journey. All right. On to our last slide, outlook. While we remain mindful of the recent geopolitical uncertainty, we're confident in another year of progress. We're seeing great momentum and excitement building in the business. And I'm pleased that we've made a solid start to 2026 and our priorities for the year are clear: deliver organic growth through R&D and customer intimacy, achieve best-in-class customer service levels; and lastly, drive operational efficiency and continue to deliver cost savings. And the team and I are fully focused on delivering this plan. Thank you very much. And with that, let's move to Q&A, please. Everybody could please say their name, speak to the microphone, so that folks on the call know who you are. Thank you. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just wondering if you could speak first about how the first quarter has started given weather in the U.S. and improving beauty markets and how you think about seasonality for the year given coatings is normally stronger in the first half, but we're probably not going to see much improvement soon. Luc Van Ravenstein: Hi Vanessa Jeffriess from Jefferies, thank you for that question. We had a solid start of the year which is encouraging -- Q4 was relatively soft. So solid start in coatings as well, which particularly was softer in Q4. And the seasonality is -- we expect it to be quite typical, 52-48 balance. So yes, encouraging start. Vanessa Jeffriess: And then just on your new growth areas, great that you were able to execute on Alchemy. But how do you think about the mix between achieving that growth from bolt-on M&A and not diluting margins, given I can't imagine there's much out there making the margins you are. Luc Van Ravenstein: Yes. Absolutely. Look, this is an organic-led strategy. So we're really focusing on organic growth, which there are great opportunities in our existing segments, as we say, Personal Care and Coatings as well as these new areas that we talked about. It really is organic-led. Look, we work with many, many companies out there, such as Alchemy. We knew that for a long time, this company -- those could be nice new arrows to our bow. But again, it's really organic-led. You're right, our margins are in a nice spot. We're driving them up further. And it's difficult to find companies that are actually accretive to our margins. Alchemy was one of those, by the way. So we're very happy to use them to grow faster. Vanessa Jeffriess: And then just on pharma. I know that you didn't give profit, but based on past commentary, I would guess that, that's making probably 10% margins. So it seems like you sold at a multiple similar to your own group multiple, which is interesting. I think since your undervaluation, but what else is left in the group do you think that is making similar margins and could be sold? Luc Van Ravenstein: I think you're absolutely spot on in terms of your analysis around the margins and what we did there with pharma. So for us, this was a really good step from a margin and a CapEx perspective, but also from a strategic perspective, most importantly. Pharma was really an activity that it's a really great piece of business, but it doesn't fit with us. Looking at the rest of the portfolio now, we're really pleased with the portfolio we have. We don't have any other business in this kind of margin area. So yes, right now, it's about growth really. That's what we're focused on. We're pleased with the portfolio. Kevin Fogarty: Kevin Fogarty from Deutsche Numis. If I could kick off firstly on innovation. So you called out some several examples of progress, I guess, in new rheology markets. It feels like you're making sort of more progress there perhaps rather than the current ones. It's obviously sort of quite a different sale in terms of new markets rather than the current. I just wondered if you could sort of talk a little bit about that process. And sort of I guess, culturally, how is that different in terms of what you're trying to do there relative to what Elementis has done in the past? You're at 16% in terms of innovation sales. Just thoughts on the 20% target you've got out there? And just secondly, if we can think about Personal Care, just if you could frame the benefits from cost savings perhaps during the year. Any thoughts on Personal Care Asia and dynamics there during the year would be quite useful and just sort of confidence on retaining the margin, which is clearly at a significantly higher level than in the past? Luc Van Ravenstein: Yes. Thank you, Kevin, for those questions. Perhaps I can take the first couple and then Kath, you can help me on the third, if you don't mind. Thank you. So in terms of the new markets, so indeed, look, we have a large market in Personal Care and Coatings where we have great opportunities for growth. We talked in July, for example, about replacing some of the synthetic additives in sun care. That's our existing markets, huge opportunities. And if I look at our growth going forward, probably the largest piece of growth is actually going to come from those existing markets. We have exciting opportunities in new markets for sure as well, where, frankly, we've started to look into only relatively recently. Some of these opportunities, we will actually be able to address and bring in with our current sales force, application knowledge, et cetera. I gave a little example of geothermal. So geothermal drilling is actually -- is happening a lot with our existing customer base already, the Schlumberger of this world. So we have the access to customers. We have the knowledge of deepwater drilling through our oil and gas business. So that's an opportunity we'll bring in with our existing setup. Other opportunities, for example, we've identified a new opportunity for hectorite to remove PFAS out of wastewater. That's really interesting, but we're not going to build a whole sales force and application knowledge to -- for wastewater removal. So there, we might work with a partner, right? So I think for these new opportunities, very large, some of them will bring in with our existing knowledge. Some we will build, some knowledge we'll build, for example, in the construction market. And some we'll just have to partner up with other people. So that's the way I look at that, but a lot of innovation coming from our existing markets. Your second question was around innovation and about our path towards the 20%. Absolutely key indeed, because if you think about everything we do in innovation, innovation sales typically generate 5% to 10% higher margins than the rest of our sales. So it's really important. It also helps us to -- in our relationship with our customers and our relevance to our customers. So we've made great steps last year, 200 basis points up to 16.4%. We foresee to further progress that with all the activities that are ongoing towards indeed our medium-term target of 20%, but we're making some good progress and the investment in R&D, which sometimes is also simply about bringing that application knowledge in is going to help. Your third question was around Personal Care, particularly Personal Care Asia. For us, Personal Care in Asia is still a relatively smaller business compared to the European and the U.S. Personal Care business. We had some movements in Personal Care in the first half last year, Korea, color cosmetic market is a big one for us, and there was some order timing for which H1 was relatively softer. We had a better second half of the year. So we continue to see good momentum. What I would say is in the fourth quarter, we did see in antiperspirant some softness, particularly from some format changes in Latin America, as I think Kath referred to. So aerosols moving to roll-ons. That's for the antiperspirant business. But in general, we see good momentum. We're very happy with the margins. As said, Alchemy is accretive there or it is actually in line with our Personal Care markets margins. I don't know, Kath, if you want to add anything on the margin point that Kevin was asking about. Katharina Helen Kearney-Croft: So I think last year, we made good progress with the Fit for the Future finalization and the start of the new cost savings. Personal Care specifically also benefited from the closure of the Middletown site. So that is directly related to Personal Care. But from the other perspective, a lot of it ends up being in allocations because we've got joint plants and back office, which ends up being allocated. Angelina Glazova: Angelina Glazova from JPMorgan. I have 2 questions. First, I wanted to ask about the midterm targets on margins for 23%. You have already talked us through some drivers for growth that you see in the midterm. How should we think about Elementis bridging the gap in operating margins from current level to target of 23% plus? And do you see any particular drivers as more important relative to others? And then there is also clearly a difference in margin profiles between the 2 divisions. So how do you see that developing? And is there anything maybe for the Coatings business where you see those actions that could help lift the margins? And then secondly, looking at 2026, are there any particular items in terms of cash flow generation, net debt development that we should be mindful of? Luc Van Ravenstein: I'll kick-off with the first question and then if you don't mind, to complement and go on to the second question. So in terms of the margin development, look, we made a nice step in the right direction. Actually, selling the pharma business is going to help us, like Vanessa just said, a little bit more. Look, this is really about growth. And as we just discussed, we're growing in areas that are actually margin accretive. Hectorite, we're actually looking to selling more hectorite and growing that double digit. So that's going to help the mix. That's going to help our margin development. Obviously, we're taking some more cost out this year, but there is a limit to that at a certain point. We're really -- the big reorganizations are behind us. We have Fit for the Future behind us. So this is about high-margin growth. Obviously, we continue to look at how we can do things more efficiently. We'll always think about how we can do things at a lower cost and having Kath come in with a fresh pair of eyes a couple of months ago has also really helped in that respect. But it is about growth and about high-margin growth, and that's the way we're going to really get to that 23% plus level. Kath, anything to add? Or you want to go to the second part? Katharina Helen Kearney-Croft: Well, I think it's also related to the profiles in Personal Care. It has got higher margins and higher growth, and therefore, that would naturally generate some accretive margin. Luc Van Ravenstein: Yes, good point. Katharina Helen Kearney-Croft: With respect to cash flow and net debt, so Page 19 has some technical guidance. We're flagging CapEx will be between 4% to 5% in 2026. We will also expect a small working capital outflow in the year. I referenced in my script that we still had some factoring at the end of 2025, we will not be factoring in 2026. And so that will naturally unwind. And then with the sales increase that we're expecting, we will need to fund that. I think from a sort of just big picture, we are expecting to be circa 1x leverage on an organic basis by the end of 2026. And when I say organic, I'm ignoring the sale of the pharma business because as we said, we expect to give the net proceeds back. Unknown Analyst: This is Madhumanti Sanyal from CaixaBank. So I want to know if there is -- if you think there is a strong synergy between the Coatings and the Personal Care business, like if Coatings continues to show lower-than-expected performance, would you consider a sale of the Coatings business without affecting the performance of the Personal Care business? Luc Van Ravenstein: Thank you for the question. Look, Coatings and Personal Care are different markets, right? So our customers in Coatings are Sherwin-Williams and PPG and AkzoNobel and in Personal Care, you talk to L'Oreal and Estee Lauder. So the markets are different. But in terms of how we operate at Elementis, there's a lot of synergies. So most of our manufacturing plants are actually multipurpose and multi-market plants. So they service both markets, so both Coatings and Personal Care. Our plant in Livingston in Scotland and the U.K. is about half-half Personal Care, Coatings. So in that respect, there's a lot of synergies. Also, if you look at the products that we manufacture and the knowledge that we have in our laboratories, we talked about rheology, we talked about hectorite, all of that ends up in both Coatings and Personal Care. So the product knowledge, the manufacturing footprint synergy, these businesses are intertwined. So no. But I would add to that as well is that we're actually quite pleased with the performance of Coatings. If you look back at Coatings, where we were 7, 8 years ago, the margins of the Coatings business were in a bad year, 10 percentage points around that. In a good year, it was 14%, 15%. Right now, in a low demand environment, we're at 18.9%. So we're actually quite pleased with the Coatings performance, and we're excited about the opportunities ahead. Operator: I've got some questions from Sebastian Bray at Berenberg. Has there been any change in the energy business that led to the strong performance as you've highlighted, despite the oil price decline? One. Second question, what are management's thoughts on additional buyback after receiving proceeds from the sale of the pharma business? And thirdly, are there any signs of the recovery in hectorite sales in Personal Care? Did these grow in 2025? And if not, why this was the case? Luc Van Ravenstein: Shall I take 1 and 3 and you do 2? Katharina Helen Kearney-Croft: Sounds good. Luc Van Ravenstein: All right. Let's do it. So Energy business, we're actually very pleased with the performance of the Energy business. And it is a relatively small business, give or take, $40 million, but it did very, very well last year. One thing that Sebastian might remember, we closed our Charleston site in the U.S. back in 2019 or early 2020, and that was at the time a purely energy-focused business, or plant, I should say. We moved the manufacturing of those products to St. Louis. So that helped us in terms of margins. That's one thing that helped us. I would also say that by doing so, we really transformed the energy business, which if I look --when I joined Elementis 14 years ago, it was a much larger business. But now we really focus this business, one on manufacturing only from St. Louis, focus on hectorite. Why on hectorite? Because we really have a unique winning differentiator with hectorite because it works very well for deepwater drilling. So if you go very deep, you have to drill at temperatures of 250, 280 degrees Celsius and hectorite is stable at those temperatures. So we refocused the team. We have a smaller portfolio. And actually looking at last year, we've had a lot of success indeed in difficult conditions for drilling such as deepwater. We talked about the geothermal energy opportunity. So that's what we're doing here. Smaller business, relatively small team, close the plant down to do cost out and focus on the areas that make Elementis unique. And we'll continue to do that actually. The third question was around Personal Care and hectorite. Yes, we have grown. Obviously, last year, with the markets being a little bit soft, also the Personal Care growth was low single digits also in hectorite. But if I look at Personal Care, again, I'm turning the clock back 14, 15 years ago when I joined, this was a $30-or-so million business. We actually reported it at a certain point under oil and gas, you wouldn't believe that. But that was a purely hectorite business. And we understood where else we could sell hectorite in Personal Care in adjacent areas. So looking at the last 5, 10, 14 years, hectorite in Personal Care has grown really, really nicely. Last year was relatively lower growth, but still growth. But looking at the opportunities ahead in Personal Care as well, replacing synthetics, which continues to be very, very exciting opportunity, entering skin care, which is a $20 million or so business for us now, we're going to scale that, lots of exciting opportunities. Katharina Helen Kearney-Croft: So I think with respect to the question on share buybacks. So as we said this morning, following the sale of the pharma manufacturing business, upon closing, we expect to distribute those funds to shareholders. We also have the target of net debt to EBITDA of about 1x, we expect to be there by the end of 2026. So that will give you a signal of what we're expecting in this year. And then as we look forward, we'll continue to take into consideration where we are on leverage and expectations. Operator: Sorry, I've got to pretend to be Anil now. Anil Shenoy from Barclays has sent 2 questions as well. We didn't see any guidance on 2026. So are you happy with where the consensus is at for adjusted EBIT? And if so, could you help to bridge the gap between 2025 EBIT to 2026 consensus EBIT. What are you assuming in terms of growth? And what are you assuming in terms of savings? Luc Van Ravenstein: Shall I do the first part and you the second? Katharina Helen Kearney-Croft: Okay. Luc Van Ravenstein: All right. Thank you, Anil, for those questions. Look, we had a solid start of the year, like we just mentioned. So we're quite happy with that. And therefore, comfortable with the consensus. In terms of the bridge EBIT '25, '26, I mean, Kath, do you want to add on that? Katharina Helen Kearney-Croft: So as I mentioned, we expect the incremental $4 million in savings to come through. We do expect volume growth, so we'll get some natural leverage and some margin accretion continue to drop through, and that's how we're moving from 2025 to 2026. So sort of steady as she goes with the additional cost savings. Operator: And just some last questions from Chetan Udeshi from JPMorgan. Are you expecting Q1 sales to be up compared to last year? And secondly, we didn't see volume growth this year. What are your expectations for volume growth for '26? Luc Van Ravenstein: I think for Q1, as I said, we made a solid start. I think the most important is that if you look at where we -- the exit rate of Q4 last year was relatively softer. So we're happy to see good progression after that. For the full year, again, back to the previous questions from Anil, we're comfortable with where consensus is. We are looking at a typical balance between H1, H2, which I think also can help Chetan in terms of his modeling. Anything to add, Kath? Katharina Helen Kearney-Croft: [indiscernible] but I would just note the geopolitical situation has weakened. So we have an expectation, and we hope we will deliver that, but some things are out of our hands. But we will maintain our focus on our strategic targets. Luc Van Ravenstein: Yes, we're 2 months in. It's early days. Good point. Unknown Analyst: [Technical Difficulty] Luc Van Ravenstein: Not so much anymore, actually. When we own Talc, I had the Dutch gas price on my phone here. I was tracking it every half an hour, and I didn't get a lot of sleep. Luckily, we don't have that business anymore. And we are in specialty chemicals. So if you look at how we generate our margins, it's about adding value to our customers' formulations rather than trying to squeeze out a cent on our costs. So very much a different situation than where we were a year ago. Good question. Thank you. And we'll continue to monitor. I mean, I think perhaps one of the things to add, we continue to monitor the situation, the situation that Kath mentioned, obviously, that the recent occurrence in the Middle East. And if our input costs go up, we typically look to price to compensate for that input cost increase, definitely. Thank you. Good question. No more questions? Katharina Helen Kearney-Croft: Can we just get a mic to you? Vanessa Jeffriess: Sorry, just to clarify what you just said that you're happy with consensus sales and EBIT, but you've got the loss of Pharma business, which is $35 million sales and $3.5 million EBIT, right? Katharina Helen Kearney-Croft: So that's on a pre-adjustment for pharma, but I do suggest that people wait until it actually closes before adjusting numbers. Operator: I am seeing no questions on the conference line. So with that, thank you very much. Luc Van Ravenstein: Thank you, everybody. Katharina Helen Kearney-Croft: Thank you.

83天前Insight Analytics约5分钟阅读

RTO 2025 Q4 财报电话会议

Operator: Hello, and welcome to the Rentokil Full Year Results 2025. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Andy Ransom, Chief Executive, to begin. Please go ahead when you're ready. Andrew Ransom: Good morning, everyone, and welcome to our full year results presentation for 2025. After my opening remarks, Paul will provide a review of our financial performance. I will then focus on the execution of our plan in North America as well as providing a brief update on our International region, our categories and our adoption of AI. We'll then open the floor for your questions. And as usual, details of how to ask a question can be found on the web portal. 2025 has been a year of encouraging progress with group revenues increasing by 3.8% and with organic revenue growth of 2.6%. Our H2 performance was particularly encouraging with group revenues increasing by 4.5% and with organic revenue growth being 3.5%. My main focus for today, however, will be on North America, looking at our performance in 2025 and how we're building on that platform in 2026. This time last year, we set out our plan for growth in North America, and it has been a year of encouraging progress with our performance, particularly in the second half, improving significantly. Whilst we're not there yet where we want to be, organic growth reached 2.6% in the fourth quarter. This was underpinned by strong execution, rolling out our new marketing plan, investing in our regional brands, opening 150 small local branches through our satellite program and delivering $25 million of in-year cost savings through our efficiency program. Our International business also saw improving organic revenue growth of 3.4% in the second half. This combination of improved growth and cost efficiencies delivered adjusted operating profit growth of 5.4% and positions us well to deliver our plans for 20% net operating margins in North America next year. Now looking to 2026, we have clear plans in place to build on the progress made last year. Our focus continues to be on growth, where we plan to expand our multi-brand strategy, deploying around 30 regional and local brands instead of the 9 we had previously indicated, and we'll continue to increase our local presence, taking our network of small local branches to around 220. As I'll explain in a little more detail later on, the team in North America has also used the pause in integration to develop a simpler plan for the creation of a single unified field operation. On systems, we've developed a new branch data portal, meaning we can maintain our existing systems for longer. And on pay plans, we're taking a more simplified approach to harmonizing pay policy where, in essence, service colleagues joining us next year will join our new plan, whereas existing colleagues will be given the choice of the new plan or to be grandfathered in their existing plan. So this combination of maintaining more brands and their branches, continuing to use our existing branch systems, whilst also simplifying the pay plan process means less change at the front line and more focus on the customer and indeed on growth. Fueling this growth and supporting our 2027 financial targets is our efficiency program, and Paul will now take you through this in more detail along with the rest of the financials. Paul Edgecliffe-Johnson: Thank you, Andy, and good morning, everyone. I will now walk you through our key financial highlights for 2025 and look at our regional performance in more detail before closing on cash flow and capital allocation. As a reminder, unless I state otherwise, all numbers are on a continuing operations basis following the sale of our France Workwear business, and any comparative performance is on a constant currency basis. Revenue was up 3.8% to $6.9 billion with organic revenue growth of 2.6%. Adjusted operating profit increased by 5.4% to just over $1 billion. This resulted in a group adjusted operating profit margin of 15.5%, a 30 basis point increase year-on-year. After an adjusted interest charge of $204 million, up $29 million due to the cost of additional bond debt issued in the year and an adjusted effective tax rate of 25.3%, adjusted basic EPS increased 2.4% to $0.2591. I have spoken previously about our focus on maximizing cash, and I'm particularly pleased with our free cash flow performance with 24.5% growth to $615 million and free cash flow conversion of 98%. This reflects disciplined working capital management and also some one-off benefits, including real estate sales. With the growth in profits and free cash flow and the proceeds from the sale of France Workwear, partly offset by an adverse foreign exchange impact of $181 million on year-end net debt, our leverage ratio improved to 2.6x, down from 2.9x a year ago and close to our target range of 2 to 2.5x. Reflecting this performance, the Board is recommending a full year dividend of $0.1239 per share, an increase of 3%, in line with our progressive dividend policy. Turning to North America. Revenue grew 3.2% to $4.3 billion with organic growth of 2.3%. Pest Control Services was up 1.1%, while Business Services grew 8.9%. I'll come back to talk about these performances in more detail shortly. Adjusted operating profit for the region was $749 million, up 5.1%, bringing our adjusted operating profit margin to 17.4%. This improvement reflects the early benefits of our cost efficiency program, which delivered $25 million of savings in the year. Operationally, we are seeing our strategic initiatives strengthen key KPIs with colleague retention up 2.8 percentage points to 82.2% and customer retention increasing to 80.5%. We also completed 12 bolt-on acquisitions in the region with combined revenues of approximately $27 million in the year prior to purchase. Looking at our performance in North America in more detail. Fourth quarter organic revenue growth in Pest Control Services improved to 2.6% from 1.8% in the third quarter and 0.1% in the first half. This sequential improvement demonstrates the results we're seeing from the strategic initiatives we put in place at the start of this year. Lead flow, a key metric to indicate future growth in our contract portfolio, grew over 7% across the second half of the year, driven by our revised sales and marketing strategy. This has included a shift towards a more targeted digital marketing approach with a bigger focus on driving organic leads and also increased investment in our regional brands to boost lead generation and brand awareness. The ongoing rollout of smaller local branches through the satellite program to bolster customer proximity and local presence is proving successful with branches with one of these localized hubs attached to it, generating more than double the lead flow of those without. We've also improved our execution by moving sales accountability directly back into the branches. In addition to winning new customers, we have retained more through a relentless focus on customer service, and we've been able to sustain strong pricing discipline through the year. Andy will talk more about these initiatives shortly and how we will continue to build into 2026. Turning to Business Services. We were pleased with fourth quarter organic growth of 7.8% against a strong prior year comparative, which included $6 million of emergency vector control revenue, which did not repeat in 2025. Across the year, Business Services organic revenue growth of almost 9% was supported by double-digit growth in both our distribution business and our brand standards business, with the latter benefiting from significant new business wins. Throughout the year, we have been executing against our plans to simplify the North American business, improving the efficiency of our cost base and creating fuel for growth. We are increasing discipline in our day-to-day operations with improvements in organizational design and simplification of processes. The streamlining of operations led to headcount reductions of over 500 roles by the end of 2025. We are also reducing cost in the business through outsourcing and moving non-core functions to lower-cost locations. This has allowed us to scale our back office operations more effectively while reducing our fixed cost base. To date, around 430 roles have successfully been offshored. We're using technology to automate manual processes and improve our overall efficiency while better leveraging the benefits of our purchasing scale through managing our third-party spend and consolidating spend with suppliers. As well as reducing costs, we continue to drive improvements in how we invest our sales and marketing spend to optimize ROI and have reallocated some $20 million of marketing spend away from suboptimal paid lead activity to higher efficiency channels and campaigns. We rapidly mobilized to deliver $25 million of savings in 2025, targeting the cost areas that were easiest to impact quickly. There remains very significant opportunities for us to create efficiency in our cost base. As we drive up efficiency in the business, we are also investing back in a targeted way to drive organic growth. In 2025, this has included incremental marketing investment and strategic initiatives such as the rollout of smaller local branches and enhancing our capabilities in areas from pricing to data insight. This is helping us to identify the levers to elevate performance and amplify the benefits of our strategic initiatives. Improving our data has been and will continue to be fundamental to our ability to optimize our marketing budgets to maximize our reach into available customer demand. We have already delivered a double-digit reduction in our cost per lead, and there is more to do. Balancing driving cost out with funding investments behind sustainable improvements in organic growth has been key to improving both top line growth and profit margin, and we will continue to balance this carefully as we progress towards our North America margin target of over 20% in 2027. Moving to our International business, which encompasses all regions outside North America. Revenue grew 4.8% to $2.6 billion with organic revenue up 3%. Organic revenue growth improved in the second half, up 3.4% compared to 2.6% in the first half. We saw our strongest performance in Europe, driven by healthy demand and solid pricing in Southern Europe, while growth in Asia was supported by the fast-growing economies of India and Indonesia. Adjusted operating profit increased 5.7% to $518 million, with margins increasing 20 basis points to 19.8%. The U.K. and Sub-Sahara Africa delivered double-digit growth, reflecting a strong revenue performance. Asia and MENAT also displayed margin resilience despite a backdrop of high wage inflation. Customer retention remained strong at 85.7%, and excellent colleague retention was seen throughout the year at 90.3%. We also completed 24 acquisitions in the region with combined annualized revenues of approximately $36 million. Turning now to central costs, which in the year were $191 million, up almost 7% and up 9% at actual rates with some 85% of our central costs in sterling. In addition to underlying inflation, this growth represents multiyear ongoing investments in proprietary technology, digital applications and AI capabilities to support colleague efficiency, customer satisfaction and to generate revenue. In 2026, we expect continued above inflation rates of growth in addition to an FX headwind. One-off and adjusting items, excluding termites, were $92 million in 2025, primarily incurred in North America as part of the overall cost efficiency program. Looking forward to 2026, we are expecting a similar level of spend. Moving now to the termite provision, which, across the year, we have increased by $201 million with an additional $122 million in the second half after the $79 million in half 1. The trends that we saw in the first half of the year have continued. These included an increase in the number of complex residential and commercial litigation claims compared to 2024, albeit at a lower level than at the time of acquisition. More detail on this is included in a slide in the appendix, and a continued increase in cost per claim as our proactive strategy to solve customer problems and reduce litigation continues. In addition, during the second half, we have resolved numerous large commercial legacy claims at a cost ahead of the historic average and increased the long-term inflation assumption in our provision model from 2% to 3.2% as a result of persistently high inflation in legal defense, housing and building materials costs. The cash cost of settling claims in 2025 was $95 million, and we expect a similar level of cash payments in 2026. Turning now to cash flow. We generated free cash flow from continuing operations of $615 million, representing an adjusted free cash flow conversion of 98%. This was ahead of our guidance of 80% and a further improvement from the half year. We reduced the working capital outflow by $67 million to an outflow of $59 million through our disciplined focus on debtor management and supplier harmonization, moving to more consistent credit terms across our supplier base. Although some of this improvement was one-off in nature, the underlying discipline remains, and we are focused on continuing to improve in this important area. Our overall free cash flow conversion also benefited from $20 million of real estate sales. Our gross CapEx of $196 million was in line with guidance, and we would expect a similar level of spend in 2026. Cash interest increased by $41 million to $222 million following our refinancing activities earlier in the year. Cash tax was $7 million lower at $100 million, mainly due to legislative changes in the U.S. Looking ahead, we continue to target a free cash flow conversion above 80%. Our strong operational cash generation, combined with strategic divestments, has allowed us to make progress in strengthening the balance sheet. Net debt at the end of the year was $3.65 billion compared to $4 billion at the start of the period. The key cash inflows in the year were $636 million of free cash flow and $391 million in net proceeds from the sale of our France Workwear business, which completed on the 30th of September 2025. Beyond the immediate cash influx, this disposal has simplified our International business, reduced our ongoing capital expenditure requirements and structurally improved our group cash conversion. We reinvested $121 million of cash in bolt-on M&A, which remains core to our growth strategy. This was less than originally planned with some slippage of deals into 2026. Our pipeline for 2026 remains strong, and we're targeting spend of around $200 million. The cash impact from one-off and adjusting items amounted to $100 million for the year. These costs were largely attributable to transformation costs in North America, which, combined with other cash one-off items, will be a further outflow of around $80 million to $85 million in 2026. Our closing net debt was impacted by $181 million adverse FX translation movement. Nonetheless, we are pleased to see progressive strengthening in our balance sheet with our net debt to adjusted EBITDA ratio reducing from 2.9x to 2.6x, bringing us close to our target range of 2 to 2.5x. Turning now to capital allocation, where our framework is built around 5 key priorities designed to balance growth, shareholder returns and financial resilience. Our primary focus is on organic investment as it drives the best ROI, deploying capital to support the long-term growth of our business. We will also continue to pursue targeted inorganic growth through bolt-on M&A. We have a strong track record of successfully integrating acquisitions to drive value creation, and we will remain selective and strategic in identifying opportunities that complement our existing portfolio, strengthen our market position and deliver long-term shareholder value. We remain committed to a progressive dividend policy, ensuring that dividends grow over time. Our approach reflects confidence in the underlying strength of our business and our ability to generate consistent cash flows while maintaining financial flexibility. We recognize the importance of returning excess capital to shareholders at the appropriate time. When we do have surplus capital beyond our reinvestment needs, we will evaluate opportunities to return it, always ensuring that such actions align with our broader financial strategy. Finally, we remain focused on maintaining a strong and resilient balance sheet. Overall, our capital allocation strategy is designed to strike the right balance between investing for the future, delivering long-term value to shareholders and maintaining financial strength. So in summary, we have delivered an in-line performance in 2025. We are encouraged by the clear signs that our revised North America strategy is working and the improvement in growth in the second half from our International businesses. Our focus on cash is improving our operational cash conversion and reducing leverage towards our target range. As we balance investing in sustainable organic growth and driving up the efficiency of the business, we remain firmly on track to achieve our $100 million cost reduction target and our goal of a North America margin above 20% in 2027. Although the first month of 2026 in the U.S. has seen some disruption from extreme weather, as we look forward, we have confidence in delivering in line with market expectations. Thank you. I will now hand you back to Andy. Andrew Ransom: Thank you, Paul. So over the next few minutes, I'm going to start by highlighting the strength of the pest control market, both in the U.S. and globally before diving into North America's performance. I'll then finish with brief updates on our international growth and emerging markets, on our 2 categories and on the good progress we are making with the use of generative AI across the business. As you can see, the global pest control market has demonstrated consistent, resilient growth, expanding from $15.4 billion a decade ago to an estimated $29 billion in 2025. This represents a robust 6.6% compound annual growth rate over the last 10 years. Looking ahead, the market forecast for growth in the pest control industry remains very healthy with a projected 6.2% CAGR through to 2035. This growth is driven by multiple consistent factors, including increasing urbanization and growing middle classes, which drive demand for professional pest services. Heightened demand for higher hygiene standards across all sectors and as you would expect, climate change are also contributing to a rise in pest activity, all combining to create a sustained need for our services. In Hygiene & Wellbeing, which accounted for 17% of group revenues in 2025, we are the leaders in an attractive global market, which is expected to grow at around 4% annually through to 2030. This is being driven by an aging global population and their increasing hygiene needs, social and demographic trends such as urbanization and increasing middle classes, so similar to pest control, a heightened focus on hygiene standards post the pandemic and greater environmental and regulatory compliance requirements. So we're operating in 2 very healthy global markets. Let's now get into the main focus of today's presentation, that's our plan for North America, where we're continuing on our journey to create an undisputed powerhouse in pest control. This is founded on a number of key themes. First, as I've just shown, we operate in an attractive noncyclical growth market with the U.S. accounting for approximately 50% of the world's pest control market and where we are now a leader for commercial, residential and termite services. Second, we are laser-focused on scale and on density. And this is not just about size. It's a fundamental understanding of how density unlocks significant economies of scale and efficiency opportunities. Third, we are building power brands like Terminix and other well-known regional brands such as Western Exterminator and Florida Pest Control, giving us strong brand equity in every city in the United States and, in turn, supporting other parts of the business' need for local digital leads, local sales, local pricing and recruitment. And finally, everything is powered by our proven, repeatable low-cost operating model, centered on being an employer of choice and maintaining an unwavering focus on customer service. Importantly, as you know, we are primarily a contract-based portfolio business with around 75% of Pest Control revenues in the U.S. being under contract. Now looking back, the integration of Terminix required 2 main thrusts: Firstly, to create a unified enterprise in the U.S.; and secondly, to create a single unified field operation. To date, at an enterprise level, we've successfully established a single leadership structure. We've completed the complex legal merger. We've aligned on our core back-office stack of systems, for example, for people management. We've introduced a single approach to procurement, and we've harmonized our management salary and benefit structure. Crucially, we've also made investments that will drive future performance. We've launched our first U.S. Pest Innovation Center, which is focused on residential pest control, termite and mosquitoes. We've placed an intense focus on being an employer of choice, making excellent progress in turning around colleague retention, particularly within Terminix. And we've also invested in new data and pricing capabilities. These are all important steps in unlocking the true long-term potential of the combined business. Now as you know, in 2024, we began pilot migrations to create a single unified field operation. And while these were very successful at delivering the expected cost synergies, and they did not negatively impact on the retention of our field-based colleagues, we did, however, experience a negative impact on our growth. The combination of fewer locations and a complex change agenda saw lower levels of inbound leads and some customers reacting negatively to the change in their technicians, eventually leading to lower customer retention in the migrated branches. Therefore, we made a decision to pause the full-scale migration throughout last year and to focus on returning the business to growth. This time last year, we outlined a new growth plan to address the root causes of the lead flow and customer retention reductions. And as you know, we saw encouraging signs of progress at the half year and again at Q3. And pleasingly, this has continued into the fourth quarter. The detailed plan that we set out in 2025 extended across a number of key areas, but was essentially focused on operational execution. For leads, we revised the marketing plan to add greater emphasis on organic leads on more local web content and on beginning to leverage AI optimization for local search. For 2025, we focused on 9 core regional brands alongside the Terminix brand, and a key part of the plan was to roll out our small branches under the satellite program to give us greater customer proximity. For sales, we moved ownership of field operations back into the branches, making the branch managers fully accountable for their local sales performance. This was coupled with a dedicated door-to-door pilot over the summer in around 25 territories. And as Paul has already highlighted, we also began driving business simplification, including the outsourcing of a number of key functional activities. Whilst this was all underway, our North America team has been working on plans to build on the successes of 2025 and to introduce a much simpler approach to branches, brands, systems and to pay. So let me provide a brief update. Our people, of course, are our greatest asset and our commitment to being an employer of choice is yielding excellent results. We've seen a 19% improvement in Terminix technician retention since the acquisition. And in 2025, North America colleague retention was up a further 2.8% to 82.2%. This is absolutely foundational to our future success. On the customer front, we delivered very encouraging improvements in customer satisfaction ratings, and we've continued our focus on the end-to-end customer experience, delivering a 0.4 percentage increase in customer retention now at 80.5%. And this will continue to be an area of maximum focus going forward. Our marketing focus shifted in 2025 to generate more organic leads through local brands and local content, where we optimize the content of around 1,200 individual web pages. And while only a very small part of the overall impact last year, we've also begun to leverage AI to optimize our local search presence so that when customers need pest control, Terminix is increasingly the AI cited domain to be shown in the search results. Critically, the successful rollout of our local network of new small branches under the successful satellite program brings us much closer to the neighborhoods where our target customers are living. By the end of last year, we had around 150 of these small branches open. In addition, our successful toe in the water with a dedicated door-to-door sales program in 25 territories last year will be expanded to around 40 territories this year. This local approach was reinforced with our focus on 9 regional and local brands alongside Terminix, which together drove a turnaround in residential lead flow, which was up 7.1% in the second half against the same period last year. As you've already heard from Paul, in addition to growth, efficiency was a big theme for 2025 and will continue to be so in 2026. Clearly, improving our marketing, our lead generation and our sales execution only matters if we're efficiently installing and subsequently billing our new customers. We continue to focus on increasing our speed to install rate. And in 2025, we introduced new KPIs to track the percentage of installs within 24 and 48 hours of signing. Overall, performance was good in '25, but this is another area where there is room for further improvement this year. By improving these operational performance areas, we have, in turn, improved our financial performance. Organic growth for Pest Control Services increased through the year, achieving 2.2% in H2 compared to 0.1% in the first half. This culminated in a strong fourth quarter, delivering organic growth of 2.6%. And importantly, the progress on contract revenue was particularly pleasing, up by 2.4% in Q4, alongside a healthy 5.6% increase in jobs. So an encouraging 2025 and one on which to build in 2026. Our brand strategy is a core lever for growth and the original plan focused primarily on both the core Terminix and Rentokil brands. The new plan outlined last year saw us add investment and focus on 9 highly recognized regional and local brands, which included the relaunch of their stand-alone websites and which delivered an encouraging increase in our inbound lead flow. And going forward, we will now invest in around 30 brands and support each of them with our best practice digital and marketing approaches. We'll have the Terminix brand as our national flagship, the 9 brands that we supported last year and a further 20 local and regional brands in key cities where their local brand equity is strong. Next, our focus is on the local branch network. And I've already highlighted the impact of the 2024 pilots and our pivot this time last year to focus on more branches. We've now added 150 small local branches, and the path forward is to continue that rollout, where we will open an additional 70 in 2026, taking our local network of branches to around 800 by the end of this year. This combination of keeping more local brands and their branches and by expanding our network of small branches as part of the satellite program gives us greater customer proximity and a stronger local brand presence. The most significant recent refinement to our plan involves our approach to data and branch systems harmonization. Our updated approach provides us with the immediate benefits of operational harmonization. We're launching Branch 360, which is a unified reporting and insight solution. It's been designed to provide a single pane of glass for our field leadership and our sales and marketing teams. By integrating data across our current branch infrastructure, this system-agnostic platform delivers consistent KPIs and daily accountability without being dependent on a single fully integrated back-end system. This ensures a standardized management experience across the entire organization regardless of the legacy platforms in place at the local level. Going forward, every branch manager will utilize a standardized performance interface that displays critical financial, operational, leads and sales metrics. Rather than requiring managers to manually extract and interpret data, Branch 360 will push actionable insights and reports directly to them on a daily basis. Finally, the team in North America has also developed a new approach for pay plans. The original plan required a branch-by-branch system harmonization to have been implemented before we could change the pay plans. Our new approach is to decouple pay plan implementation from systems harmonization. This year, we will harmonize branch manager pay, and then we'll focus on sales team pay in commercial pest control. This removes complexity and frustration of the different plans, and it's something that we expect to be well received. Finally, for our largest population, the technicians, we're taking a very pragmatic approach. New colleagues will be onboarded directly onto the new plan from 2027. However, we will give our current colleagues the choice to either opt into the new plan or to be grandfathered in their existing plan with no obligation to change. To conclude our dive into North America, we've continued to make good progress on employer of choice and on customer service. We've increased residential lead flow, underpinned by the rollout of 150 small local branches and our additional brands. This execution has led to an improved organic growth performance, which was particularly encouraging in the fourth quarter. Going forward, we're building on this growth platform with a focus on 30 brands and increasing the number of small local branches, which will continue to roll out at pace this year. And we now have a new simpler approach for branch data and systems and for pay plans. There is still a lot of work to be done, but clearly, we are seeing encouraging progress. So before we conclude and take any questions, a brief look at International and our categories as well as at generative AI, which I know will be of interest to you. As you saw earlier, our International businesses continue to operate in strong and resilient growth markets, with revenue in Pest Control up 5.4% in 2025 and increasing by 4% in Hygiene & Wellbeing. International growth markets delivered a solid financial performance with our revenue up 4.4% and profit up by 4.7%. Here, technology and innovation are our core competitive advantages. Our PestConnect deployment continues to progress well with around 100,000 additional devices installed in 2025, bringing our total to over 600,000. And in the Netherlands, for example, over 50% of our commercial pest control portfolio is now connected through technology. Our emerging markets continue to perform well, posting revenue growth of 6.2% and profit growth of 10.8%. And here, we are continuing to execute our cities of the future M&A strategy to capitalize on the development of the mega cities, which has resulted in 24 deals over the last 3 years and has secured leading market positions in key growth markets, including India and Indonesia, and this will be an outstanding platform for future long-term growth. I won't go into this slide in detail, but it's a summary of our overall Pest Control category performance globally and where organic revenue growth increased from 1.8% in the first half to 3.4% in the second. And similarly, in Hygiene & Wellbeing, which increased organic growth from 0.9% in the first half to 3.6% in the second and, as you can see, has delivered consistent revenue growth post pandemic. So this is my 50th and my last presentation to you. And looking ahead, if there's just one area in particular that I will be very excited to see develop, it's how the business adopts generative AI to enhance its productivity and efficiency as well as providing further service differentiation to our increasingly digital savvy customer base. Although clearly, it's still early days, we're making good progress. In 2025, we successfully launched Google Gemini AI to all 60,000 plus of our colleagues, and we had over 1 million users in just the first 6 months alone. On the service side, our innovations like PestConnect Optix, which was launched last year, uses AI to identify individual rodents from images sent from the field. And we've created our own in-house AI portal, lovingly named Rat-GPT, where over 100 dedicated AI agents are already in use or in development. The power of this focus on AI is perhaps best demonstrated by just a couple of brief examples of our Agentic AI solutions currently being piloted. Our prospect prioritization solution is a fully developed system, which uses multiple AI agents to analyze the wide range of leads that we receive. We receive Internet leads. We receive telephone leads, field-based leads, small leads, national account leads, jobs leads, contract leads, leads in high and low-density areas. And what this new agent will do is score each lead based on conversion likelihood, sales value and a range of other metrics, and then will nudge the salesperson to prioritize the best of the leads. Equally impactful is our on-the-go technician assistant. So if you can imagine a technician walking towards a customer site, this GenAI-powered tool will be speaking to the technician, giving them vital information; information about the site's history, the last infestation details, what the open recommendations are, what the bill payment status is and other important practical information. These are just 2 ways in which we are taking the power of AI and deploying it across the company. Clearly, there are many significant opportunities ahead of us, and we're really only just starting. So to wrap up, for the final time, I've included our RIGHT WAY scorecard in the appendix for you to read. But in short, as I prepare to hand over the baton to Mike, I personally feel very encouraged by the group's performance in 2025. Clearly, there is still much more to be done, but I'm very pleased to see our progress in North America, and I'm highly optimistic about the long-term prospects for the company where I will be cheering on from the sidelines in the future. Thank you very much. Paul and I will now be very happy to take your questions, and there will be a brief pause for the operator to line up any questions. Thank you. Operator: [Operator Instructions] And our first question comes from Andy Grobler with BNP Paribas. Andrew Grobler: Just a couple from me, if I may. Firstly, in America and operationally, as the strategy moves to kind of more branches, more systems, more brands and so forth, how would you balance the cost of doing that against and the visibility that you need from a central perspective. Is there a risk that some of these branches become somewhat independent through that process? And then secondly, just in terms of cash costs with termite costs going up in '25 and looking to '26, what are your expectations going in the longer term for those -- both for those termite costs and for the one-off integration costs over the next 2, 3, 4 years? Andrew Ransom: Thanks, Andy. I'll take the first one and hand it to Paul for the second. Look, I don't think so is the answer to your question in terms of risk either on the cost side or indeed on the risk of loss of control of lots and lots of small branches. If I take the second limb of that first. The Branch 360 single pane of glass, in particular, is going to give us the best visibility that we've ever had at branch level. At the moment, if you're a branch manager, across our suite of branches, you've got to have about 42 different tabs if you want to complete the full suite of KPI metrics and measures. And going forward, every single branch is going to have the same desktop open with the same KPIs, metrics, measures, dashboards and push reports going to them centrally. So I actually think we're going to have better control, visibility and consistency across our branches than we've ever had. And many of the smaller branches opened under the satellite program are really an extension of the larger local branch. So they're run by the same branch managers. So I don't think there's any risk there at all of loss of control, quite the opposite, I think. In terms of cost, the smaller branches are relatively cheap, if I can use that word, relatively inexpensive. The costs have been included in our plans, in our budgets, in our forward look on our numbers. So not a significant increase. And the majority of the increased investment on the brand side is actually on organic search. So it's not so much on the paid search, which is quite expensive. It's on organic, supporting their independent websites, web pages, et cetera. So I think the increased cost is modest. It's all factored into our forward-looking numbers. And I think it's going to give us great, great transparency and consistency on the branch level. So Paul? Paul Edgecliffe-Johnson: Look, on the cash side, I think the first thing that we should all remember is this is a very cash-generative business, and we've proven that in 2025. So we brought the leverage down. Cash conversion was at 98%, and we're going to keep pushing really hard on this. The working capital outflows were significantly lower in '25 than they were in 2024. In terms of the sort of one-off areas, the cost of the termite provision, $95 million in 2025 cash cost. We expect it will be about the same in 2026. Our strategy is to try and close off claims as quickly as we can, whether that's litigated claims or non-litigated claims. It's good to push them through, get them to resolution, and that's our plan so that we can put this behind us as quickly as possible. I can't tell you really exactly what the cash is going to be in '27 and 2028, how that will track down. Expectation is that it will track down because we are dealing with large complex claims now. That's what's put up the provision in the second half. And so we will see it ameliorating over time, but I can't tell you exactly the trajectory on that. In terms of the costs related to the transformation plan, the cost-out plan, we will continue to see those costs in 2026. I'm really pleased with how the plan has gone in 2025, how quickly we've managed to get cost out, but there's a lot more to do. The returns on this, obviously, though, are very, very good. So where we see an opportunity to take cost out of the business, yes, it will have a onetime cost for redundancies or restructuring, but we'll continue to pursue those. Thanks, Andy. Andrew Grobler: And just one further thing. Andy, thank you for however many years it's now been, and best of luck with whatever the future brings. Andrew Ransom: Appreciate it, Andy. Operator: The next question comes from Suhasini Varanasi with Goldman Sachs. Suhasini Varanasi: A couple for me, please. I just want to get some more color on the door-to-door pilot that you implemented in 2025. In the places where you implemented it, is it possible to understand the proportion of new sales that came from this new channel versus your traditional or digital channels? That's the first one. And the second one, I think Business Services has been delivering very strong growth despite the headwinds in vector control services in 4Q. Just wanted to understand the drivers behind this and your expectations for 2026. Andrew Ransom: Thanks, Suhasini. The door-to-door program, we're pleased with it. It did not make a major contribution to the revenue performance, relatively modest, but we were pleased with it. It's our first toe in the water for door-to-door. And as I've said before, it's become a big channel. I still think we're learning on the job with this. And I'm on the record of saying in the past, I've always had a slight concern about door-to-door that the customer retention rate on door-to-door isn't as strong as it is where a customer has reached out to find us. And that's proven to be the case. So retention rates have been lower in the door-to-door business, but absolutely in line with what we modeled. So we put a big tick against the program in 2025 as a success, but as a pilot. And we've included, I'd say, a relatively modest ambition in 2026. We're moving up from 25 territories to about 40 territories. If it continues to go well, and I don't see why it wouldn't, in '26. It will obviously be up to Mike and the team, but I wouldn't be surprised to see that getting potentially materially bigger in '27. So not a big contributor. We don't break it out separately. More to come for in '26. Let's see how we get on. If it continues to go well, I think that could be a much more material potential opportunity in the future. Business Services, yes, it's had a really good year actually off a less good year in '24. So you've got a little bit of comp benefit, I would say, '25 on '24. Just a reminder what's in Business Services, half of Business Services or just over half of Business Services is our distribution business, our products distribution business, which is really quite different from everything else. Everything else is a contract portfolio services business. The products business is selling pest products and turf and ornamental products to the industry and to individual consumers. That is a very lumpy business. It can go in waves, and we've had a very strong finish to the year in that business. But it's a good business. It's a good, well-run, solid business. So I don't see -- I'd be surprised if it grows as strongly in '26 as it did in '25, but I would say it's a good performing business, and it's going nicely. The other businesses are contract portfolio businesses. They are Business Service operations. So we have brand standards, which looks after franchise properties and goes and checks if they are living up to the standards that the franchise owner has set. That's a good business, running very nicely. We've won some big new recent accounts. So I would expect that business to perform pretty well in '26. We've got our plants business, Ambius, which is a nice business, doesn't grow at the sort of rates that Pest Control does. So that's a slower growth business, and I'd expect that to be similar in '26. So look, I think it's had a great year, slightly flattered by a poor year in '24, but solid businesses, well run, and I don't see why they shouldn't make a decent contribution in '26, but perhaps not at the stellar growth rates we've seen in '25 would be my best view. Operator: And the next question comes from Annelies Vermeulen with Morgan Stanley. Annelies Vermeulen: I had two questions, please. So firstly, on the rebranding of the retiring brands, I think you said a lot of those are one-branch businesses. So how many branches or brands does that involve? And what was the criteria for the decision on that segment specifically? Were there certain things that you look for in terms of signing those off? And then secondly, on the pay plans for the technicians, have you collected feedback on this from your existing technicians? And what was that based on? And if so, do you expect it to meaningfully continue to contribute to improving retention from here? And are there any additional costs associated with having to run 2 pay plans? Andrew Ransom: Thanks, Annelies. On the rebranding, those who've got a good and long memory will remember that we've got about 80 brands, give or take. So we're going to keep 30. So that means there's 50 -- I unfairly call them 1 horse towns. There are 50 brands. They're almost exclusively single city or single town brands. It doesn't mean to say we don't love them and like them, but it doesn't make economic sense to support those 50 individuals. So they are the 50 smallest. In aggregate, those 50 brands don't even represent 10% of the total revenues. So they will be retired quietly, slowly, gently over the next couple of years. And the criteria really was just based on scale. It's the ones that have got the least footprint, the smallest brands in small towns and smaller cities. And we tested brand equity as well. So we actually tried to work out how strong are these brands in the market. And the ones where we've got strong brand equity, we've retained and the ones where the brand equity is weak, we've taken a decision that it's better to migrate those to a strong brand equity local brand, whether that's Terminix or it might be one of the other 30. On the pay plans, no, look, there's not additional costs. There's the absence of some savings, but it's not material. And again, it's all fully costed in the plan. But as I said in the remarks, it's a very pragmatic decision. As I've explained several times over the last 2 or 3 years, we do have quite a distribution on a bell curve of pay for technicians and some have got legacy pay plans that look quite generous compared to the pay plans we've been operating across the business for some time now. And we've just taken a pragmatic decision that we will grandfather those. So if you want to stay on the pay plan that you're on because you like it, because you think it's generous, because you've worked out how to maximize your income, you can stay on it. So for the pay plan that we're moving to for the new people that joined from '27 onwards, we're essentially taking an existing pay plan that works quite well. We've modified it slightly. So there's absolutely no reason to believe it will be anything other than business as usual and a successful new pay plan. But it does mean we're running more than one pay plan for longer than we originally wanted. So there was some modest cost improvement originally planned to move to a single pay plan. We've foregone that saving. But as I say, relatively modest and included in our forward-looking plans. Annelies Vermeulen: Great. Thank you for the engagement, Andy. Best of luck. Andrew Ransom: Thank you. Cheers. Pleasure. . Operator: And the next question comes from Bill Kirkness with Bernstein Societe Generale Group. William Kirkness: I have two questions, please. Firstly, as organic growth rehabilitates, I assume there's some market share gains happening. And if so, can you just talk about where you see those? Are they quite broad-based? Or are they sort of focused with the smaller peers or larger operators? And then secondly, you mentioned the weather impact in Jan. I just wonder if that's so material as to disrupt this sort of improving momentum we're seeing in North America pest or whether actually you've got enough self-help to drive ongoing improvements regardless of the adverse weather? Andrew Ransom: Thanks, Bill. Look, market share in pest control is a notoriously difficult endeavor, there's about 18,000 to 19,000 pest control companies in the United States, and we're operating across hundreds of cities. So in any particular town, any particular city, customers have got massive choice. Typically, they've got a choice of 10 to 20 local players. And so trying to work out when we improve where the share improvement is coming from and vice versa is really, really difficult. You can only really see in a live dynamic way, whether you're winning or losing share on the big national account piece. And that isn't really what's driving our improvement in organic growth. I'd say it's broad-based, and it's coming essentially from improvement in our operations in residential and termite, and it's across multiple towns and cities. So really difficult to say where we're winning or where we're winning from. But most of it, I would say, is local movement as such. On the weather, look, the way it works in our North American business, the way the entire industry works in North America is you only get paid and you only recognize revenue once you have done the work. So if you get a weather event, as we saw for a few days in January and you can't get your colleagues out on the road to do their routines. If you're not visiting that customer, then you're not billing that customer and that revenue doesn't happen. But that doesn't mean that revenue has gone. What that means is you work like crazy in the month of February to catch up the visits that you missed in the month of January. And clearly, that's what we will have been doing in February to try and catch up that work as much as possible. February weather, we thought was going to be a bit wobbly as well. At one point, there was a couple of snow days. But in actual fact, the weather in Feb turned out fine in the end. So we draw attention to it simply because it happened. It was material. It wasn't just one day. It was a few days down the Eastern Seaboard. But we will be working very hard to catch it up through February and into March. So we're not flagging a major issue, but clearly some softness in the month of January. Operator: The next question comes from Nicole Manion with UBS. Nicole Manion: One on the price and volume split in North America piece. There are a few mentions in the release about the robust pricing environment. I think that's actually sort of fairly consistent with what you said earlier in the year. But is there anything to call out here in terms of the pricing piece still accelerating or just holding at a similar level? And then secondly, sorry if I've missed this, I think you can sort of back it out from the numbers on branches that you have given in the release and the presentation. But could you sort of just confirm the total sort of branch base number as of the end of 2025 in North America? Paul Edgecliffe-Johnson: Thanks, Nicole. So in terms of price and volume, we're still very encouraged by what we're seeing on price. We do manage to get inflation plus, which we've seen through the year. And as you've seen, the organic growth has been ticking up quarter by quarter. So we are continuing at a similar level on price and clearly doing better on volume. We're still losing a bit of volume if you look at that number that we printed in the fourth quarter, but it's improving sequentially. And in terms of the number of branches, well, we said that by the end of this year, we expect to get up to approximately 800, and that's going to include 220 of these sort of small local branches or satellite branches, which we're at 150 on. So the 70 delta is the change from 730-ish at the end of this year to 800-ish at the end of 2026. Nicole Manion: Got it. All the best, Andy. Andrew Ransom: Appreciate it. Cheers, Nicole. Thanks. Operator: And the next question comes from Jane Sparrow with JPMorgan. Jane Sparrow: Two questions, please. Just on the regional brands and the Terminix brand, it sounds like the improvement in lead generation is largely being driven by the reinvigorated regional brands. Can you perhaps comment on the main Terminix brand and how that is performing? And then secondly, of those branches where there's a high proportion of people sticking on the old plan, is there any noticeable divergence on KPIs on your new one pay scorecard versus the other branches where more people are on the new plan, please? Andrew Ransom: Jane. Yes. Look, the Terminix brand is doing well, but you're correct in your deduction that the regional brands must have done really well. They did do really well. Super pleased with the performance of quite a number of the 9 regional brands. And as I said in an earlier answer, a lot of that has come through really focusing on organic search performance, and that's what's given us the encouragement in part to go with the 30 brands. So that's excellent. But the big, big battleship brand, Terminix, is going well and has performed very nicely. We haven't seen as big percentage increases, but it is performing nicely. And there, we do things like market testing for brand recognition, unaided brand recognition. Can you name a pest control company in the United States? Can you name a pest control company that you would consider using if you had a pest control problem. And we've had a recent survey on that, and the data has come out very, very strong. It's a powerhouse brand, and it's got fantastic brand recognition. And so it's performing well, but we do support Terminix significantly with paid search as well as organic search. And over time, what we'll be looking to do, particularly as we get more into the AI generative search, we'll be looking to move further down the organic search for Terminix as well. So it's performing well, but a big part of the rebound in lead performance has come from those regional brands and the reason why we're supporting the 30 going forward. In the second question, that's way too early to say what that looks like in terms of branches with a high proportion of people on old pay plan, which is largely heritage Terminix brands and then performance of branches with people on newer pay plans. So it's too early to call that. What we have been doing, and Paul has made this observation a few times, we've been much more into the data than we've been before. We've got a Head of Data and Data Science. We've got a small data science team, actually not so small these days, analyzing data from branches and really trying to work out, well, where we've got fantastic performing branches versus poor performing branches, what are the factors that are contributing? Is it tenure? Is it pay? Is it geography? Is it commercial versus residential, all of those factors. And we're getting more insight into that, not ready to call it on that, but pay plan might be one element out of about a dozen, but there is no binary read across between old pay plan equals great performance, new pay plan doesn't. That doesn't exist. But the point of the question, what drives different branch level performances and what are those factors, that's really why we're super excited about the 360 single pane of glass. Mike and the team are going to have much better data over the next few years than we've certainly had for the last 2 or 3 years. But no correlation at this point to call out, Jane. Jane Sparrow: Okay. All the best for the future apart from the obvious foot front. Andrew Ransom: Yes. Well, I would say the same to you, Jane. I would say I hope Spurs don't get relegated, but I would be lying if I said that. So good luck, Jane. Operator: [Operator Instructions] And our next question comes from Allen Wells with Jefferies. Allen Wells: Most have been answered, but just two quick ones. Firstly, Paul, just on the $100 million cost saving plan. Obviously, we've had lots of moving parts over the last 12 to 18 months with the change in brand strategy, less closures, more satellites, changing brands, changing remunerations. As we sit here today, could you maybe take a step back and simplify down how we should think about the maiden building blocks of the $100 million and what will be delivered in 2026? That's the first question. And then maybe just secondly, just following up on the remuneration plan and the allowing of grandfathering, et cetera. Obviously, we're a couple of years into this process now. And what drove the need to change that at this stage? What have you seen? What were staff telling you? And why now? That would be my question. Paul Edgecliffe-Johnson: Thanks, Allen. So in terms of the cost plan, I'll happily take a step back and many of you will remember that we had our integration cost savings back in the day. That got a little bit difficult to track through. So when I came in, I said, take the 2024 cost base, there will still be inflation on that cost base, but we will take $100 million of that. And that's what we are tracking well against. So I've said that we've taken $25 million out of the cost base in 2025. We came sort of at that from a cold start. So most of the savings were manifested in the second half. So if you think about that, that means that on a run rate, it's more than double that, that we're achieving, we are investing back into the business. So whether it's the new capabilities we've talked about in pricing, in data, in many other areas of the business or the additional resources we're making available for marketing and for our additional branch network, that's all being funded. So it's a fuel for growth strategy, and we'll continue to do that. So we will tackle back-office costs, we'll tackle inefficiencies, we'll tackle spans and layers, all the normal opportunities that you would see in a very large-scale business to take cost out. There is significant opportunity. What we are doing is going after the right cost at the right time. Some we will leave a little because they might be a bit more disruptive to the business. So the focus at the moment has been on that back office cost, cost of finance of accounts payable, et cetera, et cetera, removing roles, offshoring roles, et cetera. But still lots to do, and we will get that $100 million out by the time we're reporting the 2027 results and to get the margin up to 20% plus. And look, in terms of the pay plans, the whole plan that we're coming up with in terms of how we simplify the go-forward integration is not to cause disruption. It's to settle people down. If there was some anxiety in technicians that perhaps they wouldn't like the new plan as much as their current plan, fine. They can just grandfather on to their current plan. We want people to get focused on doing their jobs well. We are an employer of choice in the industry, and that's the most important thing to make people go out and delight customers every day. And if there's something getting in the way of that, then we've removed that. So yes, that's our thinking. Operator: And the next question comes from James Beard with Deutsche Bank. James Beard: I've got two, please. Firstly, you noted the improvement in residential leads in the second half. I was wondering if you could talk through the time that you expect those to convert over and how that improvement in resi leads is splits between contract and jobbing. And then secondly, going back on to pay plans, again, you said no change to residential sales staff pay plans in '26. When should we expect any sort of change to residential sales staff pay plans, please? Andrew Ransom: Thanks, James. '27 is the answer to the second question. Sorry, I should have said that. In terms of the time it takes from lead into sale into install is a really good question. I mean, that's a proper pest control question, James, that's really down in the weeds, but it's really, really important. Because if it's residential, if you've got a mouse running around your kitchen, when do you want that solved? You want it solved immediately. So the speed from which we can take a residential lead, and the same is true of termite. You've just discovered termites munching away in your basement or your cellar, you want that sorted quickly. And what we've seen is why I mentioned the new KPIs, operational KPIs in terms of how quickly are we getting from the lead to the sale to the install and it only becomes revenue when you do the install. We've got to get faster and we've got to get more consistent at that. So we are now getting a good proportion of the leads converted, sold and installed within 24 to 48 hours. And that's the sort of time window we are giving ourselves because if customers are having to wait 3 days for their mouse running around the kitchen to be dealt with or for the worry of the fact that termites are in their house, for many customers, that's too long. On the commercial side, time is much less critical. Commercial customers, that's fine. You can come next week, you can come next month unless they've got an emergency. So yes, look, it's a really, really key part of the business. And if we look through 2025, what we saw, particularly in the second half was a -- if you go at the top of the funnel and come down, really good improvements in the leads coming into the business. So MQLs, which we track on a daily basis. We look forward to that. At 4:00 every afternoon, we get a daily report on MQLs. Really good progress on SQLs. So what percentage of MQLs turn into sales-qualified leads. So that's gone really, really well. Really good progress on sales. So the marketing leads are good leads. They're turning into sales leads. The sales colleagues are selling and then it gets less good in terms of how many of those sales actually get converted into revenue. So that's the critical thing that the team are now working on is the next challenge as they work from the top of the funnel and they're working through down into the middle and into the bottom of the funnel. So that's why these KPIs of what percentage of sales are getting turned into activity with the customer is super critical. So good, good progress, and I think that's where Mike will have the team focused this year is improving the conversion of actual sales into -- turning into revenue. In terms of the split between contract and jobs, I have explained many, many times, we're a portfolio business, portfolio, meaning a book of contract revenues, roughly 75% of the U.S. For group level, we're more about 80-20. But at North America, U.S. pest, it's 75% contract portfolio, 25% jobs. Really good performance on jobs, over 5% organic growth in jobs in the fourth quarter and improving performance on contract portfolio. But it's that contract portfolio that we've got to get into consistent, healthy positive quarter-on-quarter improvement. We've seen some of that now, but we've got to build on that. It's only when we get that and back to the question we had a while ago about price versus volume. We've got to get that volume growth consistently back into the portfolio. It feels like it's coming. It feels like it's building, but that's where we need to push on in 2026 and into 2027. Only when we get that plus the jobs, will we get the business back into industry levels of growth and beyond. But I'm really confident the team are all over this. But good performance on jobs and an improving performance on contracts as well. James Beard: And all the best in the future, Andy. Andrew Ransom: Appreciate it. Cheers. Thank you. Operator: [Operator Instructions] And our next question comes from James Rose with Barclays. James Rosenthal: I've got a few on commercial, please. In the release, this has been flagged as a particular growth area. I wonder can you expand on your growth plans there? Secondly, is it right that commercial branches will be running on new systems, so slightly different ones to resi and termite branches? And then finally, how progressed are you in bringing some of the innovations and technology you have in the international and European business into the U.S. And what's the opportunity there? Andrew Ransom: Thanks, James. Yes, look, good question. Rentokil is the undisputed global leader in commercial pest control. The Terminix acquisition brought with it a big business in residential and termite. But Rentokil, which operates in, what, 88, 89 countries is globally renowned for its commercial pest control business. So we should be punching above our weight in commercial in the United States. And we're not yet where we need to be in commercial. I think in part because we've had so much focus on getting the resi business right and getting the termite business right. We've recently taken the decision to give independent leadership of the commercial business to one person. We've got an individual who probably knows more about commercial pest control than just about anyone on the planet. He's an export from the United Kingdom. So we've given it dedicated leadership. In terms of the plan for the business, improving customer retention has to be at the first part of that plan. We still don't have retention where it should be. Customer retention in commercial should be very high typically. It needs to be higher. It is going to be -- the commercial business will all be on PestPac, which is the core system that Rentokil has been using for 3 or 4 years now in the United States. So there won't be any great surprises or drama there. So that should be relatively straightforward. And you're absolutely right to raise the question of innovation. I was chatting to Mike the other day, and he's been introduced to some of the really cool innovations that we've got in pest control and commercial pest control, in particular. And we've got some really interesting ones coming in the pipeline over the next year or 2. But we have manifestly been weakest at deployment of commercial pest control innovation, in particular, our connected solutions in the United States. And we're going to fix that. That needs to be a key priority for 2026. We need to see the U.S. really starting to adopt and drive innovation. That's why the individual that's in charge of the business has been chosen in part because he's got great experience with that innovation. So look, I think it's an area we should be punching above our weight given our global position. The systems are relatively straightforward in the innovation agenda. It just needs execution now. We've got the products. We've got the services. We've got the technology. We just have to execute. And it's easy for me to say, particularly as I'm about to walk out the door and say, over to you, Mike. It is easy to say, but that's what we do around the world. So I'm confident we will do that in the United States. Super. Thank you very much, James. I'm looking at Heather across the table here. Are we done with the questions? No more questions. Unbelievable. Thank you all very much. I can't believe that is it. As I said earlier, that was my 50th set of results, and I think quite a good one to sign off on. It has been an immense privilege to be CEO of this company for the last few years. We've gone from a reasonably unstructured conglomerate to a pretty focused world #1 in our chosen industries, which is a pretty cool thing, I feel. And it's been, as I say, a great privilege to be here, but the success we've made in the last decade or so is absolutely down to the people in the organization. I've always said if we get the colleague strategy right in Rentokil Initial, everything else follows. And I think we have got a wonderful culture in this company. So I do want to pay tribute to the 60-odd thousand colleagues and all the ones that went before them in creating the brilliant company that it is. And believe it or not, I do want to thank you a lot. It's been great dealing with you for such a long time, doing my best to answer your questions. Will I miss it? I think I probably will a little bit, but I'll get over it. So thank you all for your interest in the company. It's been great getting to know many of you. And for the next few weeks, I really look forward to handing over to Mike. We're having a great transition. He's having a lot of fun getting to know all the people around the business, and I'm sure he's going to be a great success. And personally, I think the company is set fair for long-term value creation, which is, at the end of the day, what it's all about. So thank you all for your support of the company, your questions and in many cases, your friendship as well. So thank you all very much indeed.

83天前Insight Analytics约5分钟阅读

ITVPY 2025 Q4 财报电话会议

Dame Carolyn McCall: Good morning, everyone, and welcome to ITV's 2025 Full Year Results. As always, I'm here with Chris Kennedy, our CFO and COO. I'm going to start this morning with a brief summary of the 2025 highlights and then Chris will talk you through our financial and operating performance in a bit more detail. ITV delivered a good performance in 2025 outperforming market expectations despite the challenging market backdrop. We have transformed ITV and are demonstrably a much leaner and more agile business with a strong digital platform. We have capitalized on numerous growth opportunities as a result and are generating strong levels of cash. We've created 2 attractive and resilient businesses in ITV Studios and Media & Entertainment. We have successfully changed the shape of ITV and achieved a key strategic target. 2/3 of our total revenue now comes from Studios and M&E digital and that really demonstrates the scale of ITV's transformation. Before discussing our results, I wanted to mention the leak in November about potential transaction. As you know, we confirmed that we were in preliminary discussions with Sky regarding the possible sale of our M&E business. We are actively engaged with Sky and we will provide an update to you when we can. The effectiveness of our strategy to diversify ITV's revenue streams is clear in our results with the growth in ITV Studios and our digital M&E business combined with our disciplined cost management largely offsetting a difficult linear advertising segment. In line with our dividend policy, the Board has proposed a final dividend of 3.3p giving an unchanged full year dividend of 5p, a total payment of around GBP 190 million. I'll now hand over to Chris to go through the numbers in more detail. Chris Kennedy: Thank you, Carolyn. Good morning, everyone. ITV Studios continues to demonstrate strong momentum with total revenue climbing 5% to GBP 2.13 billion. This performance highlights our ability to consistently outperform the broader market. Notably, external revenue rose by 10% reflecting our successful move toward global streaming partners and the rapid scaling of our digital distribution via Zoo 55. The U.S. unscripted business had a good year with a strong slate of deliveries. Love Island U.S. was the most watched streaming TV original season of 2025 in America, greatly increasing the value of the format. Overall performance in the U.S. was down year-on-year due to the phasing of deliveries and some short-term market softness. We're already seeing good momentum in 2026 and are confident that this year will be much stronger. Our U.K. and international arms saw 14% revenue growth driven by high demand from both streamers and broadcasters. Adjusted EBITA for Studios was GBP 297 million and EBITA margin was 13.9%. The year-on-year change in the margin reflects a lower proportion of catalog sales in our revenue mix as we previously guided. We remain highly efficient. We delivered GBP 31 million in cost savings this year and continue to leverage our world-class talent and unique IP to drive recurring value. Turning to Media & Entertainment. The highlight is the continued evolution of our digital business. Digital advertising revenue grew 12% to GBP 540 million and total digital revenues were up 10% to GBP 614 million. This strong trajectory is a testament to the success of ITVX, Planet V and our data-driven ad products. Total advertising revenue fell 5%, better than guidance with our digital growth providing an important and profitable hedge against double-digit linear advertising decline. We've been incredibly disciplined on costs within M&E. Content costs were down 5% reflecting an ever more optimized investment strategy. Noncontent costs fell by 6% with permanent cost savings of GBP 32 million and temporary savings of GBP 15 million. This ensured that our M&E adjusted EBITA margin remained steady at 11.8% despite the decline in advertising revenue. The balance sheet remains robust. We ended the year with net debt of GBP 566 million and a leverage ratio of 1x. Our cash generation remains good with a profit to cash conversion of 65% as expected and over the 3 years from 2023 to 2025, cash conversion averaged around 80%, in line with our target. This provides us with the flexibility to reinvest in our growth drivers and provide meaningful cash returns to shareholders. Our capital allocation is clear. We reinvest for profitable growth, maintain an investment-grade balance sheet and return surplus cash to shareholders. We've maintained an ordinary dividend of 5p and continue to keep our capital structure under review. A core pillar of our strategy is reshaping our cost base to better reflect viewer dynamics and enhance productivity and profitability. In 2025, we accelerated our efficiency efforts delivering GBP 63 million in permanent noncontent savings across the business. This brings our cumulative permanent savings since 2019 to GBP 253 million. Looking forward to 2026 taking the year as a whole, Studios will show good revenue growth with margin at the lower end of our target range. As is usual, revenue, profit and margin will be weighted to the second half with momentum continuing into 2027. In M&E, digital revenue is predicted to continue its strong trajectory in 2026. We anticipate Q1 TAR to be down around 2%, which is better than we expected. And looking forward to the rest of the year, we have a strong schedule of sports being the only commercial broadcaster of the expanded FIFA Men's Football World Cup and the new Men's Rugby Nations Championship, both of which will boost ad revenue from Q2 onwards. Finally, you can find detailed planning assumptions in the appendices in the slide deck. Thank you. Carolyn, back to you. Dame Carolyn McCall: Thank you, Chris. As you know, our strategic vision is to be a leader in U.K. advertiser-funded streaming and a diversified and expanding global force in content. Our strategy is familiar to you. Just to summarize it in 3 key pillars: expanding Studios, supercharging streaming and optimizing broadcast. So let's turn first to expanding Studios. ITV Studios has built a unique and leading position in the global content market. It has 3 core competitive advantages and value drivers. Its world-class talent who are producing some of the most successful shows around the world; second, its global scale and diversification are creating a strong platform for further growth; and three, its unique and valuable IP library, which combined with Zoo 55, its digital studio, maximizes the monetization of our IP globally and this is underpinned by a culture of cost discipline. All of this ensures the business is well positioned to continue to grow ahead of the market and drive attractive margins. So let's take these value drivers in turn. First, ITV Studios culture. It's entrepreneurial and offers creative autonomy and it's backed by global distribution and resource and that attracts and retains industry-leading talent. This is a position we continue to enhance through strategic acquisitions, talent deals and partnerships and that delivers both creative scale and revenue synergies. Most recently in 2025, we acquired Moonage Pictures in the U.K. They're the producers of The Gentleman for Netflix and also Plano a Plano in Spain, the producers of Suspicious Minds for Disney+. So the success of this strategy is really clear I think from the creative output and other recently acquired labels also demonstrate the success of this strategy. So Rivals by Happy Prince for Disney+ is returning for a Season 2. Skyscraper Live for Netflix by Plimsoll, which saw Alex Honnold's free solo quite terrifying ascent of one of the world's largest tallest skyscrapers in Taipei. Our track record on retention is really, really strong. In the U.K. where we do the majority of talent deals, about 75% of our label MDs and creative leaders stay with the business post earn-out. ITV Studios also has a formidable portfolio of world-leading brands and formats through our established scripted and unscripted labels. Love Island is now in 28 markets. It continues to expand with successful spinoffs such as Love Island Games and Beyond the Villa. Squid Game: The Challenge was Netflix's biggest reality competition and has been recommissioned for a third series. ITV Studios is constantly refreshing its portfolio with new formats like Nobody s Fool and Celebrity Sabotage, both of which launched on ITV this year and have already started to sell really well internationally. They're original shows. ITV Studios also has a strong slate of high quality returnable scripted brands that demonstrate incredible longevity. Line of Duty is an example, Gomorrah is another example and there are newer brands like Ludwig and Vigil, which have all been recommissioned. So the global content market remains large and attractive. It's expected to grow about 1.5% to 2% this year. ITV's resilience though comes from having a diversified portfolio by geography with 59% of revenue generated internationally, by genre with 32% of revenue from the scripted and by customer with 28% of revenue from the growing streamers where we have a proven track record of success now. We have deep strategic relationships with every major global content buyer, which combined with a very strong pipeline of new and returning hits, ensures that we capture further share of the key growth areas, which are scripted and unscripted commissions for streamers and IP distribution. Now a significant driver of our long-term value is our unique IP library, which now exceeds 100,000 hours of content. ITV Studios adds thousands of hours of content every single year and licenses this to over 350 customers globally. That scale allows ITV Studios to maximize the monetization of its IP and we already generate GBP 400 million of high margin revenue through our global partnerships business. Most recently this is through Zoo 55, a key area of incremental growth. Zoo 55 distributes ITV Studios IP across 3 areas. Social video where we had over 24 billion views across 200-plus social channels globally last year; FAST enabled platforms where we have partnerships with multiple partners such as Samsung, Tubi, Xumo and viewing here has been up 28% year-on-year; and the third is games and gaming where we've got 40 games live at the moment across 19 of our brands and that is going to continue to expand. And some of the key brands we distribute include Hell's Kitchen, River Monsters, the Graham Norton Show, Come Dine With Me, Love Island and there are hundreds more. So as you'd expect, we are leveraging AI to deliver content more effectively and efficiently. For example using it for subtitling, content selection and curation. Overall in 2025, Zoo 55 generated over 47 billion global views, which was up over 30% year-on-year and that drives double-digit revenue growth. ITV Studios is on track to achieve GBP 120 million of high-margin digital revenue from Zoo 55 by the end of 2027. So the combination -- this particular combination of talent, scale and quality IP ensures that ITV Studios remains a very attractive and resilient business and it delivers high quality earnings. As a creator, owner, producer and distributor of IP; ITV Studios captures the full value of its world-class content from initial idea to global delivery. Around 60% of its revenues are recurring. This is coupled with Studios diversified revenue streams and low-risk production model, remember, where we only produce programs once they have actually been commissioned. Together, this ensures ITV Studios drives growth ahead of the market at attractive margins and delivers strong cash flow. I'm now going to turn to Media & Entertainment, which includes our pillars of Supercharge Streaming and Optimise Broadcast. We have completely transformed M&E into a strong and resilient streamer and broadcaster with a very disciplined cost base, well positioned to deliver profitable digital revenue growth and strong cash generation. It leverages its compelling position and value drivers, which include wide reach in the U.K., leading platforms in ITVX and Planet V, an extensive first-party data set and deep and established relationships with advertisers and commercial partners. We are really pleased with the success of ITVX and Planet V. Since its launch in 2022, ITVX has built incredible momentum delivering 25% CAGR in total streaming hours and 16% CAGR in digital advertising revenues. Planet V, our first-class addressable advertising platform, allows brands to target audiences by leveraging an extensive first-party data set of over 40 million registered users. Now that can be augmented of course with third-party data from our partners like Tesco and Mastercard for really granular targeting. It is a powerful engine for growth bringing in over 1,500 new advertisers to ITV since its launch. Digital advertising now represents 31% of our total advertising revenues. With this momentum, digital advertising revenue is outperforming our original plan when we launched ITVX, which is fantastic news. And given the strong performance of ad-funded streaming and our focus on profitable growth, we have, as you know, pivoted our digital strategy by doubling down on AVOD and deprioritizing subscription video on demand. Therefore, it's going to take slightly longer than initially anticipated to reach the overall GBP 750 million digital revenue target. Importantly, this has saved significant incremental content and marketing spend. As a result, as this slide shows, we reached breakeven 2 years earlier than planned recouping our entire investment in ITVX 4 years earlier than projected. In doing so, we've created a profitable ITVX platform with attractive growth prospects. So building on the foundations of our strategic investments in ITVX and Planet V, we are now competing effectively for a greater share of the GBP 9.5 billion online video advertising segment and attracting new ITV advertisers. We're expanding our digital reach through strategic partnerships, the SME strategy and through commercial innovations. Our YouTube partnership for example is successfully extending reach with over 40% of ITV's content viewed on the platform coming from under 35s. Our YouTube sales team continues to grow from partnering with 8 brands at launch to 800 today. We've recently agreed a major deal with Banijay to sell all their advertising around their YouTube content. We've also added new partnerships with TikTok and expanded our relationship with Disney+ to include their content on ITV1's peak schedule. With our SME strategy, we're removing barriers to entry for TV advertising, simplifying the buying process and leveraging AI to produce cost-effective advertising. We're making good progress towards the launch of our self-serve advertising platform in collaboration with Sky, Channel 4 and Comcast's Universal Ads, which we will be testing later this year. And in a first of its kind in the U.K., we launched picture-in-picture adds, which you might have seen in the 6 Nations. This drives incremental reach and value with sensitivity to the viewer experience. We're also increasing our inventory and can now do targeted advertising on our linear channels on the Sky and Freely platforms. And if that weren't enough, in addition, we're leveraging our brand, IP and first-party data to drive profitable non-advertising digital revenue. We've just launched the Birthday Draw. You might have heard the ads for that all across Global Radio and it's a partnership with Global for GBP 1 million cash price. We're also evolving ITV Win into a premium destination, bringing scaled competitions to audiences with new games. So it's early days for both of those, but we expect these 2 initiatives to drive double-digit growth in interactive revenues. Now finally, to our third pillar, which is Optimise Broadcast. We continue to demonstrate our strength and resilience in delivering mass audiences. In 2025, ITV delivered 91% of the Top 1,000 commercial audiences. To reinforce this value, we're collaborating with Channel 4 and Sky on Lantern, an outcomes program to clearly measure the effectiveness of TV advertising. We have a fantastic slate for the year focusing on drama, entertainment, reality and sport and we optimize our spend and deliver the most valuable audiences for advertisers. We're significantly increasing live sports. We are the only commercial broadcaster with the rights to the Men's Football World Cup, as Chris said, which includes 19 more matches on ITV, a 60% increase. In addition, we have the rights to all England Men's rugby games this year. In summary, we're really confident we will continue to create value for shareholders. With the profitable growth of ITV Studios and the M&E digital business underpinned by strong cash generation, we will continue to deliver attractive returns to shareholders. None of this of course would be possible without ITV's unique blend of creativity and commercialism, which is fueled by the talent and commitment of our people. And I just want to take a minute to say how proud we all are of what we do, the work that's done in ITV, but especially how proud we are of our colleagues and we're incredibly grateful to them for their hard work and achievements. Thank you. We're now ready to take your questions. Operator: [Operator Instructions] The first question today comes from Annick Maas of Bernstein. Annick Maas: The first one is on the advertising market. I mean your Q4 was better than anticipated. Your guide for Q1 is better. Can you tell us a bit more what the sentiment is in the ad market? Is this coming from across the board? Is it just certain campaigns or advertisers? That's the first one. The second one is on programming costs, which I guess also the guide is better than what was expected despite owning actually the World Cup rights. So is there something in there that is AI cost savings or what is really explaining the program cost savings? Just thinking also ahead how we should therefore think about program costs going forward? And same question for Studios. You're guiding to the bottom end of your margin guide because of the revenue mix. I thought production would probably be within your whole industry, the 1 segment where you can put through AI savings the quickest. So is that so or if not, why not? And then maybe just 1 last one, which is on studio growth more generally. If you look to the midterm, I guess some of your competitors have been saying that the sort of growth level that you've seen for the last 5 years or so in the production world are slightly coming down. Is this something you are seeing or is it that you are taking share of the others and therefore, you can consistently grow better? Dame Carolyn McCall: Okay. On the ad market, I think Q4 was largely down as a result of a pause by advertisers while they waited to see what the budget was going to be and so it was down year-on-year and we had expected it not to be like that. So that was the story behind Q4. Q1 is definitely trading better than we thought because the run rate from Q4 feeds into Q1 if that makes sense. Thus, February was really improved on January and March has improved further not just on February, but on March. So you're right, it's definitely better. I think that the fact that we have the World Cup in Q2 and Q3 means that we're having very, very active conversations with many, many advertisers. So I mean just to give you an example of that. We have more inventory because we've got 19 more matches, that's 60% more than we had at the World Cup in Qatar. We're talking to about 100 advertisers at the moment and that is spanning 20 different categories. So we're very actively engaged with a huge number really of advertisers. And where we would say the trend really was, the Q4 was down on virtually all categories except 1 or 2. Q1, you'd have seen supermarkets doing well. You'd have seen travel was actually doing very well, let's wait and see on that one. But there's no discernible trend on categories in Q4 and Q1 whereas I think now with Q2 and Q3, the range of advertisers we're talking to would kind of indicate that all categories should be quite active in those quarters. So that is very good news. And I think the other really interesting thing is we're getting a lot more interest in the World Cup from very big global brands and they're looking really to create high quality content and very bespoke creative advertising around kind of high-end content. So using players, using teams, et cetera. That's all brilliant for TV because it's the thing TV does best. You can't really do that in any other medium. So that's I think really good and we've agreed to sponsor and that will be announced. So I think the advertising market certainly, because the World Cup will lift it, should be a strong year for us. Your second question was costs I think. Chris Kennedy: I think specifically content costs. So you're right. Last year we didn't have one of the big mens events and we've obviously got the FIFA World Cup, as Carolyn said, and we've also got the new Rugby Nations Championship as well, which runs Q3 and then into Q4. So really a strong slate of sport all the way through from Q2 to Q4 and we have managed that within the overall envelope of content and that happens in several ways. There's some self-help in there. We did a reorganization of daytime soaps, which completed at the end of the year. The new schedule started 1st of January. That saved us some money on those shows while maintaining exactly the viewer experience as we had before. In fact with the power hour in the soaps, that was viewer led. People were saying we don't want to watch an hour of the same soap, we'd like 2 half hour episodes and that's worked really, really successfully. So we've saved some money there and that's enabled us to reinvest elsewhere in the schedule as well as affording the World Cup. And longer term, the team have just got -- they get better and better and better every year using the really granular viewer data that we've got through ITVX now to inform windowing decisions, acquisition decisions, commissions, we can see how a show grows and also making the marketing a lot more effective as well. So all of that means that -- I think you asked about where do we think that content cost will go longer term. We're really pleased that we've held it at plus or minus the same level ever since the launch of ITVX. Dame Carolyn McCall: Yes, because we've absorbed a lot of inflation in that. Chris Kennedy: Yes, exactly. And so that's what we're looking to do going forward whilst continuing to grow that viewing on ITVX. Dame Carolyn McCall: And then on your Studios question, I'm just going to -- we'll take it in 3 parts because you asked a margin question, you asked AI question, you asked a growth question. Let me kick off on the AI question because I think you're right. I think AI obviously lends itself very well to Studios. And I think the first thing to say is our fundamental belief is that we use AI on creativity only to enhance and augment it, but we then use it in a very, very strategic way where we integrate it in everything we do end-to-end. So it's a very integrated way of working in Studios. And we've had quite a lot of experience already now because we've been doing this probably for the last 18 months to 2 years where we started with having what we call the Skunk Works and now actually it's kind of embedded in all the labels. So whether that is tools for R&D, research and development or preproduction or postproduction or editing or production planning and indeed marketing, we're kind of using it for the whole end-to-end process in Studios. And what we try and do there is that of course there's efficiency gains, we use that to offset inflation and then try and bank some of that. And then we use productivity gains to get people to do more interesting things for instance in development to try and get more shows in. So the more resource we free up, we actually reuse that in a higher value kind of function if that makes sense. So that's what we're doing on AI. Chris Kennedy: And then Studios, you talked about the margin guidance and we've guided for bottom end. Our Studios business has industry-leading margins. We are the best in the business and the team have to work really hard at that. Last year they made GBP 31 million of cost savings. That came from some quite difficult decisions around label reorganizations in some geographies. At the same time, we're refilling the pipe. So we've made 4 bolt-on acquisitions and those take some time to integrate the back office. So the whole strategy is around maintaining the margin within that 13% to 15% range. It will go up and down depending on the mix of business we do in the year and where we are in the cycle, but very pleased with the level they're at. And the whole point about Studios is we want profitable growth and that means maintain the margins within that range. Dame Carolyn McCall: And in terms of growth, we see the market growing. So it's a very big market, it's GBP 230 billion market. It's growing at about 1.5% to 2.5% according to Ampere. And our goal really is to be ahead of market growth and to take share. So that continues. That continues to be part of our strategy. Chris Kennedy: And you'll have seen that we've done that consistently over the last 8 years, consistent growth. And from a compound average basis over the course of that period, we've outgrown the market and we'll continue to take share. Operator: Our last question today comes from Julien Roch of Barclays. Julien Roch: My first question is on the World Cup. Based on previous additions, can you give us an indication of the impact either millions of pounds or percentage? Second question is impact of AI on a cost basis, I know it's early days. But Stroer who reported this morning said that within 5 years they thought they could save EUR 50 million thanks to AI, which is about 3.5% of their operating cost. So any indication there? And then the last question is on your linear inventory, where are you in terms of that inventory being sold digitally or programmatically so it can be included in the kind of new AI platform that all the agencies are developing? Chris Kennedy: Okay. So on the World Cup, we don't guide for the uplift for individual tournaments. But you'll have seen performance on '25 versus '24 where we had the FIFA Men's World Cup. You can see the categories that outperformed when we have those. So as Carolyn said, we're really looking forward to the rest of the year with sport. It should give us an uplift and it should bring the whole advertising market in the U.K. up with it. But we don't give the exact tournament by tournament guide on that. Dame Carolyn McCall: No. I mean just as a little fact on sports. The reason we really focused on live sport is in '25 when there wasn't a Euros or a World Cup, our reach of sport on ITV1 was 46.2 million people, which is fantastic and we would expect to exceed that in terms of our reach obviously this year because of the rugby and the football. We've got all the racing. It's an unprecedented year for sport for us. Chris Kennedy: And then, Julien, on the AI question, could you repeat it? I didn't quite pick up what the question was there. Julien Roch: So everybody is saying that AI is going to transform our lives. Every company is going to generate more revenue and they're also going to save a lot of cost. And Stroer who reported this morning said that in their view, AI would allow them to save EUR 50 million within 5 years, which is 3.5% of their operating cost. So I was wondering whether you already have sized the potential efficiency gain from all those wonderful AI things we're all going to do all the time. Chris Kennedy: The way we look at AI is exactly how you described it, where can we use it to augment creativity? Where can we use it to increase revenue and create new revenue streams? And on the flip side, how can we use it to create efficiency so that same number of people can do more with the AI tools? On the efficiency side, it absolutely fits into our long-term cost saving program. We've demonstrated that we are relentless about the efficiency within the organization. We've taken out a huge amount of cost over the last 6 years. We'll continue to do that. It's a multiyear program and within that, AI will obviously help with the next leg of that program. Dame Carolyn McCall: Because we integrate it. We build it into the continuous cost improvement program. So it's something that we task ourselves with, but it's not always about -- there's a net cost saving, but then there's also an offset against inflation. There's an offset against other costs because cost of production is going up. So we just look at it in a much more integrated way than that. And I missed the company actually, Julien. Did you hear who the company was? No. Who was saying that they would do the EUR 50 million, it's just interesting for us. Julien Roch: Stroer, the German outdoor company. Dame Carolyn McCall: I mean there will be significant savings. But in Studios in particular, we're very focused on how we can release resource to do more stuff that will generate more hits. I mean that's the kind of philosophy in Studios, which is why we will gain efficiencies and we will net off inflation, but we also want to reinvest in, say, making sure development is stronger. Chris Kennedy: Yes. I mean I think it really is -- I hate to use the phrase, but it really is in the DNA of ITV, this everyday efficiency. If you look at M&E, noncontent costs were down 5% last year and that is a lot of hard work by a lot of people across a whole range of initiatives. There aren't big set piece efficiency programs. It's baked into people's every day. Dame Carolyn McCall: I think the third question was linear inventory. Chris Kennedy: Yes. So last year we finished the year, 30% of the linear inventory could be -- was capable of having a targeted ad within it. By the end of '26, we're looking to bring that up to 50%. Obviously we will not be using anywhere near 50% for the targeted industry -- targeted advertising because we can now make the choice both for advertisers and for ITV about what is the best use of that inventory? Is it better to use it for a targeted ad or is it better in a mass reach campaign. One of the reasons we've doubled down on sport is that those big live audiences are more valuable than ever. So we would not be doing a targeted ad in the World Cup because that is the only place an advertiser can get the huge audiences that we attract. So over the course of this coming year, you will see coming out of ITV commercial a few more ad products where they will be -- they've already developed them in conjunction with advertisers and they're releasing those to do that targeted advertising in the live streams. Julien Roch: My question was not about targeted advertising. It's more being able to buy linear advertising on a digital platform, right? Because all the agencies are developing those AI platforms that they're going to give to their clients where clients can buy across media at a click of a button. And so if TV is not on those platforms, some clients will be lazy and maybe deemphasize TV. So it's more on whether you can buy digitally the linear advertising. Chris Kennedy: Yes. Understood. And absolutely, the commercial teams are really engaged with the agencies both on the buy side in terms of buying linear inventory, but also doing the outcomes work, launching Lantern in conjunction with Sky and Channel 4 to give measurability. All of the work we're doing to demonstrate the value of TV because if those models are rational, TV should benefit because we have the highest ROI of any media. So absolutely, we're working with them. Dame Carolyn McCall: Is that what you meant, Julien? Julien Roch: Yes. But only working with agencies, you can have many reasons. You can do both at a click of a button on those platform alongside Hugo and Meta and not only ITVX or targeted, the whole inventory. Dame Carolyn McCall: So I suppose that goes to the distribution strategy and our distribution strategy is to be in as many places. I mean I think we've got something like 98% coverage now of all platforms with ITVX and then a bit lower than that for channels. But our strategy is to be in as many places as possible on the right commercial terms, which then allows us to benefit from their reach and our inventory. Operator: We have no further questions at this time. So I'd like to hand back to Carolyn for closing remarks. Dame Carolyn McCall: Just want to say thanks very much for joining us today. We know it's a very busy day out there so thanks for your time. Bye for now.

83天前Insight Analytics约5分钟阅读

FTCI 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the FTC Solar, Inc. Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear automated messages by hearing a hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Bill Michalek, VP of Investor Relations. Please go ahead. Bill Michalek: Thank you, and welcome, everyone, to FTC Solar, Inc.'s Fourth Quarter 2025 Earnings Conference Call. Before today's call, you may have reviewed our earnings release and supplemental financial information which were posted earlier today. If you have not yet reviewed these documents, they are available on the Investor Relations section of our website at ftcsolar.com. I am joined today by Yann Brandt, the company's President and Chief Executive Officer, Cathy Behnen, the company's Chief Financial Officer, and Patrick Cook, the company's Head of Capital Markets and BD. Before we begin, I remind everyone that today's discussion contains forward-looking statements based on our assumptions and beliefs in the current environment and speaks only as of the current date. As such, these forward-looking statements include risks and uncertainties and actual results and events could differ materially from our current expectations. Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information except as required by law. As you would expect, we will discuss both GAAP and non-GAAP financial measures today. Please note that the earnings release issued this morning includes a full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. With that, I will turn the call over to Yann. Yann Brandt: Thanks, Bill, and good morning, everyone. I am pleased to share that we have achieved another quarter of strong growth in Q4 and continue to position the company for long-term success. Our financial results came in at the high end of our targets, as we work to strengthen our product, operational performance, and overall positioning, including enhancements to one of the most innovative 1P tracker platforms in solar. Every day, we are seeing excellent commercial momentum as we build a foundation for future growth. In terms of financial results, we achieved several key milestones in the fourth quarter. Our results came in at the high end of our target ranges on all metrics. Revenue grew by 26% sequentially, which follows the 30% sequential growth posted in the third quarter, and one of the best in company history, and came in at the highest quarterly level since 2023. Gross margin for the quarter was our best as a public company, and we posted our best adjusted EBITDA performance in six years, and our best since going public, coming in just shy of breakeven for the quarter, missing our 2025 target of breaking even by the narrowest of margins, not bad considering the insane year that solar went through with tariffs and legislative disruption. Our fourth quarter results were fitting into an incredible year of progress for FTC Solar, Inc. A year I am proud to call my first at the company. For the year, we grew revenue by more than 110% versus the prior year, significantly improved margins, added multiple gigawatts of MSAs and secured purchase orders from Tier 1 customers, added new cash to our balance sheet with strategic financing, saw new incredible talent join our team, especially in sales, and have positioned our product platform as the most innovative tracker portfolio in the market, by far the easiest and fastest to install. Turning to customers. Our commercial momentum is starting to accelerate at every level, from approved vendor list additions to project bidding, bookings, and contract conversion. It takes time and will not impact revenue tomorrow, but our progress here is clear, accelerating, and to me means everything. It is the foundation of our future growth. It is what is making this company successful and has me excited about where FTC Solar, Inc. is going. So first, we are getting on approved vendor lists. Just in Q4 alone, we were added to the AVLs of four of the top 10 EPCs, bringing the total to eight of the top 10. We are getting increased visibility and are bidding with more customers and larger project sizes, actively providing proposals on the pipelines of these new EPCs, and of those of many new customers. FTC Solar, Inc. is winning projects and seeing previously announced MSAs convert into bookings, including with the top-tier customer base. In the fourth quarter, we received bookings from two leading EPCs, and we expect some MSAs to start expanding in volume from the original capacity in the near future. We have had improving net bookings for the past three quarters and had a significant increase in the fourth quarter. With a positive book-to-bill, or positive net bookings in the period, we are starting to convert our MSAs into firm orders and book new projects. Since our last earnings call, we added $61 million to our contracted backlog, or roughly a $29 million addition net of Q4 revenue. We expect this progress to continue and to accelerate. In addition to the positive net bookings, we have had recent wins in the form of multiyear MSAs that are not yet included in that backlog, with more expected to be announced in the near future. One notable addition we are announcing today is a new 1 gigawatt supply agreement with a leading developer and operator of wind and solar farms. This is a three-year agreement for 1 gigawatt of our 1P and 2P trackers at sites across the U.S. This agreement also includes our SunPath software to achieve additional energy yield at these sites. Another example we announced just last week is a multiyear MSA with Lubanzi in South Africa. That was for about 840 megawatts of trackers delivered across the country and is a great win on the international front. The first project under that agreement is expected to begin midyear. So those are MSA wins on top of the net backlog additions we announced which brings us to over 9 gigawatts of MSAs added in just one year. The leading indicators on the customer front are what will drive this business, and they are starting to look very good. They are improving, and we have a lot of momentum. From MSAs, AVLs, and strong bidding activity, these are clear signals that show us that FTC Solar, Inc. is a critical part of the tracker diversification trend that we are seeing every day. While we have very admirable competitors, a market without choice is no market at all. And every meeting I am in, I hear about the need for diversification. Having met with most of the top 10 EPCs, I can tell you they are happy FTC Solar, Inc. to be in the room, innovative, bankable, and competitive. Our team is a known counterparty with decades of relationships, and our product continues to show very well. FTC Solar, Inc. is now a valued 1P tracker provider, and we see a significant opportunity to gain share. Our goal remains to be a top three tracker provider before long. And we hope to have much more to share on the new MSAs and new contracts backlog in the weeks ahead as we work toward that. On the product front, independent row architecture is the gold standard for solar. It has the highest production for asset owners, and has the best long-term effectiveness for solar farms. It is also ideally suited for automation in construction and O&M activity. I have shared that I believe we have what is unquestionably the fastest and easiest to install tracker in the marketplace, independent row or otherwise, a product that is superior on a total installed cost basis, one that can be built from piles to mounted modules with an unmatched efficiency of 0.053 labor hours per module. Driven by our innovative Python clips, slide-and-glide rails, and open trunnion design and power cinch clips. You can see from the customer comments as we have announced some of the recent wins, that customers are already recognizing the benefits of this efficiency. And our team is focused on achieving another 20% in labor. This is crucial as labor shortages are increasingly a pinch point for the industry, and expected to continue, and as labor continues to increase as a proportion of the total project cost. We have engaged with Tier 1 EPCs and developers. Due to our constructability savings, they tend to look at the total install cost of our tracker rather than just price. As more in the industry recognize our total cost of installation advantage, it should help further insulate us from pricing concerns or competition on projects. 2025 was a strong step forward in positioning for what is ahead. As we doubled sales while expanding the balance sheet, built out the product set, expanded our pipeline, and continued building a foundation of new project wins and MSAs. We have definitely been on a steady upward trajectory during my time with FTC Solar, Inc. Quarterly revenue levels for Q4 were three times higher than when I had started, gross margin went from double-digit negative to double-digit positive, and adjusted EBITDA loss improved to where we nearly reached some breakeven milestone. Our enthusiasm does not stem from what happened in the past alone. It comes from what is ahead. While the solar industry endured a challenging 2025 from a regulatory uncertainty standpoint that will have some carryover effects into 2026, FTC Solar, Inc.'s positioning is significantly improved, and we are closer to achieving broad adoption from Tier 1 players than we have ever been. Our financial progression will not always be linear, but we have made great progress so far and are building a solid base of orders to enable strong long-term growth. We have done a great deal to prepare the company and lay the groundwork for the strong growth ahead and aiming for a top market share position, and I firmly believe that is possible. I remain incredibly optimistic about the prospects of the business and I look forward to providing you with continued updates on our progress in the months ahead. With that, I will turn it over to Cathy. Cathy Behnen: Thanks, Yann, and good morning, everyone. I will provide some additional color on our fourth quarter and full-year performance and our outlook. Beginning with a discussion of the fourth quarter, revenue came in at $32.9 million, which was above the midpoint of our guidance range of $30 million to $35 million. The quarterly revenue level represents an increase of 26% compared to the prior quarter and an increase of 149% compared to the year-earlier quarter. GAAP gross profit was $6.9 million, or 21% of revenue, compared to gross profit of $1.6 million, or 6.1% of revenue, in the prior quarter. Non-GAAP gross profit was $7.7 million, or 23.4% of revenue, marking one of the highest levels in company history and our best as a public company. The strong gross margin performance was driven primarily by a favorable product mix in the quarter. This quarter's result compares to non-GAAP gross profit of $2.0 million in the prior quarter and a $3.4 million gross loss in the year-ago quarter. GAAP operating expenses were $10.6 million. On a non-GAAP basis, operating expenses were $8.2 million. This compares to non-GAAP operating expenses of $7.4 million in the year-ago quarter and $8.0 million in the prior quarter. Moving to GAAP net loss, as a reminder, the warrants which were issued as part of last year's capital raise are subject to liability rather than equity accounting, and therefore require us to reflect changes in the warrant fair value each quarter in our GAAP financials. If our share price goes up during the quarter, as it did in Q4, it will show as a noncash loss, and conversely, a share price decline would show as a gain. The share price appreciation we saw in the fourth quarter drove an increase in the fair value of the warrant liability of about $26 million. This is a noncash accounting adjustment that does not reflect the underlying business performance or cash flow, and will be excluded for purposes of adjusted EBITDA, but does impact our GAAP financials. So including that adjustment, GAAP net loss was $33.7 million, or $2.23 per diluted share, compared to a loss of $23.9 million, or $1.61 per diluted share, in the prior quarter and a net loss of $12.2 million, or $0.96 per diluted share post-split in the year-ago quarter. On an adjusted EBITDA basis, we almost achieved breakeven, posting a loss of just $300,000, which is our strongest result since becoming a public company. That excludes the net of approximately $33.5 million for the change in fair value of the warrant liability, certain transition costs, as well as other noncash items. This represents our best adjusted EBITDA result in six years and a substantial improvement from adjusted EBITDA losses of $4.0 million in the prior quarter and $9.8 million in the year-ago quarter. Overall, another solid quarter of financial progress delivering some of the best results we reported in years. The contracted portion of our backlog now stands at $491 million, with approximately $60 million added since November 12. To touch briefly on annual results, for the full year 2025, revenue was $99.7 million, representing a 111% increase over 2024. The increase was primarily attributable to higher product and logistics volume, partially offset by a decline in ASP. GAAP gross profit was $1.1 million, or 1.1% of revenue, compared to a gross loss of $12.6 million, or negative 26.6% of revenue, in the prior year. On a non-GAAP basis, gross profit was $3.2 million, or 3.2% of revenue, compared to a gross loss of $10.9 million, or negative 23% of revenue, in the prior year. The higher volumes and increased absorption were the primary drivers of the significant year-over-year improvement, which was partially offset by higher tariff costs. GAAP operating expenses were $34.5 million. On a non-GAAP basis, OpEx was $29.4 million, which compares to $35.5 million in the prior year. So we were able to take OpEx costs down 11% on revenue that was doubled year over year, demonstrating our continued focus on efficient growth. GAAP net loss was $76.9 million compared to $48.0 million in 2024. Adjusted EBITDA loss, which excludes the change in fair value of warrants, stock-based compensation expense, and other noncash items was $24.3 million compared to a loss of $43.1 million in 2024. With that, let us turn our focus to the outlook. Our targets for the first quarter call for the following: revenue between $20 million and $25 million; non-GAAP gross profit between negative $500,000 and positive $2.3 million, or between negative 2.5%–9.2% of revenue; non-GAAP operating expenses between $8.2 million and $8.9 million; and finally, adjusted EBITDA loss between $9.6 million and $5.9 million. For the full year 2026, we expect to continue to grow faster than the industry as our recovery progresses. Due to the timing of orders, which followed some regulatory uncertainty in 2025, as well as the ramp-up of our MSA project, we expect the results will be weighted to the back half of the year. With that, we conclude our prepared remarks, and we will turn it over to the operator for any questions. Operator? Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to enter a question, you need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. First question comes from the line of Philip Shen of Roth Capital Partners. Your line is now open. Philip Shen, your line is now open. Can you unmute? Philip Shen: Hey, all. Sorry about that. Congrats on strong results, and good news that you have in the quarter. I wanted to check in with you on the 2026 outlook. So you talked about significant growth. I am guessing you may not want to quantify, but was wondering you could qualify or provide some color on, you know, what kind of growth we could see in '26 year over year. Yann Brandt: Yes. No, thanks, Phil. Appreciate the question. Yes, look, we are really excited about where FTC Solar, Inc. is sitting from a competitive landscape standpoint vis-à-vis our peers. The overall market dynamic, obviously, you know, continuing to sign MSAs with large volumes both in the U.S. and abroad. You know, we are seeing good growth, you know, obviously, some seasonality around the timing of the early part of the year. Really strong ending to 2025, and results '25 compared to '24. But, you know, it really comes down to where we are from an execution standpoint that gives us the enthusiasm and optimism, really adding strong talent to the sales pool. We, you know, we and me in particular, who has been on the road full-time talking to the EPCs and developers and IPPs around the world. There is a strong need for diversification. There is a need for constructability features that puts FTC Solar, Inc. into a product mix with each of the companies. So I think a really important quantifiable trend and I will qualify it, is around approved vendor lists, particularly with the EPCs that make a large number of the procurement decisions of who they are going to use on their pools of projects. You know, now being on eight of the top 10 EPC AVLs, is a strong indicator, and it gives our sales team the ability to go and now close those projects. But that is, you know, that is what comes along with the process of developing a product portfolio is you develop it on a technical basis, then you have to go out and sell it and get into a position to be approved. And, obviously, our improved bankability throughout the year and the growth has been a good indicator for those EPCs to then add us to the approved vendor list and put us into the bidding cycles. Philip Shen: Great. Thanks, Sean. Hey. You guys also talked about the backlog does not include almost two big ones you guys have publicly announced since Q1. And then think you alluded to more MSA signings to come. And so you have a couple here that seem meaningful. Historically, we have seen some of your MSAs not pan out. So I was wondering if you might be able to give some color on, you know, the timing of these MSAs. Like, do we see meaningful revenue in '26 and '27 and then the ones that you might sign, maybe a little bit of insight into what they might look like. Thanks. Yann Brandt: And you bring up a good point, Bill, is when we talk about backlog, we talk about ink on paper, delivery schedules, etcetera. Right? So it is, you know, compared to our peers, a little bit more, you know, farther in the cycle. You know, it does not include verbals, for example. And the MSAs, you know, I know where you are coming from, and it is a great start. What I always tell to the team, but we are starting to see those MSAs flow through. And we expect to be able to announce some expansions of those MSAs in the near future as we have been working through them. And that is an indication of both strong partnerships, you know, us being able to convert through the project list that our partners have had. You know, some are developers, some are EPCs. And, you know, while there is obviously some air pocket in '26 and '25, that, you know, kind of caused projects to have to wait for capital to come in or some permits, you know, things that all obviously, everyone in the solar industry has been working through. You know, we have been able to find the right projects, get some moving forward. But we do anticipate an acceleration of the utilization of the MSA volume to accelerate here in 2026. Philip Shen: Then shifting to, you were talking about some of the air pockets of activity and challenges from last year. What are you seeing now? Do you think things have stabilized? Or, you know, we have been talking about some challenges sometimes on the front end with tax equity and FIOC uncertainty. And so I was wondering if you could provide some perspective on if there are some issues now on the front end of the chain. And then if you can address your liquidity situation a little bit more and help us understand, you know, from a you are getting to breakeven. You were almost breakeven last year for the full year. But what do you see ahead? Thanks. Yann Brandt: Yes. I, one of the important aspects is for FTC Solar, Inc. in particular is that we are looking at a lot more. Right? So on an FTC Solar, Inc.-specific basis, having more projects in the pool of possible additions for, you know, both bookings and revenue is that we are in more deals. And so that gives us more at-bats in terms of, you know, finding the projects that get to the start-of-construction phase. Right? And that is, I think, an important variable in the overall equation. Every project has a path to get to start of construction. There are positives. Obviously, the offtake environment for projects is as good as I have seen since I have gotten into solar in 2006. While, you know, some projects obviously have to contend with federal permit issues or wetlands, you know, there are certain challenges that come into it. But overall, I would say the trend is optimistic around more projects getting to the start of construction for the overall market, but specifically for us as I look at our both pipeline of projects in MSAs, for example, and the projects that we are bidding, it seems like there is an overall trend that it is trending in the right direction. And, you know, we are obviously trying to put ourselves into a position where we are in the best projects that are, that have the ability to move forward. And I think that is where the alignment is with the goals that both the developers and the EPCs have. We want to be building solar for the American consumers and companies that need the electricity more so than ever. And being part of that product mix where projects are allocated for diversification's sake amongst, you know, two or three tracker vendors, you know, FTC Solar, Inc. being a part of those top selected trackers more than I would say ever, and I think our financial results speak to that since going public. You know, it bodes well for where I think we are going. From a liquidity standpoint, you know, I am happy with where we ended up, you know, at the end of the year. Obviously, we had really great growth from '24 to '25. You know, just the back half alone, up 44% when our peers were flat to down. You know, we look at our Q4 results and by the narrowest of margins nearly hit the breakeven for profitability, which would have been phenomenal, but yet, still the best results that FTC Solar, Inc. has ever had. So I am, you know, I am happy for where we have been able to guide the company, you know, this kind of growth, while lowering overall operating expenses, is a good indicator of the efficiencies that we can gain. And I think there is more to be had, and we are certainly running the company as such. But, ultimately, it comes down to, you know, putting a, you know, great product into the market, being accepted by getting onto the AVLs, and then putting just a phenomenal sales team in the field that has the relationships. You know, I think when I think about the meetings that we are having and the feedback that we are getting, our sales team is going to be in a really good spot to take advantage of this consolidating market landscape in trackers and put ourselves in this top three position that I believe is in our future. Philip Shen: Great. Thanks, Yann. I will pass it on. Yann Brandt: Of course. Thanks, Phil. Operator: Thank you. One moment for our next question. Our next question comes from the line of Sameer S. Joshi of H.C. Wainwright. Your line is now open. Sameer S. Joshi: Hey, good morning, and thanks for taking my questions. So you have a considerable pipeline of $491,000,000 or other backlog. Do we know who the end customers are? Like, what industries or commercial or any other type of users are there? And then if more specifically, of the $61 million new orders received this quarter, any insight into the end customers would be great. Yann Brandt: Yeah. No. Great, great question. We do. You know, we have, obviously, the counterparty that is buying from us, you know, oftentimes, the EPC, but there are times including our new bookings in Q4 where we have more global relationships with the asset owners. You know, asset owners view the longevity of the product as well as, you know, the long-term benefit on the total installed cost basis that FTC Solar, Inc. has an advantage of, you know, as something that they want to invest in by going into multiple projects. So, you know, for the most part, our counterparties end up being the EPCs. You know, if you are talking about the counterparties on the offtake, certainly, big data center players are fighting over the generation. We are starting to see a pipeline of the behind-the-meter concept, you know, the bring-your-own-generation concepts that we see in the data center headlines. That is certainly starting to happen. You know, in the past quarter, we saw a project that had some interconnection cost issues that maybe would not pencil. That project is now under consideration for bring-your-own-generation data center play. Right? So, you know, that obviously will open up a new field of opportunities for solar at large, that FTC Solar, Inc. will be able to compete in. Sameer S. Joshi: Thanks for that color, Yann. And this, I think Phil asked you about this, but I will just dig a little bit deeper. The two MSAs just announced, the 1 gigawatt and the 840 megawatt. And they are three years. When should we start seeing, like, actual orders from this? And, also, are there any kind of regional exclusivity or any kind of exclusivity with these customers? Yann Brandt: Yeah. So let me speak about the Lubanzi one first, the one we announced last week. We, you know, that we do expect to start. We have projects that are slated for midyear. So, you know, the MSAs, the way they work is the MSAs and, you know, some MSAs are announced, some are not, where they then, you know, what we do is we oftentimes negotiate a standard template for purchase order. It makes contracting a lot easier. And we start doing co-designs on those sites. So, you know, the Lubanzi one, certainly, we have multiple projects that will start hitting in 2026. The new one we named here in this, in my announcements this morning, you know, that is a pretty large pipeline here in the U.S. We are excited about where that is going to go. We are deep in design on several of the sites. But they have to go through permitting. It is likely that there is, or it is possible that there are projects in the back half of the year that will start to book. But it also depends on, you know, it could very well accelerate if offtakers come to the table. You know, those projects in particular are more in a regulated market. So, you know, that is where the regulated utilities are under extreme pressure by offtakers to increase generation and make generation accessible to them. So we actually have seen some strong movement in the negotiations for the offtakes of those agreements that will then flow through and make permitting easier. And, you know, some do have projects listed. From an exclusivity standpoint, some are more volumetric in approach, but there is a win-win for both, i.e., a partnership where FTC Solar, Inc. is investing in resources to provide design services, things of that nature, and, obviously, priority access to some both design as well as capacity, and so it is something that you are seeing, you know, since I have gotten here. More and more customers wanting to enter into them, and that is what has gotten us to the 9 gigawatts. Sameer S. Joshi: Understood. Thanks for that color. And will you remind us of what the revenue model is for the SunPath software? Like, are there recurring revenues, or what kind of structure it is? Yann Brandt: Yeah. SunPath is actually, you know, a great tool, and it is an interesting one, you know, just looking at it from my seat. And, you know, FTC Solar, Inc. has been around a long time, so it has been under development and refinement for quite a long period of time. So it is, you know, while our 1P tracker is a relatively new addition to our overall portfolio, you know, our ability to bring 3D backtracking to the market is, you know, as good as anyone in the market. Right? So, and I think people see that. And, you know, revenue models differ by geography. There is a, you know, some customers prefer to pay for it upfront for a period of time. Some people view it as a recurring revenue model. You know? And it really depends on the site itself. It is a, I will say, the 3D backtracking software is particularly advantaged, you know, for FTC Solar, Inc. and for, you know, particularly for independent row architecture. When sites have undulating uneven terrain, the need for 3D backtracking for energy-yield increases is really important. And independent architecture where motors can run each row independently of each other, especially over the course of the year, is where you are going to see the best energy-yield advantages, which is why the market is consolidating around this independent architecture in my opinion. Sameer S. Joshi: And it includes your value proposition. Good to know. Just a question. Maybe this is for Cathy. The service margins were lower despite sequential growth in service revenue. Is this some GAAP reason, or are there more structural reasons? Cathy Behnen: No. Thanks for the question. So I think what you are kind of seeing flow through there is, you know, our service revenue includes all of our logistics services that we provide. And so as you see the increasing tariffs that came through, those are pass-through costs. And so that kind of squeezes a little bit of that margin. Sameer S. Joshi: Got it. Understood. Thanks for taking my questions, and good luck for 2026. Operator: Thank you. Thank you. One moment for our next question. Our next question comes from the line of John Wyndham of UBS. Your line is now open. John Wyndham: Thanks for taking the questions. I wanted to follow up on, I think, Phil Shen's a little bit about the liquidity. There is obviously the note in the release about not being in compliance with the purchase order covenant for the credit agreement. Can you just talk through the status of that and then what you need to do to be in compliance for it? Thanks. Yann Brandt: Yeah. No. Appreciate the question. You know, I will give you the high level, and I think we put in the note accordingly. This is, you know, our opinion is, and our lenders believe, it is a technical issue and a technical default. The language in the agreement was a little bit unintentionally restrictive and led to a surprising kind of accounting outcome, even from the lender's perspective. So while it sort of came in in the audit process, we have not yet resolved the issue, but we anticipate that we will. It was related to the bona fide purchase orders, bookings that we signed, and believe, you know, like I said, a technicality that led to a handful being excluded for the covenant. John Wyndham: Completely shifting gears, a lot of your competitors, Nextracker, Array, GameChange, have been making diversifying acquisitions in a tangential product category, whether it be wires, foundations, Nextracker is all the way out to inverters at this point. Just love your thoughts about how—your strategy around that, and whether you think you need to provide a more diversified product lineup to be competitive or you like single product? Just your general thought. Thanks so much. Yann Brandt: Yeah. I mean, look. I appreciate that they are doing that. And in some ways, understand the premise of it. Obviously, you know, our relationships as tracker vendors with procurement teams is, you know, such that they, obviously, the procurement teams are buying other things. While there is overlap with who you are talking to, the value proposition really, you know, depends on each unique product. Right? So, you know, obviously, when, you know, we are growing at a pace that exceeds what our peers are doing, so they are looking for, in my opinion, for growth in other things. So I certainly understand where they are coming from. You know, our focus is, like I said in the recording, is getting, you know, becoming a top three tracker provider, and we are well on our way for that. That is the importance of it. Hence, we have been adding to our sales team and growing, growing those, you know, our ability to do just that. It is a, like I said, dynamic tracker landscape for sure, you know? And both in what you are describing of our peers going elsewhere. But if you compare our growth here in 2025, and even heading into 2026, we believe our growth will be significant and well ahead of the market. And so we are going to, at the moment, focus on exactly what we are doing, which is, you know, getting on AVLs, converting the MSAs into projects. And that is exactly what we are going to do. John Wyndham: Can I ask a quick follow-up on that? Sorry to throw in three, but you, I mean, you make a great point. You are talking about being a top three tracker provider. Let us see. Let us use Array as a benchmark, $1,200,000,000.0 of revenue. That is 12x growth for FTC Solar, Inc. from here. So how do you think about timelines of achieving that? And then how do you feel about your ability to expand capacity to deal with that level of growth? Yann Brandt: Yeah. I mean, look. It is, like I think I said this before. It is not going to happen overnight. And it is likely not going to be linear. But if I compare the projects we are looking at on my first day at the company versus what we are looking at now, you know, I see 300, 400 megawatt projects on a weekly basis that we get to bid, and we are on the approved vendor list on both the IPP side and the EPC side. Right? Like, those are some of the prerequisites that come along with it. The headways that we have made on the product portfolio in order to get there, you know, the longer tracker, the washerless trackers, the terrain-following features, those are all things, you know, sometimes uniquely for a particular set of customers, because they are focused in a particular region or they have a certain way of installation. I do not think that we are going to have a capacity constraint if we are able to convert, you know, the MSAs or project opportunities into bookings. That is not going to be a limit to, you know, what we are able to do. We have a strong supply chain, both with our acquisition of Alpha Steel in Q4. That is going to put us in our own control of it, as well as our contract manufacturing, you know, both here and across the world. You know, it really comes down to what the customers are saying. Right? What are the EPCs telling us? What are they telling you around what the tracker mix is going to look like? Things can change pretty quickly. Right? And a couple years ago, it changed in a bad direction for FTC Solar, Inc. Now it is pivoted and moving into the right direction for FTC Solar, Inc. You know? And I would point to the back half growth in 2025 versus our peers as a leading indicator of that. But fundamentally, you know, I am relaying the optimism that I get when I sit down with customers, you know, both here in the U.S. and abroad, that they want diversification. There is a lot of concentration within some of the customers that they are trying to get themselves out of. And that is not a negative thing about our peers. Some are doing a really good job. But it is the need for what is the architecture that works for the sites that are evolving and who is going to do what they say they are going to do. And they are going to look at relationships in order to leverage their decision-making. And so it is an important moment for FTC Solar, Inc. to deliver what we are saying what we are going to do, and I think you see that in '25 that we were able to get customers to trust us and to buy from us. I think every MSA is another indicator of that. And so I do not look at it as a 5x, 10x, 12x, or more equation. I view it as, you know, I sit across the table, my team sits across the table of a customer, and we win one project at a time and one portfolio at a time. And that starts with MSAs, AVLs, etcetera. John Wyndham: Thank you so much. I appreciate your attention to my questions and your patience with me. Operator: Go ahead. There. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Jeffrey David Osborne of TD Cowen. Your line is now open. Jeffrey David Osborne: Thank you. Maybe just a few follow-up questions. The debt that John mentioned, $19,900,000.0, what, Cathy, specifically needs to happen to be in compliance with that? I missed the answer to that. Then in the event you needed to tap the ATM, I think you still have outstanding. Is that available to you, or can you just remind us of your liquidity options beyond what is on the balance sheet today? Cathy Behnen: So as John was saying, it is really just a technical definition that is in the agreement. So we are really working with the lenders to develop the right solution for that. So it is just ongoing discussions, you know, we have good confidence that it is all moving in the right direction. So we will be able to get to the resolution quickly. Yes. We still have, we still have the ATM available to us. We did use the ATM in Q4. It continues to be available to us moving forward. And so that, and we also have expanded liquidity also within the debt with our lender. Jeffrey David Osborne: Got it. Maybe just switching gears then for Yann. Post the FIAK announcement and maybe just give us a sense of the past month or so, what has the shifting patterns been as it relates to delivery schedules? Would be helpful to understand. And then maybe just at a high level, the sequential decline with Q1, how much of that is normal seasonality versus the adverse weather conditions that we have had across the U.S. over the past few weeks. Yann Brandt: Yeah. Look. I mean, I think you guys are more of an expert in the FIAK announcement, but some things were answered, some things were not. So overall, I think the market is continuing the way it was, and some tax equity providers are a little bit more cautious than others, but we have not seen that affect us in any particular way on a project or otherwise. And, you know, the cyclicality around Q1, I mean, I think it is pretty normal when you look at historically for us as well as our peers. You know, it is a, you know, our midpoint is modestly up year over year. Obviously, from a growth standpoint versus our peers that are down significant year over year in Q1. And I would like, if I were to put a root cause, I think, particularly for us, is it was rather difficult to contract in the middle of March and tariff Q2, Q3 last year? And I think that is what you are starting to see. You know, that is sort of a lagging indicator of what was really going on in Q2, Q3 of last year that muted where I was hoping we would be here in Q1. But, you know, it is not like the projects have gone away. It is just, you know, getting the contracting and really for them, for our customers, get the capital into those projects were delayed as the legislation and tariffs were figured out. Jeffrey David Osborne: Perfect. That is all I had. Thank you. Operator: Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

83天前Insight Analytics约5分钟阅读

CIEN 2026 Q1 财报电话会议

Operator: Good day, and welcome to Ciena Corporation's fiscal first quarter 2026 financial results conference call. All participants will be in listen-only mode. To withdraw your question, please note this event is being recorded. I would now like to turn the conference over to Gregg Lampf, Vice President of Investor Relations. Please go ahead. Gregg Lampf: Thank you. Good morning, and welcome to Ciena Corporation's 2026 fiscal first quarter conference call. On the call today is Gary Smith, President and CEO, and Mark Graff, CFO. Scott McFeely, Executive Adviser, is also with us for Q&A. In addition to this call and the press release, we have posted to the investors section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of Ciena Corporation's results of operations. A reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. Before turning the call over to Gary, I remind you that during this call, we will be making certain forward-looking statements. Such statements, including our quarterly and annual guidance, commentary on market dynamics, and the discussion of our opportunities and strategy, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. Assumptions relating to our outlook, whether mentioned on this call or included in the investor presentation that we posted earlier today, are an important part of such forward-looking statements and we encourage you to consider them. Forward-looking statements should also be viewed in the context of the risk factors detailed in our most recent 10-Ks and our forthcoming 10-Q. Ciena Corporation assumes no obligation to update the information discussed in this conference call whether as a result of new information, future events, or otherwise. As always, to allow for as much Q&A as possible today, we ask that you limit yourselves to one question and one follow-up. With that, I will turn the call over to Gary. Gary Smith: Thanks, Gregg, and good morning, everyone. Today, we reported strong fiscal first quarter financial performance. We delivered revenue of $1.43 billion in the quarter, our highest ever and at the top end of our guidance, reflecting strong execution across the business. Demand is incredibly strong with exceptional order activity in the quarter. This, along with long-term planning conversations with customers, gives us confidence in the durability of demand and our ability to drive growth as we move through the year and into 2027 and beyond. Adjusted gross margin came in at 44.7%, which was ahead of expectations, and we continued to drive increased profitability, illustrated in part by our adjusted earnings per share of $1.35, which is more than double our EPS in Q1 of last year. These record results reflect Ciena Corporation's market leadership and reinforce our role as a critical provider of the high-speed optical systems and interconnects that enable AI workloads to scale and to be monetized. In fact, we are taking meaningful share of the increase in AI-driven connectivity spend as customers trust our technology leadership, deep collaboration, and proven execution. To this end, we believe 2025 will ultimately stand out as one of our strongest years of market share gains, and we believe it will be even stronger in 2026. With our recent inclusion in the S&P 500, we may have new listeners on the call, so allow me to begin with a brief summary of our business. At the highest level, Ciena Corporation is the global leader in high-speed connectivity. We build solutions that move enormous amounts of data across cities, data center campuses, countries, and oceans, quickly, reliably, and at massive scale. Through industry-leading optical systems and interconnect solutions along with automation software and services, we power the world's most advanced networks, helping service providers, cloud companies, hyperscalers, governments, and enterprises meet explosive connectivity demands, especially in an increasingly AI-driven world. Our foundational business has always been to address connectivity needs in the wide area network, or WAN, spanning subsea, long-haul, metro, and data center interconnect, or DCI. We remain the undisputed global leader in this domain. Today, much of this business is driven by the continued adoption of cloud services across our global customer base and the network infrastructure required to support it. It is also increasingly fueled by the rise of large-scale AI data centers that need to be interconnected with DCI solutions linking data centers across campuses, regions, and continents. Additionally, service providers around the world have begun reinvesting in their optical transport infrastructure alongside autonomous networking capabilities, both to support surging AI-driven traffic growth across their networks and to improve operating efficiencies. And service provider and cloud provider customers are increasingly working together to deliver connectivity through managed optical fiber networks, or MOFN, as they navigate regulatory requirements and capacity needs in the U.S. and in other new and emerging geographies around the world. By way of example, our orders in India were up 40% year over year, reflecting ongoing high demand specifically for MOFN in that country. Together, we view these as structural multi-year demand drivers that reinforce the critical need to serve WAN-connected connectivity requirements, fueling both our growth and continued momentum. We expect revenue from the MOFN application will continue to be an important contributor to overall service provider growth going forward, and we are uniquely well positioned to further strengthen our leadership in high-speed WAN connectivity for service providers, cloud providers, and the growing group of neoscalers from whom we saw increased momentum in the quarter for both direct and MOFN-related design wins. In parallel to this, we are focused on the significant expansion of our addressable market opportunities in and around the data center. It is now well understood that cloud providers are investing heavily in data centers to deliver on both the current and future promises of AI. In just the last few weeks, we have seen announcements from the four largest global hyperscalers that outlined a step-function increase in their 2026 CapEx to more than $600 billion in aggregate, driven by infrastructure needs related to AI training and inference workloads at massive scale. These build-outs involve several areas of opportunity for Ciena Corporation, not only in the WAN, but increasingly in and around the data center, including scale across, scale out, scale up, and our unique data center out-of-band management solution, or DCOM. I will start first to discuss the scale across, which is really an application supported in part by our interconnects portfolio, which is emerging as AI data centers grow in size and begin to hit power and space limitations. To overcome these constraints, customers are distributing compute across multiple sites and using high-speed performance optical networks to interconnect them, effectively creating one single AI training environment that operates across distance. We believe that we are in the very early stages of this wave of opportunity, and we are already experiencing extraordinary demand, with three hyperscalers choosing to use our optical solutions for their training applications across distance, which we have talked to you about in recent quarters. And all three hyperscalers are significantly ramping, including additional orders for multiple additional from the first hyperscaler we announced in Q3 2025. We are addressing this demand for scale across solutions with our RLS platform, the de facto industry line-system standard for cloud providers, as well as our 800ZR pluggable optics. To underscore this, we realized a second consecutive record quarter for RLS shipments and revenue. We expect to expand our role in scale across applications with the introduction of our new RLS HyperRail solution. HyperRail delivers an order-of-magnitude increase in fiber density within existing rack footprints, helping customers scale traffic while reducing, and in some cases avoiding, costs and complexity associated with adding substantial numbers of amplifier huts. The solution, developed in close collaboration with our hyperscaler and service provider customers, represents another inflection point for Ciena Corporation, and we expect to be first to market again. In fact, we will be demoing the first prototype of our HyperRail system at the OFC trade show in a few weeks’ time. This solution, we expect, will begin standardization at 2026 and will ramp in 2027, allowing us to capture share and incremental value as these distributed AI training expands across regional clusters and moves to further distances. In addition to scale across, we see meaningful opportunities inside the data center, including the scale-out connectivity between racks and scale-up connectivity within racks. As we know, the physics of copper inside the data center is reaching its limit. While there will be a place for copper solutions with shorter distance scale-up interconnects, network architectures will include more optical co-packaged interconnects, and over time, as data rates and bandwidth requirements continue to increase, coherent optical connections will overtake IMDD ones for shorter reaches to address growing capacity volumes inside the data center. And as the world's leading high-speed connectivity company, we are investing meaningfully to intersect these important use cases. We continue to demonstrate progress toward our in-and-around-the-data-center growth objectives, and our expanding interconnect portfolio, including ZR and ZR+ pluggables and optical components, is well positioned to address the rising power and space constraints associated with those evolving scale-up and scale-out architectures. We have just reached an important milestone with our first product introduction following the Nubis acquisition last fall, which addresses scale-out and scale-up needs. Last week, we announced the Vesta 206.4T optical engine, which is the industry's first high-density, low-power, open-ecosystem pluggable CPO solution. Samples of the Vesta product will be available in calendar Q2 2026, and we are actively discussing Vesta, as you would expect, with our cloud provider customers and partners, and we are excited to be showcasing it at OFC again in a few weeks' time. For scale-up opportunities inside the rack, where XPUs are getting faster and driving heat and power concerns, we are advancing the Nitro Linear Redriver technology, also from our Nubis acquisition. We believe this is a critical element to active copper cabling solutions, which extend the distance that signals can travel and reduce power by up to 80% versus AEC-type solutions. We also expect samples of the Nitro Redriver to be available in calendar Q2 2026. Finally, our data center out-of-band management, or DCOM, solution continues to represent another significant opportunity inside the data center. Leveraging our XGS-PON and routing and switching platforms, DCOM was initially designed with Meta to meet hyperscale provisioning and configuration requirements. We continue to work with them and are engaged in technical discussions with two other major global hyperscalers. Let me summarize by emphasizing that demand in Q1 2026 was unprecedented, reflected in very strong order intake and a meaningfully higher backlog. We executed well and demonstrated strong performance on both top and bottom lines. This exceptional demand was broad-based across service providers, hyperscalers, and an expanding set of neoscalers. Opportunity continues to build in waves, from our traditional and expanding WAN business to multiple applications in and around the data center. Furthermore, to monetize AI for both training and inference workloads—the latter of which represents another significant growth vector still in its infancy—the foundational requirement is again high-speed connectivity. These dynamics, combined with our deep collaborative customer relationships that improve our long-term visibility plus our continued focus on execution, give us increased confidence for multiyears of strong growth and profitability ahead. I will now turn the call over to Mark to cover our financial performance and guidance in more detail. Thank you, Mark. Mark Graff: Thank you, Gary, and thanks everybody for joining the call this morning. As Gary noted, demand remains robust and has been, in fact, increasing. We are focusing our resources to not only strengthen our financial results, but also to secure near- and long-term supply and manufacturing capacity to deliver for both our customers and our owners. The results delivered in Q1 are a testament to the progress we are making and will continue to make. With that, I would like to update progress against our financial priorities previously discussed. We continue to make progress to our next milestone of 45% gross margin, as witnessed by our 44.7% gross margin performance in Q1. Q1 results benefited from product mix, inclusive of contributions from incremental demand for capacity infills, the execution of cost reductions, and early progress on advancing the value exchange with our customers. Longer term, an improving price environment, new product inflections like HyperRail, and focused cost optimization all provide opportunity to deliver improved gross margins. Our balance sheet continues to be a source of strength with working capital improving, driven by cash from operations yielding $228 million in Q1, a decrease in cash conversion of three days, and inventory turns growing to 3.2 times. With respect to capital allocation, we are taking a balanced, disciplined approach, prioritizing R&D to advance our technology leadership in the fastest growing segments of the market and to drive product velocity, all while holding OpEx levels approximately flat to 2025, delivering significant operating leverage. We are investing our CapEx to expand capacity, scale output, and meet rapidly growing demand. In Q1, capital expenditures were $74 million, inclusive of the accelerated capacity investments. For context, this is approximately two to three times our average CapEx over the last twelve quarters. Let me take a moment to comment on the industry supply and its impact on Ciena Corporation. As you have heard from many others in the industry over the last few weeks, the supply landscape remains challenging. To be blunt, our revenue in the first quarter would have been higher but for these constraints. Our close relationships with customers give us early visibility into their demand and our need to expand capacity to address it. We have been working with partners to scale by way of two key initiatives. First, we continue to partner with contract manufacturers with respect to their manufacturing capacity and output expansion, which is yielding strong results. Second, we are deeply engaged with component vendors, which is where more of the industry challenges exist, to secure and expand supply, including through responsible long-term purchase commitments. As shown by our Q1 results, we are navigating the supply environment well and are investing to expand capacity. However, we expect demand will continue to outstrip supply, at least for the next several quarters. Turning to Q1, as Gary noted, revenue reached $1.43 billion, up 33% year over year and a quarterly record for the company. Our optical revenue was up over 40% year over year, led by Waveserver and RLS product lines, each of which were up over 80% from the year-ago period. We had three greater-than-10% customers, including two global cloud providers and one Tier 1 North American service provider, with strong MOFN activity. Regarding backlog, as Gary discussed, our order intake has been incredibly strong over the past ninety days, leading to a new record by a significant margin. Given the extraordinary nature of the demand, we want to share with you that backlog has increased by approximately $2 billion this quarter to exit Q1 at approximately $7 billion. In fact, nearly all new orders we are taking now will be for fulfillment in fiscal 2027, providing ongoing confidence in our outlook. As a result, we expect backlog to continue to grow throughout the year. Rounding out Q1, adjusted operating expense met expectations, leading to an adjusted operating margin of 17.9%, 190 basis points over the midpoint of our December guide. We achieved adjusted net income of $197 million in the quarter, which delivered an adjusted EPS of $1.35, more than double a year ago. We exited the quarter with a cash balance of $1.4 billion after purchasing approximately 400,000 shares for $81 million under the current repurchase authorization. Before I discuss our Q2 and updated 2026 outlook, I would like to make a few comments on tariffs. As you know, on February 20, the Supreme Court struck down the IEEPA tariffs originally implemented in March 2025. As previously stated, these tariffs have been immaterial to our financial results. While we have noted this ruling as a subsequent event in our forthcoming 10-Q, it has not had any impact to our reported results. The administration has announced a new global replacement tariff under a separate legal authority with final rates still pending. Based on current information, we believe that these developments will have an immaterial effect on our business. Obviously, we are monitoring new developments and working closely with customers and suppliers to assess any future impacts. Now, with respect to our view for the remainder of the fiscal year and Q2, given the current dynamics, we now expect to deliver revenue for fiscal 2026 between $5.9 billion and $6.3 billion, essentially raising our year-over-year growth rate from 24% to 28% at the midpoint of the range. We believe this range appropriately balances the strong market demand with ongoing industry supply conditions. Given our Q1 results and the expectations for Q2, we expect our 2026 gross margin to be between 43.5% and 44.5%, one point above our December guide and 130 basis points improvement above 2025. With the first half exceeding our expectations and the supply challenges we are actively managing, we now expect first-half and second-half gross margins to be roughly equivalent. And we now expect adjusted operating expense of approximately $1.52 billion to $1.53 billion, resulting in adjusted operating margin of 17.5% to 19.5%. This small difference in OpEx is really due to the stronger demand environment. In Q2 2026, we expect to deliver revenue in the range of $1.5 billion, plus or minus $50 million; adjusted gross margins between 43.5% and 44.5%; and adjusted operating expense of approximately $375 million to $390 million, which will result in an adjusted operating margin of 17.5% to 18.5%. To conclude, we had a strong start to fiscal 2026. Demand for our technology is robust and durable. We see multiple waves of opportunity ahead, from continued AI training to expanding inference workloads, both domestically and internationally, to new HyperRail solutions and faster interconnects inside the data center as higher-speed requirements come online. We continue to offer market-leading, innovative technology that uniquely enables AI both in the WAN and in and around the data center, and we continue to thoughtfully allocate shareholder capital to deliver value to both our customers and our owners. Given all these opportunities, we are confident our momentum will extend beyond 2026. With that, we will now take questions from the sell-side analysts. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from Amit Daryanani with Evercore ISI. Please go ahead. Amit Daryanani: Yep. Thanks for taking my question. I guess I have two from my side. One of the things, just on the gross margin side, really impressive performance in the first half of the year despite some the supply chain issues folks are having, and I think mix was slightly negative. Just spend some time on what are the ups levers on gross margins that are helping you out, and are you seeing a shift in pricing at this point whatsoever? That would be really helpful to understand. Mark Graff: Sure. Hey, Amit. It is Mark. Yeah, I agree. We had a very strong performance. We are quite happy with the 44.7% that we printed this morning, and it is really driven by a couple of things. We saw customers requiring increased capacity, both in hyperscalers and in service providers, that increased their infill rates, and so we got quite a bit of tailwind from that. Secondly, I think the engineering team has done a wonderful job of engineering cost reductions into our products that is really separate from the supply chain activities that you are seeing us increase revenue with. So between those two things, I think we are really seeing some good tailwinds. Moving forward, I think we have got a few more levers that we are going to start working through. You mentioned price increases. One of the things that we are trying to do is really balance the price increases with our share position in the market, and I think what you have seen is we have been able to increase our gross margin as well as increase our share, and so I think we are doing a really good job of balancing those two things. I think moving forward, you will see even more aggressive cost reductions, and then the price increases that we talked about at the end of last year—those really have not started to fully kick in until the second half of the year. So I think that creates additional tailwinds for us. So all in all, again, I think we are making really good progress towards that 45% waypoint, and you should see that throughout the year. Amit Daryanani: Got it. And then if I would just follow up, how do you see the pluggables market, especially with 800-gig ramping up through fiscal 2026 and 2027? And if you could just maybe compare and contrast a bit about your positioning in 400 versus 800, that will be helpful as you go into the next cycle. Thank you. Scott McFeely: Yeah, I mean, we have seen pluggable revenue increase period over period, and we have talked in the past about our interconnect business, and we went from 2024 to 2025, that doubling sort of in the rearview mirror, and then we talked about it as a major portion of our inside and around the data center with our aspiration to triple that this year, and we are well on track for that. So we do see significant growth. From a competitive perspective, as we have talked about in the past, through choices that we made to focus early introduction of the technology in the last generation more on our systems business and our pluggable business because that was a bigger opportunity, we were not necessarily first movers in that market, so that probably cost us some share and probably cost us, actually, frankly, some margin dollars. That is not the case in the 800-gig. We are first to market there, and 800-gig is moving quite along. Now, I will say, though, and I just want to make sure people understand this, is that we are talking about capacity adds across the portfolio. It is not just pluggables. Mark mentioned the growth that we are seeing on Waveserver. If you want to be the strategic supplier to the web scalers, they have networks that span campuses, metros, national networks, submarine networks. You have to have all the things in the toolkit, and we are seeing increases across all of those components, system business and pluggables. Operator: And the next question comes from Simon Leopold with Raymond James. Please go ahead. Jeff Cocci: Yeah, thanks, guys. Jeff Cocci in for Simon. So just a couple of housekeeping items. Can you give RPO for the quarter and the percentage of the $7 billion backlog that is product? And then, while you are doing that, maybe you could just give the percentage of sales that are ZR pluggables for the quarter. And then I guess my second follow-up would be what percentage of the telco revenue is now MOFN, and how did traditional telco grow? Thank you. Mark Graff: Yeah, there were quite a few questions in there, Jeff, so let me start. If you think about the backlog, I think right now roughly 80% is products and software, and the rest I would think about as services. We are not going to really disclose the percent of pluggable revenue in the quarter. As Scott said, we expect that to triple year on year, and we are on track to deliver the 800 pluggable ramp that we talked about. Sorry, I lost track of all your questions. Scott McFeely: What else did you have? What— Mark Graff: RPO and then percentage of telco that is MOFN. Gary Smith: I will take percentage on the MOFN thing for you. By the way, I would say the interconnect is somewhat of a proxy at this stage for pluggables to some extent, so we clearly disclose all of that. I would say you are looking at about 10% to 15% of our service provider business being MOFN. We have visibility to a fair amount of it, but not all of it. We partner with service providers on identifying some of these particular build-outs, and we are seeing a good steady ramp in that. You are seeing service provider growth; I think in the first quarter, it is like 22%. Of that growth rate, MOFN is a big contributor to it. But I think overall, it is going to be about 10% to 15% of our total service provider business. Mark Graff: And then RPO, if you think about RPO as a percent of the orders that we took in Q1, Jeff, you should be thinking roughly 60%. Jeff Cocci: Great. Thanks, guys. Operator: And the next question comes from Ruben Roy with Stifel. Please go ahead. Sahid Singh: Hey, guys. This is Sahid Singh on for Ruben Roy. I guess just digging into and following up on the last set of questions around backlog, you guys have gone from $5 billion last quarter to $7 billion this quarter. I think you just said 80% of the $7 billion is products and software. And so if I just apply that 80% to the 5, that is implying $1.6 billion in product and software growth, which, you know, loose math and loose assumptions there. So then I am thinking through, okay, last quarter you said Meta expanded their DCOM engagement, the RLS customer expanded, there are a couple more hyperscalers added on, and we are talking hundreds of millions per opportunity as you have mentioned. So could you just help us bridge the gap and perhaps provide some color as to what the incremental here is relative to the expansions that were announced last quarter or the new hyperscalers that were announced? Gary Smith: Yeah, I would say that first of all, it is very broad demand that we are seeing. It is very strong on service providers, submarine, MOFN, and obviously hyperscalers. And I would also say hyperscalers in their various applications, because I think the point to note is we have very broad relationships with most of them now, across multiple applications—submarine cable, long-haul, metro, in and around the data center, and with things like DCOM inside the data center as well. So basically, if you look at all of those from an order point of view, they were all up and to the right. And I think that is sort of systemic around the drive of the traffic outside the data center now. You are seeing growth in cloud, general cloud. You are seeing inference. You are seeing this new market of training now emerge. As I said in my comments, we have now got three hyperscalers deploying us for training, and we are at the very, very early stages of that. So you put all of that together and that yields the incredible demand that we saw in Q1. And as Mark said, despite the fact that we are ramping our capacity for delivery as seen in our results, demand is going to continue, we believe, to outstrip our ability to supply, and that is going to continue for, we believe, this year. And so we are going to end up with a larger backlog than we have right now as we turn the year, despite the fact that we are ramping our capacity strongly throughout the year and obviously through 2027 and 2028. Mark Graff: Yeah, and the one thing I just maybe want to clarify a little bit for you: that 80% is across the entire $7 billion of backlog, not just the $2 billion increment. So you can look through where we ended Q4 to where we are ending Q1 and back into, I think, the information you need. Sahid Singh: Yeah, I think I got you there. The $2 billion was simply coming from the incremental, as you are saying, but I assumed 80% was sustained through last quarter as well, which may not be the case is what I am understanding. Okay. On the follow-up, maybe just touching on what Amit had asked at start of the call around pricing. How much of pricing increase is currently baked into backlog relative to volume? Mark Graff: Yeah, we are probably not going to give you that number specifically. As we disclosed in Q4, the pricing increases that we talked about were really on the new orders, and because we had such a big backlog at the time, most of that was going to be seen in the second half. So you should expect those price increases to show up in Q3 and Q4. Operator: And the next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Meta Marshall: Great, thanks for taking the question, and congrats on the quarter. Maybe just on impressive operating levers that you guys are out of the business? And just where are you finding those levers to keep OpEx flat as I assume bonus plans need to reset? There is obviously a lot of projects that you are working on with various hyperscalers. And then second, did you mention whether there were any 10% customers within the quarter? That is just a small nit, thanks. Mark Graff: Yes, Meta. So on OpEx, first part of your question, we were able to hold OpEx flat year on year, really, for three reasons. The first is, if you recall last year, each quarter it seemed that we were increasing our OpEx guidance to take into account the increased performance that we were doing last year. We basically reset that, and we were able to scoop that increment and reinvest that back into the business. So that is one. Two is, you will recall, we announced a small RIF—somewhere between 4%–5% of the population. We have been able to harvest those savings and reinvest into the business. And then you will recall that we ceased further investment in our 25-gig PON activity. So those three things, we were able to scoop those up, reinvest them back into the business, and that met our needs year on year and so, nominally, that is how we got to that flat OpEx and the, to be honest, quite impressive operating leverage. On the 10% customers, we had three. We had two hyperscalers and one Tier 1 North America service provider that is pretty exposed to MOFN. Meta Marshall: Great. Thank you. Operator: And the next question comes from Karl Ackerman with BNP Paribas. Please go ahead. Karl Ackerman: Yes, thank you. I have two, Mark. I will ask both of them for you. Could you speak to the duration of this accelerated CapEx spending, which seems driven by enhanced visibility you now see extending over a multiyear period? And for my follow-up, you also spoke about more aggressive cost reductions to support margins. I am curious if you could expand on that and whether that relates primarily to further outsourcing to the EMS partners or if there are other things we should consider. Thank you. Mark Graff: Yeah, so let me take those, and on the second one, maybe Scott can add some more color here. On the duration of CapEx, you will remember in our December call we talked about we doubled our CapEx year on year, and within that doubling of CapEx, we were increasing our productive CapEx by 50%. So really think about working with our contract manufacturers to expand their manufacturing capacity. Now, obviously, that has some lead time, and so we are investing through the year, and we expect that increase in capacity to start showing up towards the end of the year. And the intent was really to set up a 2027 plan for us. I am not going to go into 2027 yet, but the intent is to invest in 2026 and to realize the benefits in 2027. On the cost reductions, I would not say that it is more outsourcing to EMS folks. I think our engineering and product teams are really looking at the cost components of the products and looking at different materials, different solutions, and trying to drive a lot of those costs out. I would also remind you that we have got the most vertically integrated supply chain, and that drives a lot of both cost advantage for us, but I would say right now, more importantly, supply stability. And so between those two things, as I said, we are starting to see the ability to increase revenue as well as bring in a little better cost profile. Scott, if you have got something to add. Scott McFeely: Yeah, I think on the cost reduction piece, I think of it as three levers. One is we are driving a lot more volume through the machine, and we do have some fixed costs; you get a tailwind there. That is the first one to get your mind around. On the engineering aspects or design aspects that Mark talked about, think of it as a couple of things. Number one is where you do not change the function of a product, but you are going after the cost base of it, and that can be through more vertical integration, that could be through substituting parts for different parts, that could be opening up your supply chain to multiple other sources, and we are pushing on all of those levers, by the way. The other piece of the design stuff is as you go from generation to generation, where you are changing the function of the products, you get back to those price-value conversations with customers and, you know, sticking more dollars into our pocket as we do those transitions, and those are going on all the time to some degree. The third piece—and we did not talk a lot about it—it is not all on the lines that you said where we are depending more on the EMSs, but we are constantly looking at that supply chain design, the whole ecosystem design, and trying to optimize that to get cost out of it as well. So it is not the engineering design, but the supply chain design. And we are pushing on all of those, and that is why you are seeing the results you are getting. The team is doing a good job executing on those, and there is more in the future. Karl Ackerman: Very clear. Thank you. Operator: And the next question comes from George Notter with Wolfe Research. Please go ahead. George Notter: Hi, guys. Thanks very much. Was curious about your comments about the progress with the value exchange with customers. Obviously, you are raising pricing. I know it is going to come through later in the year as you eat down the backlog. But just stepping back and thinking about the space, you have got higher memory costs, you have got component suppliers that are being really aggressive on price—they are repricing their own backlogs. It just seems like it is an environment you guys could be more aggressive on price and even perhaps reprice your own backlog. So I am just curious, why not be more aggressive here given the supply-demand dynamics and what is going on in the supply chain? Thanks a lot. Gary Smith: Yeah, George, this is Gary. I think you know we have talked a lot about the good things that we are doing to manage our margins and the rest of it, including the value we are balancing, but it is a balance to it all, and that is what we are trying to strike as we go through this. You are seeing it translate into improved financial performance in all dimensions—market share gains, revenue, gross margin improvement, and operating leverage. We are seeing that, and it is a confluence of things. Scott talked about some of the cost reduction stuff. Mark talked about the value exchange. All of those things are happening and are getting weaved into the business over time. As you know, we take a very long-term view of how we run the business, and I think we see this as a multiyear opportunity for us, and we will strike a balance between those challenges of supply chain, because you have got a lot of shortages going on right now as well, which we are navigating through pretty well. So, it is the confluence of those things that result in the approach that we are taking. Mark Graff: Gary said it well. Pricing is a lever, George, but we are also looking at can we improve cash conversion, can we get better terms and conditions, can we get longer-term purchasing commits with maybe some more non-cancelable, less risky terms as we satisfy this quite large backlog. We are not taking pricing off the table, so we should say that. And you are right, we are seeing some cost increases coming from the supply chain, and we are in early days of having those conversations with customers, so I do not want to get too far into that. But I think we are trying to pull on all the levers and overall, I am pretty pleased with the progress we are making so far across the board. George Notter: Got it. Super. Anything new competitively? Obviously, the competitive environment is, I guess, more benign than it has been in recent years. You have had some consolidation among competitors. Anything new in terms of their behavior on pricing or terms or just general competitiveness in the space? Thanks. Gary Smith: On the WAN business, I think you articulate the environment well there. We are fortunate because we have got such close relationships with the hyperscalers to get out in front, as Mark said, around the capacity and component supply to that, which is showing up in our growth rate. We were able to stay out ahead of that, and we took market share in 2025, and I think we will take even more market share in 2026. This is all really now about—we are on our next generation of line systems with the HyperRail; we are on our next generation of modem technologies in their various forms. So, our competitive position continues to improve there. Obviously, as you get in and around the data center, particularly inside of it, it is a different set of competitors. It is a different set of dynamics. What we bring to the table there is our leading high-speed technology and our systems knowledge, frankly, and translating that into the component purchase we believe is meaningful, and we have got a lot of the hyperscalers leaning in with us on that. But it is a different ecosystem and environment. We have got new and different competitors there, some of which are very large. So we do not underestimate that, but we think we are coming from a position of strength and uniqueness around our optical technology, as you are really looking at the opticalization—if that is a word—of the data center, as the electrical stuff runs out of steam from a physics point of view. And we are starting to pick off some of those applications where that is most pronounced. DCOM, I think, is a decent example of that. We have got the new technology that we announced in market from the Nubis acquisition. So that is going to be a different set of competitors for us. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Operator: You there? You might be on mute. Operator: Kyle? Operator: Alright, we will move on to the next. Tim Long with Barclays. Please go ahead. Go ahead. Alyssa Shreves: Hi, this is Alyssa Shreves on for Tim. I just had two quick ones. Were you seeing any dynamic in the quarter with the order growth? Was there any trend in customers trying to get ahead of pricing actions, or was it really just underlying demand kind of driving the growth there? And then I had a follow-up. Gary Smith: Pure underlying demand across the board. Not driven by pricing thresholds or anything. There is so much demand for capacity out there across the board. Service providers have not invested in their optical infrastructure for about five years—they have been so preoccupied with 5G, etc.—that there has been an under-invest in the optical infrastructure in the world, and you are seeing very strong growth from the service providers and MOFN activity as well. And then you have got hyperscalers with the across training, clustering, new market for optical that is really ramping pretty significantly. And then you have got the inside-the-data-center optical moves as well. So across the board, Alyssa. Alyssa Shreves: Okay, that is helpful. And then just a quick one on APAC. The orders for India in the quarter were really strong. Should we expect the region to be driving APAC this year? Just given last year was more mediocre growth in the region, it was down the prior year. Should we expect a step change now with India? Gary Smith: I think that India will probably be very, very strong and robust this year, largely driven by MOFN. Obviously, it is the fastest growing Internet market in the world. All of the hyperscalers are leaning in and playing there, and because of the regulatory environment, they have to really partner with local folks and service providers to provision their optical networks. So I think that is going to be very sustainable. We are seeing an uptick in the amount of projects there. I would say overall, we are going to see good growth out of Asia Pacific this year in a number of areas, including Japan. That is largely driven by two things. One, my point earlier about service providers have largely underinvested in optical in the last five years, so that is beginning to play a part in it. The second part of it is the increase in MOFN activity in the whole Asia Pacific area, and submarine cable being a part of that too. Alyssa Shreves: Great. Thank you so much. Scott McFeely: Thank you. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Tal Liani: This time, you hear me? Operator: Yes. How are you doing? Tal Liani: I got so excited, I broke my headset. I have a question about the risk of early ordering. What we are seeing in every cycle is that when there are constraints, customers start ordering much, much earlier, and that creates big increases in backlog and then declines. How can you manage it? So I am sure you probably do not know if there is or to what extent, but is there any way you can manage early ordering through pricing the way Cisco does it, or any other way in order to mitigate the phenomenon? So you do not have what we had in 2022 or 2023, whenever we had the previous cycle. Gary Smith: Tal, that is a good question. First of all, I think having suffered through that, we are suitably sensitized to it, and we learned some lessons through that, one of which is visibility into things like installation and what are they actually doing and when with the equipment. I would say that the dynamic here—the service providers—is good steady growth. We have good visibility into that and what they are doing with it. And they were the main folks that were having the challenges around the ordering piece. The hyperscalers, I think we have deep collaborative relationships with them. They are our biggest services customers as well, and you saw our installation services were up 42% in the quarter. That gives us, and we have unique visibility into, what they are doing and deploying across the board there. So, given the scale of this, this is deep and collaborative relationships with them around precisely what are they trying to do, where. And so that gives us good confidence and visibility in the way we structure our agreements with them, given these lead times and the rest of it, which they are mindful of. I think we have great assurance—another way of saying this—in the quality of our backlog. Mark Graff: Yeah, I think the only thing that I would probably add, Tal, is when we talked about value exchange, part of that is making sure we have got the right terms and conditions in place so that we do not get stuck holding the bag, and we have not really seen a lot of people pushing back on that. Tal Liani: Got it. Second question is on margins. The risk is that in times like that, the component pricing will keep going up, and you start to see it. It started with memory. We start to see it now with other companies or other types of components. What can you do going forward? What can you do in order to mitigate the future risk? I understand what you are doing now and how you are trying to mitigate the current risk, but are there any forward pricing or forward purchase commitments, etc., you can take in order to mitigate the future increase in component pricing? Or what are you trying to do, or how are you trying to address it? Mark Graff: Yeah, Tal, I think there is—again, we keep coming back to this word “balance.” I think we are really focused on ensuring that we have got the secure supply to satisfy the demand that we are looking at, and we are locking in the pricing as we know it today with our component suppliers and the contract manufacturing folks. All that said, there is still future risk of them repricing their backlog, and we are having conversations both on our supplier side as well as on the customer side, so that we are not getting squeezed in the middle. But, again, it is the balance of pricing and supply on one side and pricing and share on the other. And I think given the results that you have seen and the basis of our raise, I am feeling pretty comfortable that we are striking those right tones. Tal Liani: Got it. Great. Thank you. Operator: And the next question comes from Atif Malik with Citi. Please go ahead. Adrienne Colby: Hi, it is Adrienne Colby for Atif. Thank you for taking the question. I wanted to ask another one about gross margin. With the 800ZR pluggables ramping in the latter part of the year and also with the pricing increases kicking in, why would we not see gross margin expansion in the second half? Mark Graff: The guide that we gave was a good range based on what we see from the product mix and from the supply chain challenges that we are trying to work through—again, that balance that I talked about before. From our seat right now, we think that is a pretty good guide. As we make more progress, we will give you guys updates. Adrienne Colby: Great, that is helpful. Thank you. And then just as a follow-up, I was wondering if you could provide some more color on the momentum that you are seeing with neoscalers, maybe just in the relative size of the opportunities, if most of that is falling in cloud direct versus MOFN. Gary Smith: Yeah, we are seeing, obviously, an emerging ramp here around a bunch of the—loosely called—the neoscalers, which encompass a fair range of different players. I would say largely right now MOFN-orientated, given the capital expenditures, time to market for them, etc. But what is clear from it all is that the network is now a real priority for them. And I think that plays through to the hyperscalers too. There has been such a maniacal focus—and continues to be, obviously—on things like power, GPU accessibility, etc. Now it is really about the network. The traffic is beginning to come out of the network both for inference and for training. And the neoscalers are obviously seeing that too. So they are leaning in on the network. We are also beginning to see some of them wish to have control of some of that network as well and do their own builds. We are cautious about that approach given the financial structure of some of those neoscalers—not all of them. But we are seeing across the board the neoscalers leaning in on their whole network requirements, largely really, Adrienne, currently going for MOFN. Operator: Thank you. We will take one other question today. Thank you. The next question comes from Ryan Koontz with Needham & Company. Please go ahead. Ryan Koontz: Great, thanks. You touched on scale across a bit. It seems like we are very early in the momentum around that area. Can you maybe expand on those projects—where we are in terms of a rough count, how your visibility is improving there relative to backlog and specific scale across projects? Thank you. Gary Smith: Hi, Ryan. We shared—I think it was in Q3—we announced the first large hyperscaler rollout. We have actually seen during the course of this quarter additional sites being added to that. Again, I would say all of these currently that we are seeing are in North America, which is, I think, to be expected. We have added two more hyperscalers to that that are also rolling this out. I think we are in the very, very early stages of this, and in talking with them, though, the plans are large and expansive, as you would expect for the scale of what they are trying to do here. It is absolutely enormous. So we are at the very early innings of this whole training, clustering. I would say that what we are also observing is there are—all of these hyperscalers we talk about homogeneously; they are not. They have very different business models. They have very different architectures both inside the data center to some extent and certainly outside from a networking point of view. Their training varies as well. And so you have got lots of different variables in there in terms of distance, capacity, speed, etc. They all want low latency, and they all want super high speed, but you are seeing a lot of variables about how they are clustering this. And again, I would say we are at the very early stages of this, Ryan. Ryan Koontz: Really helpful. Thanks for that, Gary. One last question on DCOM here. Great early move here; seems like you have got a big lead in this opportunity to bring PON to out-of-band. Do you feel like that space is defensible for you, and how do you sustain a competitive advantage there? Thank you. Gary Smith: I think there are a number of elements to that sustainability. I think it is deep collaboration, first off, and understanding and intimacy, and obviously Meta were incredibly helpful in instigating that. But there are different use cases; they are slightly different in the different hyperscalers. The dependability of it is we are very vertically integrated into it. We own the core technology, and it is the software that we are putting on that as well. We are uniquely positioned about that. So we think it is the combination of all of those elements—the collaboration, the vertical integration, the uniqueness and high speed of it, and then all of our software integration capability, and also, by the way, installation, which we are also doing. It is the confluence of those things that provide—we think it is quite defendable. Operator: Really helpful, Gary. Thank you. This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

83天前Insight Analytics约5分钟阅读

LNR.TO 2025 Q4 财报电话会议

Operator: Good afternoon, ladies and gentlemen, and welcome to the Linamar Q4 2025 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, March 4, 2026. I would now like to turn the conference over to Linda Hasenfratz, Executive Chair. Please go ahead. Linda Hasenfratz: Thank you, and good afternoon, everyone, and welcome to our fourth quarter conference call. Before I begin, I'll draw your attention to the disclaimer that is currently being broadcast. Joining me this afternoon, as usual, are Jim Jarrell, our CEO and President; and Dale Schneider, our CFO, both of whom will be addressing the call formally shortly. Also available for questions are Mark Stoddart and other members of our corporate IR, marketing, finance team. Okay. I'll start us off with some highlights of the quarter. I think a good place to start is always a quick reminder of the key value drivers that make Linamar such a great investment and how they played out over this past year. First, Linamar has a long track record of consistent, sustainable results driving out of our diverse business. Q4 and 2025 was another great example with exceptional earnings growth in our Mobility business more than offsetting soft markets in our Agricultural business. Being invested in both businesses helps trim big swings up and down in individual markets and leaves us with a more consistent, sustainable level of performance. The second key point is our flexibility to mitigate risk. Our equipment is programmable, flexible equipment that can be used on a large variety of types of products across different vehicle platforms as well as types of propulsion. This flexibility is allowing us to reallocate equipment from programs running under capacity to new launches, helping keep our capital build down, as you saw again in 2025 with CapEx down 24% despite a significant backlog of launches that we are actively investing in. Third, we have always run a prudent conservative balance sheet. We target keeping net debt-to-EBITDA under 1.5x. 2025 saw net debt-to-EBITDA at 0.77x despite significant investment in new businesses, such as the Aludyne acquisition as well as CapEx for new programs. Our peers are much more heavily indebted with net debt to EBITDA more than 2.5x. This creates financial stress and risk for them in times of soft markets and limits their flexibility, limits which Linamar is not restricted by. This gives us a huge advantage in the market. Lastly, returning cash to shareholders is a key value creation driver at Linamar as well. You saw that play out this quarter with our continued repurchase of shares in the market, which we have been steadily doing since November of 2024. Okay. Turning to highlights for the quarter and 2025. I would say it has been a really strong year that I feel like really well represents Linamar as an entrepreneurial, opportunistic, technology-driven business that is delivering growth for today and for tomorrow. We saw another record year of record earnings despite every market being down and a world devolved into a minefield of tariffs, an environment defined by uncertainty, volatility and profound structural change across the global economy. Those record earnings included outstanding growth for our Mobility segment earnings, which were up 47% in the quarter and 34% for the year. We saw great success in growing our technology portfolio with strategically important acquisitions, such as the Aludyne aluminum casting technology business as well as the GF Leipzig ductile iron casting facility. These businesses are bringing great new process capabilities to us that are already resulting in significant new business wins and quoting opportunities. Having more products and processes to sell, notably proprietary technologies that our customers are looking for absolutely expands the pathways of growth potential for us significantly. Not only is our team delivering on earnings growth again for the 13th year out of the last 16, that's 81% of the year, by the way, but also are delivering excellent free cash flow, almost $1 billion worth in 2025. Careful cash management is absolutely key in challenging economies, keeping us strong and flexible to jump on those opportunities out there. And finally, we are managing that tariff mine field very well indeed with a manageable level of tariffs that we are actively mitigating the impact of. I'll review the tariff situation in more detail in just a minute. Turning to the numbers. We saw sales at $2.5 billion, up 5.9% over last year despite tough industrial markets. Sales were down 13% in our Industrial business with both Ag and Access sales impacted. Sales, on the other hand, were up 13% in our much larger Mobility segment with 1.5 months of Aludyne and launching business offsetting soft markets that we saw in both North America and Europe. Normalized net earnings were $136.4 million or 5.4% of sales, up 22% over last year and normalized earnings per share was $2.28, up 25.3% over last year on the back of a very strong Mobility segment performance. I would summarize our results this quarter as being most impacted by launches and strong production sales on the Mobility side, of course, our Aludyne acquisition and that being partially offset by those weak industrial markets. Cash flow was very strong at $362 million. For the full year, our results were very strong as well. We saw sales of $10.2 billion, moderately softer than 2024 on those Industrial segment declines. But despite such, we delivered record earnings of $622.1 million or 6.1% of sales, another year of earnings growth and margin growth at Linamar. EPS hit $10.36, up 5.6% over prior year, driving out a strong Mobility segment performance. And as noted, nearly $1 billion of free cash flow to finance growth opportunities. Finally, let's have a look at an update on tariffs. Despite the myriad of tariffs put in place over the last couple of months, Linamar continues to have a manageable level of bottom line impact. The 232 metal derivative tariffs continue to be the only area of any reasonable impact to us and almost all that impact is for our industrial businesses. But the level is manageable, and we're actively working to mitigate the impact of these tariffs. New in the quarter were Section 122 and 301 tariffs established to replace the IEEPA tariffs deemed illegal. The good news is these tariffs have little to no impact on us. So there's 3 key reasons for all of this. Number one, we followed for a long time a strategy of producing product in the same continent as our customers, not chasing low-cost labor around the world. As a result, we're not making product in Asia or Europe that ships to the U.S., which would have triggered tariffs. For products that we're producing in Canada and Mexico and shipping to the U.S., our products are USMCA compliant for virtually everything that we're shipping in, meaning no tariffs for our customers on the Mobility side, where, of course, they are the importer of record or us on our Industrial products where we are the importer of record ourselves, unless caught, of course, by the 232 derivative tariffs that I just mentioned. Our largest business is our automotive business where our customers, as noted, are the importer of record and would, therefore, be responsible for paying tariffs in the event any become applicable. I do worry about the growing impact of tariffs on our automaker customers. However, as they continue to build up, whether they be metal tariffs, vehicle tariffs, price tariffs for offshore purchases, the cost to our customers as we have seen are in the billions, and there is concern about potential impact to vehicle pricing and therefore, demand longer term. A reality, unfortunately, we are already seeing play out. On the positive side, we are seeing customers looking at onshoring parts and systems. They are currently buying from Asia or Europe in this uncertain environment. We're building up a significant list of new business opportunities and business wins for our North American plants in all of Canada, the U.S. and Mexico. New business win and quoting activity is quite strong and actually in all of those regions. The U.S. is still respecting the USMCA agreement, meaning these parts can be supplied from the U.S., Canada or Mexico, tariff-free as long as they're USMCA compliant. Where the job goes will depend on where we have capacity, where we have experience and teams available to take on the work as well, of course, the customer preference. We're seeing great opportunities for our U.S. plants, particularly our newest acquisition, Aludyne. And we also saw a very strong year in 2025 for new business wins for our Canadian plants. In fact, we won more dollars of new business in 2025 for our Canadian mobility plants than we've seen in 3 years, and we are at a 5-year high in terms of Canadian plant wins as a percentage of global mobility business wins. Our strong, highly capable Canadian plants are really punching above their weight in terms of wins compared to their slice of our global footprint, which is great to see. I think it's key to note as well that our portfolio expansion, notably into additional structural components as a result of our acquisitions is dramatically increasing RFQ activity. This strategy has really played out positively for us. The tariff situation is also adding stress to an already stressed supply base, notably in the U.S. and Europe. This is leading to acquisition opportunities for us as you've seen us act on and the pipeline of distressed companies seems to just continue to grow. Finally, I want to emphasize that our strong results and positive outlook is very much a result of what I think is an excellent and unique business culture at Linamar. It's a culture that we've fine-tuned over nearly 60 years to be opportunistic, to be entrepreneurial, find something positive and actionable to grow our business regardless of circumstances. We are naturally responsive. We're nimble. We're fast. We're innovative. We're creative in dealmaking and mitigating challenging situations, and we get things done. These are critical elements to not just survive, but to thrive in a challenging time. So with that, I'm going to turn it over to our CEO, Jim Jarrell, to review industry and operations updates in more detail. Over to you, Jim. Jim Jarrell: Great. Thank you, Linda, and great to be with everyone listening tonight. First, we are proud of our performance in 2025. As Linda mentioned, we generated excellent free cash flow, record normalized EPS and saw another year of strong Mobility margin expansion, all while positioning the business for the future expansion. These results reflect disciplined execution in a very challenging environment. There's a great thing people often forget what you say, what you do, but we'll never forget how you make them feel. In '25, we made our employees, our customers and our shareholders feel valued, respected and supported, which to achieve our mission to be supplier, employer and investment of choice. So I want to personally thank our employees across the organization for their GRIT, which stands for using our guts, resilience, integrity and teamwork to grow, grow our revenue, grow our income and grow our team. This was our focus in 2025 and remains our focus in 2026. Continued volatility, limited visibility and macroeconomic headwinds are testing companies globally, ever-changing tariffs, shifting consumer demand, disruptive technologies, cost pressures, talent shortages and regulatory changes are all part of the puzzle. But tough times don't last, tough teams do. And of course, Linamar is one tough team. What sets us apart is our entrepreneurial mindset. We just don't react. We attack every challenge and opportunity with purpose. We stay true to our long-term vision, operate with lean discipline and make agile, decisive moves. And I think we all witnessed last year, a great example of this in Linamar, 2 exciting and strategic acquisitions. Both Aludyne and Leipzig add over $1 billion of growth to Linamar. These businesses not only strengthen our technology base, but also expand our CPV, enhance our ability to serve global customers in key markets. So let's move over to our operating segments. Let's start with the auto industry. When we first started the year, lots of uncertainty surrounded our automotive business, consistent changes to tariffs cast a fog over our industry and led to significant negative assumptions. If I look back to market expectations for the year in terms of production, North America was expected to be down 9.3% for the full year, but ended up only down 1%. Similarly, Europe was much stronger than expected in '25 being down only 1.2% versus the original expectation of 3.1%. In Asia Pacific, originally expected to be up only 0.7%, ended up 6.9%, a region where Linamar is growing at an exceptional pace. Overall, global production was up 3.7% versus the original expectation being down almost 2%, a great resilient year across the auto sector. Looking at the most recent forecast for '26, North America is expected to be down 2.2% on fears of increased pricing pressure. Europe is expected to be down 0.4% as domestic demand is expected to grow, but will be offset by increased imports from Greater China. And Asia Pacific is expected to be flat as industry experts growth will slow as aggressive pricing in domestic market is met with marginal increase in end customer demand. Globally, this leads to a slight decline of 0.4% versus the prior 2% projected increase. Turning to Linamar's CPV performance for the quarter. Once again, we saw growth in all 3 of our regions. North America CPV was up 19.2% to $329. Europe was up 5.9% to $92.82, and Asia continues to see growth with an increase of 0.4% to $10.43. Globally, for the year, our CPV remained flat over '24, totaling close to $80. In Q4 and through the whole year, our commercial teams continue to deliver on our core goal, keep winning business. We secured a grand total of $1.5 billion, again, $1.5 billion in new Mobility business wins. One of our key internal sales program was coined MCMAGA, Make Canada, Mexico and America Great Again sales program. Pictured, you will see our most recent onshoring successes with structural engine components and 2 other key wins with Asian OEMs. As I've said through the past few slides, Linamar's Asian operations chase with key OEMs overseas has been a great success through '25 and will continue through '26. Linamar's long-standing strength in structural components supported by recent acquisitions, positions us well for continued growth. Turning to our Industrial segment, starting with Skyjack and AWP market. '25 was a market facing strong headwinds, sticky interest rates, tariff pressures and delayed infrastructure projects. There were many elements stacked against our Skyjack business. Despite these challenges, Skyjack delivered an outstanding Q4, growing unit volumes by 15.9% in a market that was down 1.5% globally. If we look at the full year, Skyjack demonstrated its GRIT and exceptional product quality with total unit volumes up 12.1% versus a market that was down 19% globally, an exceptional year of performance amid a negative environment. This success was driven by exceptional market share gains, especially in scissor lift globally and booms in Europe, '25 is a clear signal that Skyjack is winning with our innovation and customer connectivity. As I mentioned last quarter, it's important to note that volume growth doesn't always equate directly to revenue as product mix plays a key role with booms and telehandlers commanding higher prices than scissors. The real story, though, is Skyjack's ability to gain the market share and strengthen its position in a tough market. Looking at the expectations for this year, North America and Europe are expected to start to rebound with a growth of about 1.4% and 1%, respectively, and a sign that some of the recovery is coming when comparing to our Q3 outlook. Asia Pacific and Rest of World is expected to be softer in '26 with a decrease of 5.3% and an overall pretty well flat market outlook globally. For '25, our Skyjack team was recognized by the largest rental player, United as the Supplier of the Year recipient. This is a huge accomplishment, and I would like to congratulate our Skyjack team for demonstrating its exceptional performance, consistent quality delivery, reliability and partnership. On the innovation side, we're very excited to say that our new SJ28 All Electric Telescopic Boom has been launched specifically designed for China and Southeast Asia markets. Turning to the Ag business. '25 was a challenging year globally due to a multitude of factors. In North America, markets were pressured due to trade issues surrounding U.S. soybeans and Canadian canola, which has recently eased as China is now buying both again. Dealer inventories and credit lines have receded, though they are still elevated. There is a reluctance to stock whole goods and dealers are still remaining cautious about their inventory levels given farmer buying intentions. This is impacted by the large federal stimulus package, which was expected in 2025 that did not materialize. It was announced very late in '25, but will only begin to flow now in early spring of '26. And the benefits of that is expected really only to help the working capital and operating lines required to support spring crop inputs. Our Linamar Ag divisions, MacDon, Salford and Bourgault, all tracked largely in line with the North American market in '25. Being down 27%, although for the year, we saw market share improvements in key segments like combined drapers in the U.S. and Europe, tillage market share in the U.S. and air seeder market share also in the U.S. With a view to the coming year in the Ag cycle overall, some peers have stated that '25 was a trough, while others are saying later '26 before the industry turns positive again in '27. We will continue to monitor global trade tensions, government bridge payments and channel inventories to react to those market signals. As always, our focus at Linamar Agriculture will be on maintain market-leading positions, solution that drive technology, productivity improvements and global growth. Turning to some industry recognition. What an accomplishment by each of our brands, all of them, yes, all of them received 2026 AE50 Awards for top innovative Ag products released to the market in the past year. This is an incredible feat. And again, congratulate each and every one of our employees from these groups. We continue to deliver innovation across all of our groups, and I know our teams will continue to build and offer exceptional products to our end customers. Before I hand this over to Dale, I want to put our diversification in perspective. Linamar is not just an automotive or even a mobility company. We're an advanced manufacturing and product development company participating in a multiple global mega markets you see here on the screen. That distinction matters. It gives us access to a much larger opportunity set than a traditional auto supplier and allows us to apply our capabilities to scale, precision, quality and execution where the world is going next. Diversification is not a side strategy for it. It is a growth multiplier. And it positions Linamar to win across industries that matter for the future. '26 is shaping up to be an exciting year for Linamar as we take diversification to another level to build the next chapters of our growth story. A few areas in particular, defense, robotics and power energy are becoming more relevant platforms for our future. Defense is not new to Linamar. It's a return to our roots. With today's global environment and NATO commitments, our ability to deliver is a powerful advantage. We have made many inroads with prime manufacturers who are seeking Canadian and global partners to help safeguard the world. At the same time, our robotics business is gaining momentum. By leveraging our strength in precision metallic parts, electromechanical assembly, actuators and smart manufacturing systems, we have engaged global partners to position Linamar at the center of automation, collaborative robots and humanoid platforms. The technology foundation is out there and the opportunity is real. It's up to us to figure out how to capitalize on it. We're also expanding into power energy, highlighted by our new strategic partnership with Regen Resource Recovery to commercialize battery-grade graphite and strengthen the domestic supply chain, another example of Linamar moving with purpose in growth future-focused markets. The takeaway here is simple. Linamar is not defined by one industry. Automotive is proof of our capabilities, not the limit of them. We're a global advanced manufacturing and product development technology partner. So with that, I'll turn it over to Dale to walk you through the financial overview for the quarter and outlook for the year. Dale Schneider: Thank you, Jim, and good afternoon, everyone. [indiscernible] covered at a high level the financial performance in the quarter. I'll jump directly into the business segment review, starting with Mobility. Mobility sales increased by $223.6 million or 12.9% over Q4 last year to $2 billion. The increase was driven primarily by several factors. First, we saw higher sales related to our Linamar Structures acquisitions, which contributed meaningfully to the quarter. Second, there was a favorable impact from changes in FX rates compared to last year. In addition, sales benefited from launching programs and higher volumes on programs where we have substantial content. These positive factors are partially offset by lower production on certain ending programs as well as reduced volumes on certain electric vehicle programs, which continue to be impacted by softer volume demand. Q4 normalized operating earnings for Mobility were up 47.3% over last year to $132.1 million. The improvement reflected earnings contributions from the Linamar Structures acquisition, benefits from launching programs and higher volumes of programs where we have substantial content. These positive factors were partially offset by lower production on certain ending programs and EV programs. In addition, executive management bonuses were reinstated in Q4 '25, whereas no bonuses were awarded in Q4 2024 due to the impairment losses in that period. Turning to Industrial. Sales decreased by 13.2% or $84 million to $553.1 million in Q4. The decrease reflects softer demand across both of our end markets in Access, lower overall market demand weighed on sales, although this was partially mitigated by continued market share gains in scissors globally. In Agriculture, sales declined in line with the market and was significantly down despite market share gains in both U.S. and Europe. These items were partially offset by a favorable foreign exchange impact compared to Q4 last year. Normalized Industrial operating earnings in Q4 decreased $23.5 million or 25.7% over last year to $67.9 million. The earnings decline reflects the continued pressure across both the Access and Agricultural end markets, resulting in lower sales volumes despite market share gains achieved in each. In addition, the quarter included a moderate impact from tariffs on certain Industrial products. These impacts were partially offset by favorable FX rates compared to prior year. Starting with our overall cash position, which came in at $911.1 million on December 31, a decrease of $143.5 million compared to December '24. During the fourth quarter, we generated $471.4 million in cash from operating activities, which was partially used to fund CapEx and debt repayments. Turning to leverage. Net debt to EBITDA was 0.8x at the quarter, an improvement of from 1x a year ago. The non-available credit on our credit facilities was $1.2 billion at the end of the quarter. Our liquidity at the end of Q4 significantly increased to $2.1 billion. Our 2025 NCIB program launched in Q3 will expire on November 16. This program authorized the purchase and cancellation of 3.9 million shares. To date, we have returned nearly $39 million to shareholders through the repurchase of approximately 462,000 shares. This brings our total cash return to shareholders since November 24 to nearly $139 million with the purchase and cancellation of approximately 2.2 million shares. This reflects our disciplined capital allocation strategy, which is maintaining a strong balance sheet, investing in growth and returning excess cash to shareholders. Turning to the outlook. I will outline Linamar's expectations for 2026, focusing on our Mobility and Industrial segments for Q1. Our guidance for 2026 is unchanged from what was announced at our last earnings call. Please note, we are not providing segment level guidance for the full year '26 at this time due to the elevated volatility in the global markets and ongoing geopolitical uncertainty, which makes longer-term segment forecast less reliable. Turning first to Mobility segment. Our outlook for the first quarter remains very strong. We expect double-digit growth in sales and double-digit growth in normalized operating earnings, supported by ongoing program launches, contribution from recent acquisitions and continued operational improvements across the business. Margins in the first quarter are expected to continue to expand and move further into our normal range, reflecting the improved mix, strong launch execution and sustained cost discipline. For our Industrial segment, market conditions remain challenging as we enter into the first quarter. We expect lower year-over-year sales and normalized operating earnings, driven primarily by double-digit declines in both Ag and Access equipment end markets. Margins in the first quarter are expected to be within our normal range though. Overall, we expect year-over-year growth in normalized earnings driven by Mobility performance, while Industrial remains pressured by significantly weaker Agricultural and Access equipment markets. Free cash flow generation in the quarter is expected to be positive, supporting our very strong balance sheet and low leverage. Capital expenditures will continue to reflect our disciplined approach with spending focused on launch activity while remaining below our normal range as a percent of sales. Looking ahead at 2026, we continue to expect normalized earnings and margins -- sorry, expect growth in normalized earnings and margins supported by our strong Mobility performance and disciplined execution across Linamar, partially offset by continuing pressure by the Industrial end markets. In Mobility, strong top and bottom line growth is expected to be driven by ongoing launches and full year contribution from the recent acquisitions of the Aludyne North American operations and the Leipzig casting facility, which will support both sales and earnings. Importantly, this growth is expected despite the vehicle market forecast to decline by 0.4% globally in '26 with North America to be down roughly 2.2%, underscoring the strength of our content growth, launch execution and operational performance. In Industrial, market conditions remain mixed. Agricultural equipment markets are expected to remain down year-over-year in '26 with global volumes down mid-single digits and North America experiencing a more pronounced double-digit decline. That said, the rate of decline is moderating, and we expect stabilization in the second half versus 2025. Access equipment markets are expected to be relatively stable and steady with modest global declines, partially offset by low single-digit growth in both North America and Europe. Free cash flow generation is expected to remain strongly positive, supporting our very strong balance sheet, low leverage and disciplined capital allocation approach. Capital expenditures are expected to increase from prior year levels, reflecting ongoing launch activity while remaining below our normal range as a percent of sales, consistent with our continued focus on capital efficiency. Overall, while the market conditions remain mixed and visibility remains limited, Linamar enters 2026 with strong financial flexibility and operational resilience, positioning the company well for continually delivering earnings growth. In summary, Linamar delivered a strong quarter and exit '25 with record normalized earnings, a very strong balance sheet and excellent liquidity. We are well positioned to invest in growth, navigate volatility and continue to return capital to our shareholders. Thank you, and I'd like to open up for questions. Operator: [Operator Instructions] Your first question comes from Ty Collin with CIBC. Ty Collin: Maybe the first one, just on the quarter. Mobility margins came in a little bit lighter than I was expecting despite some pretty strong top line performance in the segment. I guess is there anything specific to call out there apart from the bonuses that you already mentioned? Or should we really be looking at things on a full year basis as a starting point for thinking about 2026? Linda Hasenfratz: I mean I think Mobility margins always soften up a little in the fourth quarter. That's not unusual at all. And frankly, reaching 7.5% for the full year, which is our normal range, I think, is pretty fantastic. So pretty happy with our performance in the quarter. Jim Jarrell: Yes. I think the -- a couple of the issues that, as Dale mentioned, the bonus, obviously, one thing. There was some impact of Novelis, JLR and a little bit of next period. But again, that was offset with some upside with the Aludyne, which we closed in mid-November -- I guess we closed mid-November. So that would have had a few weeks in there before shutdown. Ty Collin: Okay. Got it. Got it. And I appreciate you didn't really want to give specific guidance by segment for 2026, given some of the uncertainty. But I mean can you give any sort of high-level color on how we should think about operating margins in each segment compared to 2025 or any sort of puts and takes that we should keep in mind there? Linda Hasenfratz: I mean we're a little hesitant to provide segmented outlook as Dale, I think, perfectly stated due to some of the uncertainties around markets. I mean I think the good news is our outlook for this year is absolutely unchanged. I mean we are looking for growth, top line growth on the bottom line. We're going to expand our margins. And I think that's a real positive. If you take a look at the Q1 guidance, obviously, the trends are continuing from last year with strong Mobility Group performance. And as Dale also mentioned, it's a tougher start to the year for Industrial, but we do see the market declines moderating through the year. So that should give you a bit of a sense. And we'll have a better -- a little bit more clarity for you next quarter as we can see the year shaping up a little more clearly. Ty Collin: Okay. Great. And if I could just sneak one more in. Just wondering if you could share some updated thoughts on Aludyne now that you've been under the hood for a few months there. How has that been performing compared to your expectations? And what sort of opportunities do you see for that platform going forward? Jim Jarrell: Yes. I would say it's going to plan and probably a little bit better than planned. And I would say the amount of business opportunity that it has created with the structural segment that we're now in a deeper way and having some U.S. facilities has created a lot of opportunities and new business wins, quite frankly, I'm pretty pumped up about our new business wins year-to-date based off of the structural casting side, which has been super [ marked ], right? I mean that's been probably out of the gate for the first couple of months, the best we've ever had. And so I think it's creating a lot of opportunities and having a new good trusted operator is probably the key for that reason of getting growth. Operator: [Operator Instructions] Your next question comes from Brian Morrison with TD. Brian Morrison: Congratulations on the quarter. It looks like free cash flow was insane yet again, positive outlook for next year. When you talk about the highlights or the distressed global asset opportunities, do you need to digest the current acquisitions before potential more M&A and we should think about NCIB near term? Or both really remain at the forefront or both are equally top of mind right now? Linda Hasenfratz: I mean we're continuing with the NCIB. As I stated in my comments, I think we've been pretty consistent with our buyback, and we remain committed to that. As noted, we -- there's lots of opportunities out there, certainly on the distressed or otherwise side. So like anything, you look at what have I got the cash for, what do I have the people for. And one thing I know is we've got a lot of cash, and we've got a lot of super strong and talented people. So there's a time when you need to be opportunistic if the deal is right. Jim Jarrell: Yes. And I would just add, Brian, to the distress side, as Linda mentioned in her comments, like there's no shortage of that. And I would particularly point you to Europe as a real key area for that distress because, again, capacitization and they probably don't work as fast on consolidation or making decisions. So I think there's a real catalyst over there that we continue to work on. But one key underlying thing for us to ever do a distress, you need to have the backing of the customer, right? The customer group has to be engaged. And it just takes -- again, in North America, probably a little easier to do that than it is in Europe. So we find that it takes probably a little longer in Europe. Mark Stoddart: I'd also add, Brian, that the integration of Aludyne has gone very well. And so it's not like we have lack of resources if we were to look at other M&A activities right now. Brian Morrison: Okay. And just when you mentioned defense and robotics, is that organic growth that you're looking for? Or are we going to be talking about M&A for critical mass? Jim Jarrell: Basically organic. I mean again, these prime defense contractors, if you think about us now talking about 5%, right, of GDP being pushed through, they need to have manufacturing partners in North America or Canada, I should say, directly. And so when we connect with those prime manufacturers and provide them our experience and history around defense, they get pretty excited. And I think the condition of a prime to get a contract out of the Canadian government, we'll be having partners as well. And then on the robotics side, the partnering, I was in China and just connecting with good technology partners that have advanced robotics in collaborative robots and humanoids, and they obviously need a support of a company to distribute or make things in North America. So that's how we're doing it. So really not on an acquisitive side, more on an organic growth side. Brian Morrison: Okay. And maybe one more for me. Just last question. Jim, last quarter, when you and I spoke, we talked about the Mobility margin. It was just asked previously, but I just want to drill down a bit more on it. You did imply that Q4, it should be consistent with what it was in Q3, maybe a bit softer because of seasonality, I get it. But when I strip out Aludyne, it doesn't seem like that should have any impact. So it does seem a bit softer. Is that just -- were you expecting the bonuses to be in Q4? Or is there any other factors that may have weighed on the margin? Jim Jarrell: Yes, Brian, not really that I can come up with. It could be some mix issues, some higher margin issues maybe dropped off earlier or something like that. But really, there would be no real big cost changes or anything like that other than the bonus that Dale you mentioned, right? Brian Morrison: And sorry, just to be clear, was that anticipated when you made your Q3 commentary or no? Jim Jarrell: Yes, I would say we would have had that factored in for sure. Brian Morrison: Okay. But steady as she goes, building up to 7.5%. Linda Hasenfratz: Let me just add to this margin discussion as well. You would have noticed in the MD&A that we mentioned that FX was a factor on the sales side, but not a factor on the earnings side. I mean as you know, we have formal and informal hedges. So that has a real impact on margins as well, right? If your top line is getting beefed up by FX and you're not seeing bottom line flow through at the same level, then that's also going to be impactful. So I think that's worthwhile noting. Operator: We now have a question from Jonathan Goldman with Scotiabank. Jonathan Goldman: Maybe just another one on margins with this time on Industrial. I think you were talking about contraction below the normal range in Industrial for the entire year. It looks like you beat that a bit. And if you were to take the guidance for the full year previously, it would imply a margin in Q4 about 10.5% at best. It looks like you beat that by 200 bps. So I'm just trying to find out maybe what are the drivers of that beat, if anything kind of differed versus your expectations? Linda Hasenfratz: Yes. I mean I would say in the Industrial segment, mix is a big factor. So how much is Agriculture versus how much is Access because the margin profile is different. So to me, the bigger impact for Q4 was a strong quarter for the Ag guides, stronger than we would have expected. So margins did come in a little stronger than we thought. Jonathan Goldman: Okay. That's good color. I appreciate that. And I guess another one, another strong quarter for Access, material outperformance versus your end markets. You did talk about how it wouldn't be 1:1 volume to revenue growth because of mix and pricing. But how should we think about outperformance being sustained into 2026? And could you remind us of the different drivers that are supporting the outperformance? Jim Jarrell: Yes. I mean for 2026 on the Access side, overall, the global, we're looking at flat in North America, up a little bit, Europe up a little bit and then rest of world down. So again, from that perspective of the market, if you track the market, we should have a little bit of an uptick on the Access market for our [indiscernible]. Jonathan Goldman: Okay. That's good color. And then maybe one more on capital allocation. And you obviously have your priorities listed in the presentation. But if you were given a menu of only 2 options here between a buyback and M&A, what's more attractive? Linda Hasenfratz: Well, I mean obviously, growing your business is -- from an M&A perspective, is going to be more attractive. I mean our first priority, we have been very clear when it comes to capital allocation is growth. We want to invest in a business that's going to generate earnings year after year and create growth in itself. So 100% is our first priority is always to invest in growth. Sorry, but just to finish, we're also committed to returning cash to shareholders. That's why we put our capital allocation framework in place last year to say, number one, strong balance sheet; number two, growth; and number three, we're going to return cash to shareholders. And we've been pretty consistent with that over the last couple of years with NCIB and a good track record of continued increase in dividend. Jim Jarrell: Yes. And just to add, and this is just this maybe subjective comment, but you saw out of the gate, GRIT. So we have a major focus in the company, grow your revenue, your income margin and your team. And we believe strongly that it's up to us to keep growth on the top line and bottom line and add teammates for our employees to be satisfied. So really a strong focus and a very strong entrepreneurial culture, too, and it really is important to keep people motivated for the growth side. Jonathan Goldman: Definitely. It's nice to see the results reflected in the share price as well. Operator: As there are no further questions at this time, I will now turn the call over to Linda Hasenfratz for closing remarks. Please continue. Linda Hasenfratz: Great. Thanks so much. Well, to wrap it up, I'd like to leave you with our key message for the quarter, which is identical to what I started out with. Linamar is continuing to deliver on earnings growth with now 81% of the last 16 years, registering bottom line growth. Notably, almost every one of those years, double-digit growth. That is an outstanding performance and really the definition of consistent sustainable growth. Number two, strong growth in our product and process offering, largely through acquired technologies is dramatically increasing our addressable market in our Mobility business and leading to exciting new growth opportunities. Number three, we are generating exceptional levels of free cash flow to fund those acquisition opportunities and organic growth while keeping our strong balance sheet intact. And finally, not only is the tariff situation manageable, but we are actively leveraging such to find new opportunities for growth successfully. So thanks very much, everybody, and have a great evening. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

83天前Insight Analytics约5分钟阅读

GO 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Grocery Outlet Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Ferry, Vice President of Strategic Finance and Investor Relations. Please go ahead. Ian Ferry: Good afternoon, and welcome to Grocery Outlet call to discuss financial results for the fourth quarter ended January 3, 2026. Speaking for management on today's call will be Jason Potter, President and Chief Executive Officer; and Chris Miller, Chief Financial Officer. Following prepared remarks from Jason and Chris, we will open the call for questions. Please note that this conference call is being webcast live, and a recording will be available via playback on the Investor Relations section of the company's website. Participants on this call may make forward-looking statements within the meaning of the federal securities laws. All statements that address future operating, financial or business performance or the company's strategies or expectations are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Description of these factors can be found in this afternoon's press release as well as in the company's periodic reports filed with the SEC, all of which may be found on the Investor Relations section of the company's website or on sec.gov. The company takes no obligation to revise or update any forward-looking statements or information. These statements are estimates only and not a guarantee of future performance. Additionally, during today's call, the company will reference certain non-GAAP financial information, including adjusted items. Reconciliation of GAAP to non-GAAP measures as well as the description, limitations and rationale for using each measure may be found in the supplemental financial tables included in this afternoon's press release on the Investors section of the company's website under News and releases and in the company's SEC filings. And now I would like to turn it over to Jason. Jason Potter: Thanks, Ian, and thank you all for joining our call today. I joined Grocery Outlet because I believe in what makes this business special, a uniquely differentiated model that provides tremendous value to customers with opportunities to scale. One year into my time here I believe in those things more than ever, but I want to be direct with you today. Our fourth quarter results were unacceptable, and our outlook for 2026 reflects a business that has more work to do than we expected. I own this and own fixing the issues. Today, we plan to provide an explanation of how we got here, where we are and what we're doing about it. First, how we got here. For context, I'd like to walk you through the sequence of events over the last 6 months. This is important because I want you to understand not just what happened, but where our thinking was at each stage, where we have had the course correct and why we remain confident in our ability to achieve the potential we see in our business. When we reported Q2 earnings in August, we had several reasons for cautious optimism. We delivered 3 consecutive months of comp improvement. We've been focused on improving value by sharpening our KPI based pricing, reversing missteps that occurred in '24 and believe that this had been a key driver in holding value back for our customers. Through the same period, we're able to maintain gross margin stability through shrink improvement. Our '25 cohort of new stores was performing ahead of plan, and we've modulated the '26 growth plans to prioritize returns on capital. And finally, we believe that restoring key operator tools from our systems work like the real-time order guide and new arrival guide would create an immediate tailwind to store productivity. However, as we discussed in our last earnings call, beginning in late September, comp performance began to deteriorate. We shared that some of this was a direct result of decisions we made on marketing that were net negative and we responded by recalibrating our marketing mix and doubling down on in-store execution. With new leaders across store ops, merchandising and supply chain, we began accelerating our store refresh program based on encouraging early results. Following our Q3 call, November comps were weak driven in part by the timing of EBT distributions that negatively impacted our SNAP business and affordability pressure on our core customer increased more than we'd expected. Despite finishing Q4 with positive traffic, basket pressure intensified, resulting in a negative comp for Q4. Comp sales continued to decelerate in January, driven by declining units per transactions and slowing traffic growth. At that point, we took a hard look at the business from end to end, buying and supply chain, pricing and promotions, the customer experience and our store network. We also sourced feedback from our customers and our operators. This deep review surfaced 3 fundamental drivers of comp deceleration. First, the environment has shifted meaningfully as store and industry data validated that consumer pressure had intensified through the fourth quarter and now into the first quarter. Second, customer survey and third-party research showed that while our base pricing was competitive, our leadership position on value perception had eroded. While we made progress by addressing KPIs, we needed to address value more holistically. Third, our push to improve in-stocks and add assortment to ensure the availability of everyday items squeezed our supply chain impacting our ability to deliver high-quality opportunistic product that drives value in this business. Shoppers came in looking for the value and the treasure hunt experience they expect from Grocery Outlet but left with fewer items per trip because we didn't deliver the weight of WOW! items and the breadth of assortment that drives basket size and value. While we made progress over the past year commercially, we've had to take decisive action to drive near-term improvement, and we have more work to do to improve our value proposition for our customers. Now let me turn to share what we're doing about it. First, on restoring Op mix. Grocery Outlet has historically delivered extreme savings by providing tremendous deals on opportunistic product. Our customers' perception of value is driven by our opportunistic product and they describe these products as great deals or promotions, but discounts up to 60% across an ever-changing and wide breadth of branded high-quality assortment. Before I dive into what we're doing differently, let me just say, first off, that we're convinced that ample opportunistic supply exists. We're in constant contact with our major suppliers, and it's clear to us that many of the drivers of constant supply remain intact. Over the next several months, our team is intensely focused on ensuring we have the right weight and depth of quality opportunistic branded product flowing into our mix to restore a winning position on value with our customer. To support this, we've made several important changes to how we buy and merchandise. First, we added DC capacity and improved the flow of goods by reducing inventories across nonproductive categories to ensure we have room for opportunistic product. Second, we've also made improvements to our internal forecasting to maximize opportunistic buying. Third, we've improved communication and our internal planning horizon to give our operators more time to plan effective op product execution. And in January, we unified our merchandising and purchasing functions under a strong and experienced leader, Matt Delly, who is focused on delivering stronger collaboration and organizational agility with a specific focus on opportunistic offerings and supplier engagement. These changes are designed to ensure we're consistently doing what we do best, providing extreme value for customers across a wide range, quality branded product that drives comp sales and strong margins. Our opportunistic pipeline is building. Over the past few weeks, we've seen roughly a 200 basis point increase in the opportunistic sales mix and roughly 150 basis point increase in opportunistic shipment volume driving value with promotion as a bridge. Over the near term, as we build back our opportunistic product levels to what we believe is necessary to win, we're bridging that gap by investing in promotions on branded and fresh product to generate excitement. We anticipate roughly $20 million of incremental promotional investment this year or approximately 40 basis points of gross margin, the majority of which will be front-loaded in the first half of this year. We began these investments in early February and comp performance has improved by roughly 100 basis points month-over-month relative to January. That's an early data point, not a declaration of victory, but it tells us the customer is responding positively. Now expanding our store refresh program. Value is clearly our #1 commercial focus. In the mid and long term, we intend to sharpen our customer experience as well. Our store refresh program is designed to achieve this important goal. Operators and customer feedback in recently refreshed stores have been consistently positive and early data from these stores shows encouraging comp lifts versus our control group. As we've scaled our understanding of what's working commercially and operationally is helping us continue to strengthen execution as we expand our rollout. These results give us confidence and conviction to move forward with the 150 store target by the end of this year, making our stores easier to run with tools and support for operators. With much of the system stabilization now behind us, we're supporting our operators by removing barriers and are delivering more effective tools, removing friction in our operations, creating opportunities to drive results. Improvements in item-level inventory management have now been embedded into our proprietary order guide for produce and meat, and we're supporting our operators to better align fresh inventory with demand. We intend to continue to expand these types of capabilities across categories later this year. Reporting is also improving, and we've made progress in providing our operators with improved comparability and exception reporting to accelerate the identification of opportunities to improve specific underlying business performance. Supporting our operators also means we're making investments in field personnel and support to improve forward planning and communication. While these efforts have driven recent improvement in operator engagement, we are yet to see this translate into increased comp growth. However, we remain convinced that as we fine-tune our value perception with customers and our opportunistic mix, improved operator tools and support will serve as a tailwind. Store closures. In addition to the commercial components that are essential to the core business turnaround I just reviewed, we've also taken a hard look at our store portfolio. Following a rigorous analysis of the fleet, we identified 36 stores in the network that we concluded did not have a viable path to sustained profitability regardless of the operational support we could provide. We've made the difficult decision to close 36 locations, 24 of which are located in the East, representing roughly 30% of that region's fleet. We are not fully exiting any state, and we believe we have a meaningful opportunity to grow in the East over the long term. However, it's clear now that we expanded too quickly, and these closures are a direct correction. It's important to note that the remaining 51 stores in the East are profitable on a 4-wall basis and delivered a positive 3.3% comp in the fourth quarter, which gives us confidence in the core health of the go-forward portfolio. We expect these closures will result in an annualized adjusted EBITDA improvement of roughly $12 million and will enable us to operate profitably across each of our markets. Just as importantly, closing these stores will free operational capacity and focus that we will redirect toward our model refresh rollout of the 150 stores this year. These closures do not change our long-term view that ample white space remains ahead of us. And we continue to plan to open another 30 to 33 net new stores in 2026, but they do reflect a more disciplined approach. Going forward, we plan to expand with a more clustered model to improve supply chain efficiency and marketing leverage. We're also adjusting how we go to market. We're piloting new approaches to store openings to strengthen returns on capital. For example, as we launch our stores in Virginia in '26, these locations will start as company run with the intent of bringing them up to profitability before handing them over to independent operators. Once proven, we believe this approach could be applied in more markets as we continue to grow this business. The decisions we've already made earlier this year to underwrite stricter standards has also strengthened our outlook for our '26 cohort of new stores, which are now projected to deliver an IRR in the 25% range and the '27 cohort is now projected to deliver an IRR of up to 30%, up significantly from our projections just a year ago. A strategic review of UGO. Finally, we're scrutinizing every aspect of the business to remove distractions and improve shareholder value. To that end, we've made the decision to implement a strategic review of UGO. In an effort to focus on what's important to returning this business to sustainable growth, we are reevaluating the organizational impact that would be required from a full integration of that business relative to the anticipated benefit. I want to close by being straightforward about where we stand. We haven't delivered the results that our shareholders, our operators or our customers deserve, and I take responsibility for that. What I can tell you is that we have a clear understanding of the commercial challenge, and we're taking decisive action. We're prioritizing restoring value perception for our customers, we're rebuilding the opportunistic pipeline that defines this brand and we're reinvigorating the shopping experience in our stores. We're seeing early tangible signs of progress. And at the same time, we're eliminating distractions, including closing underperforming stores, and reallocating resources to deliver stronger operating results and return on capital. The road ahead will require patience, and we understand this is difficult given the recent results. We will be measured by what we deliver, not by what we promise and we intend to earn back your confidence through execution. We're confident that we have the right plans in place and the right team to execute them, and I look forward to sharing more about the progress we're making in the months ahead. Thank you, and I appreciate your time today. I'll now turn it over to Chris to walk through the financials in detail. Christopher Miller: Thanks, Jason. In 2025, we made important progress against our key strategic initiatives. However, as Jason shared, in the fourth quarter, we encountered headwinds which impacted our financial results. I will walk you through our Q4 financials before sharing details about our outlook for the year ahead. Please note that the comparisons I will provide are on a year-over-year basis, unless otherwise indicated. Starting with the top line. Fourth quarter net sales increased 10.7% to $1.22 billion and included an incremental $82.4 million from a 53rd week in 2025. Excluding the extra week, net revenue increased 3.2%, driven by the addition of net new stores, partially offset by an 80 basis point decline in comparable store sales. The decline in comp, which excludes sales from the extra week, was owed to a 170 basis point decline in average transaction size, offset partially by a 90 basis point increase in traffic. As Jason discussed, we believe several factors contributed to the comp decline, including our emphasis on driving better in-stocks for everyday items, which came at the expense of delivering the compelling value items our customers expect as well as macro factors, including the impact of the U.S. government shutdown on federally funded benefits as well as a more promotional environment. In the fourth quarter, we opened 7 new stores on both a net and gross basis. In 2025, we added 42 new stores and closed 5, ending the year with 570 stores across 16 states. Gross profit increased 11.5% to $361 million, representing a gross margin of 29.7%. Gross margin expanded 20 basis points year-to-year but came in below our outlook as a result of higher seasonal promotions and additional markdowns to clear excess inventory. While those markdowns impacted Q4 margins, they have helped us start the new year and a healthier inventory position. SG&A was $337.1 million and grew 13.6% in the quarter. As a percentage of net sales, SG&A represented 27.7%, representing a 70 basis point year-to-year increase. The increase was due to lapping a substantial decrease in performance achievement adjustments last year as well as growth in our store network, partially offset by lower severance costs. Jason mentioned our plans to close 36 underperforming stores, which I will touch on in a moment. Related to these closures, we incurred $109.8 million of noncash impairment charges for long-lived assets in Q4. Also in Q4, we performed our required annual impairment testing of goodwill, which resulted in the recognition of $149 million noncash goodwill impairment charge. Below the operating line, net interest expense was $7.7 million, up $0.7 million from last year as the average principal debt outstanding increased but was partially offset by a decrease in average borrowing rates. Our effective tax rate for the quarter was 10% compared with 47.4% last year. The year-to-year change was primarily due to the nondeductible goodwill impairment. Net loss was $218.2 million or negative $2.22 per fully diluted share compared to net income of $2.3 million or $0.02 per fully diluted share in the prior year. Adjusted net income increased 28.8% to $18.7 million or $0.19 per share. Adjusted EBITDA was $68 million for the quarter, up from $57.2 million last year, driven in large part by the benefit of the 53rd week. This also contributed to incremental 40 basis points to adjusted EBITDA margin, which was 5.6% for the quarter compared with 5.2% last year. Turning to the balance sheet and cash flow statement. We ended the year with $69.6 million in cash and approximately $175 million in available capacity on our revolver. Our net cash provided by operating activities during 2025, increased by $110 million to $222.1 million, driven primarily by tighter inventory management and other working capital improvements. CapEx for fiscal 2025 before tenant improvement allowances was $220.3 million, an increase of $13.4 million over fiscal 2024, driven primarily by higher number of net new stores opened in 2025. CapEx, net of tenant improvement allowance for fiscal 2025 was approximately $192 million, $18 million below our outlook of $210 million. Total debt, net of issuance costs was $492.9 million at the end of the fourth quarter, up $15.4 million from the beginning of the year with net leverage of 1.7x adjusted EBITDA. Before turning to guidance, I want to share a little more detail about store closures that Jason discussed. Prudent, disciplined capital management and improved return on investment capital are core priorities for us. We approached the store closure process with rigor. We began by evaluating all stores with negative 4-wall adjusted EBITDA, inclusive of TCAP burden. We developed a rating system based on real estate quality, competitive dynamics, operational execution and recent trends and applied those ratings across the portfolio. From there, we modeled store-level NPVs and compared those to estimated lease breakage costs. We also ensured that any closures align with our long-term strategic plans. After that thorough review, we decided to close 36 stores that were not meeting our performance standards. Once completed, we expect these closures will result in annualized adjusted EBITDA improvement of approximately $12 million. This should enable us to operate more profitably across our markets going forward while focusing our financial and operating resources where they can earn the strongest returns. We expect to complete these store closures during the second quarter and anticipate that we will incur cash charges of approximately $57 million, bad debt expense of approximately $12 million, partially offset by net noncash write-offs of lease liabilities of approximately $52 million over the course of this year as we exit the leases associated with these stores. As Jason noted, we've established stringent underwriting standards for 2026 and 2027 new store cohorts and the relative performance of our refreshed stores gives us confidence in the stores we plan to open moving forward. Now on to our outlook. We are starting the year by taking deliberate actions that are designed to strengthen operating performance and position the company to deliver improved financial results. However, as you might expect, some of these actions will impact our 2026 results. The store closures will moderate revenue growth and the promotional investments we're making will be reflected in near-term gross margins. Specifically, with respect to the store closures, we expect to see roughly 40 basis points or approximately $4 million of gross margin pressure in the first quarter this year from the inventory liquidation impact from the closures. It's also important to note that 2025's 53rd week contributed $82.4 million in sales and $9 million in adjusted EBITDA. These benefits will not carry over into 2026. For the full year, we expect comp store sales growth to be between negative 2% to flat. For the first quarter, we expect comparable store sales to be between negative 2.5% to negative 1.5%. Aside from the store optimization plan closures, we expect to add between 30 and 33 net new stores for this year, fairly evenly distributed across the quarters. We expect total net sales for our fiscal 2026 of between $4.6 billion to $4.72 billion. We expect the closure of the 36 stores will impact top line growth by approximately 2%. For the full year, we expect gross margins to be in the range of 29.7% to 30%, reflecting promotional investment to drive sales in the first half and the inventory liquidation impact from the closures. We expect first quarter gross margins in the range of 29.6% to 29.8% or 30% to 30.2%, excluding the previously mentioned inventory liquidation impact from our store closure plan. For the full fiscal year, we expect adjusted EBITDA to be in the range of $220 million to $235 million, and we expect first quarter adjusted EBITDA to be between $39 million to $43 million. For the year, we expect depreciation and amortization of about $136 million driven primarily by CapEx spending, net of tenant allowances of approximately $170 million. This includes investments in store openings and remodels, our distribution centers and systems as well as store maintenance projects. For the year, we expect net interest expense to be approximately $27 million. We expect to generate meaningful cash flow from operations in 2026, which will be used to grow and maintain the business and fund cash requirements related to the store closures between $51 million and $63 million. We expect share-based compensation of approximately $18 million, a normalized tax rate of 28% and average fully diluted shares outstanding for the year of approximately 99 million. Thus, we expect full year adjusted EPS to be in the range of $0.45 to $0.55 per fully diluted share and first quarter adjusted EPS of approximately $0.01 to $0. 04. In conclusion, while we're disappointed with our Q4 results, we're clear and confident on the steps to return the business to a position of strength, and we are taking decisive action to deliver on the promise and potential of our business. This work will take time, but by driving our key strategic priorities and focusing on execution, we believe we will strengthen our value proposition and store experience in support of sustainably stronger results for years to come. And with that, we'll open it up for questions. Operator: [Operator Instructions] Our first question is from Jeremy Hamblin with Craig Hallum. Jeremy Hamblin: I thought I would just start with getting an understanding of the same-store sales trends. And you noted that you've seen a 100 basis point improvement in February versus January. I wanted to see if you could put some context behind that. And how both traffic and basket have kind of shifted here as we've entered 2026? Christopher Miller: Jeremy, it's Chris. So yes, so in the third quarter last year, as you may recall, we started to see a little bit of a softening as we exited the quarter. And then when we went into the fourth quarter, of course, we had the government shutdown, which we talked about and the impact of that on SNAP and EBT, which impacted both October and November, and we were expecting to see December come back and be more normal comp. However, we didn't quite see that. We actually -- it continued to decelerate into December. It was highly promotional and really the environment, we feel got a little bit worse externally. And then that flowed into January where we kind of bottomed out. But all along the way, their customer count remained positive. It did decel as well, but it was positive all the way through into January. And then as we -- as Jason pointed out, in February when we started to invest in doing some promotions, we did see some recovery of about 100 basis points in February and expect that to improve in March as well as we continue to promote. Jeremy Hamblin: Got it. So fair to assume that you're kind of solidly negative here in the March quarter? Christopher Miller: Yes. I mean that's our guidance, right? It was minus 2.5% to minus 1.5 million. Jeremy Hamblin: Yes. Okay. And just coming back to understanding the core issue, where you've identified the value and kind of value proposition because it sounds like you're struggling with basket. Is it that you don't have the right goods that your customer set is looking for? Or is this really about competition and competition that has just been a lot more aggressive or closer in value to your price points? Jason Potter: It's Jason here. I'll answer the question. We can see clearly that value slipped because of the gap that was created in December, January time period on the weight -- the breadth and weight of our op mix, in particular and we know that restoring that will drive improved perception ultimately, comps. Customer -- our customers talk about op as great deals or promotions, and that's absolutely critical for us to drive value perception. In this time period, we've been looking at, obviously, we're monitoring this closely. Momentum is building. Our op mix is now up about 200 bps month-on-month over the last month from January and shipments up about 150 bps. And we can see that your question about basket, it directly relates to op. And so the drop in our units per transaction there are addressable based on our plan. And we've got the whole team focused on supporting on driving improvements on the buy side to drive that supply chain on opportunistic product. Operator: Our next question is from Kylie Cohu with Jefferies. Kylie Cohu: I'm on for Corey Tarlowe today. I was curious about SNAP benefit specifically, I wanted to ask about the February reductions that kind of just rolled out? And then any other color you could give around what you're seeing to consumer responses to the step changes? Jason Potter: Yes. Maybe I'll just take you back to November. I know there was a lot of conversation about that at that time. What we eventually did experience in November was a double-digit decrease and EBT sales, given the SNAP benefit being interrupted that created some noise for us. We did see a recovery in December, but not to the level we were perhaps expecting and it's something we continue to monitor. But in Q4, that's basically what happened. So November disruption and that roughly just under 10% of our sales with a double-digit increase during that period. Kylie Cohu: Got you. So nothing -- I guess I'm kind of curious, is there anything baked in for the recent. Is that reflected in the guidance? Jason Potter: Yes. February has recovered if that was something just to mention. And yes, it's in the guide. Operator: Our next question is from Oliver Chen with TD Cowen. Oliver Chen: On your opening comments, what would you say as earlier or faster in terms of fixing an opportunity versus longer term? And then you do have a lot of new leaders as you mentioned, across ops, merchandising and supply chain. How could you get us comfortable in terms of that new leadership and the right testing to make sure that things are optimized for go forward. And lastly, it's probably related, but the value perception the consumer is perceiving value versus what you're going to correct opportunistic. Like in other words, will it take a while for consumers to come back? Or how are you thinking about customers' perception versus what you're offering and timing around that? Jason Potter: Yes. Thanks, Oliver. Maybe I'll answer the second question first. So when we're looking at the business, we can see clearly that opportunistic is -- we have a gap right now internally and what we've delivered for supply and mix and value is directly related to the weight of that category of products, if you will, you can think of it like promotional weight. We think that restoring that pipeline is a 3- to 6-month piece. The promotions that we're implementing, the synthetic promotions we're creating are basically a bridge in the time period it's going to take for us to get that in the right place. And value is definitely driven -- perception is driven in our business by the depth and breadth of opportunistic product. And we're still comfortable there's plenty of supply. We don't think it's a gating factor to ambition, but we have some work to do there to deliver that. We've got a number of things that we've put in place to make sure that, that happens. Number one, we've unified the buying team under 1 leader, Matt Delly. He's got experience in that business. We feel good about the support we're providing for that team. We've added some resources there. We've got momentum, as I mentioned, on shipments and mix. We've made some changes in our supply chain with new leadership to create capacity to ensure that as op becomes available, we can flow that product through the system. We did burn off some less productive inventory in GM and HAB, that we think is going to be very helpful. And there's lots of opportunity for us to continue to expand on what we're doing there on the upfront. So that's the value perception piece. On the piece with new leadership, clearly, there's always a learning curve in any business. I mean, I'm still learning. I think I've learned a lot in this business in the first year. We're going to apply those learnings to improve the business at every stage we go. I'm highly confident in the team we've brought on. They're very confident. We've got a lot of great feedback from peers as well as operators on their level of engagement and understanding of the business and what they're going to deliver here over time. Operator: Our next question is from Simeon Gutman with Morgan Stanley. Pedro Gil Garcia Alejo: This is Pedro Gil on for Simeon. For the first question, I wanted to ask you about the $40 million in promotional investments that you've talked about for the year. Can I ask you, is there any specific categories or types of merchandise that they're touching. Do they stay in place? Do they become permanent? Or can you get some of it back over time? And are there any offsets? Can you lean on vendors or work with vendors, suppliers, look for efficiencies to try to mitigate some of the impact on the bottom line? Jason Potter: Thanks for the question. It's a quantum of about $20 million, just to clarify. And what we're doing is we're using fresh products, in some cases, direct-to-store branded quality product as a bridge. This is not a permanent part of our P&L. We think that the way we've approached this is by waiting the promotions based on the gap we have with opportunistic product is how we've sized what we think is necessary. And so not a permanent part. Part of what makes op such an important part of our business is it drives margins as well as value. And on the flip side, we are not a traditional promotional company, nor do we intend to be a traditional promotional company. And so when you promote those kinds of products, the margins are typically lower, but we are endeavoring to make sure that we are providing value for our customers in the short term as we work to close that gap. Pedro Gil Garcia Alejo: Great. As a follow-up, if I could ask you about the marketing mix is one of the elements you mentioned last quarter that sort of drove some of the weakness towards the end of the third quarter. Could you give us an update how that developed over the fourth quarter and how you're thinking about it into 2026? Jason Potter: No, that's a great question. We did calibrate our marketing post that September time period both in weight and channel. We've seen a nice result in the -- especially in Q1 so far year-to-date in the way we're executing our marketing spend. We reoriented more to outdoor and search and a little less on some of the smaller items as well as some broad-based marketing that we were doing that we didn't think was hitting the right target groups nor had the spend per value that we were looking for. So that, we think we've dialed in the right location at this point. Operator: Our next question is from John Heinbockel with Guggenheim Partners. John Heinbockel: Jason, I wanted to start with -- can you talk about the connection between the everyday product and opportunistic, right, and every -- the focus on everyday hurting opportunistic. Is that just capacity in the warehouse? And then does it take -- you referenced 3 to 6 months pipeline. I'm curious how long you think it takes to get opportunistic bought again. I would think that would be fairly quick, right, to buy that, get it in warehouse and into stores. Maybe talk about why it takes that long to get where you want to get to? Jason Potter: Yes. I think what I'm looking for, John, what I expect to see in the next 90 days is 2 or 3 things. By creating this bridge as well as what we're working on an opportunistic product, we expect to see a 200 basis point improvement in flow, a 200 basis point improvement in our mix on op. I also expect to see some value perception scores improving and then on the sales line, a traffic number that's north of 2 and stability in our basket on UPT. And when we're looking at the business at the tail end of Q4 and into the first part of Q1 that UPT piece is under pressure comes really all from op. On your question about every day, every day is for us, we're just trying to meet a minimum standard. So that is not the main event. The majority of our product is opportunistic in our stores and will remain that way. I think that what we're doing right now is calibrating those assortments to make sure that treasure hunt is the main event. That's what our customers care about, and that's our differentiator, and that's our future. John Heinbockel: And then as a follow-up, the 24 closures in the East, at least, maybe I'm wrong, do not include I mean how do you think about that review? Do you think there'll be UGO closings? And UGO op is company-owned, sort of your thought process on -- do they stay company-owned? Do you transition them? Where do you think that review ends up? Jason Potter: Yes. I mean our effort to execute a turnaround here and narrow our focus as we come to the conclusion we'd like to conduct a strategic review of that business. A couple of things to say. We have confidence in the business, the team there, the market, it continues to be profitable and stable. But given our priorities and the trend in the core business, we want to make sure we're evaluating our options. I don't know what the outcome of that will be at this point, John, but we're -- there's a range of possible outcomes there from full integration to a potential sale, but we're going to evaluate each one of those on its individual merits and we'll keep you up to date on that progress over time. Operator: Our next question is from Edward Kelly with Wells Fargo. Edward Kelly: So taking a step back, if we sort of think about the business before you got there and where things are moving currently, there's been the systems issues, which have been disruptive and then some of the things you mentioned about marketing and the SNAP stuff and then obviously, the environment seems to be more promotional. You're adjusting to this, but how does this impact the way that you're thinking about the long-term margin structure of the business? And then as you think about things like store growth, you're still opening stores next year, those leases probably signed. Are you still signing leases beyond that? Just how do we think about what all this means for the business bigger picture and longer term? Jason Potter: Yes. I mean, bigger picture on the margin structure, confident that we're going to be able to expand margins over time. What we're doing right now, as I mentioned, is a temporary bridge. Op is a driver. Accretive margins, attractive on the value front for customers. I think when you talk about systems, we're only going to get better at running the business as we extract ourselves from that period. There's a whole host of things that we're going to be able to do there, including something I mentioned in my opening remarks, which is giving support to our operators to get even better at what they do best. And then on the store closure front, just a couple of things I just want to take a minute to talk about because I think it's really important given where the company has come from. First of all, we're not going through another restructure. This is it. If you kind of play back the last year on that front, Q1, the company made the decision to slow unit growth. The past practice, I guess, of really promoting a high unit growth -- high single-digit unit growth created some challenges and some dysfunction. Clearly, there's white space for us there, but we need to make sure we have the winning conditions in place for sustainable growth. I think that's really important. And as we kind of entered the new year in January, we wanted to make sure that we spent time reviewing every part of the business and the store network was part of that. So we did come to the conclusion to close 36 locations that didn't have a viable path of profitability. And we want to make sure that resources are focused on the key priorities of the business. So those are some of the things that we had thought through. Our process over the last year on the network and growing is very much focused on sustainable growth and returns on invested capital. And key ingredients to that include site selection quality, making sure sales productivity potential is there. Those things, I think, there's a lot of real estate in the 36 that's very challenged. We're underwriting stores now, locations that have more potential. We spent time on lowering our CapEx costs. The conversations we've had over the last couple of quarters include clustering, waiting to core markets, leveraging marketing, brand strength, supply chain and obviously, the operators are key. And so we look at our outlook for the underwriting we have this year on the 30 to 33, we made decisions last year as well on that portfolio and feeling much better about the 25% IRR and the following year with that cohort of stores in the 30% range. So clearly, we -- growth is important, but we want to make sure that we're improving the strength of the company as we do that. Edward Kelly: Okay. And then just a follow-up. You mentioned the highly promotional external environment that began in December. Could you maybe provide a little bit more color there in terms of where that promotional activity has been coming from and how broad that is? Jason Potter: Yes. We cover a lot of different states in the country, and we saw pick your promotion far deeper promotions starting actually around the Thanksgiving time period that ran right through December, early January with some pretty aggressive high low out in the marketplace. And we just see continued aggression across a host of commodities crossover competition that we have. So we would just describe it as more promotional. And our customers in store and so on, we're seeing challenges with affordability there. And I think that our gap there on up through December and the New Year has obviously affected the business, and we need to double down and make sure that we're able to deliver there in a significant way. Operator: Our next question is from Joe Feldman with Telsey Advisory Group. Joseph Feldman: I guess my first one, I also wanted to ask on stores. Can you -- I guess why would you open 30 new stores or so this year before you get the format right for the existing stores. It feels like we're not fully there yet on the format, and maybe I'm wrong, but that's my interpretation of what I'm hearing. And yet we're going to keep opening stores without knowing what's the right and best format. So maybe you could address that first. Jason Potter: Sure, Joe. I think that the stores that we have in the portfolio for this year, first of all, are highly weighted to core markets. So I think West Coast -- and that's a big part of what we've calibrated to. The -- we've cut some of the locations out that we didn't feel were high potential, and we're confident that, that approach is a much more attractive way to open stores. The following year, we have a smaller cohort of stores that we've obviously signed leases for. There's -- but after scrutinizing and going through the network work that we did, it was quite rigorous, we still feel comfortable that, that is the right thing to do for the business. Joseph Feldman: Okay. Got it. And then if I heard you guys correctly, I think in your prepared remarks, Jason, you mentioned you're going to open stores -- new company-owned stores, I guess, and then you'll come back later within IO. That seems like a pretty big change in strategy. And maybe you could help us understand that. Jason Potter: Sure. Yes. Maybe I'll talk about the company has done in the past, which has been successful. So in places like California where we've opened a lot of stores over a long period of time. Operators -- strong operators would typically open new locations. And there is a competency, a skill set, and understanding of the business. It's very extremely important in a new store. New stores are generally difficult to run, volumes tend to be lower as you're ramping up. And so when we look to places like the east, where we have much fewer stores, the network is relatively new. The experience of the team is obviously at a different place than it is in a place like California. We think that number, obviously, site selection, strength of the site is key, but that first year sales productivity number is critical. We do want all of our operators to have an opportunity to make money. And attracting highly skilled people to the business is a very important part of what we're doing. And so we're taking some of the risk by driving that year 1 sales productivity with the idea that we'll hand that off in a more stable way to our operators post year 1. And we think that, that approach might be an interesting thing for us to understand in a place like the east part of the country. Joseph Feldman: And just one quick on that one, sorry. But does that mean you're going to have, like, say, a really successful IO in the West Coast go and run an East Coast store for you? Jason Potter: Yes, we have had that happen. So that's not -- it's happened before, but it's not -- clearly, as you think about moving across country there's only a handful of individuals that are sort of up for that kind of challenge. So you typically are recruiting from a geography, right? And that's also helpful. So as we build that team and as we build that market, that will get easier. But we do think that it's essential to get stores up to speed, so to speak, on a sales productivity standpoint. And we'd like to see if this is one of the ways we can improve our performance long term. Operator: Our next question is from Mark Carden with UBS. Mark Carden: So I want to start with the IOs. Going forward, what steps can you take to help re-ensure your IOs is the long-term opportunity of the company, just especially when considering the exits you guys are making. You guys talked about support. Are you planning to offer additional incentives in the near term? Or has IO demand and retention been pretty consistent with what you guys have seen in the past? Jason Potter: Yes, that's a great question. So a couple of points here. The restructuring with the 36 locations closing is a result of these operations not having a viable path to profit, as we talked about. We do want to make sure -- ensure that our operators are healthy and they have a legitimate opportunity to profit from the skill and effort they bring to our business and their community. We're very focused on providing improving levels of support for our operators in terms of tools, reporting and reducing friction in the business to help them build sales, improve their profit, make the business easier to run and obviously, together strengthen the brand. And so where we are right now, comps are critical, as they accelerate the P&L follows and our operators are -- we've obviously spent quite a bit of time over the last number of weeks before this call sharing this plan with them, decided about it, they're supportive. And people are -- we're all rolling in the boat here together. So one of the things that we brought to operators to help with some of this, call it, profit potential in the business is there's some real opportunity for them to improve bottom line, their bottom lines with some of the things we've recently rolled out, including the inventory management system that's now embedded for fresh meat and produce in our order guide. We've also introduced peer group comparability and exception reporting on things like shrink. All of these things provide immediate and obvious opportunity for them to address improving their profits and health right now. So that's the way we thought about it is -- but we haven't considered anything else at this point, but the whole company, including our operators are focused on driving comps. Mark Carden: That's helpful. And then as a follow-up, you talked about the 36 closures being more heavily weighted towards the East, but that you remain committed to the region and aren't fully exiting any state. How do you think about the pace of growth in that region going forward? Just as growth gets deemphasized over the next few years, given store densities will presumably be lower out East? Just how are you thinking about that? Jason Potter: Yes. No, it's a great point. The -- a couple of things to say there. We believe that growth will be extendable in those kinds of areas where returns are disappointed in the East in particular. We're, as I mentioned, putting winning conditions in place for that business, including the way we launch. We just talked about in Virginia, how we underwrite in select locations is important. We've modulated already the kind of mix of stores in core markets versus new, and we've done that over the last couple of quarters, which reflects some of the returns that we've indicated. In the East, in particular, the 51 stores that we have remain are all four-wall profitable, and they were comping over 3% in the last quarter. We think that the DC we just opened in the East, which was opened flawlessly by the team will greatly support the improved product availability that we need for those stores. And the work will continue there, but we're probably going to go in a more measured pace in a place like the East than for sure what's happened over the last 5 years. Operator: Our next question is from Robby Ohmes with Bank of America. Robert Ohmes: I wanted to follow up on the IO questions. Just are the IOs -- are they still having any lingering execution issues related to systems? And is that part of the headwind here? And another question is just on the promotions you're doing, are the IOs sharing in the promotional funding? And is that going to be sort of a headwind for them and was any of the value slipping that's been going on related to IO decisions on what they're highlighting in their stores or what they're buying from an off-price basket? Any thoughts on that would be really helpful. Jason Potter: Sure, Robby, thanks. Good to talk to you. So on the systems piece, our orientation this year is there's 4 buckets that we want to support our operators with. First is when we interact with them in any way, shape or form, we want to add value by helping them improve their sales. We want to help them improve their profits. We want to make the business easier to run. And obviously, all of this work together is to improve the brand strength, which creates loyalty for customers. On your question on systems, we had a, I'd say, a very long laundry list of things that we're getting in their way, making -- creating friction in the stores. We still have some work to do that we're going to clean up kind of right around the end of Q1. We've made progress there. It's not perfect, but we clearly -- when we talk to the operators, we've restored tools. We've made changes, and we continue to make progress there. I'd like -- and I've told the operators this we want to make the stores as easy to run as humanly possible. We want them focused on their customer and improving their business and working with their teams. And they had -- as you kind of noted, a fair amount of distraction over the last couple of years related to that. On the promotion front, there is some sharing that goes on. Obviously, the model here is to share profitability, but we've also made some decisions about what that looks like in the short term. We obviously are always keeping a very close eye on the margins and making sure that we're doing everything possible to ensure that the operators are profitable and healthy. Those are 2 of the questions. Maybe Robby, if you had the third point that... Robert Ohmes: Yes, maybe a way to phrase it me. So for example, the percent of opportunistic product declining, I guess, a bit in the stores. Was that something that happened because IO has lost flexibility? Or was it sort of aggregate decisions by IOs to reduce opportunistic product? Or was that something centrally done? Jason Potter: No. The operators are very, very focused on opportunistic product. They are absolutely motivated to grow sales and drive margins, and that's one of the first things they review, look at, try to understand. I think that if you kind of go back in time, one of the things that happened here was with the implementation of the new systems in '23, we did see a substantial reduction in the mix on op just generally. And some of that we thought was related to tools and visibility. Some of it is related to work of expanding things like made-to-order products or, in some cases, some of own brands implementation. But operators are game to drive that. And what we're doing now is just making sure we've done everything possible to increase the supply and the quality of those choices for our operators to make sure that they can fully take advantage of that. And the customer wins and so do we, on the margin side and sales. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. And again, we thank you for your participation.

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CBRL 2026 Q2 财报电话会议

Operator: Good day, and welcome to the Cracker Barrel Fiscal 2026 Second Quarter Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead. Adam Hannon: Thank you. Good afternoon, and welcome to Cracker Barrel's Second Quarter Fiscal 2026 Conference Call and Webcast. This afternoon, we issued a press release announcing our second quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the second quarter ended January 30, 2026. Please refer to the footnotes in our press release for further details about these metrics. The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials. On the call with me are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect our results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnished to the SEC. Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie? Julie Masino: Good afternoon, and thank you for joining us. Q2 total sales were $874.8 million and adjusted EBITDA was $38.2 million. Our entire team is executing our plan to: one, improve our operations; two, connect with guests through our menu, marketing and value proposition; and three, deliver cost savings to improve profitability. We're gaining traction and are encouraged by some important guest metrics and green shoots around traffic, and we're energized in terms of driving improved performance. I'd like to start by thanking our store teams for their hard work every day. Operationally, we're pleased with the improvements we are seeing following the leadership changes we made in October. Our Google star rating, which over the long run is strongly correlated with traffic, was 4.28 in Q2. This represents the highest quarterly score since Q2 in fiscal year '20. We've also seen gains in food taste, service and value scores, all of which increased 4% to 5% in Q2 compared to the prior year, and these positive trends have continued into Q3. Additionally, we're making progress with turnover as we saw improvements in both our hourly and manager turnover trends, including a 10% improvement in management turnover in Q2 year-over-year. We view all of these metrics as important leading indicators and are confident that these gains will translate into improved traffic over time. Turning to our menu. Our multipronged strategy continues to include bringing back guest favorites, introducing new offerings, enhancing quality and leaning into value. We are incorporating elements from these tactics with each of our seasonal menus and all of this is being done with the overarching goal of improving guest satisfaction and driving traffic. We're continuing to reintroduce favorites, both to our core menu and as part of our limited time-only promotions. Our holiday menu promotion featured our Country Fried Turkey. This fan favorite continues to resonate with guests, and we again sold out of product. In January, we reintroduced hamburger steak and eggs in a basket. Then with our spring menu that launched in mid-February, sugar-cured and country ham dinners returned to the core menu. We also brought back carrot cake as an LTO. We continue to use Front Porch Feedback, our guest feedback mechanism, and there are more returning favorites in the pipeline. And as we bring back items, we are doing so through the lens of improving taste, consistency and ease of execution. We also continue to innovate and close menu gaps with the introduction of new items. In the fall, we added the breakfast burger. Topped with our signature Hashbrown Casserole, this delicious burger is the ultimate combination of country cooking and a breakfast for dinner entree. Our spring menu provides additional examples. Guests have been asking for omelets and scrambles for years, and we recently debuted our new Garden and Farmhouse Scrambles. We also added Smoky Southern Salmon, and this LTO offering provides a more premium, lighter fish option. Collectively, these items, both the new offerings and returning favorites have been well received, and we've been particularly pleased with the breakfast burger and carrot cake, both of which have outperformed our expectations on preference. In addition to introducing items, we're also evaluating food quality improvements to existing offerings as part of our targeted efforts to drive greater guest satisfaction across the menu. We're testing improvements to several signature items and have additional tests planned in the coming months. Finally, as it relates to our menu, we're also leaning into value. We already have a strong everyday value foundation, which we've strengthened with our barbell pricing strategy, and we've been layering in new constructs and targeted promotional offers. This has allowed us to evolve the way that we talk about value by amplifying our communications around compelling price points to drive traffic while reinforcing affordability as a hallmark of the brand. This fall, we launched meals for 2 starting at $19.99. This offer available for dine-in on weekdays, includes 2 full-size entrees and choice of shareable or desserts. We continue to evolve this platform, and we've seen a meaningful lift in guest preference since launch. Our approach to value also includes pulsing short window offers to create urgency and trial. In the weeks leading up to Christmas, we ran a promotion for our free toy up to $5 with the purchase of a kids meal. We were pleased with the results and impressed by the team's agility in quickly creating and implementing this offer. It delivered incremental margin dollars and contributed to outperformance of the toys category during the promo window. Our ability to connect restaurant and retail in a single experience is a real point of differentiation. We're exploring additional ways to capitalize on this advantage and believe that by lengthening the lead times for planning and execution, we can make these integrated promotions even more impactful. In fiscal '25, we were pleased with the positive mix we delivered, and the team has been focused on developing menu enhancements to build margin while reinforcing our value proposition. We introduced several changes in January. For example, guests can now upgrade to 3 sides for a modest upcharge and add a soup and salad to their meal for just $5. They could also choose bundled shareable duos and trios. Early results from these actions are encouraging as we've seen an improvement in our mix trend following these additions. Another important way we are driving traffic and delivering value is through our loyalty program, Cracker Barrel Rewards. After a little over 2 years since the program launched, we now have over 11 million members, and they account for over 40% of tracked sales. That scale gives us a meaningful way to understand guest behavior and directly engage with guests to reinforce value and drive frequency. It's a tremendous benefit for guests and an increasingly important tool in improving traffic. Engagement in the program remains strong and traffic among loyalty members has held up better than nonmembers since August. From a marketing perspective, our guest connection strategy remains centered on food, value and the heritage that makes Cracker Barrel distinct. And every campaign is designed with a clear objective, drive traffic and strengthen brand affinity. We are seeing early signs this is working as evidenced by our improving traffic trend and the fact that our brand sentiment scores improved 2% over Q2 compared to Q1. As part of this, we have deepened our storytelling and leveraged key partnerships to reinforce emotional connection, expand reach and drive visitation. We continue to highlight our scratch cooked food made with care through the Our Country Friends series on social media. We are emphasizing and expanding our long-standing commitment to the military community. We again offered a complimentary Sunrise Pancake Special for military members on Veterans Day. This contributed to a strong traffic comp performance for the day, and we also helped support 30 worthy veterans organizations throughout November. Most significantly, we launched an ongoing 10% military discount available all day, every day in both restaurant and retail. This discount is available through Cracker Barrel Rewards and is helping to drive continued growth in loyalty membership, while also recognizing this important group. We are building on our efforts from the past year and continuing our successful partnership with Speedway Motorsports. We are once again sponsoring the Cracker Barrel 400 in May as well as increasing our on-site activations at races across the country, which kicked off at Daytona last month. Last year, our partnership with Speedway Motorsports gave us cultural moments to amplify our story in ways that guests loved and that supported traffic and brand trust. We are looking forward to leveraging similar opportunities this year. We're also excited to feature our Campfire Meals platform again this summer. Campfire is one of our strongest nostalgia anchors and a clear expression of Cracker Barrel, Americana, Travel and gathering. Turning to retail. As a reminder, Q2 is our biggest quarter for retail sales due to the holidays. Overall, our retail results remain pressured due to traffic, but we were encouraged by the guest response to our seasonal holiday assortment. We were also encouraged that retail attachment was flat versus prior year, given that it has generally declined in recent quarters and that our average order value increased slightly. We're excited about our upcoming assortment. Looking ahead, the team remains focused on effectively managing inventories, mitigating tariffs and enhancing the shopping experience. Finally, in addition to our efforts to drive traffic by improving consistency of food and the guest experience, we are also focused on cost savings. In Q2, we continued the restructuring of our corporate office that began in Q1. We remain committed to returning G&A closer to historical levels as a percentage of sales and are continuing to closely manage our expense structure to protect our balance sheet. As we look ahead to the back half of our fiscal year, we are encouraged that we continue to welcome back more guests. Our #1 focus is serving delicious food and delivering experiences guests love. We have a number of tactics to support this, and we're confident in our team's ability to execute. We're engaging our guests through our menu, messaging and continued commitment to value. We're committed to operating with excellence, and we're implementing actions to improve profitability, all to strengthen the business and to return to positive momentum. I'll now turn it over to Craig to review our results and discuss our outlook. Craig Pommells: Thank you, Julie, and good afternoon, everyone. For Q2, we reported total revenue of $874.8 million, which was down 7.9% from the prior year quarter. Restaurant revenue decreased 7.5% to $694.3 million. Comparable store restaurant sales decreased by 7.1%, which included a traffic decline of 10.1%. From a monthly perspective, November and December traffic both declined between 10% and 11%. We were encouraged by the improvement in January, which declined 9%, including an approximately 50 basis point net year-over-year unfavorable impact from weather. Restaurant average check increased 3.4% and included pricing of 4.2%. Menu mix was negative, driven primarily by higher discounts. Off-premise sales were 23.6% of restaurant sales, which increased modestly over prior year. Total retail revenue decreased 9.3% to $180.5 million, and comparable store retail sales decreased by 9.2%. Moving on to our quarterly expenses. Total cost of goods sold in the quarter was 33.5% of total revenue versus 32.6% in the prior year. Restaurant cost of goods sold was 27.4% of restaurant sales versus 27.1% in the prior year. This 30 basis point increase was driven by higher waste, increased discounts and commodity inflation, partially offset by menu pricing. Commodity inflation was approximately 1.3%, driven principally by higher beef, pork and coffee prices, partially offset by lower poultry and dairy prices. Retail cost of goods sold was 56.8% of retail sales versus 53.4% in the prior year. This 340 basis point increase was primarily driven by higher tariffs and increased discounts, partially offset by pricing. Quarter end inventories were $180.3 million compared to $173 million in the prior year. Labor and related expenses were 36.1% of revenue compared to 34.4% in the prior year. This 170 basis point increase was primarily driven by sales deleverage and lower productivity. Wage inflation was approximately 2%. Other operating expenses were 24.8% of revenue compared to 23.2% in the prior year. This 160 basis point increase was primarily driven by sales deleverage and higher store occupancy costs, including increased maintenance spending, which was in part due to elevated snow removal costs. Adjusted general and administrative expenses were 4.9% of revenue and exclude $2.6 million in expenses related to the proxy contest, and a $2.6 million corporate restructuring charge related to organizational and leadership structure changes. Compared to the prior year, adjusted general and administrative expenses improved 60 basis points, primarily driven by lower incentive compensation and cost savings initiatives, including the corporate restructuring. Our GAAP financial results include a noncash store impairment charge of $400,000 related to Maple Street stores. Net interest expense was $4 million compared to net interest expense of $5 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. Our GAAP income taxes were a $4.9 million credit and adjusted income taxes were a $3.5 million credit. GAAP earnings per diluted share were $0.06 and adjusted earnings per diluted share were $0.25. Adjusted EBITDA was $38.2 million or 4.4% of total revenue compared to $74.6 million or 7.9% of total revenue in the prior year. Now turning to capital allocation and the balance sheet. Our balance sheet remains strong, and we continue to have ample access to liquidity. We ended the quarter with $531.5 million in debt compared to $471.5 million in the prior year. At quarter end, our consolidated senior debt to adjusted EBITDA leverage ratio was 0.3, which is below the maximum allowed of 3.0. In the second quarter, we invested $26.6 million in capital expenditures. I also want to note that in our third quarter, we expect to record a net cash benefit of approximately $46 million following the settlement of certain litigation matters. This amount will be included in the calculation of EBITDA as defined by the credit agreement for purposes of calculating applicable ratios for debt compliance and borrowing capacity. However, we expect that it will be excluded from the calculation of reported adjusted EBITDA to enhance comparability to our adjusted EBITDA results across periods. Before sharing our annual outlook, I want to provide some context on current trends and how variability between last year's third and fourth quarters are expected to affect comparisons for the remainder of fiscal 2026. If you recall, in the third quarter of fiscal '25, traffic declined 5.6%, in large part due to weather and macroeconomic factors. That was our lowest traffic performance of the year. As a result, we have an easier comparison in this year's Q3. Having said that, we are pleased that our traffic trend in February further improved on January's results. Regarding Q4, traffic in fiscal ' 25 declined 1%, a significant step up from our third quarter. As a result, we will have a more challenging lap in the fourth quarter. Turning to our fiscal '26 outlook. Our guidance reflects our best estimate as of today. The rate and level of our traffic recovery as well as the level of investment required remain key drivers of our fiscal '26 EBITDA performance. As outlined in our press release, we anticipate the following for fiscal 2026. Total revenue of $3.24 billion to $3.27 billion, pricing of approximately 4% and lower menu mix resulting from higher discounts, commodity inflation of 2% to 2.5%, and hourly inflation of 2.5% to 3%. As discussed on the last call, we've implemented a number of cost savings measures. We executed a corporate restructuring that began in Q1 and continued in Q2, which we expect will result in annualized G&A savings of $20 million to $25 million. Additionally, we have reduced our advertising spend and anticipate that our aggregate advertising spend in the second half of the year will be $13 million to $17 million lower than the same period in the prior year, reflecting a more targeted approach to our advertising. Taking all of the above into account, we now anticipate full year adjusted EBITDA of approximately $85 million to $100 million. Finally, we are now planning for lower capital expenditures of $105 million to $115 million, and this reduction is part of our comprehensive efforts to manage cash flow and the balance sheet. With that, I'll now turn the call back over to Julie for a few closing remarks. Julie Masino: Thanks, Craig. I want to wrap up by reiterating that all of the initiatives I described across operations, menu and marketing are part of our focus on consistently delivering delicious, flawless food, improving guest satisfaction and driving traffic. We're highly encouraged by the green shoots we're seeing, particularly the strong gains in the guest experience metrics I mentioned. Looking ahead, we know that consistently executing at a high level is imperative for our recovery, and the entire organization is aligned to support this. Before we go to Q&A, I want to thank our team members around the country. I'm so proud of their hard work and commitment to the guest experience. I'm confident that our continued focus on food and the guest experience will enable us to return to positive momentum. Operator, we can now hand it over for Q&A. Operator: [Operator Instructions] The first question comes from Dennis Geiger with UBS. Dennis Geiger: I wanted to start off by asking a bit more about the quarter-to-date commentary, just given all the moving pieces and the importance of traction against the plans that you have in place. I think specifically the comment was improvement quarter-to-date. So I was curious if that was sort of, Craig, on a 1-year basis, you were referring to that? If you are seeing continued traction and an underlying trend improvement? Anything else on kind of the latest and greatest as it relates to where traffic trends are and how you'd kind of size up traction against plan so far? Craig Pommells: Dennis, we do believe the underlying trend is gradually improving. As we shared, January did better than November and December, and that included some weather, as you know, at the end of the month, and we're encouraged by an even better start to February. We did try to kind of balance all of that, just recognizing that February in the prior year was a bit softer due to some weather as well as some macro issues, but we feel like the underlying trend of the business is gradually improving. Dennis Geiger: Great. And then as a follow-up, encouraging to hear about the improvement in the brand sentiment scores as well as the strength in that Google Stars rating. Perhaps, Julie, using those metrics and any others that are relevant, can you give us any better sense for how those metrics sort of help you assess where you are in the recovery process as we try and get a better sense for sort of the leading indicators sort of ahead of further traffic improvement? Julie Masino: Yes. Thanks, Dennis. Again, we are really encouraged by the improvement in everything you mentioned, Google Star rating and the brand sentiment, our food and value scores as well as just the way the teams are really executing. Being in our restaurants is just -- they feel so good right now. I'm in a lot and talking to guests, talking to our team members, and I feel like we are just at our best, more than we have been in a while. So that said, we're moving in the right direction. As I've said to you guys in the past, I don't have a crystal ball, and we don't have a correlation that says when scores improve by X, traffic follows by Y, weeks or months. We don't know that, but we know these are leading indicators. We've checked all correlations. They still correlate to same-store sales growth and improvement. So we know we're headed in the right direction, and everybody is working hard to make that a reality. Operator: The next question comes from Jon Tower with Citi. Jon Tower: Great. Julie, you had mentioned earlier that you're starting to do things a little bit differently, it sounds like on the marketing front. And I know, Craig, you had mentioned that in the back half of the year, you're expecting a lower spend in terms of advertising. So I'm curious what tools you're using to ensure that consumer awareness remains high as the advertising spend drops lower in the back half of the year? And can you maybe dig into the exact tactics that you're going into, particularly on social and digital, to kind of draw in either new or lapsed guests back to the brand? Julie Masino: Sure. Jon, I'm probably not going to lay everything out the way you asked specifically. But as you know, driving traffic is about much more than just advertising. And we have really spent the last year building out audiences, really going after the specific ways to reach them in the channels that are most relevant to them. And we have a holistic plan to really reach them in those channels to bring them back and build their trust. So it is targeted, it is nuanced. And then there is some broad-based media that really just gives us reach across that. And as Craig has shared, we have been disciplined about our marketing spend given the current environment because, as you know, we spent a lot more in Q1 and Q2, and that really hasn't manifested in traffic. So we're actively testing messaging. We're testing offers, campaign constructs really through our loyalty member base to really make sure that they're going to work and get after the right people. That's really the last thing I'd leave you with is loyalty is a great way for us to reach guests. And so we've been using that to really refine messaging, try out offers, test some different messaging constructs with different -- we've got different segments within our loyalty population and making sure that we're really talking to them about what they want to hear from us. Some people want to hear more about food. Some people want to hear more about retail. Some people want to hear about the holidays. So we've really tried to dial that in an effort to meet them where they are and welcome them back. Jon Tower: Got it. And maybe, Craig, this one on the tariff outlook. I know there's quite a bit of fluidity in terms of what's happening now. I believe in the last call, you had mentioned about fiscal '26, there was about a $24 million or so incremental impact on the business from tariffs. Has that changed? Craig Pommells: Jon, well, you said it right. It is dynamic and the tariff environment is changing. As you know, there's relatively new news out there. Maybe just a couple of things on the dollar impact. In part, there's a component there of traffic and retail sales that will impact the absolute dollar impact. I think the team continues to do a really good job here. But it is also kind of late breaking and evolving. We do expect it to be a smaller tariff impact, a little bit this year, but there are a couple of things. The rate change is not actually as big as it might seem in theory, Additionally, the impact to us really needs to flow through the supply chain. So we have to receive the product, warehouse it, send it to our stores and then ultimately sell it. So there is a lag with all of that, and the rate change is a bit more modest. So more to come in the future on that one. Operator: The next question comes from Jake Bartlett with Truist Securities. Jake Bartlett: My first question was just to make sure I understand the guidance for traffic. Before you had talked about 8% to 10%, negative 8% to 10% for the year. I'm wondering if that's still the case. Maybe if you could be a little more specific about what you expect in the back half and what that implies. Maybe you'd share whether you expect to be on the higher or the low end of that range or something like that? And then I have a follow-up. Craig Pommells: Jake, in terms of the back half, I think the key takeaway for us here is we're thinking about what we're comping on and what happened in the prior year. As we shared, Q3 was a bit of a challenge last year. We had some kind of broad-based macro issues to start out the quarter. And then Q4 picked up a lot. We had positive dinner traffic in Q4. We were very pleased with that, with the bring back of the Campfire campaign. So as we comp over a relatively easier Q3, we expect that to be a little bit of an assist. And then as we comp over what we expect to be a bit more challenging of a Q4, we expect that to be a little bit of a headwind. In terms of traffic, not a lot of movement there. That Q4 dynamic is still pretty unknown. I mean we've shared what we think there. But our thinking right now is in the full year, we would expect traffic to be somewhere in the neighborhood of negative 8.5% to negative 9.5%. Jake Bartlett: Got it. Great. And it was encouraging to see the brand sentiment improvement versus pre-August. I'm wondering if you can share how far you are from what it was pre -- maybe how much you have to go to kind of get back to normal or kind of pre-August, pre-rebranding. And I'm also wondering whether you can share whether there's different sentiment from cohorts of your customers. And I'm wondering about local versus nonlocal travelers and maybe some of the implications that could have as the summer travel business becomes a larger part of your business in the fourth quarter. Julie Masino: Yes. Jake, I'll start with that one, and then maybe Craig will have an assist. I don't know, we'll see. There's a lot in there. So let's see. We have not shared where we were prior to August. So I think that is probably not a place I can go right now. We are seeing improvements there. We are a little bit below sort of the average for casual at the moment, and so really working to claw that back and improve our trends there. But again, we are pleased with the progress that we're making. And you kind of hit the nail on the head a little bit. The way we're doing that, and it's a little bit in my answer to Jon's question as well, we are really segmenting our loyalty audiences by what we know about them, how they shop with us, what they want to hear from us. And we've done a lot of research, as you can imagine, in the last 6 months, talking to them about their feelings and what they want to hear from us and what they want to see from us. And so we're really using that learning to welcome them back. And so those messages are different based on who you are in our loyalty program and what you have said matters to you and how you shop with us and whether you're a breakfast customer, whether you're a dinner customer and whether you're a retail customer, all of those things we're using, again, to meet you where you are and to welcome you back with open arms. So we're really pleased with the progress we're making. We've got some ways to go, but we're starting to unlock that and feel good about that. Craig Pommells: In terms of the traffic composition, maybe the only thing I would add is that the traffic coming from our loyalty program is holding up well. So we're pleased with that, and that's encouraging because we have such a large base there, and we've been investing behind that for a long time. So we're going to continue to utilize and leverage those capabilities. Jake Bartlett: Got it. And if I could just sneak one more in, and I apologize for this. But your guidance for EBITDA and the margins, you've taken down your inflation guidance for commodities and for labor. You're talking about lowering the spend much less in marketing year-over-year. You beat in the second quarter, but your overall annual guidance didn't change very much. So I guess, are there some offsets that some costs that you hadn't anticipated that you think you're going to incur? Or I guess I'm trying to kind of get at to what level -- to what degree this might be conservative? Craig Pommells: Yes, Jake, we did move up the bottom end of the range a fair bit, and the Q4 dynamic is a bit of an open question mark. So I think all of that factors into our thinking. Operator: Next question comes from Sara Senatore with Bank of America. Sara Senatore: I have a question and then maybe a couple of follow-ups or clarifications. First, on the kind of demand environment, obviously, hearing a lot about gas prices potentially spiking. I know in the past, we've talked about Cracker Barrel having some relatively high perhaps exposure to people who are traveling or coming from other ZIP codes. I was just curious if you could speak to that and perhaps any kind of historical correlation? And then like I said, just maybe one quick clarification. Craig Pommells: Sara, on the gas prices, in particular, we've looked at this a couple of different times. Pre-COVID, gas prices did have a really strong relationship to traffic. More recently, we focused more on disposable income, because that has been a little bit more impacted with all of the other moving pieces in people's spending. So gas prices are obviously one input into that. So potentially if gas prices are up, that could be a negative. But as an example, going the other direction is tax refunds are expected to be higher this year than they were in the prior year and the retirees also have a larger deduction this year. So there are multiple moving pieces that flow into the disposable income. We have a bit more exposure to travel, which exposes us to gas, but we also have more exposure to folks that are over 65, and they are likely to have a benefit as well from the tax changes. Sara Senatore: Okay. And I'll actually ask a clarification on this and then I'll follow up later with the other questions. Just in terms of, to your point, I guess, tax refunds also, though those typically benefit kind of upper or higher income consumers. I guess, have you maybe talked about your income exposure? I guess there's the perception that perhaps your customer base maybe skews a little bit lower income. But I guess, as I think about the puts and takes, you make a good point, but just from an income perspective? Craig Pommells: Yes, it's a good question. Our income exposure is pretty close to average, maybe a little bit lower than average, but not dramatic. And in this case, I do think this particular tax environment is different. And the folks that are retirees, they do get a larger benefit. So there are a lot of moving pieces as you think about disposable income this year a little bit more so than in the past. Operator: [Operator Instructions] The next question comes from Todd Brooks with Benchmark StoneX. Todd Brooks: Congrats on a nice quarter. It was good to see. I wanted to dig in. I mean, we all see kind of the weekly sales and traffic data. And if I look across like the last 8 to 10 weeks, you've seen a pretty material step-up in traffic as far as the drag kind of post August was in that down 10% range, give or take. And recently, it feels like it's more in the down mid-single-digit range. I'm wondering, with your data and how well you can track and measure your customers, do you sense this is the displaced customer coming back that's causing most of this lift? Or is it a function of what you're doing against loyalty and promoting to those customers that maybe you didn't really lose post August and just getting them in the restaurant more frequently? I guess, what's the data telling you, Julie, for where this traffic lift is coming from? Julie Masino: Sure. Todd, and thank you for the congrats. We're proud of the quarter. We're working hard. We've got a ways to go, but we're getting after it. With respect to your question about the lapsed guests, what I think is probably the best thing to share with you is that we've really been working on those loyalty guests. And we are encouraged that a percentage of our highest value loyalty guests, the percentage of those people who visited us in Q2 was consistent with our historical levels. So we're retaining that and that's really, really important to us. We also were able to capture a meaningful percentage of lapsed guests that we hadn't seen in Q1 that came back in Q2. So that, again, sort of to Jon's question and Jake's question, how we're really targeting some of those people. We're seeing movement there, and that feels good to us because, obviously, increasing frequency with people that know us and are already in our ecosystem is really important to us. We're using Front Porch Feedback. Again, I told you we've done some research to really reach out to them and figure out what's meaningful to them and make sure that we're delivering on that. So and again, just executing really well. You're an operator. When we're operating well and getting great experiences in delicious hot foods, like that's really the key thing there. In terms of people that we've lost, we did see a lot of new people come into the business with Campfire last Q4. Some of those people have not returned back to us. And so we're working on casting a net to get those people back into the business. Todd Brooks: That's great. And if I can squeeze one more in. It wouldn't be... Julie Masino: Of course, not. I mean everybody else did, too. You might as well. Yes. Todd Brooks: Okay. If we can talk about holiday meal performance. I know the strategy has maybe even changed to better balance profitability versus sales. But I guess if you could review how Holiday Meal performed during the quarter. Is that behind any of the improvement or maybe less bad restaurant COGS than maybe what some of us were expecting and just how that overall offering resonated at Holiday? Julie Masino: Sure. We did a little bit on the last call because it was right after Thanksgiving. But look, gosh, November feels like a long time ago, but really, we built on the learnings from last year, because if you remember, Q2 of '25 was a really strong performance for us, and we had spent a lot of time really restructuring that business, especially from an operations standpoint to make sure that we were delivering great experiences for our guests as well as our team members and making sure that we weren't overspending on labor and all of those things. So we took those learnings into this year, really simplified the operations, make sure we had great guest experience. We were proud of the metrics, and we did almost $110 million in sales on Thanksgiving week, which was a big week for us. Thanksgiving traffic was in line with the rest of the month. So it didn't crazily outperform or anything like that. We were pleased with the performance. We were pleased that people invited us into their homes for Thanksgiving and that they celebrated with us in the restaurants, all leading to that $110 million in that week. Operator: This concludes the question-and-answer session. I would like to turn the call back over to Julie Masino for any closing remarks. Please go ahead. Julie Masino: Thank you for joining us today. We're encouraged by the improvements we've seen in key guest experience metrics and in our traffic trend, and we remain confident that the plan we are executing will drive improved performance. Lastly, I want to again express my gratitude to our over 70,000 team members who remain focused on delivering an exceptional guest experience every shift, every day. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

83天前Insight Analytics约5分钟阅读

FOXT.L 2025 Q4 财报电话会议

Guy Gittins: Good morning, everyone, and thank you for joining the Foxtons' 2025 Full Year Results Presentation. I'm joined, as always, by Chris Huff, our Group CFO, and we will answer any questions at the end of the call. This morning, I will take you through some of the highlights of 2025, provide an update on the London property market. Chris will then talk you through the financials, and I will finish with an update on our operational progress in the year, followed by some detail on the outlook for 2026. We delivered 5% revenue and EBITDA growth in the year, driven by incremental acquisitions revenue and operational progress in areas such as Lettings, cross-selling and financial services. These higher revenues offset the challenging operating environment, including a volatile sales market and cost headwinds to deliver flat operating profit. These results highlight the resilience of our business as a result of our strategy to position Foxtons firmly as a Lettings-led business. Our portfolio now exceeds 32,000 tenancies, which is up over 50% over the last 5 years, and these tenancies generate highly valuable reoccurring revenues. In 2025, these revenues generated over 2/3 of group revenue. We delivered 8% Lettings market share growth through improved landlord attraction, retention to build on our position as London's largest agent. And impressively, for a London-focused business, we are also the U.K.'s largest Lettings brand. We continue to execute our strategy on acquisitions. In 2024, our acquisitions in Reading and Watford made a significant contribution to revenue growth. Recent acquisitions in Milton Keynes and Birmingham create strong platforms in high-value markets that complement our London base. And operationally, we haven't stood still. The business has embraced a culture of continuous improvement and that mindset is cascading through the organization. We're focused on unlocking the next stage of growth by driving revenue and improving productivity and efficiency right across the business. On Slide 6, you can clearly see our strategy in action. The business has made great progress since I returned in 2022. Over that period, we've reset the strategy with a focus on Lettings-led growth, rebuilt our operational capabilities and delivered significant market share gains. The result is consistent year-on-year revenue growth with an 8% CAGR over the last 5 years. And with a sharp focus on costs, we've maximized operating leverage across the business. As a result, profit growth has outpaced revenue growth, delivering a 23% CAGR over the same period. So while profits were flat in 2025, I remain confident that we can return to our growth trajectory over the coming years. Turning now to Slide 8 and an update on the London Lettings market. On the chart on the left-hand side, you can see the number of renters per property back to 2021, highlighting supply and demand dynamics in the market. The market was resilient in 2025. Tenant demand remains strong and supply levels were healthy. We did see a softening in supply in the run-up to the autumn budget, reflecting speculation around potential tax changes for landlords. But with no major tax reforms announced, supply picked up in December and we delivered a record December for both deal volume and revenue. Rental prices were broadly flat as the market balanced flat supply and demand dynamics with affordability limits for tenants. Even so, the market has delivered a 7% CAGR since 2021. And over the medium term, we expect a return to inflation-linked rental growth. Over the next 2 slides, I will take you through an update on the Renters' Rights Act, one of the biggest changes in the Lettings industry over the last 25 years. On this slide, we've outlined the key provisions in the act. The Renters' Rights Act will come into effect on the 1st of May and brings England broadly in line with the rest of the U.K. There are several key changes. Fixed term tenancies will end, meaning all existing and new rental agreements will move to open-ended periodic agreements. Rent increases will become available to landlords annually, although will require evidence that any increase is in line with the market. This is a shift from the current system where rents are typically fixed for the duration of the contract. And local authorities will have stronger enforcement powers, including the ability to impose higher penalties for non-compliance. So what does this mean for landlords? The vast majority of landlords who provide good quality homes and want to keep good tenants in situ for as long as possible, very little changes to their investment. What does matter is staying on top of the new compliance requirements and working with an agent who can manage those requirements on their behalf. It's incredibly easy to fall foul of the legislation, which is fragmented across local authorities and often overly complex. Even the Chancellor was caught out last year, a reminder of just how difficult it is for ordinary people to navigate the rules. Slide 10. As these new requirements come into force, we expect to see some shifts in the market and opportunities for Foxtons. These fall across 4 main areas. The first is increasing the total addressable market for Foxtons as increasing numbers of DIY landlords opt to use an agent to let and manage their property. Over 50% of landlords fall into this DIY category today, highlighting the size of the opportunity ahead. The second is by increasing Foxton's market share of the Lettings market. We expect landlords will increasingly turn to high-quality agents who can protect their investments and navigate the growing compliance burden. And as the leading agent in our markets, this creates significant opportunity to grow share and also the cross-sell of high-margin property management services. Thirdly, we expect more portfolio stability. With fixed terms removed, we expect longer occupancy lengths as tenancies become more stable. Annual inflation-linked rent increases are also expected to become the norm, creating a more predictable income profile. And fourthly, we expect the estate agency sector to consolidate further. The industry is still highly fragmented with 66% of the market made up of small independent agents. The new regulation will place real pressure on these businesses requiring significant investment in people, training, technology and compliance. Many simply won't be able to make these investments, accelerating consolidation. This dynamic plays directly to our strengths. We are well positioned to lead consolidation in our markets and have a strong track record of delivering attractive returns on capital when we do so. Finally, structurally, we anticipate little change in the size of the sector to remain broadly stable over the medium term based on the experience of similar legislation in Scotland. Turning now to Slide 11 and an update on the London sales market. The sales market was highly volatile in 2025. Across the year, volumes in our London markets were up 2%, in line with our own performance. Q1 volumes were around 30% higher than Q1 2024, driven by a large number of first-time buyers competing ahead of the stamp duty deadline. As expected, Q2 volumes were materially lower, reflecting the pull forward of the transactions into Q1. In the second half, activity was impacted by the delayed autumn budget. The wider economic uncertainty and weak consumer confidence was compounded by the intense speculation around potential tax changes, including the abolition of stamp duty and the implementation of mansion taxes for most properties in London, which really dampened the market. You can clearly see the impact on buyer demand on the bottom chart. New offers agreed, ahead of the budget were subdued, sitting at levels similar to those seen in 2023 shortly after interest rates spiked following the September 2022 mini budget. And with the average transaction taking 4 to 5 months to complete, this slowdown in late 2025 will naturally impact volumes in the first half of this year. In the end, the actual policy changes were fairly limited. Stamp duty remains unchanged and continues to act as a major barrier to improving affordability for buyers. The new mansion tax coming into effect in 2028 only impacts properties over GBP 2 million. While this may create some drag at the very top end of the market, that segment represents only a small share of transactions. This change reinforces our strategic focus on the volume segment of the market, particularly properties priced below GBP 1 million where Foxtons is strongest and where volumes are more resilient. Looking further ahead, it's worth noting that buyer demand in early 2026 is still being held back. For vendors looking to sell in this environment, pricing is absolutely crucial. There are buyers in the market, but they are focused on the right properties at the right price. And when we see homes coming to market competitively priced, buyer interest and offer levels remain strong. I'll now pass over to Chris for a run-through of the financials. Christopher Hough: Thank you, Guy, and good morning, everyone. 2025 saw the group deliver revenue growth despite a challenging operating environment, highlighting the financial resilience we've built into the business over the last 4 years. Financial highlights are set out on Slide 13. Incremental revenues from acquisitions and improved cross-selling of high-value Lettings property management services drove a 5% or GBP 8.6 million increase in revenues to GBP 172.5 million. We delivered GBP 22.2 million of adjusted operating profit, which is flat on the prior year. This represented a robust performance in the context of a challenging operating environment due to a volatile sales market and external cost pressures, in particular, from employer national insurance and living wage increases. Adjusted operating profit margin decreased by 60 basis points to 12.9% as margin growth in Lettings partially mitigated some of these external cost pressures. I'll provide more detail in the segmental reviews. Adjusted EBITDA, which is defined on the same basis used to calculate the group's RCF covenants grew by 5% to GBP 25.3 million. Statutory profit before tax was GBP 16.9 million and net free cash flow grew by 14% to GBP 11.2 million. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, unchanged from the prior year. The group also bought back 5.5 million shares in the year via the buyback programs announced in April and September. Now turning to Slide 14, which provides an overview of the income statement and key changes. Group revenue increased by 5% to GBP 172.5 million, reflecting 5% growth in Lettings revenue, 6% growth in sales revenue and 10% growth in financial services revenue. Group revenue continues to be underpinned by Lettings revenue, which represented 64% in the year. Lettings revenue is non-cyclical and recurring in nature and delivers high levels of consistency and earnings visibility. Direct costs were GBP 3 million higher, reflecting additional acquisition-related headcount, increased revenue-linked staff commissions and GBP 1.1 million of additional employment costs. Contribution margin was flat at 64%, including margin growth in Lettings. Overheads were GBP 4.2 million higher, primarily driven by incremental acquisition operating costs, targeted marketing investments, higher employment costs and GBP 1 million of non-recurring overhead costs. Depreciation, amortization of non-acquired intangibles and share-based payment charges were GBP 1.2 million higher. Together, these movements delivered adjusted operating profit of GBP 22.2 million. Profit before tax was GBP 0.6 million lower than the prior year, reflecting broadly flat adjusted operating profit and GBP 0.5 million higher amortization of acquired intangibles. Cost control continues to be high on our agenda. This included delivering a material cost saving by negotiating an early exit from the Chiswick Park head office lease and rightsizing head office space. This move unlocks GBP 1.5 million of operating cost savings from January 2026 onwards, providing some protection from cost pressures in 2026. Through 2026, we are redoubling our focus on costs to protect profitability in the context of current market conditions. Turning now to Slide 15 and performance in Lettings. Lettings revenue grew by GBP 5 million or 5% to GBP 111 million as a result of GBP 5.2 million of incremental revenues from Lettings acquisitions in Reading and Watford, GBP 0.6 million higher like-for-like revenues, which reflects property management revenue growth with a like-for-like increase in uptake of 7% delivered in the year. This progress will continue to benefit the group in 2026 as revenues annualize and GBP 0.9 million lower interest earned on client monies due to lower Bank of England rates. Revenue per transaction increased by 1%, reflecting the improved cross-sell of property management services, partially offset by the move into higher volume commuter markets and the lower interest on client monies. Contribution grew 6% to GBP 82.9 million off the back of revenue growth, whilst the contribution margin grew by 100 basis points, which is primarily due to margin accretive property management and cross-sell of related ancillary services. Adjusted operating profit grew 9% to GBP 29.8 million and adjusted operating profit margin grew 100 basis points to 26.9%, reflecting the strong contribution margin and the delivery of acquisition-related synergies. Moving to Slide 16, where we have presented detail on the returns from our Lettings-focused acquisition strategy. We have an industry-leading operating platform that delivers high levels of returns from acquisitions by delivering high levels of landlord retention, organic growth from acquired databases and cost synergies. Our operating platform is highly scalable and can power a significantly larger portfolio than we operate today for limited incremental cost. Historic acquisitions in London deliver EBITDA margins above 50% and return on invested capital above our 20% target rates as we maintain a tight focus on ensuring returns through a portfolio's life cycle. Acquisitions are our primary route into new geographies, combining acquired Lettings income to underpin profitability with organic Lettings and sales growth. Under our buy, build and bolt-on strategy, we focus on acquiring platform businesses in high-value markets and enhancing them through high ROI bolt-ons, targeting aggregate returns of at least 20%. In October 2024, we acquired 2 leading businesses in Reading and Watford, completing the group's first acquisitions outside London. Both have performed well, delivering organic revenue growth and first year returns on capital above the target level of at least the group's weighted average cost of capital. The Watford business was integrated onto Foxton's operating platform in 2025 with Reading planned for 2026. Returns are expected to grow as synergies are delivered in Reading and be annualized in Watford. In February 2025, we completed the bolt-on acquisition into the Watford platform. This bolt-on was rapidly integrated and is delivering annualized returns on capital above our 20% target, which highlights the growth we can rapidly deliver in new markets. In January 2026, we acquired leading businesses in Milton Keynes and Birmingham. Over the next 12 to 18 months, we will focus on integration, deploying the Foxtons toolkit to drive organic growth, deliver synergies and support further high ROI bolt-on acquisitions. Moving to Slide 17 and an update on the sales business. Sales revenue grew GBP 2.7 million or 6%, reflecting GBP 3.4 million of incremental revenue from our Reading and Watford acquisitions and GBP 0.8 million lower like-for-like revenues. On a like-for-like basis, revenue was 2% lower, reflecting 3% growth in transaction volumes, broadly in line with the market and 5% reduction in average revenue per transaction, primarily reflecting the higher proportion of lower value first-time buyer properties transacting in Q1 ahead of the March stamp duty deadline. In total, volumes were 19% higher and revenue per transaction was 11% lower. The reduction in revenue per transaction primarily reflects the expansion into commuter markets, which typically display lower revenue per transaction, but higher volumes. The acquisitions in Reading and Watford delivered 9% revenue growth in the first year of Foxtons' ownership, driven by market share growth. Average market share across Foxtons London markets was robust at 4.8%. The adjusted operating loss in sales increased to GBP 5.7 million as the profitable contribution from new commuter town acquisitions only partially mitigated increased operating costs and a strategic decision to maintain bench strength despite weaker H2 market conditions. Improving the profitability of sales remains a key priority for us, and Guy will provide more detail later in the presentation. Moving on to Slide 18 and Financial Services. Revenue in Financial Services was 10% higher at GBP 10.3 million. Specifically, volumes were 13% higher, reflecting the stronger refinance pipeline, higher estate agency cross-sell rates and improved adviser capacity and productivity. 2% reduction in average revenue per transaction, reflecting the change in product mix towards refinance activity. In the year, 42% of revenue was generated from non-cyclical refinance activity and 58% of revenue from purchase activity and other ancillary sources. Adjusted operating profit was broadly flat, primarily reflecting investment in fee earner headcount in H1 as we scale up the business. New fee earners supported revenue growth in the year and typically break even around the 12-month mark. Moving now to Slide 19 and cash flow. There was a 14% increase in net free cash flow to GBP 11.2 million. The operating cash to net free cash flow bridge on the left-hand side shows the key items of note. Operating cash before working capital movements was GBP 36.4 million, 3% higher than the prior year and including GBP 1.9 million of non-underlying cash outflows primarily relating to closed branch costs. There was a GBP 4.4 million working capital outflow, reflecting the ongoing transition to annual billing across the Lettings portfolio to improve competitiveness and landlord retention and position the business ahead of the Renters' Rights Act becoming effective. We expect the portfolio to be fully transitioned to annual billing by 2027 with an estimated GBP 10 million working capital investment across 2026 and 2027. The group paid GBP 4.3 million of corporation tax and made GBP 13 million of lease liability payments in the period. GBP 3.5 million of CapEx spend primarily relating to our new H2 fit-out costs and internally generated software development. Looking at the opening to closing net cash bridge on the right-hand side. Net debt at 31st December was GBP 16.9 million. This reflects GBP 11.2 million of net free cash flow, GBP 5.3 million of acquisition spend and GBP 9.1 million of total shareholder returns. In the year, we increased the RCF to GBP 40 million and extended it by 12 months to June 2028. The interest cover and leverage covenants have remained unchanged. And at the year-end, the leverage covenant ratio was 0.7x, which was below our covenant limit of 1.75x. And the interest cover ratio was 24x, which was above our 4x covenant. Finally, the Board has declared a final dividend of 0.93p per share with a full year dividend totaling 1.17p per share, which is unchanged from the prior year. The proposed dividend will be paid on 15th of May, 2026 to shareholders on the register at 10th of April, 2026, subject to shareholder approval at the AGM. Moving to Slide 20 and an overview of the group's capital allocation framework. The framework aims to support long-term growth and deliver sustainable shareholder returns through organic growth, making accretive Lettings-focused acquisitions, paying a progressive dividend whilst maintaining strong dividend cover and delivering other shareholder returns, namely share buybacks. We continually evaluate the effective uses of capital, including comparing acquisition returns versus those achievable through share buybacks. We consider factors such as expected return on investment, earnings per share accretion, borrowing capacity and leverage. The group seeks to utilize its balance sheet and revolving credit facility to best effect and to maintain a leverage ratio of net debt to adjusted EBITDA of less than 1.25x at the year-end position. I'll now hand back to Guy, who will take us through the operational update. Guy Gittins: Thank you, Chris. Over the next 2 slides, I will lay out operational progress we've made in our business areas and our focus for 2026, followed by the operational upgrades we've delivered across the group. In Lettings, we continued to make progress with our organic growth strategy, delivering against our formula of growing the portfolio and driving the cross-sell of high-margin services. Over the year, we increased our London market share by 8% and maintained high levels of stability across our tenancy portfolio. Revenue and margin growth was supported by a 7% increase in cross-selling property management and the proportion of the portfolio that is actively managed now stands at 43%, up from 32% at the end of 2021. Our focus over 2026 is to continue delivery of our growth formula to continue to grow this highly valuable business. Organic growth is complemented by acquisitive Lettings growth. In the year, we delivered good returns from our Reading and Watford acquisitions with returns above our initial targets. In Watford, we have integrated the business into the operating platform, rebranded to Foxtons and boosted with a bolt-on acquisition that is delivering returns at our 20% target level. We are now the largest Lettings agent in Watford with more than 3x the market share of our nearest competitor. And in January 2026, we expanded into 2 new complementary high-growth markets in Milton Keynes and Birmingham. Milton Keynes is well connected to London, home to a large number of corporate headquarters and has one of the highest levels of GDP per capita in the U.K. Birmingham has undergone a significant regeneration and continues to attract major investments, including a growing number of banking and professional services roles, a trend set to accelerate with the opening of HS2. Both cities have strong pipelines of build-to-rent and new homes developments. And we have already linked these businesses with our corporate customer base. These acquisitions are not part of a plan to become a national agent. This is a targeted strategy focused on markets where Foxtons can create real value. Our priority over the next 12 to 18 months is maximizing returns from these deals through the delivery of organic growth, cost synergies and high return on investment acquisitions. Moving to sales. We operate through a highly volatile market last year, and our market share held broadly flat. In November, we appointed a new Managing Director, James Stevenson, who has a fantastic track record of delivering turnarounds over his 20-year career at Foxtons. And we now have an operational plan to reposition the business to reflect current market environment, and in doing so, improve profitability. It's worth remembering that whilst we are a Lettings-focused business, sales is an integral part of our full service proposition and is highly complementary with Lettings. Our offer is built around supporting customers through their entire property life cycle and sales plays a critical role in helping landlords expand or reposition their portfolios. By delivering this full service approach across sales and Lettings, we significantly strengthened landlord loyalty, enhanced revenue repeatability and increased customer lifetime value. And as Chris highlighted earlier, sales delivered a positive financial contribution before the allocation of shared costs. In Alexander Hall, our Financial Services business, we delivered a 10% revenue growth driven by increasing the operational productivity of our advisers and improving the efficiency of our processes. This included a 13% uplift in mortgage deals per adviser and a 5% improvement on the conversion of leads to mortgage applications. Continuing to build on these upgrades will support further growth. And underpinning all of this is a consistent focus on cost and productivity to maximize the operational leverage across the business. As Chris mentioned, we forensically review our cost base on an ongoing basis, taking costs out wherever we can, including our recent HQ move, which generated GBP 1.5 million of annualized savings. And we're focused on leveraging our technology stack and data capabilities to drive efficiency right across the organization. Turning now to Slide 23. Over this slide, I will present the key group-wide operational upgrades we're delivering to support our growth plan. Customer lifetime value is a key focus for the business. We aim to support customers through their property life cycle, becoming their trusted property partner. And in doing so, we can generate high-quality recurring revenues and earnings. To do this, we need to deliver best-in-class service. We've made significant progress in this area, and I'm pleased to say that we now achieve customer satisfaction scores of over 80%, a double-digit uplift since we launched these programs. In 2025, we continued to enhance the customer experience by further embedding our real-time feedback system across the full customer lifecycle, enabling us to measure service throughout the journey and resolve any issues quickly. Combined with AI-powered sentiment analysis, this allows us to identify the drivers of exceptional service. It embeds insights into training and delivers consistently high standards. Supporting this focus on service are our brand and marketing initiatives. Our focus this year was on strengthening customer attraction and retention in a competitive market. Foxtons has always had a distinctive level of brand awareness. We do things differently. And in 2025, we built on that by launching an exclusive partnership, which makes us the only U.K. estate agent where customers can earn Avios points. It's a differentiated position designed to attract new customers, reward loyalty and drive uptake of our higher-margin services. Turning now to our technology and data capabilities. Our in-house technology and data stack creates the flexibility to develop and deploy AI and data solutions at pace without the constraints of an off-the-shelf system. Our approach is very clear. We only invest in AI where it makes a meaningful difference to our financial results. It's not AI for AI's sake. In 2025, we made strong progress. We expanded our AI-driven sentiment analysis, giving us far deeper insight into customer interactions. We also advanced our data-led lead scoring models, ensuring our people focus their time on the highest value opportunities. And we introduced AI-powered training tools that help new agents reach their full performance faster. Together, these improve efficiency, drive higher productivity and ultimately, enhance profitability. We will continue to identify areas across the platform where embedding AI can deliver an operational and financial impact. These upgrades are a key part of the continuous improvement culture that now runs throughout the entire business. Finally, and most importantly, our people and culture. It is my fundamental belief that a state agency is a people business, having the right talent, developing great leaders and embedding and really demonstrating our core values is critical to our success. This year, we worked with external partners to assess our strengths and opportunities, enhance our employee proposition and introduced our Getting It Done. Together. framework to align recruitment, development and well-being across the organization. The response from our people has been really encouraging. 81% believe Foxtons is well positioned to succeed over the next 3 years, and 85% believe we truly value diversity and build diverse teams. We remain committed to building a collaborative culture that enables our people to deliver exceptional service for our customers. And finally to Slide 25 and the outlook for 2026. In Lettings, we expect the market dynamics we saw throughout '25 to continue with consistent levels of stock and strong tenant demand. The Renters' Rights Act represents a significant growth opportunity for Foxtons as landlords increasingly need professional support to navigate the new regulations. In addition, the 2 acquisitions we completed in January 2026 will generate incremental Lettings revenues. Our plan for 2026 is focused on maximizing the returns from the deals we have completed over the last 18 months, driving organic growth, delivering cost synergies and progressing targeted bolt-on acquisitions to strengthen our market positions. Turning to sales. Buyer activity continues to be held back by weak consumer confidence, macroeconomic concerns and policy decisions. In response, we are repositioning the business for the current market conditions to improve profitability. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and cost continued discipline. Overall, despite the softer backdrop, we are targeting year-on-year revenue and profit growth, supported by a clear mix of organic initiatives, earnings-accretive acquisitions and continued cost discipline. Importantly, profitability across the group remains underpinned by our substantial base of non-cyclical and reoccurring Lettings revenues, giving us confidence in our ability to deliver against our growth strategy. That concludes the formal presentation. Thank you all for joining us today. Chris and I look forward to meeting with many of you in the coming weeks. I'll now pass to the operator for any questions you may have. Operator: [Operator Instructions] Your first telephone question today is from Robert Plant of H2 Radnor. Robert Plant: Three questions, please. Post the acquisition in Birmingham -- the acquisition is in the center of Birmingham. How much of the Birmingham market are you targeting geographically? Secondly, the period of repositioning in sales, how long do you think that will take? And lastly, what are the working capital implications of the Renters' Rights Act? You mentioned investment in working capital. I'm sure there's a difference between when you collect and when you bill for sales. So, can you just talk us through that, please? Guy Gittins: Well, thank you very much for those questions, and welcome, everybody. Thanks for tuning in. Firstly, if I talk about Birmingham, the business that we bought as we do when we're targeting new locations, we always use data to lead the decision and we look for high-volume, high-value rental markets. And obviously, Birmingham is a superb area for this. There's also still, we believe, good growth left in the Birmingham market, both for sales and for Lettings. So, really highlights the reasoning behind looking outside of London as well in conjunction with our continued focus on talking to businesses within London that would be bolt-on. The business that we bought is a Central Birmingham specialist with leading market share within the city center. And we are talking already to other agencies in the nearby vicinity that would allow us to continue our bolt-on strategy to quickly grow revenues and continue to grow that portfolio of Birmingham properties to give us a slightly larger geographic area. So yes, always, we look to buy the hub, which is the business that we bought FleetMilne, and we are wanting to add to that to turbocharge the growth as quickly as possible, and that helps us really drive those profits in the years after. Second question was around repositioning of sales and how quickly does that happen. We're fortunate, as you know, to have huge amounts of data, huge volumes of data and using the data platform that we've built over the last couple of years. Chris and I, and the rest of the senior leadership look at this data on a daily basis to really give us a view of where we think the sales market is heading and allows us to be able to dial up or dial down resource in certain areas. And last year is a great example of that. Prime Central London, the volumes were considerably subdued. However, in our Southwest offices, the market was actually really quite buoyant and that allowed us to be able to apply resource meaningfully to grasp the opportunity in those higher volume areas. And that's really what our plan will be across this year as we sit here looking at the outlook today for what we feel the rest of the sales market will look like in London is different to how it looked 6 months ago and different to how it looked 3 months ago. So, that is an always-on process, but we're perhaps a little bit less excited certainly looking with some of the things that are happening in the Middle East about what may happen around inflation and interest rates. So, we're just making sure that we're always ahead of that. I'll pass on the RRA -- the Renters' Reform Act question over to Chris. Christopher Hough: Yes. The question was around our working capital changes in this area. So, Renters' Rights Act, that will see the removal of fixed terms tenancies. And what we'd expect to see there is an average reduction in the billing period start those tenancies. So, we're making a change here to improve our competitiveness and indeed increase landlord retention. And we've been reducing our billing terms since 2023 as it happens. We estimate that over the course of 2026 and 2027, there's a GBP 10 million investment in working capital required as we fully transition our portfolio. Transitioning portfolio takes time, hence, why there's a 2-year period there. Operator: The next question is from the line of Greg Poulton from Singer Capital Markets. Gregory Poulton: Three questions from me, please. Firstly, obviously, the move to more fully managed tenancies has been an important trend for the Lettings business. Could you just talk about the level of uplift in fees you see from a fully managed versus a letting-only tenancy? And second, can you talk about the expected cadence of acquisitions for the rest of the year? I'm not asking for a forecast on that, but just to sort of guide as to what we could expect to see throughout the remainder of the year? And thirdly, linked to that, how much capital expenditure do you think you will allocate to acquisitions in the remainder of the year? Guy Gittins: All right, Greg. Thanks for those questions. Yes, look, we're really proud of the improvement that we've seen over the last 2 or 3 years with the upsell of our property management service, and that really has come from a fantastic cross-business effort, particularly driven by the Head of Letting working very closely with the Head of Property Management. And that means that we've seen a 7% uplift in that cross-sell of property management services, which ultimately delivers around about a 6% additional fee, which is charging for that premium fully managed service. And of course, as we extrapolate that over a longer period of time, that 7% uplift of the volume of services that we're transferring into that premium service for new deals over time massively helps us grow the overall number of properties that we have under management. And that really is a key KPI that we drive within the business and lots and lots of remuneration is linked to that, lots of the KPIs we talk about across the business is focused on it. So, we're proud of that movement, and it's certainly a very big focus across the business. And I think that as we've mentioned, the change into the Renters' Reform Act does, we believe, increase the likelihood of non-managed landlords wanting to take the fully managed service. As we saw and we mentioned in our presentation, it's really easy to fall foul of some of the rule changes and you need a very, very capable agency who's got large teams of compliance, making sure that your property is fully compliant and looked after at every stage along this journey. And that's why we are seeing more people choose that service through Foxtons. Acquisition cadence, look, we've made 2 great acquisitions at the start of this year. We're watching very carefully what the outlook looks like. And of course, our capital allocation is always very much under review, both with our Board and internally. I'll perhaps let Chris talk to that a little bit later. But acquisitions very much are a function of opportunity. We're talking to agencies both inside London and outside London. And really, we want to make sure that we make the right acquisitions, not just any acquisition. We're pleased with the 2 acquisitions outside of London in Milton Keynes and Birmingham that we've made at the start of this year in January. And really, I suppose my preference now is to try to make sure that those new acquisitions are settled in that we can drive the synergies, that we can make them more profitable and hopefully, find some bolt-on acquisitions to make in the near future. Christopher Hough: Finally, Greg, from a quantum perspective on CapEx and acquisitions, we've done 10 already, and I'd be thinking about that 15 number we put out there previously. So, I expect that additional quantum being the target and the ambition for the remainder of '26. Operator: [Operator Instructions] The next question comes from Adrian Kearsey from Panmure Liberum. Adrian Kearsey: I will say, thank Rob and Greg, for asking the questions I was initially going to ask. But in terms of sales, you've got an average property price last year of GBP 574,000. Can you perhaps sort of give us an indication of the range of the types of properties that you sell to give us a sense of how broad or how narrow your market focus is? Back to also to the second question. Back to Birmingham, currently one site. In order to take advantage of that huge opportunity in Birmingham, when you make further acquisitions, do you think you'll end up having multiple offices in Birmingham? Or will you have a single office in the center? Guy Gittins: I'll take the first question around sales. Our average price around GBP 574,000, look, we want to be in the volume market across the markets that we operate in. And the reason for that is we know that they're more resilient, and we are a volume efficiency machine at Foxtons in sales and particularly in Lettings as well. The spread of properties that we sell, we actually have a minimum fee of GBP 6,000 in London. Now, that means that we don't end up selling many short lease garage spaces, which we were doing a little bit of prior to my arrival. But we do across all price points. I mean, we've just agreed something, a bulk deal in an area in the east of London that's nearly GBP 10 million. And so we're operating in all markets. But absolutely, our sweet spot is that volume piece right in the middle of where the average pricing is across London, and that's really by design. Now, we have been making some efforts to try to increase over time the average. And when I say increase, just a very small increase in that average sales price does make a meaningful difference to us, but we don't want to ever turn our back on that volume market. And the second question was Birmingham one site or multi-sites. Well, I think certainly today, we view the value, the biggest opportunity is to continue to grow from the center to the more affluent areas of the residential areas around Birmingham. And as I've mentioned, we're talking to multiple agencies around those locations at the moment already. And we can also bring, of course, the Foxtons Operating Platform, which really does help grow the businesses. And we've seen fantastic examples of that in both Watford and Reading last year where we've actually delivered some really solid growth once we've layered in the kind of Foxtons' toolkit of marketing, brand productivity and operational excellence. And that doesn't happen overnight. That takes a little bit of time to bed in, and that's what we're very busy doing with both our business in Birmingham and in Milton Keynes at the moment. Operator: There are no more questions from the telephone anymore. We can now read the questions from the webcast. Unknown Executive: First question is from Robin Savage at Zeus. It says, the impact of the Renters' Reform Act this year is interesting. Are there any early market signals that we or any other lettings agencies are seeing that might indicate an uptick in DIY landlords moving towards professional lettings management? Guy Gittins: Great question. Thank you, Robin. Yes, absolutely. Look, we've seen this trend starting to kind of infiltrate the London market over the last 18 months really. We've seen obviously market share increases for Foxtons, and we've seen this increase in our property management cross-sell. And as I've mentioned at the start, that's been a major focus of what I wanted the business to deliver over the last 2 or 3 years, and I'm really proud of the delivery of that. And I don't see it slowing down. We really do offer and believe the offering of the service that we can give to our landlords is best-in-class. And what we are trying to do is deliver the very best service for our landlords, but also making sure that they remain fully compliant and clear of any issues that may be happening and being ahead of those legislation changes as we know they can come in very quickly and catch people out. So, very pleased with what that looks like and definitely are seeing that within London. Unknown Executive: Second question from Robin. Foxtons has built a significant competitive advantage through decades of structured proprietary data and a highly analytical approach. How do you see advances in artificial intelligence and large language models further strengthening that advantage, both in how Foxtons generates market insights and how it manages the business and delivers differentiated services relative to competitors with less developed data capabilities. Guy Gittins: Great question. Thanks, Robin. Well, you've been a beneficiary of coming and seeing the operation in-person here at Foxtons. And I'm sure that you'd agree that there isn't another data system, there isn't another database like Foxtons has across the London market and as far as we're aware, across the whole of the U.K. market. And we've been really utilizing that database, cross-referencing it already with early machine learning over the last 12 months and some AI functionality to help us improve productivity. Great example of that is we have 100 people who sit at Foxtons' head office who are calling into a huge database of nearly 4 million people to drive new listing opportunities. Now the old way of doing that would be just randomly picking a street and calling from A to Z, but our new system uses AI and has machine learning so that it filters up to the top and surfaces the most likely leads that we think we'll convert in the next 3 months. And that's had a meaningful impact on the productivity of that team. We're also using AI to help us improve the speed of new recruits under training to get them to be able to build for the business quicker by helping them through the training flow where we've got AI platforms that have really improved that speed of service during that initial training period. And we're using AI in other areas as well. And as we said in the presentation, we're not -- we are definitely not using AI for AI's sake. It has to have a meaningful impact to the bottom line. And we keep a very, very close eye on lots of technologies that lots of people are working very hard to try to deliver across the industry. And because of our structure of that data and the way that we've built the database, we're able to loop in these functionalities very, very, very quickly. Thanks for that question, Robin. Unknown Executive: One from Andy Murphy at Edison. Given the number of recent deals outside London, are you no longer focusing on London M&A? Guy Gittins: Great question. We absolutely are still very focused on London opportunities. But given where we've seen the growth in the marketplace when we were presented with the deals that we could have done this year and last year, it just totally made sense to look at the Birmingham and the opportunities in Milton Keynes. But it doesn't stop us from looking and continuing to speak to other agents as roll-ins within the London environment. But as I said before, they need to be the right deal for Foxtons, and we need to be paying the right prices for them. And yes, that search is still an always on. So, certainly not turning our back on London-focused acquisitions. Thanks, Andy. Unknown Executive: One from Robert Sanders at Shore Capital. What are the multiples in the market at the moment for Lettings portfolios? And how much consolidation do we see likely in the sector after RRA? Guy Gittins: Yes. I think the RRA opportunity is more likely to create even further consolidation. But actually, I'll let Chris take the questions on the multiples. Christopher Hough: Yes. The multiples really depends where we're buying, what we're buying, the balance of sales versus Lettings. But broadly speaking, a range from 2 to 3x Lettings revenue is a sort of multiple we're seeing, which is actually pretty consistent with what I see in both '24 and '25. So, there's been no significant change there. And for us, now we've got 2 new platforms, which we're building into, i.e., Milton Keynes and Birmingham. That gives the bandwidth and the opportunity to launch into new areas, which is really exciting for us. Unknown Executive: And a question on the sales market from [ Donald ]. How impactful is the lack of overseas buyers in London and the alleged exiting of high-net-worth individuals from the London sales market? Guy Gittins: We touched on earlier, our average sales price across London is GBP 574,000. The super prime market, we know very clearly, particularly last year, felt the pain of the exiting of high-net-worth individuals and certainly, lots of reports, as I'm sure you will have read from the super prime agents really having a torrid year last year. Did that impact our volume market? I mean, ultimately, it does have a very small effect on the movement up and down chain. But the reality is that's why we are in the high-volume market because we know that those transactions overall are less impacted by these big swings of where Netwealth may decide to spend their money this summer versus the next summer. So yes, we haven't been impacted by it. But certainly, super prime agencies, we know really felt the pinch last year. Unknown Executive: And the following question, what are the -- essentially, what's the catalysts that are required to drive volumes in the sales market? Guy Gittins: Well, ultimately, the biggest barrier to returning back to those 145,000 sales transactions that we historically used to see going back before the financial crisis is stamp duty. Last year, we think there were somewhere in the region of 90,000 sales transactions. The year before that, probably 85,000 sales transactions. We always believe that the market would return to its 5 or 6-year average of around about 100,000 sales transactions, but that looks very unlikely this year. And that's the reason that we are ahead of the market really thinking about what we want to do with the sales business this year so that we are rightsizing everything across all of the different regions that we're in. But if you also look at sales being agreed this year already, we know that year-to-date, the number of sales in London is circa down in total around about 6%, whereas pretty much the rest of the U.K. market is up year-on-year on sales agreed. So hopefully, another good reason to point to our acquisitions outside of these locations. Unknown Executive: And that's the end of the questions from the web. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Guy Gittins for any closing remarks. Guy Gittins: Firstly, thank you for joining us this morning. As you know, Chris and I will meet many of you over the coming weeks. We are really focused on continuing to deliver the medium-term targets that we set out in our CMD in last year. We've got a very good business. We've taken a lot of costs out last year, and we're laser-focused on making sure that we can continue to pull all of the different growth levers to achieve those targets in the medium term. I appreciate everybody joining the call this morning, and look forward to seeing you all soon.

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EKTAY 2026 Q3 财报电话会议

Peter Nyquist: Hi, and good morning, everyone. My name is Peter Nyquist, I'm heading up Investor Relations here at Elekta. With me here in Stockholm, I have our CEO, Jakob Just-Bomholt. I have our CFO, Tobias Hagglov, who's doing his last quarter as well as our incoming CFO, Klara Eiritz, who will not present today, but she will be available here in the studio. Tobias and Jakob will present the result, as always, for the fiscal third quarter -- fiscal year 2025-2026, third quarter. We will start the presentation with Jakob giving away the takeaways from the third quarter as well as an update where we are in the strategic execution and the change of operating model and the cost savings related to that as well. Tobias then will talk about the financials and the Elekta's outlook. After presentation, as always, we will have time for questions and answers. But before we start, I would like to remind you that some of the information discussed on this call contains forward-looking statements. This can include projections regarding revenue, operating result, cash flow as well as product and product development. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. With that said, I would like to give the word to you, Jakob. Please, Jakob. Jakob Just-Bomholt: Thank you, Peter. Thanks, and welcome to all of you. So before I get into the quarter, let me just share some overall reflections. It's a solid quarter, but Elekta, we still are not trading at what I believe is the long-term potential of the company. So that calls for a clear strategy. It calls for decisiveness. It calls for execution, bias to action, bold decisions. And I would say we are on that journey. I would say, specifically related to the change in our operating model, I really appreciate the support from leaders within Elekta, Elekta colleagues. We're changing a lot. We are changing the structure. We are changing layers. We are letting go of people who are highly valued and deeply competent. But we had to change coming back to my point that we are not trading at full potential. But the support in getting there has been spectacular. And as I'll outline, essentially by the end of this week, we are running consultations in U.K. We will be concluded with the change we outlined end of November. That's very good. And then big thanks to you, Tobias. You have ensured that we have had a very orderly transition in leadership within the finance function. To you, Klara, and welcome to you at this call, and we look forward to you presenting the numbers at our Q4 and annual accounts. But let me then turn into what this call is really about our Q3. As I said, it's a solid quarter. We have to recognize significant impact from FX, and we will also see impact coming into Q4. And then clearly, also in line with the guidance we gave at Q2, a significant impact in reported EBIT from a restructuring charge of a bit more than SEK 400 million. We stand by the guidance that it will be less than SEK 500 million. On orders, I would say good, a book-to-bill of 1.17, it was 1.15 last year. Keep in mind that typically, Q3 is a good order intake quarter because we roll on a lot of the service contracts, particularly in Europe, that given quarter. And then we saw -- and I'll come back to China, we did see order growth. We did see revenue growth. So that's pleasing, but it was also expected. On U.S., I'll come back to. But there year-to-date, we have seen good orders coming in. It was also much needed, and then we continued the momentum on Europe. So all in all, when I look at the book-to-bill rolling 12 months of 1.09, I think it's healthy. We would like to see it higher, but it's healthy. In terms of organic growth, we are at 2%, continue to see good momentum in Europe. And as I said, China returning to growth. And we stand by the view that we expect both on orders and revenue double-digit growth, probably around 10% in China for second half of the year. And then what our Chinese General Manager, Anming outlined in the strategy update, we do see the market bouncing back almost to pre-anticorruption levels in terms of units. Gross margin at 38.3% supported by product launches. And also pricing, we actually do see a bit of tailwind on that mix and pricing, but a headwind on the cost, and that's a big focus area. I'll come back to that later on. But of course, it's going to be a significant focus area for us going forward. EBIT margin at 11.9%, a bit higher than last year. But just keep in mind, on a comparable basis, we get headwind from less capitalization, more amortization, relatively speaking. So adjusting for it, the EBIT cash margin that we look a lot at, at Elekta is significantly higher, and you will outline that, Tobias, on rolling 12-month basis is really good news. I can say my sincere hope is that coming into next year, the EBIT cash and the reported EBIT will be roughly the same number, meaning that our amortization and capitalization will be a match. Let's see if we get there. In terms of cash flow, less good than last quarter -- same quarter last year, but we should keep in mind that overall, year-to-date, we see good cash flow improvement, and we have paid out roughly SEK 100 million in the quarter linked to restructuring charge. So if we move on to the next page on commercial development, Americas, a decrease of 6%, fundamentally, of course, not attractive. That's why we have a must-win battle to address it. We did outline last time that we were positive on getting Evo approval. I think it's important as part of our commitment that we have a good say-do ratio, and we were, of course, pleased to see that on 16th of January, we could announce Evo approval. Year-to-date, as I said, we have double-digit order growth, substantial double-digit order growth in the U.S. alone. That's also needed because our decrease in revenue reflects a depleted order backlog. So we have a lot of work ahead of us. But of course, every quarter that goes well and is growing is a good quarter. And year-to-date, we have been doing well. We have sold 2 customers on the promise of Evo upgrade. That's now happening. And we are building our funnel going forward. But you shouldn't expect that it's just going to be a huge splash going forward because a lot of the orders have been already taking year-to-date. But of course, the customer interest is good going forward, and we will look at commercializing Elekta Evo the way we have done in Europe. We continue to see growth in South America linked to very strong order intake prior years. On APAC, as I said, and as expected, China is returning to growth. We do see a little bit slowdown in other large countries, notably Japan, also Indonesia, where there's a big tender. So the market is really awaiting what will happen there. And then on EMEA, we see a good increase, continued strong momentum in Europe. And of course, we need to sustain that going forward. And then I'll just flag here, Middle East could potentially impact timing of installation. It's way too early to indicate how many we have a sense for what are the installations at risk, and it's not going to be material, and it will just be a time delay if that happens from Q4 to Q1. So all in all, I would say a solid quarter commercially. But of course, we would like to see that number go up. And that's what our strategy is all about, yes. So if we take the next slide and look at our must-win battles, this is what we outlined end of January. We feel very good about them. They have been working through. Some we are far on, some we are less far on. And I'll give you more details on simplifying power speed. But we did this. I'll just remind you, not to save cost. Of course, we take that in, but we did it to increase velocity of our decision-making within operations, within commercial and most notably also within our innovation department. We are delayering. We are empowering. We are driving culture. It's part of performance management. I think it's going to deliver a lot of good results. And I actually start to feel that the puzzle is getting assembled. We are moving on from having it as an initiative that we needed to execute on to kind of things are settling down. And as I started out by saying, thanks to great work by the leaders and colleagues at Elekta. It's a lot of change. We have asked people to come back to the office because we feel being an innovation-driven company, we can really benefit from problem solving together rather than at a distance. Two focused innovation. There are a lot I could say, but there's also a lot that could be used against us commercially. But I would highlight that we continue to invest in innovation. We believe there is significant need for our solutions going forward. Our current product portfolio will become even better going forward linked to what we have in our pipeline, but we will do it more focused. We will have a stronger commercial lens on it, and we will unfold more of that thought process when we meet at the Capital Market Day in June. Then our third initiative, expand in China, win in the U.S. China is important for Elekta. We are market leaders. We did unfold what does that mean, but it really goes into localizing Elekta in China. We are both from a product point of view, we have a very, very strong organization. We are localizing our supply chain, and then we also continue -- we have both local products, and we are saying should we have even a broader made in China for China product portfolio. So we actually feel good about our China position, not least also because what we said is that the market is going to recover. And then with Elekta Evo, it's now about competing in the U.S. This is Elekta's biggest opportunity because this is the market where our relative share is the lowest compared to other places. And I believe we have every right to compete in the market. That's what I hear from our customers, there is systemic demand for having strong competition, and we are ready. And then lastly, the fourth on continuous COGS reduction. I would really say in today's quite volatile world, it has 2 dimensions. And one is to continually address our bill of material, our ability to install and service our installed base. So that's on cost. A lot of focus will be on continuous engineering to update our tech stack and work with our vendors to continuously increase quality, lower cost. But we also focus a lot on pricing to ensure that we can mitigate certain cost increases in today's volatile world. So we are establishing a pricing desk here in Stockholm. I feel good about that, and we certainly have potential to become more dynamic in how we approach that top line part of our business. So that's where we are. If we then go into our operating model, I have to say, actually, I think we have done well. And by the end of this week, we will almost have executed all the changes that we outlined to you end of November. So that's in 3 months. And we are now at 83%, but the remaining 17% is due to a consultation in U.K., which is happening this week. Of course, it's been tough for us within Elekta, but it will serve the company very, very well to clarify roles, responsibilities who are accountable for what, reduce layers, decentralize, push decision-makings to those who has the best knowledge and then move with a bias to action. So we stand by what we state that we will have a run rate savings without jeopardizing commercial or innovation of more than SEK 500 million, full impact Q1 next year, i.e., from 1st of May. The mix is 30% COGS, 70% OpEx. We're still simulating, but that's our best evaluation. Restructuring charge to be taken this year between SEK 450 million and SEK 500 million. We have taken SEK 417 million here in Q3. And then as I said, we are moving well. And then in parallel, we are now linked to budget and also, Klara, with your support, we are now assessing all the discretionary spend because I do think there is a potential for Elekta to just be very, very, very prudent in terms of where we allocate resource and cost and that should also support us into next year. So that's where we are. And then with that, over to you, Tobias. Tobias Hagglov: Thank you, Jakob, and good morning, everyone. So let's look into the third quarter then a little bit more in detail. And I think you, Jakob alluded to several of the points here on the slide. Net sales in the quarter increased by 2%, and we had a growth here in Solutions by 1% and Service by 3%. We can see a continued strong momentum in Europe, supported by our product launches, Elekta Evo, Elekta ONE. And also when looking into our Chinese operations, as you know, this has been impacted by the anticorruption campaign here over the last years. It's actually returning here to growth in the quarter after 2 years, which is a very positive signal. Then moving down in the P&L, looking into the gross margin, we have an improvement here of 120 basis points. In the quarter, we have a negative impact from tariffs of 100 basis points and then furthermore from FX of 130 basis points. But including this, we are improving our gross margin. It is supported by the product launches. It's also, as you heard Jakob mentioned, supported by general price improvements that we see across our products. If we then look at the operating margin, we have an improvement here of 20 basis points, amounting to 11.9 percentage points in the quarter. This is driven by the improved gross margin. We also can see that we have lower R&D investments and also lower admin costs here year-over-year in the quarter. And what also Jakob mentioned here is that we do have lower capitalization of R&D and higher amortizations. And if you actually would look at the cash EBIT margin, adjusted cash EBIT margin is actually up 170 basis points in the quarter year-over-year. And then also here, we do have restructuring charges here of SEK 417 million reported as items affecting comparability, which is also then reflected in the earnings per share. What we have seen in the quarter is a quite a rapid move of the currencies. And here, we have outlined the effect here both from operations and then also sorted out the currency impact. So what we see in our P&L is that our net sales are impacted by more than SEK 500 million negative in the quarter from the FX moves. And in terms of growth, this corresponds to minus 12%. This is predominantly driven by a stronger Swedish krona versus our main revenue currencies, the U.S. dollar and the euro. When you then look further down in the P&L, we have a negative impact on our gross margin of 130 basis points, which I just mentioned, and furthermore here on the operating margin of 180 basis points. And in addition to the translational currency impact, which I just mentioned, this is also driven then by the dollar depreciation versus our main cost currencies in euro and pound. If we then look at the cash flow, and Jakob also mentioned this, we do have a lower cash flow year-over-year in the third quarter. Still though that year-to-date, our cash flow is more than SEK 400 million better than last year. We have also had a more smooth development of our working capital in the inventory development, especially. In this slide here, we have sorted out the effect of restructuring provisions and then here stated more solely the working capital development in the quarter, which was stable. Then investments are lower than last year, both here in the quarter as well as year-to-date. And taxes, interest, net and other are on the same level as Q3 last year. The cash flow generation this year has led to that we have a net debt decrease of more than SEK 200 million compared to Q3 last year. Then looking at the trends here, I was talking about the currency impact and in nominal terms, we have seen a bit of a slight decline of the revenues, although currency adjusted growth here in the quarters. But when you look at it, and I was talking about the improved gross margin, there is a steady trend here, strongly supported by the product launches and price improvements and also which, of course, then with the must-win battles that Jakob was on will be further supported by the gross -- to the gross margin development. So a steady improvement here over the quarters on the gross margin. We have also an improvement here on a 12-month rolling basis on the operating margin improvement. And if you then would look again at the cash operating margin, it's a strong improvement here, which has been ongoing here quarter-by-quarter sequentially. Then looking at the cash flow. We have a lower cash flow in Q3. But if you look at the -- as well as the year-to-date, you look at the 12-month rolling, it's a significant stronger cash flow over the last 12 months than what we had here a year ago. And if we then look at the outlook, we reiterate our '25, '26 outlook. We expect net sales in constant currency to grow year-over-year. And we also expect a negative impact here on earnings and from tariffs in Q4 as well. And the midterm targets, no change there, and they are confirmed. So by that, I would like to, before the Q&A session, say a big thank you to all here over the years here. Working with you has been a pleasure. And I then hand over the word to you, Jakob. Jakob Just-Bomholt: So the closing remarks should reflect what you just heard. So solid quarter, solid performance. We have launched Evo now in the U.S. also. We are building up the funnel, good order growth year-to-date. Obviously, we have strong currency headwind and also increased tariff headwind despite gross margin is at 38.3%. And as you outlined, Tobias, with an improving trend, and we need to sustain that. And then we focus a lot on what we can control as part of our must-win battles, super important, and we are well on the way of resetting how we operate and how we think and how we execute within Elekta. And by the way, it will also lead to cost reduction of more than SEK 500 million. And then we focus obviously on cash flow generation also. That's also why we can report here year-to-date an increase of almost SEK 0.5 billion. Peter Nyquist: Great. Thanks. And before we start with the Q&A, I just want to remind you that we have the Capital Markets Day here in Stockholm set for June 17. So it will be here in Stockholm. More information will be distributed later on. And with that, I think we have -- yes, and this is the calendar for the following report. So the next one comes in May 28, our Q4 earnings report. So with that, I would like to open up for questions, operator. Peter Nyquist: And I think the first question comes from UBS and Kavya Deshpande, please. Kavya Deshpande: Can you hear me? Peter Nyquist: Yes, we can hear you, perfect. Kavya Deshpande: Two, please, both on China. The first was, would you be able to share how much China order growth actually was in the quarter and remind us how this compared to Q2 and Q1, please? Just because you've been quite specific about the target to grow orders around 10% in H2. So it would be a bit helpful to get some more specificity on the year-to-date trend. And then just more generally, would you be able to remind us, please, why you think the radiotherapy category in China differs to other capital equipment markets where we've obviously seen this acceleration in share shift towards Chinese players over the past year and a bit. Specifically to United Imaging, you look like they're getting good traction with their new O-ring linac and adaptive radiotherapy product as well, please? Jakob Just-Bomholt: Yes. Thanks, Kavya. Good questions, of course. So we'll stick to second half, we say double-digit growth on orders, but we have positive both on revenue and orders here in Q3. So that's good. And it is linked to market recovery. Of course, we have also asked ourselves why are we an outlier on China versus other MedTech companies. But I think the short answer is the market is heavily underpenetrated. You have 1.8 linac accelerator per capita, and there is a growing cancer burden in the country. So there has now been pent-up demand, and we used to have 300 linacs, it dropped to 170 and now it could very well be 260, 270 linacs going forward. So we are not entirely back. Then in terms of competitive situation, we also outlined, there are a lot of local ring-based competitors, but there's really one who has traction, that's United Imaging. Despite, I would say, and also because of we have localized our products and our market presence, we remain the market leader. We have lost a bit of share, but we remain in the high 30s in terms of market share, and that's also our aspiration going forward. Peter Nyquist: And we'll move to the next question, Kepler Cheuvreux, and that's Oliver Reinberg. Oliver Reinberg: Quick questions from my side, if I may. Firstly, can you just provide us a bit of color on the order intake composition? I would assume that a large part is driven by Evo. Can you just confirm that ideally quantified? And if that's the case, what kind of product categories you have seen any kind of declines? That's question number one. Secondly, just looking forward into Q4, we had a very strong comparison in terms of gross margin. I just wondered if you can share any kind of thoughts on that, what to expect going forward now? And lastly, just on strategy, Jakob, I just wondered, can you just discuss how you think about the critical size of Elekta overall and obviously, you have to pay for your marketing installation service infrastructure. How easy is that? And related to that, how do you think about the role of partnerships in the past, there was always a discussion of the importance of independence. It would be helpful to get your thoughts on that. Jakob Just-Bomholt: All right. I'll take the very easy one first. Gross margin Q4, we don't give that guidance, I'm sorry. We will stay with our guidance. We believe in organic growth positive for this year. So I hope you understand that. In terms of order intake, what I will share is that, of course, we just got the approval in U.S. mid-January and our quarter ended January. But we have seen a very substantial order growth in the U.S. It's still too low, but very substantial relative to prior years linked to the expectation of Evo getting approved. And as we got more certain, then we saw that pick up. We are now converting that order backlog from Versa HD into Evo. So that's working. We are, by the way, also upgrading to Iris. And then we can just see the funnel opportunity. I would dare to say, quite rapidly expanding in terms of prospective customers having interest. And of course, we hope to see the same commercial traction in U.S. And why shouldn't we, as we have seen in Europe, and there are roughly 2/3 of what we sell of new solutions are Evo related. So that gives you a good indication. And it's also a nice system, I have to say it's versatile, it's adaptive, it's competitive. So we'll continue to build from that. Then the last one in terms of Elekta's critical side, I would almost say I would love to answer it. It will probably also take 10 minutes, and it's certainly a worthwhile topic for our Capital Market Day. But if you will get my helicopter perspective, then relative to our main competitor, of course, we are smaller. But I would just dare to say that we are the focused radiation therapy market, and that comes with a lot of benefits. Then we have assessed our product portfolio. The product portfolio logic is absolutely sound from Brachy to Neuro to linear accelerator, CT, MR to supporting software suite. So the logic stands, and we believe we can build that ecosystem that is relevant. And then there will be a choice. You can have Elekta. We are a little bit more open, not fully open, but a little bit more open than others or you can go for a more closed system. And that's good. We want to give customers choice, and then we want to compete for our fair market share. Peter Nyquist: We'll move to Handelsbanken and Ludwig Germunder. Ludwig Germunder: I have a few. I want to start with the cost savings program, please. And you've been talking about it, of course. But would you say that the underlying impact from savings during this quarter has been in line with your own expectations? Or would you say that the -- for the quarter has been above your own expectations in terms of how fast you've been able to get the impact from it? That's my first one. Jakob Just-Bomholt: As expected, very little impact this quarter. It will have a significant impact in Q4. But the model we did was really focused on Q1 and there we are, I would say, on par with maybe a little bit above our expectations. Ludwig Germunder: Okay. And just to make sure regarding this restructuring charge of SEK 417 million in the P&L, is it fair to assume that most of this was a cash expense in the quarter as well? Tobias Hagglov: No. Most of it is actually a provision, but you also have a certain degree of payments in the quarter cash cost. Jakob Just-Bomholt: Yes. So what we guide is roughly SEK 100 million was paid out in the quarter. That means remaining SEK 300 million remains to be paid out and that's in line with the expectation. And then we will have some further provisions to be made. So the guidance we have given is SEK 450 million to SEK 500 million, of which we have paid out, if you will, SEK 100 million. Ludwig Germunder: Great. Very helpful. And then just one final on the Middle East situation you mentioned. I know you said it's too early to quantify, but would you be willing to give us any context here, like how much of sales or orders are related to the region where you see a risk of any delayed installations? Just to get some sense on how to think about it. Jakob Just-Bomholt: Sure, sure. So -- but take it with a grain of salt because, as you all know, the situation is fluid. But in terms of potentially impacted installations and thereby sale would be 2% of Q4 sales. So I would say it's a very manageable amount, and then we follow in real time those installations. That number may change given where we are and what we see, but I would still dare to say it's manageable. Then our perspective may look different in a week's time. Peter Nyquist: So we'll move to Mattias Vadsten at SEB. Mattias Vadsten: Can you hear me? Peter Nyquist: Yes, we can hear you perfect. Mattias Vadsten: First question, maybe another one that takes 10 minutes to answer, but you talked about commercially driven innovation in the presentation. So if you could give just some examples on what this statement really means, focus on software vis-a-vis hardware, new platforms versus refining current platforms, et cetera, et cetera? That's the first one. Jakob Just-Bomholt: Yes. It's also a fundamental question, and we outlined a little bit in the strategy outlook. We'll outline more, of course, and find the boundary between what we want to say and what we can say and so forth. But yes, commercially driven means a little bit less big platform, more modular-driven innovation. It's deliberately vague. Sorry about that, Mattias. But I would say we reduce the risk profile in our innovation. We increase the traction. And I would say when I -- and we spent a lot of time over the last 4 months in assessing our innovation pipeline. I'm also hands-on involved in it. I have to say. We put a customer lens on and a commercial lens on. And you should expect that over the next 24 months, we will significantly enhance the portfolio of our CM linac portfolio, and that goes both for hardware and software. So I feel very good. That's also why we are willing to fund continued investment. As I said, we are not asking our investors to underwrite, an increase in gross R&D, it will come down a little bit, but we should be able to see more output. And then let's not forget, it's not only resources put in, it's also how efficient you are. So we are also structurally addressing the efficiency within our R&D engine, if you will. Mattias Vadsten: And then you talked a little bit about Evo and the comparison to Europe and so on. But from what you've heard and seen now in terms of customer behavior, customer feedback, what conclusions can be drawn if you compare sort of what you've seen in Europe since sort of late 2024? And also, if you could give an update on sort of upgrade versus new linac? Jakob Just-Bomholt: Yes. If I take the latter first, then given that we have sold quite a few units this year with the promise of upgrading technical obsolescence against the fee, then you can say we have essentially already sold Evos in the U.S. and we'll continue to sell Evo. Then we are now upgrading. We will build reference sites. We will prove -- provide clinical evidence. And it matters a lot that we shouldn't ask U.S.-based customers. I met some of them here 3 weeks ago in Holland, but then they had to fly to Europe. That's not very efficient. So we are now building our reference sites with Evo so we can demonstrate the value. And then we look at our funnel and so far, so good. But I'm not going to commit to a number. I think it's too early days, but why -- I would just say why wouldn't we see the same demand in U.S. as we have seen in Europe. And there, we have just seen a good traction. But I would rather demonstrate it through actions and promise here for the future. But so far, so good, I would say. Mattias Vadsten: Perfect. And then I will squeeze in one final quick one. So you said book-to-bill was 1.3 first half in the Q2 report for China. Could you give that year-to-date figure now, book-to-bill for China? Jakob Just-Bomholt: Yes, it's above 1.1 for China. And so we will end up with a book-to-bill. I'll just do the math here, but it will be above 1.1. And that's an important milestone because we have seen a depletion in our China backlog. So we actually had a good revenue year after the anticorruption, but we were depleting the backlog and now we are building the backlog again. And that's why we essentially feel pretty okay about our China position, recognizing everything that is said in terms of competing. And we're also using it, I would say, we very often, as Europeans, we are a bit defensive. I look at it differently, how can we tap into China speed? How can we build competitiveness in China? And if we can compete in China, when we can, we can also take that know-how elsewhere in the world. Peter Nyquist: We'll move to Veronika Dubajova from Citi. Veronika Dubajova: I'm going to keep it to 2, please. My first one is just to understand the sort of process of converting some of the older orders in U.S. to Evo. Can you sort of maybe talk through from a customer perspective, how that works? And also just from an accounting perspective, when you do trigger that conversion, does that show up in the gross order number? Or is it just because it's a conversion of an older order, there is no incremental impact on that? If you could just touch upon how that works. That's the first one. And then obviously, you guys are pushing ahead with the restructuring with the strategic changes. And so it would be great to sort of just get a little bit of a pulse on the organization and what's the feedback? Where does morale sit? Anything that sort of is worrying you in terms of how the organization is dealing with the changes that you put into place? Jakob Just-Bomholt: Yes, I can do that. So if we talk about upgrades to Evo, that will now happen and there will be incremental charges. I don't want to share the specifics, but it's substantial, and then it will be triggered from a revenue recognition point of view when we install the units. That's typically when we recognize the revenue. So that's how it's going to go. In terms of restructuring, as I started out by saying, I have to say, I've just been super impressed all around with the behaviors from, I would say, owners to leadership to employees. We knew we needed to change. And then at the same time, we empathize because the change is tough. And it is not only in terms of fewer people, it's also the way of working. And I have to say, I've just seen so many people who work, including a few here in this room until very last day, and it's massively impressive. I think the morale is good, where we -- you can say, biggest impact on morale is actually we have implemented a 4-day in the office policy. But we do that because Elekta, our purpose is so important. We need to innovate for customers and patients around the world. There's more than 2 million patients being treated on our ecosystem, you can say. And we feel that we need to increase momentum and velocity. And part of that is inspiring each other. But all in all, I have to say I'm very pleased with where we are. We haven't lost focus on commercial, on customer and cost and so forth. But I have to say there's a lot more to do. So the must-win battles we have outlined is really meant for the next 24 months. And as I said, as part of that must-win battle 1, we are now addressing our discretionary spend, and we are just going through line by line. And that's important because we only want to spend money where it adds value either for our customers, patients and investors. Veronika Dubajova: And just to clarify, so when you upgrade, I don't know, Versa from to Evo. What's the impact on the order backlog? Do you recognize the whole order, the price uplift? How does that work? Jakob Just-Bomholt: Yes. Then we -- once we upgrade, we recognize it in the order backlog. And when we install it, we recognize it in revenue. And obviously, it's quite good margin perspective. Yes. Veronika Dubajova: Yes. But from an order perspective? Jakob Just-Bomholt: Yes. So when we then commit to the order, then there is an order backlog increase. But the way you should think about it, you will not see it in the -- yes, you will see it, but it's not going to be that significant in the total order backlog number. Tobias Hagglov: And it's the upgrade value. It's not like we double counted here, Veronika, if that's your question. Veronika Dubajova: Okay. Perfect. That's just what I was trying to get at. Peter Nyquist: The next question will come from Kristofer Liljeberg at Carnegie. Kristofer Liljeberg-Svensson: Three questions. The first one is you said that you're looking at other costs here besides the restructuring program. So should we interpret that as you expect or that you see potential for more savings than the SEK 500 million in the next fiscal year? Jakob Just-Bomholt: Kristofer, you should interpret what we have said is we are committed to run rate of more than SEK 500 million. And now we'll just -- we are running through the machine and then let's see where we get to. Kristofer Liljeberg-Svensson: Okay. And I don't -- I understand you don't want to be specific, but just to clarify, do you expect China and U.S. sales growth to be positive now in the fourth quarter, given what's happening with better order momentum? Jakob Just-Bomholt: I think the only thing I'll say on China is we have guided towards second half growth, right, double-digit growth, probably around 10%. On U.S., I will put that under the overall group umbrella and say we guide at a positive organic growth for the year. I know we are vague, I hope we can be more precise, but I'll stick to the guidance here now. Kristofer Liljeberg-Svensson: Okay. But when you say 10% in China, is that for orders or sales? Jakob Just-Bomholt: Both. Kristofer Liljeberg-Svensson: Both. Okay. That makes sense. And then my final question, I noticed you said here that you would like cash EBIT to be in line with reported EBIT, i.e., a much less positive effect from capitalized R&D. In such a scenario, would you say that this midterm EBIT margin target of 14% is still valid, i.e. that cash EBIT improvement would be even bigger. Jakob Just-Bomholt: Let's get back to at our Capital Markets Day. But if I just address in isolation, and I think many of you on this call will agree, if we look a couple of years ago, difference between reported and cash-based EBIT was 4%. Last year, it was 3%. This year, it's 1.3%. And it's complex. And I personally like to keep things simple. So within Elekta, we look at gross R&D spend. And why not then take the next step in the simplification and match capitalization with amortization. How that will be executed, we are evaluating. But I do think I said that we are committed to improving the quality of earnings, and I think this is an important part of it. Peter Nyquist: So next question, we'll go to Sten Gustafsson at ABG. Sten Gustafsson: Two questions. And the first one is a follow-up. Did I hear you correctly when you said that you expect to see a substantial part of the cost saving program to materialize in Q4? I think previously, you talked about it to come in Q1 next fiscal year. But do you expect to see it already now in Q4? Jakob Just-Bomholt: Not full amount, but substantial. So you heard correctly, Sten. Sten Gustafsson: Very positive to hear. My second question is related to China. Obviously, you book orders there now for Evo, but have you also started to book sales? Or when will you start installations of Evo in China? Jakob Just-Bomholt: So it goes into what I outlined here that we expect in second half, both from orders and revenue growth of around 10%. Specifically on Evo in China, yes, we got approval. We also see it's a relatively smaller part of the overall portfolio from a commercial point of view. We sell Harmony Pro also with adaptive treatment possibility. Sten Gustafsson: Okay. I mean, but you are allowed to make installations of Evo in China now? Jakob Just-Bomholt: Yes. That's right. Correct. Peter Nyquist: And I would like to welcome in David Adlington at JPMorgan into the call to ask question. David Adlington: Just on the U.S., please. So firstly, I assume you saw some pent-up demand on orders with the approval of the Evo. I just wondered if you could sort of quantify how much of that was pent-up demand and how you're expecting orders to develop in the U.S. in the coming quarter? And then secondly, I just wonder if you've seen any customer reaction to the Varian announcement that they're launching a new platform in the late summer. Jakob Just-Bomholt: Yes. So if I take Varian first, David, I don't comment on competitors' product. We are very well aware, both from an IP point of view and in the market performance. I think it's actually fundamentally good because it's more adaptive, and we are just very early on in the S-curve of making adaptive radiation therapy treatment the main product. So I think for more options to a customer will expand that piece of the market. And then we look at our own innovation road map and feel actually good about our relative strength today, tomorrow and in 2 years. Specifically on U.S., I mean, obviously, it's helpful to have your best product available for commercialization. As I said, part of that pent-up demand was taking in the quarters up to. So we also had a good Q3 and some of the orders we had prior to FDA approval because we included a provision in the contract that they would be upgraded once we got the approval. And now we have the work ahead of us in building the funnel, building the reference sites and really get into the track of what we have seen in Europe. I would say -- so I don't want to give specific guidance. I don't think that's appropriate for Q4. I would say that overall, we are not getting our fair market share in U.S. That's why we have it as a must-win battle. We now have the product portfolio, I would say, to compete. We have set the organization. We know what we need to do. Now we just need to do it and demonstrate it in actions actually. David Adlington: Maybe just a quick follow-up... Peter Nyquist: Go ahead. David Adlington: A quick follow-up? Peter Nyquist: Yes, absolutely. David Adlington: Just wondering, with the announcement that they are launching in September, has that seen any customers who were potentially looking at Evo just sort of pause and wait to see what's coming in September? Jakob Just-Bomholt: It's not the feedback I'm getting. I mean, I look at our funnel and how it develops and that part looks okay. Peter Nyquist: Next question will go to Richard Felton at Goldman Sachs. Richard Felton: Two for me, please. First one is on one of the must-win battles winning in the U.S. So obviously, having Evo in the market is an important part of that. But can you talk about what you're potentially doing differently from a commercial execution perspective in that market going forward? And then the second question, just coming back to China, you alluded to a little bit of market share losses, but there's still a market share in the high 30s in that market. Could you just clarify, are those comments based on the installed base overall or share of new placements? Jakob Just-Bomholt: China share of new placements. Basically, we look at how many linacs been purchased, and it's very transparent in the China market and then what has been our share. On U.S., yes, I can share a bit. I mean, it, of course, always starts with suitable product, but then commercial execution matters a lot. And that's going back into our decentralized model. So we are pushing P&L responsibility to our 5 regions. We report here 3, but we have 5 reporting directly to me. We have delayered the organization. We are centralizing part of the pricing, strategic pricing framework, but otherwise, we are out there. Then we have spent a lot of time mapping our existing installed base, what our retention strategy. We look at aging profile, we look at flips, we look at greenfields. We are mapping out the market. And then we really -- and I have to say, I'm pushing a lot on let's build the funnel because funnel should be a predictor for order intake, which is -- should be a predictor for revenue generation. I'm not saying we are there yet, but we are doing quite some swings, I would say, in structured commercial execution, but that goes for all regions. And then maybe I'll just say -- and then at the same time and very, very importantly, we recognize we are on a burning platform, and we are deeply frustrated about where we are in U.S., not least because I think it's good for our customers and our patients or their patients to have a strong competitive alternative. We think we have that now. They are part of our portfolio. We want to do even better, and that's what we are addressing in focused innovation, and we need to address it fast. Peter Nyquist: Great. Thanks, Richard, for those questions. We move to SB1 Markets with Johan Unn rus has the next question. We lost you there, Johan or maybe you. Can you hear us? Johan Unn rus: Can you? Peter Nyquist: Yes. Now we can hear you. Good. Johan Unn rus: Can you hear me? Yes. I think we will double [ command ] to that. Yes. A follow-up on the funnel in the U.S. Evo is, of course, extremely important in the U.S. and clearly a very important bit of that win -- must-win battle. What about the funnel so far? Can you see any new Elekta? Any orders coming from centers and accounts which are new to Elekta? Or is this Elekta users already? Jakob Just-Bomholt: Yes. So if we look at it, funnel is important. Let's not forget funnel on service and our TPS OIS software is extremely important. We have Brachy and Neuro also important. But if we get to linac, I mean, quite pleasing, we have done some flips taken from competitors. I think that's very important. When they flip us, we flip them. And then it's less a greenfield market actually because it's so mature. If we look at the funnel, I would say I think we are on track in building it. I still -- before I commit to saying that we are at the same track as Europe, I want to see that converted in execution. But as I said, we just got the approval. So I think it's also okay. But so far, so good. So far, so good. Johan Unn rus: Yes. And a follow-up to that, obviously very important to have centers and reference sites. You referred to that earlier. What -- how long will it take to get that in place, 3 to 6 months? Jakob Just-Bomholt: It will happen very quickly. It will happen very quickly. Some of them here in Q4 also. Johan Unn rus: Good. And what about the sense of time from order to installation in the funnel? Are most of them fairly sort of imminent orders, so to speak? Jakob Just-Bomholt: I don't want to give the specific here in terms of maturity from funnel to orders. And then the way you should think about it is from order to revenue, it's typically 12 months, but with significant variations from order to order. But it's, of course, important if you look at U.S., we have a very favorable working capital. I mean people pay upfront and so forth. So I think it's not only from a revenue and EBIT, it's also from a cash perspective, favorable that we get our fair market share. Johan Unn rus: Is it fair to say that, that dynamic is in line with what to be expected in the linac hardware market in general? Or could it be [ offset ]? Jakob Just-Bomholt: I think if it relates to Evo, we are on expectations, but I still would say we need a bit more time. We got approval mid-January. We have received quite a few orders. You saw order intake Q3 linked to Evo. So that's good. I look at year-to-date, and I can see a substantial, substantial increase in U.S.-based, not Americas-based, but U.S.-based orders. I like that. Let's see how we sustain it over the next couple of quarters and our ability to then convert funnel into actual wins. That's what I'm looking at. Peter Nyquist: We will now move to the last question for this session, and that will be Ludvig Lundgren at Nordea. Ludvig Lundgren: So a bit of a follow-up to the Evo and the U.S. So I think in Europe, you actually initially saw sales being driven by Iris upgrades for like previous Versa installations. And as these have shorter lead times than new installations, so I just wonder if you will expect to see a similar pattern in the U.S. And then also, if you can remind us of the margins of these type of installations. Jakob Just-Bomholt: Yes. So the margins, I think, let me put it this way, 80% plus. So they're obviously attractive. And we are looking at upgrade. It will be less than in Europe from that point of view. But we will do Iris upgrades here in Q4. And -- but we also did that last year. So when you look at the comp, we look at Q4 that is a tough comparable quarter last year, but we still stand by, of course, the guidance we have given in terms of organic growth for the year. Ludvig Lundgren: Okay. Understood. And then my final one, just on -- if you have any updates on the Section 232 investigation. And also, if you can comment on this recent U.S. tariff changes and how you expect that to affect? Jakob Just-Bomholt: Yes. We are evaluating it. We actually report here this quarter a bit higher tariff impact, but it's also linked to selling more in U.S. So in a way, it's a positive problem, but we are still evaluating and understanding. So I think we need a bit more time with everything that's going on. Peter Nyquist: Maybe before we close the call, any final remarks from your side, Jakob? Jakob Just-Bomholt: Solid quarter. We are busy. We execute a lot. We have to continue the momentum, bias to action, clear strategy, then we look forward to Capital Market Day where -- so with your support, Klara, I hope and endorsed by the Board, we can outline a financial plan that management stands behind. Peter Nyquist: Thanks. Jakob Just-Bomholt: Thank you very much. Peter Nyquist: Thank you.

83天前Insight Analytics约5分钟阅读

RBGLY 2025 Q4 财报电话会议

Nicholas Ashworth: So good morning, everybody, and thank you for joining us for Reckitt's full year 2025 results presentation. I'm Nick Ashworth, I head Investor Relations here at Reckitt. So before we start, can I draw your attention to the usual disclaimers in respect to forward-looking information. So presenting today, we have our CEO, Kris Licht; and our CFO, Shannon Eisenhardt. Following the presentation will be the usual Q&A session. We're going to take questions from the room first, as we always do, and then followed by the written questions via the webcast. For those of you who have joined online, please feel free to submit your questions via the questions tab, which I think is at the top of the screen, and I will read them out. And if you've got further questions after the event, please feel free to reach out to me or the team, and we'll be happy to help. So with that said, I'm going to hand over to our CEO, Kris Licht, to start the presentation. Kris Licht: Thank you, Nick, and good morning to everyone in the room and those who have dialed in. I'll start with an overview of our 2025 results and some of the key highlights from the year, and then Shannon will take you through our financial performance. I'll then come back and provide an update on our key priorities for 2026 and some of the elements of our winning playbook. After that, we'll both be happy to take your questions. 2025 was a year of strong financial delivery as we continue to deliver on our strategy. Core record net revenue grew 5.2%, ahead of our improved half year guidance of above 4%. Group net revenue increased 5%, including Mead Johnson growth at 3.8%. This was driven by Emerging Markets, with China and India growing double digits in the fourth quarter. In our developed markets, a weaker season held back growth and the consumer environment in Europe remains tough. However, this was more than offset by a strong nonseasonal performance in North America. Adjusted operating profit increased 5.3%, underpinned by the benefits of the Fuel for Growth program. Core Reckitt margins expanded 90 basis points to 26.7%, with Emerging Markets margins growing 210 basis points to 20.9%. We are delivering profitable growth at scale. EPS grew 1.1% and was supported by our ongoing share buyback program, offset by a higher year-on-year effective tax rate, in line with our guidance. And we delivered another year of strong cash returns with GBP 2.3 billion returned to shareholders through dividends and our share buyback program. Looking at our noncore businesses, we completed the divestment of Essential Home to Advent in December, and we returned a further GBP 1.6 billion to shareholders via a special dividend in February. Mead Johnson Nutrition grew net revenues by 3.8% as trading normalized. We continue to consider all strategic options for that business. So we made strong progress delivering against all our strategic priorities during the year. We simplified and sharpened the portfolio, supported by the divestment of Essential Home. And this has allowed us to focus exclusively on 11 high-growth power brands with increased investment, increased accountability, faster decision-making showing through in our results, in particular, in Emerging Markets. We delivered superior innovation with launches across all our categories. Some were new products with the power to disrupt such as our Durex Intensity condom, which we've rolled out to 18 countries in 2025. And many others are extensions and improvements helping us to grow loyalty and win new consumers. They included new fragrances for Lysol air sanitizer for Dettol antiseptic liquid as well as Nurofen mini liquid caps and dual-action cough and sore throat products from Strepsils. We've generated significant benefits from our Fuel for Growth program. This has supported increased investment in our brands to drive revenue, expand margins and deliver our ambition of sustained earnings growth. We feel good about the program, and we believe we can go further. Shannon will come to this later. And finally, improved execution has strengthened our competitive position. In China, strong e-commerce growth has enabled us to capture more digital-first consumers. And in North America, our omnichannel partnerships and quick commerce are accelerating and widening access to our portfolio, for example, by bringing Mucinex to consumers in 30 minutes with 68% of buyers new to the brand. Building on this final point, executional excellence can only happen with a strong supply chain. This has been a big focus of mine since becoming the CEO. It's critical to have a supply chain that reflects the quality of the brands and the products that we make. Historically, modest investment in our supply chain created risk and led to inconsistent performance. We have started to address that by investing in greater levels of localization, automation and digitization, building a supply chain that is more scalable and resilient as we continue to grow. You can see this in the actions we're taking. On the manufacturing side, there is a lot going on. For example, we're rationalizing and improving our China footprint, installing new Durex lines in our state-of-the-art Taicang factory with a new China Science and Innovation Center due to open this summer in Shanghai. We're increasing our North America footprint with our new factory in Wilson, North Carolina, which is on track to open next year. And we've also enhanced our Lysol toilet bowl cleaner capacity and capability at our Belle Mead plant. We're adding a new generation of lines at our Polish factory to support innovation behind Finish. And we're investing in new Gaviscon capacity in Thailand, initially to support growth in Europe and Australia and ASEAN in the longer term. And as part of Fuel for Growth, digital and AI and GBS will enable greater effectiveness and efficiency right across the supply chain. We've stepped up investment in CapEx to GBP 592 million in 2025. And this is starting to deliver results across the portfolio with a few examples shown here on the slide. Our service levels have increased across Europe and North America, and we're driving improved factory operational performance with good early results, in particular, in Emerging Markets. There's more to do, but we have made great progress on the supply chain over the past 18 months. So in summary, I'm proud of what our teams have achieved in 2025. Our actions have repositioned Reckitt as a world-class health and hygiene company. Our focused portfolio of power brands are in the right categories, driving premiumization and benefiting from geographic diversity. We have a proven playbook for how to grow and expand our brands, and we're executing more consistently against it. Our foundations are strong, and we're making them stronger. There is much more to do, and I will come back to you to talk about our priorities for the year ahead shortly. But let me stop now and hand over to Shannon for more detail on our financial performance. Shannon Eisenhardt: Thanks, Chris, and good morning, everyone. Let me start by running through the key financial highlights and the strong progress we made in 2025. Core Reckitt like-for-like net revenue grew 5.2% with volume growth of 1.5% and price/mix of 3.7%. Excluding seasonal OTC, Core Reckitt grew 7% year-on-year. Core Reckitt's growth was led by Emerging Markets, up 14.6%. Group like-for-like net revenue increased 5%. We held Core Reckitt gross margin flat at 62.2% with group gross margin above 60%, expanding 10 basis points year-on-year as productivity efficiencies more than offset the impact of tariffs. Adjusted operating profit margin for Core Reckitt increased 90 basis points, helped by our Fuel for Growth program, with group adjusted operating profit margin up 40 basis points to 24.9%. At constant currency, group adjusted operating profit grew 5.3% year-on-year with adjusted diluted EPS up 1.1%. Looking now at volumes for the year, where Core Reckitt volumes grew 1.5%. In Emerging Markets, we delivered broadly balanced growth with volumes up 6.7%, led by online launches and increased penetration in China as well as expanded distribution reach in India. In Europe, volumes declined 3.1%, reflecting category growth rates slowing throughout the year. This was compounded by a weaker cold and flu season in Q4. In North America, volumes were flat. Encouragingly, volumes improved sequentially in the second half, driven by the performance of our nonseasonal brands. Turning next to performance across each of our areas and starting with Emerging Markets. Growth was broad-based across all categories and all regions. China delivered its 10th sequential quarter and another year of double-digit growth, driven by strong performance in Dettol with innovations and extensions such as Activ Botany, ongoing strength in VMS and sustained market leadership in Intimate Wellness across both Durex and Intima. India delivered high single-digit growth for the year, driven by our offline execution as we continued to increase distribution points. We have also seen double-digit growth across a number of our smaller markets, including Indonesia, Colombia and Malaysia. We're pleased that we're driving this growth while expanding our adjusted operating profit margins 210 basis points on the prior year to 20.9%. This has been driven by continued gross margin expansion, which includes mix benefits from continued outperformance in Self Care and Intimate Wellness. Moving on to Europe, where net revenue declined 1.4% for the year. During the year, category growth rates slowed to being broadly flat. We saw increasing promotional activity across the area as well as a softer season in Q4. However, our premiumization strategy continued to deliver price/mix benefits. We continue to focus on our power brands and showing up competitively on shelf for our consumers every day, which enabled us to maintain market leadership positions. Finish declined low single digit, but remained the category leader in Europe, supported by continued premiumization. In Self Care, nonseasonal OTC grew low single digit, led by strong performance from Gaviscon, partially offset by a mid-single-digit decline in seasonal OTC brands. Durex delivered low single-digit growth, driven by the successful launch of Durex Intensity, our new nitrile condom, enhancing our category leadership. Adjusted operating profit margin was 31.4%, up 130 basis points on the prior year, with strong delivery from cost savings and efficiencies, offsetting stable gross margins and volume declines. Now in North America. Like-for-like net revenue growth was broadly flat at 0.2%. Our nonseasonal brands, which represent around 70% of our portfolio performed well with low single-digit growth against a soft category backdrop. Lysol grew low single digits, supported by strong core business execution, particularly in wipes and the continued momentum of recent innovations with laundry sanitizer and air sanitizer, both growing double digits year-on-year. And while our seasonal OTC business declined mid-single digit, reflecting the soft season, our nonseasonal Self Care business grew double digits in 2025, driven by successful innovation launches across Neuriva, Move Free and Biofreeze. Adjusted operating profit margin at 30.1% was down 30 basis points year-on-year with cost savings partially offsetting a decrease in gross margins driven by category mix. Now turning to our categories. Self Care net revenue increased 3% on a like-for-like basis. Seasonal OTC declined mid-single digits, more than offset by high single-digit growth in our nonseasonal Self Care business. Gaviscon grew high single digits, and we delivered double-digit VMS growth for the year. For Germ Protection, net revenue increased 8.4% on a like-for-like basis. This was led by double-digit growth in Dettol across emerging markets, including high single-digit growth in India and double-digit growth in ASEAN and China behind the launch of new innovations. Harpic grew mid-single digits with emerging markets offsetting a softer consumer environment in Europe. Moving on to Household Care. Like-for-like net revenue declined 0.4%. Finish was broadly flat year-on-year with double-digit growth in emerging markets, offset by softness in both Europe and North America. Vanish was flat with strength in China, offsetting softness in LatAm and mid-single-digit declines in Europe. Finally, Intimate Wellness was our fastest-growing category with net revenue up 12.5% on a like-for-like basis. Durex delivered double-digit growth, supported by ongoing product innovation, notably the successful launch of Intensity in Europe and additional Durex launches in China and India. Veet also delivered double-digit growth in 2025 and Intima's like-for-like net revenue almost doubled as brand adoption in China accelerated. Looking at our market share data. As expected, our seasonal business has some share weakness given the soft season. So 51% of Core Reckitt's top CMUs were in gain or hold territory for the year. Turning to our noncore business. Mead Johnson Nutrition delivered like-for-like net revenue growth of 3.8% in 2025, driven by our specialty brands, particularly Nutramigen in the North America business with favorable price/mix. The business also benefited from rebuilding retail inventories following the Mount Vernon Tornado in July of 2024. Mead Johnson Nutrition international grew low single digits. Adjusted operating profit margin increased by 150 basis points to 20.4%, reflecting favorable gross margin progression on higher-than-normal production volumes as well as insurance proceeds. Essential Home is excluded from like-for-like net revenue growth following the disposal completion before year-end. Operating profit is included until the disposal on December 31, 2025. Our Fuel for Growth program continues to drive meaningful simplification and improved effectiveness across our business. We've made strong progress against each of our focus areas, and our actions are enabling us to deliver savings faster and more efficiently than originally planned. Our investments in digital and AI are creating value, particularly in marketing with automation and shared services also progressing well. The larger impact from these areas will build progressively over time. In 2025, group fixed costs were 19.4% of net revenue, a 150 basis point improvement year-over-year. As expected, this ratio will rise in 2026 before declining again in 2027, driven by 2 factors: first, the mitigation of stranded costs following the sale of Essential Home; and second, a smaller net revenue denominator resulting from the transaction. Program delivery costs in 2025 were below our GBP 500 million guide due to pacing and phasing of costs and around GBP 200 million of restructuring and separation costs that were offset against Essential Home proceeds. With this progress and disciplined execution, we remain on track to deliver within the GBP 1 billion investment envelope and now expect to exit 2027 with a fixed cost base below 19%. Reviewing our progress shows the benefits this program is delivering. We delivered 90 basis points of savings in 2024. 30 basis points went back into increased BEI investment. In 2025, we've driven 150 basis points of savings, which enabled 120 basis point step-up in BEI investment. We're investing more behind our brands to fuel our top line growth while also growing our margins. And importantly, we're enhancing our functional capabilities to enable sustainable growth going forward. In 2025, consistent with our guidance, we grew group adjusted operating profits ahead of net revenues, up 5.3% at constant currency. Our Fuel for Growth savings enabled us to step up investment behind our brands and also drove group operating profit margins up 40 basis points to 24.9%. Turning now to earnings. EPS grew 1.1% over the year to 352.8p. This was driven by net revenue and profit growth and further supported by a lower share count resulting from our share buyback program. These benefits were partially offset by a higher effective tax rate and adverse foreign exchange impacts, both totaling a 7% headwind to EPS. In total, we returned GBP 2.3 billion to shareholders through dividends and share buybacks. This included GBP 900 million of share repurchases, and we will shortly commence the final tranche of our current buyback program, which was announced at the half year. We delivered free cash flow of GBP 1.7 billion with a conversion rate of 71%, including one-off cash costs associated with transformation and restructuring. Net debt to adjusted EBITDA closed the year at 1.6x, reflecting the proceeds received on December 31, 2025, from the Essential Home divestment. Adjusting for the GBP 1.6 billion that was returned to shareholders last month via a special dividend, our net debt-to-EBITDA ratio would have been roughly 2x at the end of 2025. As we move through 2026, we expect leverage to rise towards 2.5x by half year, given continued investment in the group and the lower EBITDA denominator post divestment before starting to trend back down through 2027. The Board is proposing an increase to our full year dividend of 5%, consistent with our aim of delivering sustainable dividend growth. Our disciplined capital allocation framework remains unchanged. Our priority continues to be investing in organic growth as we've done in 2025 with a step-up in investment behind our supply chain and R&D capabilities. We aim to continue to pay a progressive dividend, and we will manage the portfolio for value creation, continuing to return excess cash to shareholders through our share buyback program as well as any excess proceeds from future transactions as we look to continue to deliver attractive total shareholder returns. Now turning to guidance for 2026. First, Core Reckitt. In 2026, we expect to deliver 4% to 5% net revenue growth, in line with our medium-term guidance. This again will be led by emerging markets growth. We expect the challenging environment in Europe to remain where we're taking actions that are already having an impact. And similar to the fourth quarter, Q1 will be negatively impacted by the softer season. Given these factors, in Q1, we expect Core Reckitt net revenue growth to be below our full year guide. In our noncore Mead Johnson Nutrition business, we expect low single-digit like-for-like growth in 2026 with a mid-single-digit net revenue decline in Q1 as we lap retailer inventory build from Q1 2025 post the tornado. At the group adjusted operating profit level, we aim to largely offset stranded costs associated with the Essential Home divestment through our Fuel for Growth program. Finally, looking at EPS. We'll receive income from our participation in Vestacy, the Essential Home vehicle in 3 different ways: noncash interest income from our USD 300 million vendor loan note, which is part of our net interest guide; associate income from our 30% equity stake; and around GBP 25 million of pretax income from service and other agreements we're providing. The share consolidation and ongoing share buyback will reduce share count, and we'll provide updates on foreign exchange impacts as we progress through the year. Our ambition remains to deliver long-term sustainable EPS growth, acknowledging in 2026, the dilution headwind resulting from the divestment of Essential Home. I'll now hand back to Chris to talk about our strategic priorities for the year ahead. Kris Licht: Thank you, Shannon. I want to spend the last part of the presentation taking you through our key priorities for 2026 as we continue to strengthen Core Reckitt's foundations for long-term sustainable growth. Before I go through each of our areas, I want to revisit a chart that you may have seen me use recently. It's a great chart because it marks an important inflection point. For the first time, emerging markets have more households with $25,000 disposable incomes than developed markets. That's a big shift in terms of where global purchasing power lies and Reckitt is in a strong position to benefit. As our results show, we're capturing these consumers through category penetration and category creation. But it's not just about emerging markets. The opportunities across developed markets also remain exciting. Our power brands are at the premium end of the market where consumer loyalty is high. We're building that premium position with new launches and by expanding our categories. We have the portfolio to win in both developed and emerging markets. So turning to our areas and starting with Emerging Markets. As we said at our December event, we expect the strong trajectory to continue with high single-digit growth over many years. The number of consumers able to buy our products increases every day. And in many ways, we're only just touching the surface. Consumption patterns are changing fast, supported by the growth of households that own dishwashers and an increasing number of consumers paying much more attention to their health. We have 3 clear priorities for the year ahead. First, to increase penetration in mature categories, driving our distribution strength to reach more consumers through efficient and digitized execution in India and Sub-Saharan Africa and to continue our success of expanding into new categories in China. Second, to develop nascent categories. In December, our Emerging Markets President, Nitish Kapoor, spoke about growing levels of dishwasher penetration and our focus on rolling out our self-care portfolio across many parts of the area. This is working well with Finish and Gaviscon both growing double digits in 2025. Finally, to scale up the next tier of countries. We're already seeing very strong double-digit growth across a number of markets that are small today, but they have very high potential. We will continue to drive executional excellence by increasing OTC medical expertise in Latin America, making our sales teams in Africa more digitally enabled and modernizing our go-to-market capabilities in ASEAN. Next, turning to Europe. Our performance in 2025 was impacted by the challenging market backdrop, a slowdown in our categories throughout the region and weak seasons. We expect consumer sentiment to remain weak, and we've already taken actions to improve our competitive position with early positive share results. And while the season has continued to be soft in Q1, we have maintained our market share, and so we're well positioned looking forward. Our priorities in Europe are, therefore, to capture trade-up and premiumization, and we're doing this. Our highest tier dishwasher tab, Finish Ultimate Plus all-in-one grew double digits across Europe in 2025, driven by the formula upgrade. Competition will remain tough, but the mix opportunity for us remains. Next, we will drive category expansion through innovation. We will continue to successfully roll out Durex Intensity as well as launching Nurofen mini liquid caps into a number of new markets. And finally, we'll take steps to strengthen our competitive position. A big focus will be on the pharmacy channel, working with pharmacists on product education and by better equipping our sales force with improved technology. We will also strengthen e-commerce and tailor our North America omnichannel best practices for Europe. And then finally, North America. I believe this area has great opportunity for us. 2025 saw good progress, and we're encouraged by the momentum we saw through the second half. Our nonseasonal business is strong, outperforming low single-digit category growth, offset by the weaker seasonal OTC. The investments we're making in our supply chain and in our iconic brands are strengthening our platform for further growth in 2026. Our priorities will be to expand our premium categories. We built a strong track record of category expansion, moving into laundry and air sanitizer with Lysol into lozenges and pediatrics with Mucinex, and there is much more to come in 2026. We will work closely with our partners to deliver customer-centric growth. This means greater online and omnichannel focus and continued focus on winning in the club channel. Innovation and digital execution are helping us do this, whether it's through exclusive SKUs, pack sizes and variants for specific retailers or working together with quick commerce partners to accelerate and broaden access to our brands. And finally, we want to deliver consistent operational excellence. We've seen improved performance in Lysol wipes in 2025 as we invested in our largest U.S. factory in St. Peter's, and this will support greater consistency in 2026. We will also continue to invest in our supply chain in North America with our Wilson, North Carolina site moving towards operational readiness by 2027. And there's more work to do, but the future is an exciting one in North America. Moving to our seasonal business, which represents right around 12% of our core portfolio. The past few years, we've seen the natural volatility that we all associate with this category, but it doesn't change the attractiveness or strategic importance of the portfolio. Even after a couple of weak seasons, the upper respiratory category has still grown at a 5% CAGR from 2019 to 2025, supported by strong macro tailwinds from an increasingly health-conscious consumer base. When viewed through a longer-term lens rather than just a 1-year basis, the trajectory is good. Strepsils delivered a 7% CAGR between 2019 to 2025, while Mucinex grew 5% in the same period. These are 2 of the highest gross margin brands in the portfolio. The strength of these brands is underpinned by leading brand equity, superior claims and a consistent track record of innovation. Part of our excitement for 2026 in North America is around Mucinex. This is a brand with a great history of innovation, powering growth. This slide shows you that it has delivered a number of firsts over a number of years, and I'm proud to say that we're going to continue this strong track record in 2026. Mucinex 12-hour Cold and Fever will be launched later this year. It is the first and only 12-hour cold and fever multisymptom remedy in the market. This is a real breakthrough. It lasts 3x longer than other cold medicines from just a single dose. It took us 15 years to develop. It's the first FDA-approved new drug application in the upper respiratory category in over 15 years, and it's our first approved NDA. So when I talk about superior innovation, this really is an excellent example of our teams delivering, and we're doing this right across our portfolio and all around the world. This slide shows some of the other launches we've delivered in 2025. Innovation is integral to our ongoing success because it enables us to grow our categories, it strengthens further loyalty to our brands. It captures more consumers, and it drives pricing and ongoing premiumization. The investment that we've been making in R&D will ensure that our pipeline remains strong to underpin a steady stream of launches in 2026 and the years ahead. As many of you know, we started our series focus on educational events last spring. For 2026, I'm pleased to announce our next 2 events. On the 14th of May, we will showcase digital science with our first virtual event where our digital and R&D teams will come together to show how we're applying new digital and AI technology to innovate faster and better. And then on November 19, at our new office in New Jersey, we will host our first event in the U.S., showcasing our North America business. So there's a lot to look forward to in 2026. Shannon took you through our guidance for 2026, and I want to reiterate our confidence in delivering on our medium-term ambitions. Our strategy is focused on positioning Core Reckitt to consistently deliver 4% to 5% like-for-like net revenue growth alongside annual EPS growth. Last year, we saw a tough consumer backdrop, and 2026 doesn't show much sign of improvement, especially in Europe. However, I'm confident that our portfolio, geographic footprint, executional excellence, combined with continued investment and innovation puts us in a strong position to deliver our targets. So in summary, we achieved a lot in 2025. The transformation of Reckitt is well underway. We've simplified the portfolio. We've reduced costs. We've expanded margins, and we've invested behind our brands to accelerate growth. We have iconic brands in categories with decades of runway for growth. We have the innovation pipeline, the executional capabilities and the financial model to win. Core Reckitt is built to deliver sustainable profitable growth year in and year out, and that's what we're focused on doing in the year ahead. Thank you for listening. Shannon and I will now be happy to take your questions. Nicholas Ashworth: Thank you very much. And yes, so as we said at the beginning, we'll take questions in the room first and then we'll go online. And if you're watching through the webcast or listening through the webcast, then there's Ask a Question box. So please put the questions in there and they'll come through to me and I can read them out. To start in the room. James got the first. Wait for the mics as well, I should say, if you can introduce yourselves. James Jones: It's James Edwardes Jones from RBC. Two questions, if I may. Obviously, you're not giving explicit margin guidance for 2026. Can we interpret your comments as being that margins for Core Reckitt are likely to decline in 2026? And within that, can you give any indication on brand equity investment sales whether that will go up to support all those innovations you're talking about? Secondly, you said 51% of your top CMUs are gaining or holding share. I'm not sure if that was Q4 or full year. So clearly, 49% are losing share. Is that something we should be concerned about? Is there any intensification in the competitive environment? Kris Licht: Do you want to handle margins? I can do the share. Shannon Eisenhardt: Yes. I'll start. Okay. So from a margin standpoint, we exited the current year at 24.9%, which is what we shared in the release this morning. Obviously, when you think about it from the group level with the Essential Home divestiture, that will be a positive tailwind to our operating margins in 2026 just because it's a lower profit business that we're divesting. We will, however, be facing the stranded costs coming from Essential Home. And so what we outlined was that we expect to largely offset those stranded costs with the Fuel for Growth program in 2026. So the expectation would be that operating margins will increase. However, the amount of increase is obviously dependent on how much of those stranded costs we offset within 2026. We're confident as we then head into 2027 that will more than offset those costs, and that's why we also changed the guidance for the Fuel for Growth program to now get below 19% as we move forward. James Jones: Shannon, just to check, so operating margins for the group, you expect to increase, but not necessarily for Core Reckitt. Shannon Eisenhardt: For Core Reckitt, I think it will be the same dependence around exactly how much of those fixed costs we offset because we have to metabolize that within Core Reckitt, obviously, going forward without Essential Home. From a BEI standpoint, we remain very consistent in the fact that our intention is to be growing BEI as a percent of net revenue year-on-year. We believe it's important to be investing behind innovation. So we'll continue to focus on that in 2026 as with any other year. Kris Licht: On your question on market share. So 51% it's a full year number for the CMUs. One of the things that happens when we have a weaker season is some of our self-care brands that are highly efficacious and medicated and premium lose a bit of share. Conversely, when we have strong seasons, they gain a bit of share. So we did see Mucinex suffer some share loss during the year because of that weaker season. Mucinex is a really big CMU. If you consider that effect, how we're running is okay. Obviously, I'm not happy unless that number is 60% or higher. But with a weaker season, we know and expect that that's a headwind on share, and it's temporary. Jeremy Fialko: Jeremy Fialko, HSBC. So a couple from me. First one is, can you delve a little bit more into Europe and what's going on there? Because you talked about the markets being broadly flattish at the end of the year. Obviously, you were down somewhat more than that. So talk about why there's that difference in the market, what the sort of the seasonal bit there is and how you think you can get at least that back to, let's say, around flattish or into positive territory during '26, your confidence in that? And then secondly, maybe we have a bit of a follow-up on this margin question. If we think about some of the other components of margin. So for example, would you expect some -- any progress in gross margins over the course of the year? Would there be any leverage as other factors beside this sort of fixed cost versus this -- fixed cost versus stranded overheads point? Kris Licht: Let me tackle Europe first, and I'll hand it to you. Look, the first thing I'll say is we had a tough quarter in Q4 in Europe. A part of that was the season being weak, as we talked about. And so that's sort of quite understandable. And obviously, we hope that the next season will not mirror that. The other part of it is a very competitive environment, slowing category growth to broadly flat growth in our categories in Europe and a more competitive environment. So more promotional activity, deeper promotional activity. In that environment, we need to stay focused on being competitive, but we also have to strike the right balance. And some of the promotional activity in Europe at the moment, we feel is excessive. So we saw a return to what we would say was normal promotional activity last year after the period of time when there was almost no promotions when we were all passing on the COGS increases, the unprecedented COGS increases. But now the promo has gotten to a level that we think is probably not sustainable. However, we are very focused on being competitive. We're very focused on striking that balance, and we have taken some actions, and we're seeing some good early share results as a consequence of that. However, I would say that Europe will likely remain tough. Everything that we see in terms of consumer behavior, category dynamics and really the outlook for growth in Europe is not particularly strong. So that's why we were clear and even in -- when we discussed our guide. We're setting that guide knowing that Europe will be a tough marketplace to operate in and will be highly competitive. But we have a portfolio that can handle that. I think the point of really the 2025 results that we're showing is, yes, Europe was tough. Yes, we had a weaker season, but look at what we delivered in terms of top line growth. So I think that speaks to the strength of our company. Shannon Eisenhardt: Yes. Do you want me to answer the second? Look at that Nick was not going to answer your second question. So the other components from operating margin, I think I'd call out -- I mean, gross margins, we've been pretty consistent in discussing over the past 2 years that we have sector-leading gross margins. We're not looking to drive significant expansion there, particularly given the increased investments we want to be making in supply chain. You saw in the current year, we did end up expanding gross margins by 10 bps. But if I think looking forward, I wouldn't change the general theme that we're not looking to drive expansion in gross margins. I think the only other driver I would call out is obviously geography mix plays a role. You can see the various profitability levels across our geographies. And so we've talked a fair amount around the fact that we do expect to see developing markets deliver more in 2026. And so that would obviously roll through as well from an operating margin standpoint. Jean-Olivier Nicolai: Olivier Nicolai from Goldman Sachs. Two questions for you. First, a quick follow-up on Europe, perhaps on auto dish specifically, since you mentioned high promotional activity in end of '25. How much room do you see for premiumization in the category there? And do you think you've reached somehow the end of the journey in terms of how much you can premiumize that category auto dish? And then secondly, perhaps for Shannon, on free cash flow delivery, it was down year-on-year, reaching GBP 1.7 billion. You mentioned the higher cash costs associated with Fuel for Growth and the CapEx that led to about 70% free cash flow conversion. What are the building blocks for 2026? And how can we expect the free cash flow conversion to improve from there? Kris Licht: So just on Europe, I mean, I said a few things already, but auto dish is actually the category that's most promotionally intense to your point. Premiumization is entirely doable. In fact, we did really well with Finish and our ultimate all-in-one range, which is the most premium offering we have, and that grew really strongly in the year, and we will continue to fuel that. The tiering that we run and moving consumers up that ladder, that's absolutely critical in our playbook, and we'll continue to run it. And we're seeing no signs that, that can't work. I think the promotional intensity is really more on sort of base products, and that's where we're seeing that. And again, I hope that we can return to a more rational environment. I think right now, the consumer is under a lot of pressure. Retailers are wanting to provide great value, and some of our competitors are promoting in very deep rates, and we're just trying to strike that balance. The thing about Finish that's also important to remember is we have a good, strong business. We're market leaders in Europe, and obviously, we'll defend that position. But at the same time, the runway for growth for Finish in emerging markets is the exciting part for this franchise. So we'll continue to premiumize and innovate in Europe, and I think that will deliver good results in a tough environment, but I'm really very focused on making sure that we win in emerging markets because that is the future growth for the franchise. Shannon Eisenhardt: So for free cash flow, the impacts you referenced in 2026 around the one-off restructuring costs as well as the heightened CapEx spend, I would expect those to continue in '26 and '27. And so we'll exit that restructuring program at the end of 2027. From a CapEx standpoint, I'm sure you saw the guide for '26 was around 4%. And so a higher guide than last year, but consistent with how we ended up spending last year. I would expect the restructuring costs, as I said, roll off when we enter '28. The CapEx, I think we intend to continue to be investing for the foreseeable future at that higher level of CapEx. From a free cash flow conversion then, I think you'd see it around similar levels in '26, '27. And then we would expect once we're through the restructuring program that free cash flow conversion would get back to more normalized historical levels. Tom Sykes: Tom Sykes from Deutsche Bank. Just one question, firstly, on Russia. How much is Russia now of your sales and I guess the ecosystem that supports into Russia? And how much would that be of Intimate Wellness, please, which is obviously growing quite quickly? And then just sort of further on that CapEx point, could you give a feeling for what the geographic split between EMs and DMs on the CapEx is because your D&A to sales that you give in the release for the EM business is relatively low, it looks like. So I was wondering how hot are you actually running the EM businesses? And how quickly can the CapEx actually give you more capacity in EM to continue that growth, please? Kris Licht: Okay. Just on Russia. So what I can share with you, we've shared this before is Russia today is part of our MENARP business. It's about 15% of sales for Core Reckitt. It's -- for Emerging Markets and Core Reckitt. Russia is not a driver of growth. It's not a place where we're investing, and this is what we've shared before. And so the growth performance you're seeing is not -- there's no contribution to that from Russia. So it's not significant, including for Intimate Wellness. Shannon Eisenhardt: Yes. Then on CapEx. So expect to spend around 4% of net revenue on CapEx. Within that, when you think about it, the majority of that is supply chain CapEx, manufacturing CapEx. When we look at how that splits across our geographies, I'd say it splits I'm not going to say evenly, but it's across all of our geographies. So we've talked around the Taicang facility in China has been a place within developing markets where we've been investing CapEx. We've just overtaken or Harald, our Chief Supply Chain Officer, overtook an entire review of our manufacturing footprint around the globe, and we'll be spending across all 3 geographies to support growth. So we've talked about the Wilson facility in North America, which will be a significant source of CapEx spend, but it will be spread across both developed and developing markets. Edward Lewis: Edward Lewis from Rothschild & Co. Redburn. A couple of questions. I guess just on the first year that you've done the change in the organizational structure. And clearly, that benefited the emerging market business with the strong results there. Can you just talk about the impact that's had on the developed market business, Europe and North America, where obviously contrasting performance is relative to the emerging markets. And then, Kris, you mentioned about bringing omnichannel capabilities in North America into Europe. What sort of opportunity is that? Could you elaborate further, please? Kris Licht: Sure. So let me start with the organization. Look, I'm very pleased with the way the new organization is functioning, but it's also year 1. So I think it's important to know that there's more benefits that will come from the simpler organization that we have now. And obviously, we have more scale in our markets when we are not split into GBUs, and that's a benefit that will keep paying off for us. Emerging Markets was one of the main reasons why we changed the structure because they were -- they didn't receive the level of focus that I think is important for them to receive. And obviously, we can see what happens when we set them up for success like we've done in China and India, but we want to do that in many more markets. This organization facilitates that. So very pleased with that. Europe went through a lot of change last year. And obviously, going through a lot of organizational change takes up some time, some capacity of the organization, but that's behind us now. And so therefore, one of the reasons why we believe Europe will be able to demonstrate improving performances because they have that stability and they have greater scale in what they're doing in a number of markets. In North America, we're actually quite pleased with how the business is doing. So I mean, recognize that it's not quite the growth rate we're realizing in Emerging Markets, but it probably won't be, but actually, we're outpacing our categories. And as we shared, the nonseasonal business, 70% of the business is doing really well and I expect it to do really well this year. And then with the innovation behind Mucinex, I think we'll see a strong year from North America. That's my expectation. They are an energized organization at this moment. We were actually just with them and spent a lot of time with the team there, and they're fired up. And I'm very pleased with what I'm seeing there. And I think we're laying the foundation for very good performance. So North America will definitely also benefit and is benefiting. And as you said, now we have to see the benefits come through in Europe, too. Omnichannel. So omnichannel is really the name of the game in terms of how increasingly our business operates. Obviously, we have very sophisticated capabilities in China, and the business there has really moved quite heavily online. The vast majority of the business is now online. In North America, it's been a more measured evolution, I would say, and the majority of the business is certainly still offline in the U.S. But leading retailers are now operating in an omnichannel way, right? So you're seeing many of the retailers that are succeeding are really running multiple fulfillment models and relatively seamlessly moving across the screen in the store and combining these 2. So that means that we have to work with them in that way, too. So we can't do the traditional thing that we did where we had a separate team doing e-commerce and separate investments and separate P&Ls. And now we have to unite it and we have to run optimization and growth initiatives across these platforms seamlessly. So we have to activate online, offline in a very cohesive manner. And the U.S. is ahead of Europe on this dimension. So European retailers are certainly investing in this space, but they're not as advanced as the leading retailers in the U.S. And so that's why we can take what we do well in the U.S. because we really are quite successful with the leading retailers in the U.S. on this dimension. And so we want to move those best practices to Europe. And we'll do that gradually as the trade landscape in Europe evolves and gets more advanced. Unknown Analyst: It's [indiscernible] from RBC. It's a question for you, Shannon. So Reckitt's share is not very cheap anymore. And with the level of leverage at the moment and the planned spending on CapEx, what's your view on share buyback going forward? Shannon Eisenhardt: I won't address the not very cheap comment. But on the share buyback, look, we view the share buyback program as a really important lever in how we return value to shareholders. And we've talked pretty consistently since that started in October of '23 around the fact that we view it to be an ongoing component of how we think about capital allocation and of how we return value to our shareholders. And so we mentioned today the fact that the next tranche of our already announced program will be announced imminently to finish up that program. And then my expectation would be that it will be an ongoing program. Now we've also talked that the magnitude of the program can vary. And so that can be impacted in line with our capital allocation principles around our net debt ratio and other uses of cash, but we view it to be an important component. Nicholas Ashworth: Great. So we have a number coming online. [Operator Instructions]. I'm just going to work through an order. So starting with Feng at Jefferies. She's got 3 questions. The first one was around operating margins for Core Reckitt. I think you've already answered that one, Shannon. So I'm going to move on to, can you talk about the price/mix for Core and/or Emerging Markets, specifically, how much of EM price contribution reflects underlying pricing versus the VAT increase on contraceptives? And have you secured the California WIC contract? And if so, when should it start contributing to Mead volumes and revenue? Shannon Eisenhardt: All right. I'll do emerging markets price/mix. So we've talked around the fact that our ambition is that price/mix, we want to drive balanced growth. So we want our growth across all of our geographies to be balanced across volume and across price/mix. Specific to emerging markets, if you look at the first 3 quarters of the year, our results were very balanced across volume and price. When you look at the Q4 number, it's important to note a couple of things. One of them is the fact that we did have a realignment of some of our marketing investments where we moved that from an accounting standpoint out of trade spend and down into BEI. And so that was a onetime contributor of seeing more price/mix driving growth. We did also, and I think she mentioned it, we had condom pricing in China ahead of the new VAT policy. And so we took that pricing a little bit early. And so that influenced. And then we had some positive mix coming through India as we look at the Dettol products that have been driving growth for us in India. And then California WIC. Kris Licht: California WIC. So that's a contract we secured last year, and it is contributing. I think that's all we can say about that. Nicholas Ashworth: Okay. So the next, I've got a couple from Callum at Bernstein. The first one, I think we've already answered, it was around the free cash flow conversion, a step down to 71% this year. And what's the outlook? And I think you've already talked about that, Shannon. So then the second one, strong progress of Fuel for Growth in 2025. Can you help us understand the 19.4% fixed cost in 2025, what does it look like if you adjust for the Essential Home divestiture? Shannon Eisenhardt: I mean I think the answer is that we haven't been sharing a specific number around stranded costs for Essential Home. What we're really focused on is getting to the target we set out, I guess, 18 months ago around getting to 19%, which we're seeing strong progress. It's coming in faster than expected. It's coming in more efficiently than expected. And I think a reflection of our confidence came through today and the fact that we've now increased our ambition that as we exit 2027, we'll be below 19%, which obviously reflects more than offsetting any stranded costs from the Essential Home transaction. Nicholas Ashworth: Thank you. Next up from Guillaume, UBS. And Guillaume, I can see that you've sent me through a few. So thank you. I'm going to start with the -- I'll start with the first 2 and then come back to some of the other ones later. The first one then on Latin America. Region's like-for-like was down mid-single digits in Q4. Can you shed some light on the main drivers behind this decline? And what do you expect for the year? Is it going to be similar challenging trading conditions or some gradual improvement? And then second, on the tax rate, you're guiding to around 27% this year. This is the second year in a row where tax is increased. What's driving the uptick? And how should we think about it over the medium term? Kris Licht: So let me answer on Latin America. So obviously, we run a seasonal OTC business in Latin America, too. So some of that weakness is directly impacted by a weaker season. The other thing is it is a subdued trading environment, and it is highly competitive in some of our categories. We're also changing a couple of things about how we enhance our go-to-market system. And so I fully expect Latin America to get back to growth, but those are some of the drivers why we've seen the weakness. Shannon Eisenhardt: Then from a tax rate standpoint, so it's important to remember, we exited 2024 with what we had called out as an abnormally low tax rate. I think we were around 22%. So for 2025, we'd guided that we'd be 25% to 26%. We came in a bit under that with 24.7%. 2026, guiding the tax rate at around 27% is just reflecting that we're getting -- returning back to our more structural tax rate. And so there's no specific driver other than the fact that we're coming off of an abnormally low base in 2024. Nicholas Ashworth: Perfect. Thank you. Diana Gomes at Bloomberg. This is a question around the current geopolitical events and the impact on gas and oil prices. So have you talked about hedging levels for 2026? How should we think about gross margins as we move through the year? Kris Licht: So I think the first thing I'll just say on that, and maybe you want to talk about hedging. I think the most important thing for us to say on current events is we're watching it very closely, but our overwhelming focus right now is the safety and well-being of our team members in these markets and their families and anyone that's impacted by it in our organization. And obviously, we hope for a resolution soon. Shannon Eisenhardt: Yes. I mean I would just say we obviously have an active hedging program to try and mitigate risk and to provide some level of consistency or ability to forecast gross margins. As we head into 2026, we hedge out 12 months, and we have about 55% of exposures hedged at this point in time. And so we'll continue to run that program and to manage volatility as much as possible. Nicholas Ashworth: Thank you. So next up from Warren at Barclays. A couple of questions. So the first one, I actually think has 2 parts. On the modeling for 2026, what associate contribution would you expect from Essential Home? And on 2026 fixed costs, I assume they go up before they go down to below 19% in 2027. So can fixed costs be above 20% in 2026? And then how much more below 19% could they get to in 2027? So I actually apologize, I'm not sure that was 2 questions. I think there's a few more. Shannon Eisenhardt: Yes. I would say 5 questions from Warren. Okay. I'll do my best here. So on the associate contribution to EPS, we're not providing a specific figure. I think the variables that would be important to think through as you model that would be, we obviously shared last year the profitability of Essential Home. That level of profitability will change as that comes under new ownership. I think it's important to remember that it will be highly leveraged, and that will have an impact. And then that we're a 30% shareholder in that business. And so to reflect that as you think through the modeling. From a fixed cost standpoint, the question was fixed costs, will they go up before they go down. And so I think the answer is yes, consistent with the language around Fuel for Growth largely offsetting, which would imply it doesn't fully offset. From a number standpoint, I'm not going to provide a specific number of guidance on fixed costs for 2026. But I will say that we'll be below 19% as we exit 2027. Nicholas Ashworth: And then a second one from Warren sort of. It's on the volume price mix. And so some of our peers put mix into volume. Can you, therefore, try to give us a feel for what mix is versus pricing in Q4, given volume was a little bit weaker. But then, as I said, others put mix into volume. So is there an argument that we should be doing likewise? Shannon Eisenhardt: I saw Warren's request bolded and underlined in his note this morning. So it's on my list of things to talk to Nick about. I mean I don't think we have a specific mix number to share. We've talked around the fact that we want to drive balanced top line growth that we would expect that to look like a point or 2 a year from volume, a point or 2 a year from price and a positive impact from mix. Kris Licht: I think the only thing to add is in emerging markets, we are seeing really good mix benefits. And that's a function of the innovation. It's a function of the fact that we're driving growth in categories that have better structural economics than the base business. So there's sort of a benign trend there that we think will continue, and it's significant. Nicholas Ashworth: And coming back to Guillaume again, a couple more. Thank you, Guillaume. So on condoms in China, do you expect a material impact from the recent change in VAT on category growth? And so how could this affect Durex's momentum in 2026? And then on brand equity investments, it increased 120 bps as a percentage of sales last year. Which brands and geographies got the lion's share of this increase? And are you satisfied that you're getting the right returns on that incremental investment? Kris Licht: So on the VAT change and the sort of outlook for Durex, I fully expect Durex to have a good year in China. Durex has been growing really well in China for a very long time. I mean it's a very steady pattern. And so obviously, when you have changes flowing through like the change you're asking about, it can have short-term impacts and a little bit of upside and a little bit of downside in the next quarter, but it's not going to change the trajectory of Durex performance. And I think Durex will do well in China in '26. Shannon Eisenhardt: Yes. From a BEI standpoint, I mean, I think the best way to think about where are we putting incremental BEI is we always want to prioritize innovations and making sure that as we launch new innovations that those are fully funded and that we're really driving to make sure those launches are as successful as possible. Beyond that, we look across all 3 geographies and really go sort of think of it as going brand by brand, country by country to understand where are we investing in line with what we view as the minimum levels of BEI that we'd want to be spending and where are we below that and then deciding where it makes the most sense to put the incremental investment each quarter, if not more frequently. And again, our intention is that, that BEI as a percent of net revenue should be increasing year-on-year. Nicholas Ashworth: So just a couple left. [Operator Instructions]. So a couple from Celine at JPMorgan. Firstly, on China, I'm not sure whether we might have answered this already. Have you seen higher orders ahead of the VAT implementation in condoms? And what has been the impact on pricing that you mentioned? And then on Mead, you mentioned you were looking at all strategic options for Mead. Can you help us understand what those are and any time expectations around litigation? Kris Licht: So China, I mean, yes, we saw a little bit. But again, like I just said, we're not expecting this to be a significant headwind for Durex in 2026. For Mead, I would say that we've been very clear. We're looking at all strategic options, and we've been consistent about not setting a time line for that so as to give ourselves the flexibility to do what's best for shareholders. And of course, as you know, we're working to resolve the litigation. So the -- today, we don't have a lot of new news on that. I think the thing to maybe just focus on is that Mead Johnson is trading well. And Mead Johnson had a good year, and we expect them to have another good year this year, and that's a positive. Nicholas Ashworth: And this is the -- for now, the final one I have online. So it's from Juan Rios at Santander. Again, a couple of questions. Firstly, on Mead. There's been some turbulence in infant nutrition market recently. Could you comment on whether this has any knock-on implications for the Mead Johnson brands operationally and from brand perception? And secondly, regarding issues in the Middle East, can you provide some color on how you're thinking about the potential impact on your business? Kris Licht: So I think it's easy to answer the first one because it had no impact on us. So we were not involved in it, and we haven't seen any commercial impact because we don't operate in the markets in question in any significant way. The geopolitical events, look, it's too early for us to really assess where this is going. The range of possible outcomes, as you know, the uncertainty is extremely high. It's developing live, and we're just paying a lot of attention to what's going on, obviously, mostly focusing right now, as I said before, on the safety and well-being of our employees and of course, protecting our assets, our business. But it's too early for us to quantify any impacts. Nicholas Ashworth: That was everything online. Anymore in the room? We've got through a lot. Perfect. So look, with that, we will call it the end. Thank you very much for all the questions and interest. And I will just highlight the next slide, which is going to come up on the screen as if by magic. The next focus on events. The next one will be May 14. And hopefully, we will see many of you then. Thank you very much.

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STUB 2025 Q4 财报电话会议

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to StubHub's Fourth Quarter and Year-End 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, March 4, 2026. I will now turn the call over to Clinton Hooks with StubHub. Please go ahead. Clinton Hooks: Thank you, operator, and thank you for joining us to discuss StubHub's fourth quarter and year-end 2025 results. For reference, our fourth quarter and year-end 2025 earnings release, shareholder letter and presentation are available under the Quarterly Results section of our Investor Relations website at investors.stubhub.com. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements. These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore, you should exercise caution when interpreting and relying on them. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can make no assurance related to its expectations. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, unless otherwise required by law. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the annual report on Form 10-K for the year ended December 31, 2025, when it is filed with the SEC. During today's call, we will also be discussing non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Reconciliations of these measures to the most directly comparable GAAP measures are available in our earnings release, shareholder letter and investor presentation as applicable, available on the StubHub Investor Relations website. Please note that unless otherwise noted, our profitability and EBITDA discussions today refer to non-GAAP adjusted EBITDA. Joining me today are Eric Baker, our Founder, Chairman and Chief Executive Officer; and Connie James, our Chief Financial Officer. They will provide opening remarks, then take questions. With that, I'll turn it over to Eric. Eric Baker: Good afternoon, everyone, and thank you for joining us today. 2025 was a pivotal year for StubHub. We grew our marketplace, further strengthened our competitive position, transformed our balance sheet and became a public company. As we enter 2026, StubHub remains a leading global ticketing marketplace for live events with durable advantages, scale and liquidity, structurally strong financial fundamentals and a diversified global footprint. These fundamentals are built on our core strengths, which continue to drive our competitive advantage. First, our leading marketplace position with a category-defining brand and approximately 50% share of the secondary ticketing market in North America. Second, our proven network effects that create durable competitive advantages. As we attract more buyers through our leading distribution and global reach, sellers add more inventory and selection to our platform, which in turn draws more buyers and further expands our distribution. Third, our asset-light online marketplace model, which delivers consistent take rates, over 80% adjusted gross margins and strong free cash flow conversion. As an online marketplace, we generally do not take inventory risk and incur limited variable costs with each transaction, allowing us to reach large global audiences and generate substantial revenue with modest ongoing capital requirements. Fourth, our extensive data set across millions of global events. Our data on supply, demand, pricing and user behavior enables differentiated product innovation, marketing optimization and pricing intelligence that reinforce our market leadership. Fifth, scale is the defining advantage in our category. As the scale leader in secondary ticketing, our superior liquidity, trusted brand and operational excellence creates sustainable competitive advantages. And finally, an exceptional team with leadership experience built through decades of building and operating our business. I'm grateful to work alongside a group of high-caliber employees who show up every day for our customers, improving the product, strengthening trust and delivering operational excellence at scale. We're also fortunate to have a deeply experienced management team, leaders who helped build this company from the ground up, raising the bar for StubHub year after year. Together, these strengths position us to capitalize on the expanding live event industry. We sit in a unique position at the intersection of technology and live events as we pursue our vision to be the global destination for fans to access live entertainment. We remain relentlessly focused on improving every part of the StubHub experience from discovery and pricing transparency to fulfillment and support because a better fan experience strengthens trust, drives conversion and reinforces the marketplace flywheel. Before I touch on longer-term initiatives, I want to be clear about what is driving our business today. Our results and outlook are driven by our resale marketplace, which constitutes the vast majority of our revenue. In 2025, we delivered $9.2 billion of GMS, continued to grow, gained share and strengthened our competitive position. We expect that in 2026, StubHub's financial performance will continue to be driven by this core resale marketplace. Building on this foundation, our first several months as a public company have provided valuable perspective on our strategy to unlock new market opportunities. We believe direct issuance, non-exclusive, open distribution of originally issued tickets remains a transformational long-term opportunity for StubHub and the broader live event ecosystem. We have made progress through business development with marquee content rights holders across sports and music in multiple geographies, and we believe demand for this distribution model has been validated. Our experience has reinforced that the largest market potential will come from making direct issuance frictionless to adopt across a much broader range of rights holders. That requires reducing operational friction for partners with varying levels of technological sophistication and advances in artificial intelligence are materially expanding what is now practical to build on the supply side. By leveraging these advancements, we believe we can bring capabilities to market that would have been difficult to deliver even a year ago, including AI-assisted tools that automate workflows and simplify inventory management. For 2026, we are prioritizing building the product foundation required to scale direct issuance broadly. Accordingly, we are shifting from a primarily business development-led strategy to a more product-led strategy, building an AI-enabled technology-driven ecosystem that enables inventory to be contributed and managed with minimal operational burden. Development is underway to bring these supply-side products to market. We believe this approach positions direct issuance to become a durable growth engine when the self-serve capability is in place. This strategy shift means we will not be optimizing for immediate revenue growth, but for maximizing our revenue opportunity over the long term. Similarly, our efforts to build our advertising business are showing promising early results as we leverage our unique advantages. Early partnerships have helped validate the opportunity and are helping inform how we will scale advertising in a way that is truly additive by enhancing relevance and utility for customers. Our advertising business is generating modest revenue today, and we are continuing to iterate toward a model that enhances the seller and buyer experience. We are taking a disciplined approach to both initiatives, prioritizing scalable execution. This measured path forward reflects our commitment to maintaining the marketplace experience that defines our competitive advantage while compounding shareholder value over the long term. Finally, a quick note on the regulatory environment. We continue to operate within a generally favorable status quo that supports open functioning resale markets across jurisdictions. That said, public discussion around ticketing has increased in recent months, and we want to be clear about why we believe the secondary ticketing market and StubHub as a scale leader are defensible and durable over the long term. The secondary market solves durable ecosystem needs across a broad diversity of live event content. It is not dependent on any single event type or a narrow set of behaviors. A liquid resale market supports the ecosystem in foundational ways by: one, improving the category experience for consumers through trusted, fraud-protected ways to buy and sell tickets with ease and providing flexibility when plans change. Two, improving sell-through and pricing confidence in the primary market as consumers are more willing to buy earlier when they know they have a trusted option to resell. Three, enabling risk and cash flow management for content rights holders, teams, promoters and event organizers by providing liquidity and a pathway for inventory to be redistributed through power sellers and season ticket holders. And lastly, improving attendance utilization and venue economics by helping ensure tickets end up with someone who will attend, driving meaningful ancillary revenue through concessions, parking, merchandise and a better in-venue experience. Even if well-intentioned, we believe altering this vital link in the live event value chain ultimately harms the fan experience and the live event ecosystem overall. Regulatory change in live events is inherently complex. The live events ecosystem is a vast global surface of content and demand profiles, spanning everything from lower demand community events, small club shows to global music tours and the world's largest sporting moments across countless jurisdictions and market structures. Any framework that seeks to broadly reshape the resale market would need to account for a wide range of event types, seller profiles, consumer use cases and enforcement realities and would need to be implemented across many jurisdictions where live events occur. With that context, we believe public discussion tends to focus on a certain subset of the resale market, resellers that list large quantities of inventory on marketplaces for very high-demand concerts at high prices significantly above the original sale price. Based on our internal data, we estimate that approximately 10% of our GMS in 2025 was attributable to these types of high-demand concert ticket sales by resellers. Importantly, we believe that StubHub's durability is reinforced by our diversification and lack of concentration across sellers, content rights holders, buyers, event types and geographies. providing a level of insulation from potential regulatory changes that may affect any single subset of the market or any single jurisdiction. Finally, we have a responsibility to continue educating policymakers on the consumer protections and structural benefits that our marketplace provides and are continuing to bolster our government relations efforts to support this. We intend to engage constructively while operating responsibly to best serve fans around the globe. We are entering 2026 with a scaled, resilient core resale business, an improved competitive position that supports growth and scaling margins and a transformed balance sheet. We are also continuing to progress towards longer-term upside opportunities. Our commitment is straightforward, set expectations we can deliver upon and execute consistently. We intend to deliver results that reflect the strength and durability of the business. With that, I'll turn the call over to Connie to discuss our financial results and guidance. Constance James: Thanks, Eric. In 2025, we delivered $9.2 billion of GMS, up 6% year-over-year. Excluding the Eras Tour, our GMS grew 18% year-over-year, reflecting the underlying performance of the business. Our growth was driven by continued market share gains in North America, where we expanded our share in North America to approximately 50% of the secondary market. Internationally, our expansion outpaced growth in North America. Turning to our income statement. As a reminder, I'll discuss our financials on an adjusted basis, excluding stock-based compensation and other onetime items. Full reconciliations are available in our earnings release. First, on the fourth quarter. Beginning with the fourth quarter 2025, we generated $2.3 billion of GMS, down 8% year-over-year. This reflected lapping an unusually strong fourth quarter 2024, which benefited from several favorable dynamics, including the conclusion of the Eras Tour, a particularly strong MLB World Series and the timing of major concert on sales shifting across quarters. Excluding Eras-related comparability, fourth quarter GMS growth was approximately 6%. Revenue was $449 million or 19% of GMS, down 16% year-over-year. The change was primarily due to lower GMS, partially offset by lapping prior year direct issuance-related minimum guarantee structures that were treated as principal revenue and that we have since reduced. Additionally, our revenue as a percentage of GMS of 19% reflects our deliberate market share investments through take rate adjustments, consistent with our full year 2025 operating strategy to prioritize competitive positioning. Adjusted gross margin was 83%, up from 76% in the prior year period, reflecting the lapping of those minimum guarantee structures. Adjusted sales and marketing expenses were $234 million or 52% of revenue compared to $221 million in the prior year period or 41% of revenue. The change reflects our investments to accelerate market share in core resale. Adjusted EBITDA was $63 million, representing a 14% margin. This reflects the impact of our market share investments as we deliberately prioritize capturing market share and our continued investment in direct issuance capabilities during their early partnership development phase. For the full year 2025, revenue for the year was $1.7 billion, 19% of GMS compared to $1.8 billion in 2024. The performance was impacted primarily due to direct issuance-related minimum guarantee structures in the prior period and the impact of our market share investments on take rates. Adjusted gross margin for the year was 83%, up 200 basis points from 2024. The improvement reflects the lapping of the costs associated with minimum guarantee structures. The full year gross margin is representative of our current operational profile and demonstrates the structural advantages of our asset-light marketplace model where we facilitate transactions. Adjusted sales and marketing expenses were $943 million or 54% of revenues compared to $828 million or 47% of revenues in 2024. The increase reflected 2 primary drivers. First, our investments to accelerate market share in core resale where we deliberately prioritized market share capture. Second, our continued investment in building direct issuance capabilities during the early partnership development phase. Adjusted ops and support costs were $57 million, down from $59 million, flat as a percentage of revenue at 3%, reflecting improved operating efficiency. Adjusted G&A costs were $223 million, 13% of revenue, down from $250 million or 14% of revenue in 2024. The reduction reflects improved operating leverage as we continue to scale the business, including a reduction in professional service fees. Adjusted EBITDA was $232 million, equal to 13% of revenue. This result reflects 2 primary factors: First, the deliberate investments we made during the year, both in market share acceleration and in building longer-term initiatives. These investments successfully positioned us to achieve approximately 50% of North American secondary ticketing market share, establishing a foundation that supports fiscal '26 margin expansion. Finally, I want to highlight 2 factors impacting our net income. Our GAAP results for the full year include a nonrecurring noncash expense of $1.4 billion related to stock-based compensation granted prior to our IPO. The expense was triggered by the completion of our IPO. Accounting standards require recognition of these previously granted awards when their IPO-related performance conditions are satisfied. In addition, we incurred a nonrecurring noncash income tax expense of approximately $480 million related to the establishment of a valuation allowance on the deferred tax assets. Both stock-based compensation and valuation allowance expenses are excluded from our adjusted EBITDA calculations and have no impact on our cash flow or cash position. Turning to cash flow. I want to spend a minute on how cash is generated in our marketplace model. First, our cash conversion cycle benefits from the timing mechanics of ticketing. We collect funds from buyers at checkout while seller payouts occur later, often closer to or after the event date. This timing difference creates a recurring balance of seller proceeds on our balance sheet and contributes to our cash generation. Our business is also structurally asset-light. We don't generally take inventory risk and capital expenditures remain modest relative to the size of our business. We also benefit from net operating losses that reduce cash taxes in the medium term. Finally, because of the seasonality of live events and the timing of major tours and sports calendars, free cash flow can be variable quarter-to-quarter. For this reason, we evaluate free cash flow on full year and trailing 12-month periods rather than any single quarter. In 2025, our free cash flow represented nearly 70% conversion of adjusted EBITDA. This figure also includes interest costs during the period, which has since been reduced as a result of our debt repayment. Turning to the balance sheet. In 2025, we reduced our total debt by approximately 35% through the repayment of approximately $900 million of our U.S.-denominated term loan, bringing our total debt down to $1.5 billion at year-end. We also ended the year with approximately $1.2 billion of cash and cash equivalents or $494 million, net of payments due to sellers. As we scale, we expect the business to continue generating strong cash flow, and our priority remains maintaining a strong balance sheet and reducing leverage over time. Turning to our fiscal year '26 guidance. Before I discuss the specifics, I want to address why we are providing annual rather than quarterly guidance. The live event market is seasonal and can be variable quarter-to-quarter where the timing of major concert on sales and event schedules can shift across quarters from year-to-year. This can create lumpiness in quarterly growth rates even when underlying business momentum is steady. Fourth quarter '24 and fourth quarter '25 GMS illustrate this dynamic clearly. Fourth quarter '24 benefited from unusually favorable timing, including the finale of the Eras Tour and a concentrated set of major concert on sales, contributing to an exceptionally strong period and year-over-year GMS growth of 47%. Fourth quarter '25 reflected the inverse. Our GMS was down 8% year-over-year, driven by the lapping of this unusually strong comparison and by major concert on sales being more spread across quarters. Neither quarter on its own provides a representative view of the business. In fact, our market share was higher in the period GMS declined than in the period GMS grew significantly. For these reasons, we believe our business is best evaluated on an annual and last 12 months basis. Our guidance is grounded in what we control and what we believe we can execute with high confidence. For 2026, this reflects the earnings power of our core resale marketplace and includes disciplined operating expenses to support direct issuance and advertising without assuming any material revenue contribution from either initiative. For 2026, we expect to grow GMS to between $9.9 billion and $10.1 billion, representing 9% growth at the midpoint and expand adjusted EBITDA to between $400 million and $420 million as our marketplace flywheel strengthen and operating leverage increases at scale. Our GMS growth formula is straightforward: North American market growth, incremental market share gains plus international growth. Let me dive into each of these segments. First, North American secondary market growth. This market has historically grown at low double-digit rates. While there will continue to be a comparability impact from the all-in pricing transition until we lap its implementation in May, we believe underlying growth in the market remains strong. Second, market share gains in North America. We have a demonstrated track record of outgrowing the market in recent years. For 2026, we expect to continue gaining share while reducing these investments and increasing customer acquisition efficiency. Last, international growth. International markets account for approximately 15% of our GMS. We expect GMS in international markets to grow at an accelerated rate, benefiting from earlier-stage market development. Overall, our adjusted EBITDA guidance assumes the economic engine that has long defined StubHub remains consistent. Take rates in the 20% range, over 80% adjusted gross margin and improving operating efficiency as we scale. Given the structural strength of our unit economics, an important driver of earnings power is how efficiently we scale operating expenses, particularly adjusted sales and marketing, our largest expense line. To that end, our 2026 plan reflects 2 key strategic refinements. First, we are evolving our direct issuance strategy towards a more scalable technology-enabled model, which naturally reduces investment intensity. And second, we are raising customer acquisition efficiency in core resale. Acquisition efficiency is an input we control and our improved scale and conversion allows us to earn higher returns on marketing spend while growing. In 2025, we deliberately lowered acquisition efficiency, spending more per transaction to accelerate market share gains. The goal was to strengthen the marketplace in durable ways. As our share of transactions increased, our competitive position improved, and we created advantages that continue to compound through improved conversion. Higher conversion means each marketing dollar generates more transactions and more gross profit than it did previously. As a result, in 2026, we believe that we can raise acquisition efficiency while continuing to grow and take share. Together, these refinements reflect how a scaled marketplace model inflects. As conversion improves and our competitive position strengthens, we can allocate marketing dollars more efficiently while growing, expanding EBITDA through operating leverage and generating strong free cash flow. With that, we will now open the call to Q&A. Operator? Operator: [Operator Instructions] the first question comes from Doug Anmuth with JPMorgan. Douglas Anmuth: You're gaining share in retail, you talked about hitting kind of around the 50% level. Does the 9% growth in GMS just in the core retail market is growing slower than you initially expected in '26? Or is there something else going on? Eric Baker: Sure. Doug, thank you for the question. Appreciate it around growth. And let me revisit just sort of the general framework around growth and how we think about it, and then I'll hand it to Connie to get into some of the specifics. So again, as we've sort of said, we're very -- our market has been very strong. More people are going to live events. They're going to a greater breadth of events. They're doing it all across the world. So the North American market has been strong. As we've said, too, we continue to gain share in the market as we're inflecting margins. So that's happening. And then we're seeing increased throughput internationally, these global events that are taking place and people traveling. So there's a lot of great tailwinds in the market, which is allowing us to grow and grow while we take share. But with that, let me throw it over to Connie for the details. Constance James: Yes. Thanks, Doug. Good to be with you. And I'll just touch on the GMS drivers, and there's really 3 key ones, which you've picked up on a couple of them. So first, the market growth, as Eric mentioned, we benefit from operating in a really healthy overall North America secondary market that has consistently grown low double digits. That said, what we know to be true is we're going to continue to have this all-in pricing overhang for the first 5 months. We do anticipate continuing to accrete some modest share gains and then layer on top of that international growth. So all of that, call it, ladders up to the 8% to 10% GMS. And what I would also add is, again, it's anchored in what we're seeing today. The good news is quarter-to-date, we're seeing really healthy top line growth, expanding margins, all supportive of our full year guide. Douglas Anmuth: And then if I could just follow up on direct issuance, you've kind of talked in the past about like '26 being a potentially industry inflection point. And now obviously, there's a strategy shift that's taking place. I guess what has changed most here in your view on the outlook and progress for direct issuance? Eric Baker: Sure. Thank you for the question, Doug. And let me walk you through what's evolved on direct issuance and what we've seen and why we've made this deliberate decision to shift to the product development for this year. So just for everyone again, to set the context, direct issuance for us is this belief in this open distribution. Content is going to want to come, sell their tickets directly over StubHub and use our data and distribution to do so. We've had great success we had with folks like the Yankees, Ambassador Theater Group and others to prove this out. And as in the past 6 months, as we've gone out and we've been excited about it, there's a lot of, we believe, demand and enthusiasm for it. And quite frankly, we've been very excited about how broad and deep that is, by which I mean there's a long tail of different types of events and a great breadth of them. What we have found, Doug, in going through it with the team is that really, we think one of the key unlocks to unlock it even faster is eliminating friction on the product side, make it easy for people to use the product and technology because the will is there, everything makes sense. And that really unlocks more of what we talked about with a number of customers we had seen where you have this like self-serve ecosystem, which is a great solution for the customer. It's also a great business model that scales very nicely. And so as we looked at and we sat down, we said really with what's going on, we should focus in '26 on developing that product, particularly with the fact that given everything going on with AI, there's a real chance to advance those tools quickly and to get them to a good place. As a result, that does mean that we are deliberately shifting to a longer-term focus. We think we will create more value in the long term rather than focusing on the short-term revenue creation this year. Operator: Your next question is from Eric Sheridan from Goldman Sachs. Eric Sheridan: Maybe a 2-parter, if I can. In terms of learning on some of the key dynamics from ramping marketing and gaining market share in '25, can you talk a little bit about what the key lessons learned from that were? And how it informs the theme you're talking about tonight with respect to being more effective with acquisition and growth investments in '26? And if possible, a way to frame sort of that effectiveness either quantitatively or qualitatively '26 relative to maybe some of the return profile in '25? Eric Baker: Sure, Eric. Thank you for the question. Appreciate it. Let me give you an overview about some what you're asking about what are -- how do we think about this core secondary engine and what does that mean in terms of getting these inflections. And I'll give you my sense of that, and then Connie can give you more of the financial detail as well. So I think as you recall, our whole fundamental thesis that was from our lived experience is that we saw that if you can get -- if you have the StubHub asset and you run it the right way and you can get the market share back and hit the right point of relative market share, you accelerate all these different flywheels that you get and network effects because you're in a marketplace business. So whether that's you've got more data, the conversion goes up, the liquidity flywheel, all these good things happen. Therefore, what we've seen and what you see in marketplace businesses is that you're able to hit a point where you get this beautiful thing, you're able to grow and take share while increasing your margins, which is why it's such a great business to be in. That's not just something that we've observed about marketplaces, be it the Airbnbs and others of the world. That's our lived experience that we've seen in building these businesses and what we saw at viagogo. And so to your point, what we said is in 2025, we really were focused on finishing off and pushing this concept of the market share and doing some of those things. And we really believe and as our thesis was that we would see we would get to this relative market share, be 3x greater than other people and start seeing this virtuous cycle occur. As Connie, I'm sure, will walk you through, not to steal her thunder, you can see what we're now saying in our guidance, we're seeing that we will be able to grow, continue to take share and inflect the margins. And I think as Connie will tell you, we sit here now, whatever it is in March, observing that this is, in fact, happening. So with that, let me turn it over to Connie. Constance James: Yes. I think that's exactly right, Eric. And also thanks, Eric, for joining the call today. If you step back and really think about it, we were explicit that '25 would be a period of accelerated investment in particular into these relative market share, and we were really pleased with the outcome having secured about half of the market. So what you would have seen is an elevated period of sales and marketing. Late December, we decided to call it turn the dials given the flywheels and the benefits that Eric explained that started to show up, and that has continued. So we are seeing better efficiency coming through, which is resulting in these expanded margins, which Eric mentioned, we're seeing as we sit here, 2/3 the way for the first quarter. So all of that, again, gives us confidence of the stickiness and the benefits that we've seen and supports the full year guide. Operator: We'll now go to Justin Post from Bank of America. Justin Post: Great. Just wondering what you're thinking about for the concert season this year? You mentioned you had some comments on that in November and also the World Cup impact and then I have a follow-up. And how that's incorporated in your guidance? Eric Baker: Sure. I'll just give you a couple of comments generally, Justin, and thank you for the question for being on the call, and then Connie can talk. So obviously, as we said, in terms of the concert season, we've seen a number of very exciting concerts going on sale in January and whatnot, and that's been great. Obviously, the World Cup is a wonderful event that sort of epitomizes the fact that we have this global platform. I do think as Connie will walk you through some of the guidance slots, I think she'll probably also touch on why we guide annually. And I think it's sort of key in what we hope to articulate before because there's sometimes a little bit of lumpiness of when things go on sale. But with that, let me turn it over to Connie. Constance James: Yes. Thanks, Eric, and I appreciate jumping on the call, Justin. I think as we sit here today, things look really healthy. We typically look at the overall opportunity for the year and call it, Tier 1, Tier 2, Tier 3 events. In relation to your question specifically around World Cup, what we have seen in terms of our forecast assumptions is that we've decided to include that as a Tier 1 category. To be explicit, the Eras Tour was in a league of itself. As and when the World Cup continues to progress, we'll continue to keep you updated. In addition, I think you had a question just around how does perhaps some seasonality or as Eric talked, lumpiness occur from a concerts perspective and perhaps that just relates to what we saw in the fourth quarter. You're absolutely right. There can be movement. But again, the good news is when you look at it on an annualized basis, it tends to normalize. So where we sit from today, the overall market looks really healthy. Justin Post: Great. And then I'd love to hear any updates on the U.S. secondary regulatory environment? And/or have you learned anything so far from the Ticketmaster trial and opening arguments? Anything you might have learned from that? Eric Baker: Yes. Thank you for the question, Justin. And let me walk you through how we think about regulatory, and then I can touch on the trial that's going on. So the first thing is that from -- just to give people sort of our orientation is, started this business 25 years ago basically to give consumers a safe, secure way to buy tickets. And so that you wouldn't have fraud, you wouldn't have problems. And so we are, by definition, sort of we serve the consumer, we serve the fan, and that's what we do. And what I would say is we try and work as cooperatively with legislators and regulators because I believe, certainly, that in good faith, they have the same thing. They work for their citizens. They want people to have a good experience. They're working for the fan to make sure they can get into their events and get in there without having any problems. And so that makes sense. And obviously, we mentioned all-in pricing earlier. That's a great example where we worked and lobbied for that because we believe it's great for the fan and the consumer, even if it was a short-term headwind, as Connie said, because in the long term, anything that's good for the fan and the consumer is good for StubHub, and that's how we think about it. Now let me talk about the general regulatory environment today as it stands and some of the chatter that's out there. We generally -- first thing for people to understand is that we're in a very positive environment. It's legal to resell tickets. People are enthused about it. There's no issue going on today that is sort of hindering that in any meaningful way. What we are talking about now is why is that the case? And why has it been the case for decades. And I think there's two things that people need to understand. One is that, as I said, we're providing a service that's great for fans to give them access and eliminate fraud. And two is that it's actually very good for the content ecosystem. So in 2 ways. One is that if they're selling tickets and people have a safe, secure way to resell what they can't use, it's going to make it easier to sell the ticket in the first place. Secondly, is if you can unload tickets and put it in the hands of someone who can use it, you're more likely to fill the seats in the arena. So for all those reasons, that's why it has looked this way. Now let me get to your question twofold. One is, well, what is the regulatory -- what's the chatter? Are there concerns? What could they be? How do we think about it? So when we look at it today, Justin, all the real public discussion is really focused on what we see as a very narrow set of the market, which is for very high demand concerts where people are concerned or there are people who buy up tickets for those concerts in bulk and then sell them at a markup in bulk. They sell a number of tickets. So that's really where the focus has been. To give you a sense of how we -- because we think about this a lot, just what that surface is for our company as we approximate it to the best of our belief, you look at it that, that's about 10% of our global GMS. And that's 10% of our -- when I say global GMS for those types of events, that's across everything, across jurisdictions, across locations, across types of concerts, across different primary ticketing companies. So we have a very diverse catalog. That's just to give people a sense of surface. I know that's important to them and so forth. Finally, in terms of the Live Nation trial that's going on, I think it's important for people to hopefully understand, let me give you context for that. The DOJ going to trial with them is talking about Ticketmaster being a monopoly in primary tickets primarily. They've also talked about whether or not they tie things together, but let's stick with the monopoly power, I think, is the main focus. To us, that's really fundamentally, if you listen to what they're talking about, is the need for more open distribution. So they're basically talking about what we've called direct issuance and open distribution, which is that isn't the best outcome for any consumer and quite frankly, for content to allow them to take a ticket and distribute it ubiquitously, non-exclusively and have the outlets compete to give the best service to the fan. We're all for that. We support that. We're obviously working for the fan the same way other people do. All that being said, what we've also said is we do not bake in or anticipate any changes to what the status quo. I'm in no position to predict what may or may not happen in a courtroom or between the governments and Live Nation. We'll see how it plays out. If anything was to come to pass that was to push forward more of this open distribution agenda, that would only be great for fans and therefore, great for StubHub, but we will see. Operator: And next up is Mark Mahaney from Evercore ISI. Mark Stephen Mahaney: I'll just ask one question. On the advertising initiatives that you've had that is in advertising revenue. So you started rolling that out in the fourth quarter. Can you talk about what kind of traction -- you just mentioned it briefly in your opening remarks? How much revenue you've been able to generate so far, what the demand looks like in '26, how much you're baking into your outlook for '26? I know it's helpful on the top line, but particularly on the bottom line, too. So just how much contribution you expect from there? And when do you think you'll have a fully rolled out, the way you'd like it to be, advertising option? Is that this year? Or is that still -- is that more like a '27 event? Eric Baker: Thank you, Mark. Appreciate the question. Thanks for being on the call. Let me give you first on the advertising piece, what has evolved and how we've made some deliberate decisions in terms of how we're thinking about the strategy and timing there. I'll walk you through that, and then Connie can address sort of how that fits into guidance. So advertising, big opportunity for us. We know that we have a great group of users and folks on the site that have a very passionate and clear intent that people want to reach. We also know we have a bunch of sellers on the platform who have a perishable item and they want to get their ticket in front of the right buyer. So there's a lot of demand and interest for that. We always said that we have to get that right in terms of the customer experience, the experience for the buyer and the seller and then how it fits in our business before we're going to scale it up. And therefore, we did what we said we were going to do, which is in the fourth quarter, we started rolling out the ad product, sponsored listings as well. And we saw a good reaction from sellers to that. We started generating revenue and testing. What we realized in our thinking is we said, gosh, it's very important that we get this right to maximize the experience for the long term and maximize the business model for the long term so that we create maximum value for the participants in our ecosystem as well as for our shareholders. And in doing that, we've come to the determination that we want to spend more time working that through, working the product through and experimenting with it in this coming year. And that's the conscious decision we made, which we think will drive more value over the long term, even at the sacrifice of near-term revenue. With that backdrop, I'll turn it over to Connie, who can more specifically address your question about how that filters through guidance. Constance James: Thanks, Eric, and I appreciate you jumping on the line, Mark. In relation to how much revenue did we have in the fourth quarter, again, a very small modest amount. As Eric mentioned, we're still in testing mode on a small portion of the surface, albeit, again, super excited about the longer-term opportunity. And then we've been really explicit about ensuring that our guide is anchored in what we see in relation to today. And so we've taken the approach to have a very modest amount of revenue flowing through. You can think, call it, tens of millions for this year. That being said, as that continues to progress and change, we'll provide you with updates. Operator: John Blackledge from TD Cowen is up next. Logan Whalley: It's Logan Whalley on for John. A question around agentic commerce. Could you discuss your early learnings from your partnership with OpenAI and ChatGPT? And then looking forward, how do you expect to compete with other marketplaces in a world where people could be using chatbots to purchase tickets and other goods? Eric Baker: Thank you for the question. Logan, appreciate it. Let me -- I think you're asking about AI and how we think about that, what our experience has been in different ways. So let me start by sort of just setting the table for how we're thinking about that, how we think we're positioned. So the first thing is, obviously, AI is a transformational technological development across the world, across society. It's a big thing. There'll be a lot of, I'm sure, disruption. And with disruption comes risk and opportunity. So we spend a lot of time thinking about this and how we mitigate risks and how we see those opportunities. And I think as we've looked at and thought about it, I'll tell you how we think about it. We think we're very well positioned for what's going on if we execute and innovate appropriately. The first thing that is important to note is we are in the live event end market. So that is a pretty good end market to be in. We're very optimistic that it will be a long time before you're watching AI robots participate in the Super Bowl and people want to go to live events. So that's a good thing. The second thing is that we are a marketplace business, and we think it's a marketplace business with the complexity that we have operationally, that is also a good place to be. But let me be more specific to probably some of the questions you had about how we think about it. There's what we call the marketplace operations layer and then there's an experience layer to it. And I'll tell you how we think about each. So on the marketplace operations of our business, we think, is not something that's easily replicable, so to speak, just by an agent in terms of you've got very fragmented supply. You've got to have trusted fulfillment, payments, fraud prevention, customer support, financial protections. And quite frankly, AI will help us as the largest player with the most data excel at providing the best experience for customers in that. So we think that's good. On the experience side and as you note, there are people who are going to be making purchases through chat and agent-based interfaces with us. And we've been at the forefront of doing a number of things, as you mentioned, with some of our partners. What we're excited about is that by having the most data on our platform about you as a user, if we are able to -- what we're working on is weaving AI into the product, we can create that great experience for you at StubHub that's unmatched anywhere else. We also think that it is a unique emotive experience where humans relative to other things are more likely to want to have the experience of even looking at what event they want to go to, discovering those things. It's not like finding the cheapest toilet paper, so to speak. So for all those reasons, we think there's a lot of opportunity. I'd also say on that discovery layer, it's creating more demand at the top of the funnel. So you're adding more ways to get people in, in a great fashion. And so we think that's great. And we think that at the top of the funnel, what we found is they want to make sure they're directing people to a trusted brand that has the customer service and execution, which is key because it's not just driving someone to content, where if you get the content, you're done and there's nothing else to it. So we think there are a lot of tailwinds. The last thing I would say, and Connie may add something here, as with everyone, I'm sure everyone knows, there's tremendous cost efficiencies and productivity gains for anyone who applies this the right way, which we're very focused on. And that's why it's very important to us to be taking advantage of AI every way we can in what we do. We take it, as I say, extremely seriously because any time there's a big disruption, there's big opportunity. But if you don't work with purpose and with innovation, of course, there's risk. And so we're working hard every day to do that. But maybe on the efficiency side, I'll let Connie add a couple of things if she has it. Constance James: Yes, absolutely. And just happy to build on what Eric said, which is, again, we're excited about the technology, a huge number of benefits across the board. One of them clearly being cost efficiency. The team has already done a phenomenal job in terms of ops of support, really thinking about how we can create a level of efficiency, but perhaps even more importantly, how can we continue to delight the customer with a better way to interact. So seeing some really early traction there and obviously more to come. And then more broadly, even just from an engineering perspective, we know there's a huge opportunity. So again, a tremendous number of benefits, excited about the technology and how it plays out. Operator: Next question is from Brian Pitz, BMO Capital Markets. Brian Pitz: Eric, maybe more broadly, with primary ticketers pushing initial prices ever higher via dynamic pricing, can you comment on whether this is squeezing the volumes or margin spreads historically available to you in the secondary market? And then maybe number two, apologies if I missed this, but can you quantify the GMS growth and progress made in international markets during the fourth quarter? And are there any specific remaining regulatory hurdles regarding viagogo's global presence? Eric Baker: Sure. So thank you. Thank you for the question. So a couple of different things in there. So let me try and make sure I address or give you a sense on the different things you're talking about. So I think a question there about primary ticketers and sort of how they use dynamic pricing and how that may impact the business. And then you had some specific questions on international specifically. So let me try to answer those as best I can and then flip it over to Connie for more of the nitty gritty. So I think in terms of the primary companies and these different policies they've talked about with dynamic pricing and other things that they're doing, I just want to set the context for everyone. Again, doing this for 25 years. We've been competing with the Ticketmaster and other primary companies for many, many years, for decades. And they obviously have always had an interest in trying to control more of that system and capture things. Again, they don't work for the fan, the same way that we do, and there's nothing wrong with that. They just have a different business in terms of what they want to do. And so this concept of dynamically pricing and doing things has been around for a long, long time. So I would just put that into that context. And therefore, both historically and today, we have not seen any impact from those types of policies on our business. It continues again. We've got a broad and deep catalog. We're serving a real need for consumers, and we think a real need for the ecosystem. So we haven't -- and that's just to give you the historical take of that not only today, but on decades of experience of something that has been around. Internationally, I'll just -- before going over to Connie, what I would say is that international is just a phenomenal opportunity for us. One thing also getting back into sort of the history of it is that viagogo, which I started, it was an international company. And so we have a heritage in our DNA is servicing things internationally. We had to be able to service the languages, the jurisdictions, the payments. And so as events become more and more international, it's phenomenal as things move to Asia and Latin America, it's phenomenal. I think there's definitely a lot of speaking about our friends who are in the promotion business as they always talk about, there's tremendous opportunity in those markets, and we think that's great. So we're bullish on it. In terms of any more specifics that we can or can't comment on, I will throw it over to Connie. Constance James: Great. Thanks. And just to address your question in relation to what was the fourth quarter growth rate in the international business. We don't break it out specifically, but what I can tell you is that it was growing at multiples of the North America. As Eric mentioned, we have a phenomenal footprint operating in over 200 countries and really continue to be excited about the opportunity. Operator: And everyone, we have time for one final question. It comes from Andrew Boone, Citizens. Andrew Boone: I wanted to go back to the marketing efficiency. As we think about the EBITDA guide for 2026, should we compare marketing levels for 2026 to 2024? Is that the right level of normalization? Or can you provide us with any others [indiscernible] as we think about that expense normalizing? And then you guys made gains in 2025 with ReachPro. Can you help us better understand what are the benefits of that? And then how do you approach making additional gains? Or how aggressive do you want to be with that product this year? Eric Baker: Thank you for the question. It sounds like you had some questions about the guide around some of the marketing stuff and some questions around ReachPro. So let me try and address the level of the product stuff in ReachPro a little bit, and then I'll give it over to Connie to tie out on some other things. So yes, just so everyone understands, ReachPro is a point-of-sale system that sellers can use to manage their tickets and manage their flow. It's just basically like software tools. It's not anything that we're selling or whatnot, but it becomes a default for people to use. When you get that default in the operating system, it has tremendous benefits data-wise. People make you the first quarter call. So it's very helpful in terms of getting some permanent benefit in terms of share and whatnot. We basically, as part of the share gains we got, we're able to deploy ReachPro, and I think Connie will talk about how we've accreted tremendous share in that and have a great trajectory. That is also in a good place where, again, one of the benefits of the flywheels is once you become 3x larger than someone else and more efficient and this -- and you have a superior tool, you can get continued acceleration of people adopting it, which has continued benefits for our system and for our customers. But let me throw it over to Connie because I think you had some questions about marketing. Constance James: Yes. I think before we go into the details on marketing, it's probably worthwhile just to step back and think about the broader building blocks of the guide that just might help provide a bit more context. We did touch on growth, which we know we have 3 drivers, again, operating in a really healthy overall North America secondary market, but noting again, the overhang of all in pricing in those first 5 months. In addition, we do anticipate continuing to accrete modest share gains. And then as we just discussed, we've got a tremendous international business that you can layer on top. What's also important to recall is if you step back and you think about last year, we were explicit about taking a point uptake and investing it in order to accelerate market share. Again, incredibly pleased with the progress we made in capturing nearly half of the market. But as we move forward, we would expect take to -- be more consistent with what we've seen historically, call it, in that 20% range. And then specifically, I think you were touching on, well, what should we expect in relation to marketing efficiency. Again, last year, it was a period where we had a deliberate decision to invest, which ran sales and marketing as a percentage of revenue at a bit of an elevated rate. You would have seen in the first quarter, we were at 55%. By the end of Q4, we're about 52% normalized. And what I would say is you should continue to see increased benefit flowing through. So all of that, call it, ladders up into expanding margins at the bottom line. Operator: Thank you, everyone, that does conclude our question-and-answer session. I'd like to hand the call back to Eric Baker for any additional or closing remarks. Eric Baker: Yes. I just want to say thank you to everyone. I appreciate folks making the time and taking the interest, and we appreciate it greatly. So thank you very much. Operator: And again, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.

83天前Insight Analytics约5分钟阅读

MPGPY 2025 Q4 财报电话会议

Operator: Good morning. Thank you for attending today's PageGroup full year results. My name is Sarah, and I'll be your moderator today. [Operator Instructions]. I would like to pass the conference over to your host, Nick Kirk, Chief Executive Officer. Please go ahead. Nicholas Kirk: Thank you. Good morning, everyone, and welcome to the PageGroup 2025 Full Year Results presentation. I'm Nick Kirk, Chief Executive Officer. On the call with me is Kelvin Stagg, Chief Financial Officer. The group produced a resilient performance despite continued market uncertainty. We saw variable market conditions across the regions with ongoing challenging conditions in Continental Europe and the U.K. However, we continue to grow in the U.S., and we saw improved conditions in Asia Pacific, particularly during the second half of the year. The conversion of interviews to accepted offers remained the most significant area of challenge as ongoing macroeconomic uncertainty continued to impact candidate and client confidence, which extended time to hire. As you know, we've taken robust action to optimize our cost base by simplifying our management structure, reducing our operational leadership team and improving the efficiency of our business support functions. We remain committed to our strategy, and I will update you on our progress later in the presentation. I will now hand you over to Kelvin to take you through our financial review. Kelvin Stagg: Thank you, Nick. Although I will not read it through, I'd just like to make reference to the legal formalities that are covered in the cautionary statement in the appendix to this presentation and which will also be available on our website following the call. In 2025, the group delivered gross profit of GBP 769.5 million, down 7.6% in constant currencies against 2024. Operating profit in 2025 was GBP 20.9 million, down from GBP 52.4 million, and our conversion rate was 2.7%. Earnings per share was 2.9p, and we ended the year with net cash of GBP 31.4 million. Today, the Board has proposed a final dividend of 3.21p per share. Combined with the interim dividend of 5.36p, this represents a total dividend of 8.57p. I will now take you through the financial review. Against the ongoing challenging trading conditions, we have taken robust action to optimize our cost base by simplifying our management structure, reducing our operational leadership team and further improving the efficiency of our business support functions. These initiatives incurred a one-off cost of around GBP 15 million in 2025, partially offset by savings of around GBP 5 million. This will deliver annualized savings of around GBP 15 million per year from 2026. Given the distortive effects of these one-off costs at a regional level, we have presented the conversion rates, both including and excluding these costs. Looking at each of our regions and starting with the largest, EMEA, our underlying conversion rate was 9.6%, down from 13.2% in the prior year. Profitability decreased on 2024 due to the tougher trading conditions seen in 2025. The Americas underlying conversion rate was broadly similar to 2024 at 4.4%. However, in Asia Pacific and the U.K., while our trading conversion was positive, after central cost allocations, both regions had a negative underlying conversion rate of minus 1.4% and minus 8.7%, respectively. The tax charge for the year was GBP 7.2 million, which represented an effective tax rate of 44.4%. The higher-than-normal tax rate is due primarily to the impact of irrecoverable overseas withholding taxes and permanent differences, which have a disproportionate effect due to the reduction in profits. In 2026, the effective tax rate is expected to be around 35%. The most significant item on our balance sheet was trade and other receivables of GBP 317 million, which decreased by GBP 11.4 million versus 2024. After returning a total of GBP 53.6 million to shareholders by way of ordinary dividends in 2025, net cash at the end of the year was GBP 31.4 million. Overall, net assets decreased by GBP 47.8 million from GBP 262.4 million to GBP 214.6 million. This slide shows the key movements in our cash throughout the year. Our EBITDA inflow was GBP 81.8 million, partially offset by an increase in net working capital of GBP 8.1 million. Tax and net interest payments were GBP 23.7 million and net capital expenditure was GBP 11.3 million (sic) [ GBP 11.4 million ], down from GBP 15.8 million in 2024. Payments made in relation to lease liabilities reduced cash by GBP 41.6 million. The group purchased GBP 8.3 million worth of shares into the Employee Benefit Trust to satisfy future committed obligations under our group share plans. The largest outflow of cash totaling GBP 53.6 million was dividends. The overall impact of these cash flows was to decrease the group's net cash position by GBP 63.9 million to GBP 31.4 million at the end of the year. The group aims to run the balance sheet in a position of net cash. We have a clear capital allocation strategy with 3 defined and well-established uses of cash. The first is to satisfy the operational and investment requirements of the group as well as the hedge liabilities under the group's share plans. Once the first requirement is met, the second is for payment of ordinary dividends, where our policy is to increase them at the long-term growth rate of the group, subject to affordability. Finally, any remaining cash surplus is to be distributed to shareholders by way of a supplementary return. While reviewing the group's current and future cash position, in light of the sustained challenging trading environment and the ongoing unpredictable nature of our markets, the Board believes it is prudent to declare a final dividend for 2025 of 3.21p per share. This action balances the group's current level of profitability and affordability with the desire to continue to invest in growth areas. The Board recognizes the importance of dividends to shareholders, and we'll continue to assess the level of dividend payments whilst considering the group's prospects. I'll now hand you over to Nick to take you through our strategic review. Nicholas Kirk: Thank you, Kelvin. We launched our strategy in September 2023 with 3 key strategic goals: delivering operating profit of GBP 400 million, changing 1 million lives and increasing our Net Promoter Score to over 60. Our primary financial goal is to deliver GBP 400 million of operating profit in the medium term. Despite the tougher market conditions, we have made progress with our strategy. We continue to reallocate resources into the areas of the business where we see the most significant long-term structural opportunities. I will talk about this in more detail later in the presentation. Against our social impact goal of changing 1 million lives, we performed strongly. Progress in this area is measured by the number of people whose lives we have changed by placing them into work as well as the number of people who access programs we run that support traditionally underrepresented groups accessing employment. In 2025, we changed over 140,000 lives, meaning that in total, we've changed over 790,000 since 2020. As a result of our continued commitment and success in this area, we are well on track to deliver our target by 2030. We also made excellent progress on our customer experience goal of achieving a client Net Promoter Score of over 60. From our pre-strategy baseline of 52, we saw improvements in 2023 and 2024. And in 2025, our score grew again to 66, rating us as excellent and exceeding our target for the second consecutive year. Our Net Promoter Score reflects the commitment we have to deliver for our customers. Our strategy prioritizes delivering what we are famous for, building on our existing strengths and leveraging our established global platform. To achieve our strategy, we have 4 pillars of growth: our core business, our technology business, Page Executive and Enterprise Solutions. Our core business is the main driver of group performance. We define our core business as Michael Page and Page Personnel, which covers all disciplines except technology. Technology recruitment is a scale play for the group, enabling us to build a high-volume, high-value business in what for us is already a significant market. Page Executive is a market gap play with a specialization in senior leadership search and recruitment as well as offering executive advisory services. Enterprise Solutions is a partnership play as we build out our capabilities and breadth of offering to create long-term mutual value with our strategic customers. I will now provide a brief update on the progress we've made within our 4 pillars of growth. Within our core business, despite the tougher market conditions, we've continued to reallocate resources to match activity levels as well as investing into business areas where we see the greatest long-term opportunities. Whilst the macroeconomic uncertainty continues to impact the majority of our geographies, in 2025, we saw a return to growth in our U.S. business and improved conditions in Asia Pacific. As we anticipated, this recovery has been driven almost entirely by an improvement in the conversion rate of offers to placements rather than increasing activity levels. As a reminder, in permanent recruitment, for every 5 offers a fee earner receives, in a normal trading environment, we would expect 4 to become placements. Over the past couple of years, this has fallen to around 3 out of 5. Reviewing our improved performance in the U.S. and Asia Pacific, what we have seen is a gradual return to a more normal level of conversion of offers to placements. This has been due to clients and candidates being more willing to engage in conversations and negotiations at the latter stages of the recruitment process. As has been widely reported in recent years, trading conditions in the technology sector have been challenging. Despite this, technology remains our second largest discipline at 12% of group gross profit. Within technology, we continue to see a more resilient performance from nonpermanent recruitment. We are reshaping this business from the pre-pandemic model, increasing our offering within contracting and interim roles. This is particularly evident in markets such as Brazil, Greater China, Colombia and Spain, which is now our second largest technology business after Germany. We've also been rolling out our proven contracting model from Germany into other markets in Northern Europe. Despite the tough conditions globally, we delivered a record performance in India, and we saw good growth across a number of individual markets, including the U.S., Colombia, Greater China and Japan. Page Executive continues to deliver strong results despite the challenging macro environment with gross profit down just 2% against a record comparator. Within this, our best-performing markets were Spain, Colombia, Greater China and Southeast Asia. A key element of our Page Executive strategy has been to focus on more senior leadership roles and as a result, increase the salary levels at which we place. This strategy continues to prove successful, and we've seen a notable increase in the median placement salary. Alongside this, the track record and the success of our well-tenured consultants in Page Executive has resulted in an increase in our median fee. We continue to believe that the market gap for Page Executive is a significant opportunity for the group and one that we are uniquely placed to exploit. Despite sector-wide challenges in recruitment outsourcing, Enterprise Solutions, which is our business focused on strategic customers, delivered an encouraging performance in 2025. Our well-established global platform across 34 markets allows us to consult with clients as they look to enter new territories. Our customer-centric approach highlighted by Net Promoter Score continues to make us the partner of choice for companies looking to go global. In 2025, against the backdrop of a difficult macro, we generated 12% more gross profit from our largest 20 clients than we did in our record year in 2022. Within Enterprise Solutions, our outsourcing business delivered growth of 18% and a record performance. We've also seen a strong increase in our sales pipeline as our strategic commitment to global customers gathers momentum. We remain focused on winning business that delivers conversion rates in line with our strategy. As many of you will know, I joined PageGroup in 1995. And over the last 31 years, I've seen huge changes in the sector and the technology that surrounds it. In more recent times, the proliferation of social media and 24-hour news has made the business world a very noisy and fragmented place with conflicting headlines, opinions and data points. When it comes to moving jobs or changing careers, it is now more important than ever for candidates to work with an expert who can filter out the noise and guide them through one of the biggest decisions they will make during their working lives. Our industry is built on human relationships, trust, judgment and insight, especially in white-collar professional recruitment. AI and technology will continue to accelerate the process, but it can't replace the conversations, trust and credibility our consultants bring. When it comes to AI at Page, we've talked before about the importance of building enterprise-wide platforms and having a globally aligned approach to data. We've told you how we've been working closely with major technology partners to build a single integrated data environment ready for AI-enabled products to be deployed quickly across markets. With these solid foundations now in place, we can be confident that we can exploit the wide range of AI that is available. Our strategy is not to replace the human element, but to augment it. For decisions on AI investment, the question that matters most for us at Page is, does it make money or will it save money? This mindset keeps us focused on tools that genuinely enhance consultant productivity, have a tangible benefit for our clients, and drive efficiencies in our business support functions. Companies that get this balance right will pull ahead of those that don't. Across the group, we put this strategy of augmentative AI into action and are already reaping the rewards. We're delivering qualified client leads through our AI-powered business development hub, which uses internal data and external feeds to help our consultants prioritize their time and focus their effort towards the roles we are most likely to fill. We are harnessing the power of Copilot with our consultants building the agents they need the most to transform how they research roles, prepare insights and craft follow-ups. We've also used AI to update over 7 million candidate records in 2025, saving our consultants from an otherwise manual task that equates to the equivalent of nearly 2,500 working days. We continue to see the benefits from AI tools we've highlighted to you in the past. Adverts created through our job ad generator delivered 48% more applications per job with double the number of candidates going on to shortlists compared to manually created adverts. To keep us looking forward, our established data and innovation lab gives us the ability to test and learn quickly, only the use cases that deliver clear commercial value move into production. Whilst AI will play an increasingly important role, we still see that as a supporting one. To repeat what I said earlier, our business is built on human relationships. It's about providing our clients and candidates with the kind of knowledge that comes from great questions and curiosity. Our focus is on using AI where it adds value and keeping people at the center of every meaningful interaction. I will now finish with a brief outlook. Whilst the market outlook remains uncertain due to the unpredictable economic environment, we will continue to control the controllables. We have a strong balance sheet. Our cost base is under constant review. And given our highly diversified and adaptable business model, we remain confident in the execution of our strategy. That concludes the formal presentation for this morning. Kelvin and I will now be happy to take any questions you may have. Operator: [Operator Instructions] Our first question is from Karl Green with RBC Capital Markets. Karl Green: First question just on the dividend. You've laid out a very clear capital allocation policy. But just drilling down into the potential balance over the medium to longer term between ordinary dividends and special dividends. Could you just elaborate on how you potentially see that unfolding, clearly subject to how trading unfolds in the meantime? And then the second question was just on CapEx. I mean, again, very controlled in the year just gone. Just wondered how you anticipate the CapEx budget developing over '26 and perhaps beyond? Kelvin Stagg: Yes. Certainly, on the dividend, it's really a question for us of affordability. We obviously have a high amount of operational gearing in the business, and we don't want to add financial gearing to that mix. So we're keen to keep the balance sheet with an element of net cash on it. We looked at the, therefore, affordability of a dividend in terms of our cash flow in June and felt that paying what amounts to GBP 10 million worth of dividend in June was the right amount to give us a fair balance of ending the year with enough cash to run the business. To probably reiterate what I said at the previous trading statement was that whilst we used to say that, that was probably around GBP 50 million of net cash to run the business, we now think we can run it on about GBP 25 million. Such is the efficiency of our cash management and processes nowadays. But I think in paying GBP 10 million, that will bring us in line with that sort of net cash and also allow us to make a decision on the interim dividend when we get to the interims in August. But I don't see that as a fundamental rebasing of the dividend. I feel that when we get back into affordability, i.e., we generate the cash that we need, we would move hopefully briskly back to the level of the dividends that we had in 2024, and that then would be the position that we would increase at the longer-term rate, which historically has been 4.5% per year. So this isn't a fundamental rebasing down to this level. It's a short-term affordability measure before we hopefully return back to the historical ordinary dividend levels. On CapEx, yes, well, historically, and by that, I mean, probably during the teens years, our CapEx spend was roughly GBP 24 million. And it would have been split pretty much GBP 12 million on software capitalization and GBP 12 million on leasehold fit-outs for two reasons, one being that largely, we finished all of our big software implementations. Our global finance system has been in place for 10 years now. We've got Salesforce in place, and that's been in place for at least 8 years now. We don't really have a huge amount of software implementation to do, coupled with the fact that now all of the software rollouts we're doing, including the HR system that we're rolling out at the moment, which is a relatively small expense in comparison to the two previous finance and operational implementations, are Software-as-a-Service. And Software-as-a-Service, you can't capitalize. So it's expensed through the P&L. So last year, 2025, the cost for software was about GBP 2 million. I'd expect that probably to be about the same going forward. We had very little leasehold fit-outs in '21 and '22 coming out of the pandemic as we look to try and better understand the ways of working and therefore, what the office of the future back then was going to look like. We realized that we didn't really need interview rooms. We interview all of our candidates pretty much online. And therefore, during '23 and '24 primarily, we spent quite a lot on office fit-outs as we moved out of the big offices that we had downsized, but also made them sort of places that people wanted to come to, break-out space, and different fit-out options. That peaked in 2024. Last year, 2025, that was about GBP 10 million. I'd probably expect current year and going forward, that will probably be around GBP 8 million. So my expectations for CapEx in 2026 are probably collectively about GBP 10 million, and I would expect that to go forward. Operator: Our next question is from Remi Grenu with Morgan Stanley. Remi Grenu: Just maybe 2 on my side. The first one, can you maybe tell us a bit more about the difference in performance between the brands, Page Personnel and Michael Page. So some kind of update on how the activity has trended within the 2 brands? And maybe an update as well on the progress that you're making in reallocating resources towards Michael Page and away from Page Personnel. I would like also to understand if it's a process that you're accelerating. So the first question on these 2 brands. And then the second one, any additional initiatives you think could be launched to further reduce the cost base? I'm trying to understand if we should think about potentially adding one-off costs to our forecast in 2026? Nicholas Kirk: Okay. Remi, thank you. I'll take the first one and Kelvin will take the second. I mean, your 2 questions are slightly kind of obviously linked, because it's quite hard to necessarily give you a fair view on the 2 brands because of the fact that we are moving business across from Page Personnel into Michael Page, and we're rebranding parts of the business. We're moving out of less profitable areas, maybe in lower level temp, and reassigning consultants into more senior contracting work or interim work. So it is distorted as a result of the work we're doing. So perhaps maybe it makes more sense to talk about what we are doing, which is as we move through the next few months, we're looking at the final 5 or 6 countries that we have that still run the Page Personnel brand and looking to sunset that brand and focus the business around Michael Page. We feel that, that's the right decision in terms of the job market and future trends around the pressure that you can see and will inevitably probably only grow at that level of admin heavy roles, clerical roles. So we don't want to be in that market. We want to be more focused around the Michael Page and Page Executive brands, which, as you know, are management roles, leadership roles, expert roles. So that's a very clear strategic decision, hence, the justification of moving towards those brand areas. And at the moment, the reason why it slightly distorts the results between the 2, and therefore, I'm not sure it would really help you in terms of making any particular decisions on those 2 areas. Kelvin Stagg: Yes, I can take the one on cost. I think I probably look at it in 2 different areas. One part of it is in operations. And so that's really about fee earner headcount. The challenge that we have at the moment is the issue in the business, if I frame it that way, is the conversion of offers into placements. So we need to have the fee earners there to work the jobs. If they're not working the jobs, then they don't have a percentage chance of converting it into fee rates. Obviously, if those job numbers come down, and we've seen that in parts of Europe, probably point towards France, you will see our fee earner headcount come down, and therefore, the cost will come down. But in other areas where fee earner headcount has been more static, that reflects the fact that the job numbers are relatively static, and it's the conversion of offers into placements and therefore, revenue that's become the problem. But expect to see fee earner headcount move during the year in line with that expectation. On the non-fee earner headcount, obviously, we will continue to align our transactional support staff in line with the activity that's going on. And you would see that in things like transactional finance, you'd see that in transactional HR, you'd see it in what we call middle office, which is non-perm administration for temps and contractors and the like. We have finished now the transition of our shared service center from Singapore into Kuala Lumpur. That's now very stable, but we obviously have the ability to improve the efficiency of that. Whenever we do one of these transitions, we slightly overstaff at the beginning and look to get efficiencies as things progress. We are right in the middle of the HR transformation, which is the implementation of an HR system, as I mentioned earlier, but it's also the transition of the HR transactional people from the local countries into primarily our shared service center in Kuala Lumpur. Whilst that will have a one-off cost, a small one-off cost, a couple of million in the current year, which is already accounted for in terms of where we are in consensus, that will deliver about a GBP 5 million annual saving kicking in partly during this year, but fully from next year. So yes, there are some strategic activity we've got at this point, I'm not going to announce any sort of large restructuring charge, but we'll continue to actively manage the cost base as we have done over the last few years. Remi Grenu: Understood. And one follow-up, if I may. Any trends or insights to take away from the first 2 months of trading in 2026? I mean, I appreciate these are smaller months, but anything to take away from that? Nicholas Kirk: Yes. No, you're right. They are smaller months. And I think on the basis that we're out again, Remi in about 5 weeks with our Q1 update, we'd rather see the big month of the quarter, which is March to get a complete picture. So that's what we decided to do. Operator: Our next question is from James Rowland Clark with Barclays. James Clark: Two questions, please. I was just curious as to the sort of operational practical difficulties of moving your recruiters from Page Personnel to Michael Page and moving upmarket into different sectors. Is there a sort of time lag to delivering full productivity for those individuals? And is that impacting the business today? And then also, how does that impact traction with clients as well, as you move different personnel into that relationship? And then secondly, on cash, I appreciate that GBP 25 million is now a level you're happy to run at. Are you comfortable to dip below that, I guess, as bonuses are paid out? Can you maybe elaborate on where you are with cash right now following sort of bonuses being paid out at the year-end? And how we should think about the sort of shape of that if market conditions remain as they are through the year? Nicholas Kirk: Thanks, James. As regard to your first question, I think your approach needs to be, with any significant change, to be very thoughtful, to be very careful, and to be patient. So we do it step by step, stage by stage. We've already been through this process in Asia, where we look to transition people across from Page Personnel to Michael Page. We've been through this process in the U.K., where we did exactly the same. So we've learned a lot of lessons from it. What you're likely to see is initially just a rebranding of operations from Page Personnel into Michael Page. And then steadily and slowly, we will move people upwards into more senior work, because the last thing we want to do clearly is disrupt relationships with clients, disrupt relationships with candidates, and just as importantly, disrupt the fee earners and their ability to earn and deliver for themselves and the company. So it's a process. It's not something that happens overnight where you come in one day and the working brand that you operate under has changed and your client base has changed and your candidates have changed and you've got a new market, that would be a ridiculous way of going about it. So as I say, it's something that's very intentional. It's very thoughtful. We're applying lessons that we've learned in other markets where we've done it already. We'll do it step by step, and we'll be careful to ensure that client relationships aren't impacted as a result, and the consultants' ability to earn remain. But the actual process of moving upwards into more senior work is actually a very normal one. I mean I think back to my time as a consultant. I mean, if you think about it, you start as, in my case, a 23-year-old, you're working on relatively junior jobs, entry-level jobs with candidates that are a similar age to you and you grow up with your candidates and your candidates become clients and you recruit them as clients and they become candidates again. So you move through a life cycle with them. And that happens to every single consultant. So this will actually enable us to more effectively do life cycle management of our candidates as they start to become more senior, because Michael Page obviously has that greater scope through those levels of roles. So yes, I mean, it's something I am very, very aware of, the team is very aware of, and we will be very thoughtful and intentional about the way we go about it. Kelvin Stagg: Yes, James, talking to cash. I mean, we operate with a philosophy of having net cash on the balance sheet. That's not a rule that we adhere to on a day-to-day basis. I mean, we have a number of facilities available to us, including an GBP 80 million revolving credit facility, we have a GBP 50 million invoice discount facility, and we have a GBP 20 million overdraft. So with a number of temp and non-perm businesses around the world, we need to be able to fund those. And we will and do dip into those facilities from time to time to fund working capital requirements for non-perm as well as dividends when we pay them out. So I'm not strictly adhering to having GBP 25 million in June for the dividend payment. I'm comfortable that we would dip into those for a short period of time. Our current cash balance would be less than GBP 25 million. But we're comfortable that we're forecasting to end the year without structural debt, and that's really the philosophy that we're trying to adhere to. Operator: Our next question is from Steve Woolf from Deutsche Bank. Steven Woolf: Just you mentioned earlier, Nick, about the level of median fees going up. Could I flip it to sort of fee rates if you look on a like-for-like basis year-over-year? How have you found those? Are they still at the record high levels you were speaking of before? Or has there been any sort of weakening in that over the past 12 months, I guess? Nicholas Kirk: No, I did that -- well, firstly, good morning, Steve. No, I did that assessment very recently actually just to compare '25 to '24. And no, they're pretty much flat. There might be the odd movement within a country where a country goes from, say, 30% to 29%, but that's offset by another country that goes from 25% to 26%. So the increase that we saw was within Page Executive, and that's really more through the levels that we're working at more senior roles, and also the ability to negotiate higher fee rates based on having well-tenured experienced consultants in a market where candidates are in high demand. So the fees naturally can be pushed up a little bit because clients need access to these individuals. But overall, to your question, no '24, '25, fees remain at record levels, little movements within countries, but as an overall figure, still at that same high level. Operator: [Operator Instructions] There are no questions waiting at this time. So I'll turn the conference back over to Kelvin Stagg, Chief Financial Officer, for the further remarks. Kelvin Stagg: Thank you, Sarah. As there are no further questions, thank you all for joining us this morning. Our next update will be our first quarter trading update on the 14th of April. Thank you very much. Operator: Thank you. That concludes PageGroup full year results. Thank you for your participation. You may now disconnect your lines.

83天前Insight Analytics约5分钟阅读

CHPT 2026 Q4 财报电话会议

Operator: Good afternoon, and thank you for standing by. Welcome to ChargePoint's Fourth Quarter and Full Fiscal Year 2026 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on ChargePoint's Investor Relations website. I would now like to turn the conference over to John Paolo Canton, Vice President, Communications. Please go ahead. John Canton: Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's fourth quarter and full fiscal 2026 earnings results. This call is being webcast and can be accessed on the Investors section of our website at investors.chargepoint.com. With me on today's call are Rick Wilmer, our Chief Executive Officer; and Mansi Khetani, our Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter ended January 31, 2026, which can be found on our website. We'd like to remind you that during the conference call, management will be making forward-looking statements, including our outlook for first quarter of fiscal 2027. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on December 5, 2025, and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP in our earnings release and for certain historical periods in the investor presentation posted on the Investors section of our website. And finally, we'll be posting a transcript of this call to our Investor Relations website under the Quarterly Results section. Thank you. I will now turn the call over to our CEO, Rick Wilmer. Richard Wilmer: Good afternoon, and thank you for joining us. Today, we will provide a comprehensive review of our quarterly performance, share our perspective on current market conditions, discuss the progress we have made toward our 3-year strategic plan and how innovation and execution, supported by our partnership with Eaton and key leadership additions, position us to build confidently for the future. We delivered a strong finish to fiscal 2026. Revenue for Q4 came in at the high end of our guidance range at $109 million, marking another quarter of year-over-year growth and execution above expectations. Our non-GAAP gross margin remained at a record high of 33%. We maintained strict cash discipline. Cash utilization from operations was minimal and much better than planned. These results are a clear validation of our relentless commitment to operational excellence, and there's still opportunity for further improvement. This performance reinforces our return to growth trend, which we expect to accelerate later this year and into next year as our new products ramp into volume. This growth results from investments in product innovation, partnerships, rising market interest, greater utilization and market consolidation, which have boosted our market share of public ports in North America. Europe experienced robust double-digit growth, driven by regulations and new incentives. We expect this trend in Europe to continue, further accelerated by our new products. Operational excellence remains a core pillar of our 3-year plan, and progress here is tangible. We continue to see benefits from tighter cost controls and improved supply chain execution. Station reliability, the quality of deployments and customer satisfaction all continue to improve. Stations that are down, as monitored by our Network Operations Center, or NOC, have been reduced by over half in the last year and are now below 1%. Over 80% of owner support cases are proactively created by our NOC or driver reports as opposed to a customer having to call us to report a problem. Other initiatives like picture to resolution, cut-resistant cables and our Safeguard Care service are all contributing to high reliability. First-time right deployments have improved to above 95%, which has been driven by our training and certification program. Customer satisfaction, as measured by results from our CSAT survey responses for driver, owner and home support, is now at 8.5 or higher on a 10 scale. All of these improvements are driving customer loyalty, which in turn drives expansion business. Our continued deployment of AI is yielding tangible benefits, which we expect to increase substantially as we move through this year as the tools and capabilities continue to advance rapidly. With our headquarters in Silicon Valley, we are at the epicenter of AI innovation, and we view this as a competitive advantage. We are striving to be at the forefront of AI adoption, and the benefits we are anticipating are not just incremental improvements but truly disruptive. We expect to deliver AI-driven innovation in our products and services to make them more differentiated, valuable and useful. AI for code generation and testing will allow us to deliver innovation faster and more cost effectively. We believe AI will also drive overall operational efficiency where every job in the company that is done on the screen will be performed more effectively. All of this is evidence that our model works. It gives us speed, flexibility, resilience and the ability to invest where we see the greatest long-term returns. Turning to the broader EV market. While headlines often focus on short-term volatility, the underlying fundamentals remain compelling. Multiple independent sources point to sustained global EV adoption, with particularly strong growth in Europe and continued long-term confidence from automakers and consumers alike. Global EV sales grew meaningfully year-over-year in 2025, with Europe posting strong double-digit growth, supported by regulatory tailwinds and renewed consumer incentives. Even in North America, where growth moderated, interest in EVs remains resilient, and satisfaction among EV owners continues to be exceptionally high. OEMs still view EVs as the long-term destination, but the path is proving longer and less linear with hybrids and plug-in hybrid serving as bridges. The next leg of adoption depends less on mandates and more on economics and customer experience. A wave of sub $35,000 EVs arriving in 2026 is designed to hit the true mass market where price parity matters most. Despite the headlines about an EV slowdown, U.S. fast charging tells a different story. Infrastructure expanded rapidly in 2025. Usage grew in lockstep. Utilization remains stable, and reliability improved. Approximately 18,000 new public DC fast charging ports were added, largely driven by private investment rather than government stimulus. This indicates the charging ecosystem is maturing operationally, not overbuilding speculatively. As vehicle affordability improves and adoption reaccelerates, the charging foundation is being put in place to support it. This market environment favors companies that can execute, scale efficiently and deliver a seamless experience across hardware, software and services. This is where ChargePoint is uniquely positioned as evidenced by some notable customer wins. We have partnered with Ford Pro so that Ford's commercial fleet customers in the U.K. and Germany now have integrated access to ChargePoint solutions across home, fleet and workplace EV charging, providing these businesses with the most innovative and reliable charging solutions. Not only can Ford Pro customers benefit from our hardware and software. They also have access to ChargePoint's expertise for charter installation, site planning and related services. We also consummated the next phase of our strategic partnership with RAW Charging, one of the U.K.'s leading ChargePoint operators. The new multiyear agreement comes with an initial commitment valued at USD 7.5 million. This collaboration strengthens RAW Charging's Connecting Amazing Places campaign, which is focused on normalizing EV charging at destinations rather than solely en route. Also, we extended our work with Georgia Power to new locations, including the prominent Grady Health System in Atlanta. Innovation remains the engine of our strategy. In the coming months, we will release a major update to our mobile app. This new experience is designed to do more than just help drivers find to charge. It equips them with the ability to choose an experience while they charge. By guiding drivers towards available, reliable, amenity-rich and well-priced charging locations, we believe this capability will drive increased utilization, improve economics for station owners and strengthen the value of our network. We believe we are in a position to influence where drivers choose to charge, which is a powerful example of how software and data can benefit both drivers and site hosts. With the largest community of drivers in North America on our platform, we have the scale to drive incremental value for ChargePoint. When we look ahead, our confidence is rooted in 4 elements coming together: execution, market opportunity, innovation delivery and partnerships. Our partnership with Eaton continues to expand our reach and accelerate adoption of next-generation AC and DC solutions. Combined with our improving execution in a market that increasingly demands reliable, scalable charging, we believe we are building a durable platform for long-term growth. In this context, I also want to highlight the importance of Jaser Faruq joining our leadership team as our Chief Product and Software Officer. Jaser brings a wealth of experience in electrified transportation, energy and the scaling of global operations. Jaser's leadership enhances ChargePoint's ability to develop an innovative product road map that encompasses both software and hardware but is also agile in response to the rapidly evolving environment, especially as artificial intelligence creates opportunities in our industry. His approach is anchored in what we believe is the inevitable transition to electrified transportation, ensuring ChargePoint remains at the forefront of innovation while maintaining operational excellence. This quarter, we are introducing new key performance indicators. We are sharing these metrics to strengthen the alignment between our strategy and the market understanding of our performance. Let me briefly explain why each matters. Software-only managed ports are non-ChargePoint hardware ports managed by our software and reflect our software-first strategy. Managing non-ChargePoint hardware expands our addressable market and supports a business model centered on recurring software revenue and sticky long-term customer relationships. Globally, we have nearly 130,000 software-only managed ports, representing approximately 30% of all ports under management. Share of ports exceeding 30% utilization at least 1 day in a month, we believe, is an important leading indicator for expansion demand. Utilization above roughly 30% is typically when site host begin evaluating the addition of chargers to maintain a good driver experience. More than 100,000 AC ports recorded time utilization above 30% at least 1 day in January of 2026, indicating over 7 hours of continuous use per day across workplace, retail and other locations. Monthly active users defined as drivers utilizing a ChargePoint account is the equivalent of our user community. Monthly active users is a core measure of the network effect. Growing driver engagement increases utilization and delivers greater value to site hosts and customers, reinforcing why our software and network are central to their long-term charging strategy. At the end of FY '26, we had 1.48 million active users, representing 8% year-over-year growth. In terms of KPIs we have historically reported, ChargePoint now manages approximately 385,000 ports, including more than 41,000 DC fast chargers and more than 130,000 ports located in Europe. Globally, ChargePoint drivers have access to over 1.37 million public and private charging ports. Together, these KPIs are intended to provide more insight into how our business is performing, our differentiation and how long-term durable value is being created across our ecosystem. To close, fiscal year 2026 marked an inflection point for ChargePoint. We returned to quarterly growth, managed our cash with discipline, strengthened our operational foundation and continued to deliver innovation that matters. Disciplined execution and a constructive market outlook, accelerating innovation and strong partnerships, we believe ChargePoint is well positioned to build for future opportunities. Thank you to our employees, partners and shareholders for your continued support. I will now turn the call over to our CFO, Mansi Khetani. Mansi Khetani: Thanks, Rick. As a reminder, please see our earnings press release where we reconcile our non-GAAP results to GAAP. Our principal exclusions are stock-based compensation, amortization of intangible assets and certain costs related to restructuring, settlements and nonrecurring legal expenses. Revenue for the fourth quarter was $109 million, coming in at the high end of our guidance range, up 3% sequentially and up 7% year-on-year. Network charging systems at $58 million accounted for 53% of fourth quarter revenue, up 2% sequentially and up 10% year-on-year. Subscription revenue at $42 million was 39% of total revenue, up 1% sequentially and up 11% year-on-year as our total installed base continues to grow. Other revenue at $9 million was 8% of total revenue. Turning to verticals, which we report from a billings perspective. Fourth quarter billings percentages were: commercial, 78%; residential, 6%; fleet 9%; and other, 7%. In terms of geography, North America made up 77% of revenue and Europe was 23%. Europe was particularly strong this quarter, delivering its highest share of revenue since we became a public company. Non-GAAP gross margin continued to remain at a record high of 33%, flat sequentially, and up 3 percentage points year-on-year. Hardware gross margin was flat sequentially. Subscription margin continued its upward trajectory, reaching a new GAAP record of 64% and coming in even higher on a non-GAAP basis, supported by economies of scale and sustained efficiencies in support-related costs. Non-GAAP operating expenses were $58 million, essentially flat to the prior quarter. We remain committed to prudent expense management, maintaining a disciplined approach that balances current constraints with selective investments in R&D intended to support announced product launches that we believe will position us for long-term growth and margin expansion. Non-GAAP adjusted EBITDA loss was $18 million. This compares with a loss of $19 million in the prior quarter and a loss of $17 million in the fourth quarter of last year. Stock based compensation was $13 million, down from $15 million, both in the prior quarter and in the fourth quarter of last year. Our inventory balance was $215 million, a slight increase from the prior quarter. Although physical inventory levels were modestly lower versus the prior quarter, the overall balance ticked up slightly primarily due to foreign exchange fluctuations and overhead capitalization. Turning to cash. This quarter, we made a $40 million payment related to the debt transaction we announced in November. After that payment, we ended the quarter with $142 million in cash. Excluding that payment, full year fiscal 2026 net cash usage was just $43 million, a significant improvement from the $133 million used in the prior fiscal year. We've made substantial progress in reducing cash usage from normal operations over the past year, and this will remain an important area of focus going forward. The debt exchange announced in November is now reflected in our financials. Because the transaction included a significant discount, the accounting treatment requires us to record future interest payments as short-term and long-term liabilities on the balance sheet. As we pay down the capitalized interest, the corresponding debt balance will come down, and there will be no related interest expense flowing through the P&L. With respect to full fiscal year 2026 results, revenue was $411 million. Non-GAAP gross margin was 32%, and non-GAAP operating expenses were $231 million. From a geographic perspective, North America was 83% of full year revenue and Europe was 17%. For additional full year fiscal 2026 results, see the press release issued earlier today. Turning to guidance. After a strong fourth quarter, we expect first quarter revenue to be in the range of $90 million to $100 million, reflecting the typical seasonality we see in Q1. In summary, this quarter, we continued to deliver both sequential and year-over-year revenue growth, achieved yet another record quarter for subscription gross margin and continued to make steady progress towards profitability. We also delivered against our annual objectives around disciplined cash management, reducing operating expenses and significantly lowering cash usage throughout the year. Looking ahead, we will continue to remain focused on disciplined execution and operating expense management, and we are committed to building on the progress we've made in the quarters ahead. We will now open the call for questions. Operator: [Operator Instructions] We'll go first to Colin Rusch at Oppenheimer. Colin Rusch: You've talked about the eVTOL opportunity in the past, and so I'd be curious just on the update there as people are making progress. But certainly, as we look across some of the emerging form factors and around the robotics space and physical AI, I'm just curious about how much opportunity there is now in kind of initial interest for what you guys have both from just a pure charging perspective as well as the software platform that optimizes a lot of that network. Richard Wilmer: Yes. Colin, if it was eVTOLs, I think that's what you mentioned, we haven't focused much on that space yet. But with respect to physical automation, I think the bigger near-term opportunity that we're very focused on is autonomous vehicles. We're now investing quite a bit of time in understanding what, if any, unique charging requirements are required by that market such that we can leverage the success we've had already and expand that and become the default charging solution of choice for autonomous vehicle fleets. Colin Rusch: Excellent. And then from a cost perspective, you guys are making steady progress. I'm curious about opportunities for continuing to drive those concepts from a hardware perspective or even start driving a little bit of price increase and pushing that through to help support margins. I'm not sure how realistic that is, but just want to get a sense of how you're expecting that to play out here over the balance of the year knowing that you're only guiding for a quarter? Richard Wilmer: Yes. Thus far, we have not pushed any price increases into the market, and I don't think we anticipate doing so. The opportunity for gross margin improvement on hardware, and therefore, cost reductions, assuming we don't increase prices, is really hinged on a lot of the new hardware platforms we'll be introducing into the market as we move through this year. We announced our Flex product line last year, which is our single-port AC product for both home and fleet. And that product is ramping now. It's got a better margin profile than our historical single-port AC products. And then we've got our next-gen DC product, which has substantially better margin profile than our current DC architecture. And that will be ramping into production in the second half of this year, and we're very optimistic about the prospects for that product. The market interest right now is very high in that product because not only is it more cost effective than our current DC solutions, it has also got some innovation in it that really reduces overall cost for a customer beyond just the initial capital expenditure related to both OpEx and construction and build-out costs. Colin Rusch: Excellent. And just a follow-up that I want to sneak in here is around inventory reduction. You guys have obviously gone through the product transition, but just curious about when you can start working that inventory balance down a little bit more aggressively. Mansi Khetani: Yes, I can take that one, Colin. So mix of products sold during the quarter impacts inventory. In generally, like I mentioned, even in Q4, while we did see a little bit of a decline in physical inventory, the dollar value that you see on the books went up a little bit because of the impact of foreign exchange on our inventory that is stored in Europe and there was some impact of cost capitalization, which included some tariffs as well, which resulted in a net increase of inventory in the books. As you know, we are managing inventory very carefully. And as we get to the tail end of our prior commitments to our contract manufacturers, we should start seeing a gradual reduction throughout this year. Operator: We'll move next to Mark Delaney at Goldman Sachs. Mark Delaney: The company had a press release out in mid-February highlighting 34% growth in charging sessions and also that it was putting upward pressure on utilization. You spoke more on that today, highlighting a growing number of users and also the increase in utilization rates. At the same time, guidance for the first quarter implies revenue will be down a little bit year-on-year at the midpoint. So can you help us reconcile some of the progress you're seeing in terms of the user count and utilization rates with the outlook for revenue to be slightly lower year-on-year at the midpoint and 1Q? Mansi Khetani: Yes. So the utilization rates are growing, as we've mentioned before, and that definitely leads to sales cycle kind of kicking off. In terms of the guidance, specifically after coming off of a strong Q4, we're guiding to Q1 based on typical seasonality, where we've historically seen about a 5% to 15%-ish reduction in Q1 revenue versus Q4 because of the seasonal factor and winter months, et cetera. And this is what we've reflected in our Q1 guidance. And besides that, we're taking a prudent approach given the current macro environment. However, you noticed that our range does encompass a growth scenario year-over-year. Mark Delaney: Understood. And my other question was around NEVI. There's been some talk of a change in how much domestic content might be needed to qualify. I think last quarter, the company spoke about more states getting ready to move forward with those, but I'm hoping you can update us on what you're seeing given what could be some changes in the requirement for domestic content and if that's having any effect on your business and outlook for that piece of the market? Richard Wilmer: Yes. So our understanding right now is that obligated funds are not going to be affected by any rule changes around domestic content. And we've got a strong pipeline of obligated funds that will continue to fulfill this year and maybe even to next year. And then on the non-obligated funds, which may be impacted by any changes, we're going to have to wait for those rules to get finalized before we can assess what, if any, impact it will have on us. Operator: We'll take our next question from Chris Pierce at Needham & Company. Christopher Pierce: Just 2, I think both for Mansi. If we look at the revenue guidance, the growth you guys have shown kind of think about the rest of the year, and you've kind of given us the playbook for gross margins. I'm just curious, is there any chance for further OpEx leverage or OpEx reductions? Or are we sort of in the late innings around there? I'm just thinking about the pieces to get to closer to flat adjusted EBITDA. Mansi Khetani: Yes. OpEx has been relatively flat for the last couple of quarters on a non-GAAP basis. We expect that this non-GAAP OpEx would remain in that current range in the near term. However, we should see a reduction over the year as we get through our engineering efforts on the new products that we've introduced and our NRE or prototyping costs on the engineering side start coming down. Richard Wilmer: The other comment I'll make there is around AI. We are now seeing a measurable impact on keeping OpEx flat or even reducing it in some areas and then reallocating resources to other areas that have a need through AI implementation. We've got a number of examples and proof points in the company now where this is paying off in real dollars. Christopher Pierce: Okay. And then I think I have this right. You had a pretty sizable working capital benefit in the quarter, which helped cash. But if you look at the pieces of it, there was a pretty sizable jump up in trade payables and accounts receivable came down modestly that, I think, makes up the bulk of it. Should those reverse in the first quarter? Or is this sort of -- like how should we think about those 2 numbers and the benefit you might see in working capital or the debit in the first quarter? Mansi Khetani: Yes. So AR, we made a significant progress in collections. We were pretty aggressive this quarter. We'll continue to do that. But you're right. That probably will not be a big benefit in Q1. AP, same thing. It's timing. So sometimes it's up or down, so it's difficult to pinpoint exactly if there will be a benefit or it may be a little bit worse. However, typically, Q1 tends to use more cash. So typically, Q1, we see the highest usage of cash as compared to the rest of the year because we have a lot of software expenses that we have to pay upfront for the rest of the year. So that will impact working capital in Q1. However, through the rest of the year, we should start seeing that coming down. And then as we mentioned before, as inventory comes down, we should see a boost to working capital as well. Operator: Next, we'll go to Ryan Pfingst at B. Riley Securities. Ryan Pfingst: Can you talk a bit about the competitive landscape as the EV market has evolved here in the U.S. and what kind of opportunities that might present to you in terms of potential M&A or market share gains? Richard Wilmer: Yes. We're -- won't comment on any M&A opportunities, but it's very active. I can tell you that. There's plenty of assets that are becoming available. We're getting calls. In terms of competitive landscape, we're capitalizing on some exits from the market by certain parties. So there are real opportunities, again, that we're capitalizing on as a result of people leaving the market. So in general, I would consider it favorable and normal for an industry that's going through a cycle like what we were -- like we've been through. Ryan Pfingst: Got it. Appreciate that. And then understanding you don't guide for the year. But what do you see as the main revenue growth drivers by segment or by product in 2026? Richard Wilmer: It's going to be our new products in addition to the strength we see in Europe. I think it looks fairly steady in North America. We had a very strong quarter in Q4 in Europe. We expect that trend to continue and then be further accelerated by the new products that are now built for Europe in addition to North America unlike some of our prior products, which were continent specific. Operator: We'll go next to Itay Michaeli at TD Cowen. Itay Michaeli: Just to follow up on the last couple of questions, I was hoping you could mention at a high level kind of the various paths the company has to reach positive EBITDA, whether it's -- you have the new products. It sounds like there's some gross margin opportunity, maybe opportunities on OpEx. But when you kind of think about those drivers as well as the EV market overall, kind of how are you thinking about the different ways you have and levers to pull to get the company to positive EBITDA? Richard Wilmer: Yes. I think it's a combination of things, Itay. It's obviously growth, and as we just mentioned, we're optimistic about Europe, especially as we introduce new products and move through the year with North America continuing to be steady and perhaps opportunities coming about as the attrition of competition moves forward. And then on the gross margin side, again, as we mentioned a minute ago, we expect much better gross margin profiles on all the new hardware products that we're introducing into the market, and that should move our overall weighted gross margin up as we move through the year. And then lastly, we'll continue to control OpEx and optimize OpEx, again, with AI now starting to show tangible results for us in terms of our ability to keep our costs constant without -- while growing top line and expanding our product portfolio because of the efficiencies we're seeing through AI implementation in different areas of the company. Itay Michaeli: That's helpful. And then my second question, Rick, actually is on the AI initiatives. I'm just kind of curious which quarter this year do you think that starts to kind of show through and kind of how do you see the opportunity progressing even over the next couple of years for the company. Richard Wilmer: I think for now, what we're seeing, generally speaking, is knowledge work that is done on a screen that tends to be complex but repetitive. We're now using agentic AI to automate that. So there's quite a number of jobs in the company that fit that profile. And in specific areas where we've implemented solutions, we're doing twice as much work with half as many people, and I think we'll continue to expand that capability across the company. It will also show up in the way we write and test code, which should increase our pace of innovation when it comes to releasing new software features. And then last, we've got some very interesting AI features on the road map that will manifest themselves in our product, primarily on our software side, that I think will be really valuable for our customers and the drivers that use our technology. Operator: [Operator Instructions] We'll go next to Craig Irwin at ROTH Capital Partners. Craig Irwin: So Rick, over the last many years, technology companies and their charging points outside of their offices have been a great opportunity for ChargePoint. Some of us have been moderately optimistic with the building wave of sort of back to the office. I know the footprints of how these companies are staffing, are changing a little bit. Maybe that's actually the incremental opportunity. Can you talk about your legacy technology customers that were so very important many years ago? Are they coming back in any material way right now? And is this something that you see maybe building in momentum? Richard Wilmer: I think what we're seeing generally is steady expansion of their networks. We mentioned that new KPI in the prepared remarks around station that exceeds 30% utilization 1 day in a month and that -- we had over 100,000 AC ports that met that criteria. And when you reach that threshold, you'll find drivers pull into a parking lot and just have a hard time finding an available charger. So in areas where EV penetration is strong, generally speaking, in North America, the coasts, we're seeing that metric exceed that 30% number, which drives expansion business. So that remains an important part of our company's strategy, is to continue to grow with our customers as the population of EV drivers that frequent those workplaces continues to grow, which is really driven by the cumulative number of EVs on the road. I think a lot of people get fixated on the new EV sales, but what really drives our business is not only new EV sales but the cumulative number of EVs that are on the road. So we continue to see good expansion business with our workplace and commercial customers in general. Craig Irwin: Okay. Excellent. And then my second question really is about the pathway to positive EBITDA, right? Over the last number of quarters, you've kind of sort of leaned in the direction of wanting to preserve the capacity in the company and see growth help you deliver this with new products and new partnerships. Can you maybe build us a bridge on how we get there? And do you have a set time line that you're looking for? What should we expect as external observers of the company? Richard Wilmer: Yes, we're going to -- like I just mentioned when I answered a question a moment ago, it's a function of growth, improving gross margins and controlling OpEx. And as you've seen historically, we expect to gradually improve in all areas as we move through the first half of this year. And then I think the acceleration on improvement in all 3 of those, particularly growth in gross margin, will be stronger in the second half as we introduce these new products, and we really take advantage of the favorable macro conditions in Europe with a whole suite of new products that we weren't selling into those segments before because we did not have a product offering. Operator: And that concludes our question-and-answer session and today's conference call. Thank you for joining ChargePoint's call. You may now disconnect.

83天前Insight Analytics约5分钟阅读

STG.CO 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Scandinavian Tobacco Group Full Year 2025 Results Conference Call and Webcast. [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, Torben Sand. Please go ahead. Torben Sand: Thank you, and good morning, and welcome to Scandinavian Tobacco Group's webcast for the Full Year and Fourth Quarter 2025 results. My name is, as said, Torben Sand, and I'm Director of Investor Relations and External Communications. And I am today, as usual, joined by our CEO, Niels Frederiksen; and our CFO, Marianne Rorslev Bock. Please turn to the next slide for today's webcast agenda. Niels will start the presentation by giving you a brief overview of the highlights, including a snapshot of the key financial data. Niels will also summarize a few of the highlights from our new strategy that we launched last year, Focus2030. Then Niels will move on to share more details on the performance of our product categories before Marianne takes over and give you an update on the financial performance in our 3 reporting divisions. Marianne will also give more details about the financial performance, including comments on cash flow, leverage and capital allocation. Niels will conclude the call by giving some insights into the expectations for the full year 2026. After the pre-prepared presentation, we will conduct a Q&A session where we will be pleased to take any questions you might have. Before we start, I ask you to pay special attention to our disclaimer on forward-looking statements, which can be found on Page #3 in this slide deck. Now please turn to Slide #5, and I leave the word to our CEO, Niels Frederiksen. Niels Frederiksen: Thank you, Torben, and welcome to the call. 2025 became a challenging year for Scandinavian Tobacco Group with a combination of external disruptions and internal operational issues. Tariffs and lower consumer sentiment in the U.S. directly impacted our handmade cigar business and the category experienced fierce price competition, both in retail and in the online distribution channels. Our machine-rolled cigar business continued to be under pressure, while our investment in our nicotine pouch business delivered good contributions to the group's financial performance. Throughout the year, we have concentrated our efforts on protecting our market positions, integrating Mac Baren and growing our handmade and nicotine pouch businesses. And given the difficult circumstances, I am satisfied with our results for the year despite having to reduce our full year expectations in May as a consequence of the increased tariffs. 2025 was a year where we launched our new strategy, Focus2030, and we released new financial ambitions, and we adapted a new more flexible shareholder return policy. At our Capital Markets Day on November 20 last year, we unfolded the new strategy but today, we will also provide a few highlights on this later in the call. We expect 2026 to be a year where geopolitical uncertainty will remain a market condition and economic growth will be challenging. For Scandinavian Tobacco Group, this means that our main priorities in the year will be to stabilize earnings in our machine-rolled cigar and smoking tobacco business and inject new energy and growth into our strong handmade cigar business. We will also continue to grow our promising nicotine pouch business. Now please turn to Slide #6. Let me now share a few financial highlights for the year. Marianne will give more details about the financial performance and the quarterly development later in the presentation. But reported net sales were DKK 9.36 billion compared with our guidance of DKK 9.1 billion to DKK 9.2 billion, and the EBITDA margin before special items was 19.8% compared with our guidance of 19.5% to 20.5%. Overall, this results in an EBITDA before special items in line with our expectations. The free cash flow before acquisition came in more than DKK 200 million below our guidance due to a delay in the collection of certain receivables due to the SAP implementation in Europe. The issue has been solved and as the deviation is a phasing issue, the free cash flow will be equally positively impacting 2026. Marianne will give you more details in her part of the call. Adjusted earnings per share were DKK 10.8, in line with our guidance of DKK 10 to DKK 12 per share. Please turn to Slide #7. On 20th November, we launched our new 5-year strategy in connection with the Capital Markets Day, and you can find a recorded version of the event on our website. The purpose of Focus2030 is not only to create value by executing the strategy but also to develop a company that is even better positioned to deliver value beyond 2030 and we are confident that we can do so. We've defined 3 strategic priorities, each important for us to deliver on the ambitions for Focus2030. Firstly, to create a sustainable and stable machine-rolled cigar and smoking tobacco business, primarily focused on Europe. Secondly, to grow our attractive handmade cigar business anchored in the U.S. but with a stronger global footprint. And thirdly, to build a larger nicotine pouch business with even more upside in an attractive category. And in the process, we intend to turn the declining earnings trend around and we have -- sorry, in the process, we intend to turn the declining earnings trend around that we've seen over the past 3 years and create value for consumers, employees and shareholders. The new strategy is anchored in our strong brands and strong market positions across our diversified portfolio. However, the market conditions and the strategy call for us to allocate resources differently going forward to ensure that we focus on and capture what we see as the largest growth opportunities. And our power brands strategy is tailored to facilitate this. The strategy addresses the areas that we need to fix because they are not performing up to expectations, but also the areas where we do well and where we need to push further to deliver even better results, all with a combined ambition to build a sustainable and growing company with more potential beyond 2030. We also introduced new financial ambitions, which are to significantly improve the return on invested capital from about 7.9% in 2025 to more than 11% in 2030, to deliver an incremental increase in EBIT and a free cash flow generation exceeding DKK 1.2 billion in 2030. Acquisitions as well as divestments of less core assets will continuously be evaluated, assuming these potential transactions support our strategy as well as our financial ambitions. The shareholder return policy has been adapted to be more -- to a more flexible dividend payout ratio policy based on 40% to 60% payout ratio against adjusted earnings per share, supplemented by share repurchases when the projected leverage ratio allows. Please now turn slide to Slide #8. To meet our financial ambition and the objectives in Focus2030, we need to deliver on 3 strategic priorities. Growing handmade cigars will be defined as growing net sales as well as delivering incremental profit growth to the group. The key growth drivers are expected to -- the key growth drivers are expected to be delivered by a combination of increasing our market share of own brands in the U.S. from approximately 13% to more than 15% in 2030 as well as through an expansion in our retail network. This expansion will be driven by our power brands, which in 2025 have 5% overall market share. Stabilizing the machine-rolled cigar business requires a focus on protecting profits and cash flow. The path to success is offsetting the structural volume decline in the categories through price management and market share gains. Mitigating structural market trends through intensified market share focus is reflected in the ambition to increase volume market share in key European markets from 26.8% in 2025 to more than 29% in 2030. And a key component to the profit growth will also be through simplification of our portfolio by almost 50%. Finally, accelerating our nicotine pouch business is expected to deliver important contributions to the group's growth in net sales and profits in Europe. We expect to build on existing market share positions in Sweden and in the U.K. but also in other markets where our capabilities within distribution and access to the market provide us with an advantage. Now let's turn 2 slides -- to Slide #10. Machine-rolled cigars and smoking tobacco comprised 50% of group net sales in 2025 with handmade 35%, nicotine pouches at 5% and others at 10%. Others include accessories and bar sales, amongst others. For the full year, organic net sales growth was minus 3%, where handmade cigars delivered flat organic net sales, machine-rolled cigars and smoking tobacco minus 1% and nicotine pouches a negative 17% growth. However, the organic growth for nicotine pouches does not reflect the underlying progress of our power brand, XQS, which delivered a high double-digit organic growth. The negative growth for the category was significantly impacted by the discontinued online distribution of ZYN from the second half of 2024. For the first time, we are giving details on the gross margin structure for our product categories. For the group, the gross margin before special items was 44% for the full year of 2025. The product category machine-rolled cigars and smoking tobacco delivered a 51% margin, handmade cigars, 41% and our nicotine pouch business, 36%. Going forward, we intend to share these details in order for you to get a sense of the progress we make in our strategic priorities. Now let's move on to each of the categories, and please turn to Slide #11. The market for handmade cigars in the U.S. continued to contract in 2025 by an estimated mid-single-digit percentage. For 2026, we expect a 4% total market volume decline rate. We still estimate the underlying longer-term decline rate to be a lower single-digit number. For the full year 2025, reported net sales decreased by 4% for the category with organic net sales being broadly unchanged. Reported growth was impacted by the development in currencies. Increasing organic net sales in retail and pricing were offset by underlying volume declines in the U.S. market and by international sales. Gross margin before special items have been on a declining trend for the past 2 years. For 2025, the margin was 41.4%, with the main drivers for the decline being fierce competition in our online distribution channel, and negative impact from increasing tariffs and consumers trading down. The data illustrated in the chart show the development in the last 12 months data, not the specific quarterly data. For the fourth quarter, our category performance was 1% organic net sales growth and was positively impacted by business-to-business sales in the U.S. and continued growth in our retail stores. The sales of handmade cigars to U.S. wholesalers and distributors, the business-to-business market continued to recover in the fourth quarter and delivered a 6% increase following a low single-digit growth in the third quarter. Sales in our retail stores continued to increase, driven by new store openings, although the same-store sales were slightly down due to a temporary rebuild of our largest store in Dallas, Texas. And finally, our online sales of handmade cigars were broadly unchanged, where sales to our international markets decreased during the quarter. Now please turn to Slide #12, and we'll talk about machine-rolled cigars and smoking tobacco. For machine-rolled cigars and smoking tobacco reported growth in net sales was 2% for the full year. The growth was impacted by the acquisition of Mac Baren from the second half of 2024, while organic growth in net sales was slightly negative by 0.5%. The gross margin before special items was 50.8%, broadly in line with the full year of 2024. But as the graph also indicates the last 12 months margin declined -- sorry, the last 12 months margin declined significantly throughout 2024, primarily as a result of the high volume decline rates we experienced in machine-rolled cigars throughout 2024. In that context, the stabilization of the category margin is encouraging, although still not satisfactory. The current margin level remains negatively impacted by changes in product and market mix as well as disruptions caused by our SAP rollout in Europe. With the financial ambitions we have communicated, we need to protect and improve the margin, not only for machine-rolled cigars but also for smoking tobacco. For the fourth quarter, organic net sales for the category were unchanged, comprised by a low single-digit growth in machine-rolled cigars and a low single-digit decline in smoking tobacco. Now let me give you an update on the market share development in our machine-rolled cigars. The total market for machine-rolled cigars in Europe is estimated to have declined by 1.2% in the full year of 2025 based on preliminary data for our 7 key markets and with the decline rate for the fourth quarter estimated to be 2.8%. The data can deviate somewhat quarter-by-quarter and year-by-year from the underlying trends, and we don't regard 2025 market development as an indication of a sustainable improvement. Our base scenario of 2% to 3% structural decline rate is maintained, and for 2026, we expect a 3% market decline in Europe. Measured by our market share, we experienced a stabilization in the fourth quarter compared with the third quarter. The market share index was 26.3% for the fourth quarter and 26.8% for the full year of 2025. As mentioned with the Focus2030 strategy, we will invest in strengthening our positions as stronger market share positions are crucial to deliver long-term value in the category. With this, please turn to the next slide. So moving on to next-generation products, which comprises our nicotine pouch business and currently accounts for 5% of group net sales and slightly less of gross profits. For the full year 2025, reported net sales growth was 2% and organic growth was minus 17%. However, these data points do not give the full picture of the positive development we experienced for the category. The full year growth was significantly impacted by the discontinued distribution of ZYN in the U.S. but the reported growth rates were also impacted by the nicotine pouch portfolio we acquired from Mac Baren in the middle of 2024 and the ongoing streamlining of the brands, ACE and GRITT now being sold in fewer markets. Importantly, our brand XQS delivered 55% organic net sales growth and the market share in Sweden increased from 7.8% in 2024 to 12.3% in 2025. And by the end of 2025, the market share was above 13%. Our market share in the U.K. also improved during the year, although it is still only close to 1%. The category gross margin before special items was broadly unchanged at the level of 35% for the full year 2025 compared to 2024. As a result of the continued expansion of XQS to new markets and with investments to increase market positions, the EBITDA margin was only slightly positive for the year. During the fourth quarter, our nicotine pouch business delivered 42% reported net sales growth and 37% organic net sales growth. XQS -- the XQS brand delivering 87% organic growth, driven by a strong performance in the U.K. and Sweden. With this, I will now leave the word to Marianne for more details on the financial performance, please turn 2 slides to Slide #15. Marianne Bock: Thank you, Niels. In 2025, the commercial division Europe Branded comprised 36% of group net sales, North America Branded & Rest of the World, 33% and North America Online & Retail 31%. For the full year, organic net sales growth for the group was minus 3%. Europe Branded delivered minus 1%; North America Branded & Rest of the World, minus 5%; and Online & Retail, minus 4%. For Online & Retail, growth was impacted by the discontinued distribution of ZYN from the second half of 2024. In the table, we have shared an overview of the margin structure for each of the divisions measured by gross margin before special items as well as EBITDA before special items. For Europe Branded, the gross margin before special items was 48%. North America Branded & Rest of the World delivered 46% and Online & Retail, 38%. These differences in margin by division reflect product and market mix and for Online & Retail business being a direct-to-consumer business, whereas the 2 other divisions are business to business. The group margin was, as already mentioned, at 44%. Measured by EBITDA, the margin differences are even wider with Online & Retail delivering the lowest margins, while North America Branded & Rest of the World delivered the highest margin, primarily as these markets do not have own sales organizations. We'll now move to each of the divisions. So please turn to Slide #16. I will begin with Europe Branded. For the full year, reported net sales grew by 6%, largely due to the acquisition of Mac Baren in the third quarter of 2024. Organic net sales growth was slightly negative as increased sales of nicotine pouches were offset by declines in machine-rolled cigars and smoking tobacco. During the year, our gross margin before special items decreased from nearly 49% in '24 to 48% in '25. The decline was driven by changes in product mix with a strong growth in net sales of our nicotine pouch brand, XQS and lower sales of smoking tobacco. The same factors contributed to a decrease in the EBITDA margin, which fell from 21% in '24 to 19.8% in '25. Overall, profit margins for Europe Branded are affected by shifts in product and market mix as well as disruption in product availability. Reported and organic net sales growth for the fourth quarter was 6%, driven by both nicotine pouches and machine-rolled cigars. However, declines in both gross margin and EBITDA margin were due to the rapid growth of nicotine pouches compared to other product categories. Now please turn to Slide #17. For the full year, reported net sales decreased by 4% and organic growth declined by 5%. The acquisition of Mac Baren contributed positively to reported growth, while the weakening of U.S. dollar against the Danish krone has a nearly equal negative impact. The full year gross margin before special items decreased from almost 51% in '24 to 46% in '25, primarily due to changes in product and market mix. This was most notably affected by lower sales of high-margin machine-rolled cigars and smoking tobacco products. For the fourth quarter, reported net sales for North America Branded & Rest of the World fell by 12%. Organic growth was negative by 7% as growth in handmade cigars could not offset a high single-digit decline in machine-rolled cigars and smoking tobacco. The category other, which includes sales of accessories and similar items, also experienced negative growth during the quarter. The decline in the gross margin during the fourth quarter was even steeper compared to the full year decrease as the quarter was compared to a particularly strong fourth quarter in 2024. Additionally, lower sales of machine-rolled cigars were primarily driven by reduced sales in our high-margin markets in Australia and Canada. These dynamics were also the main factor behind the significantly lower EBITDA margin before special items during the fourth quarter, impacting not only North America Branded division but also the group margin for the period. Now please turn to Slide #18. For the full year, North America Online & Retail reported growth in net sales decreased by 8%. Organic growth was down 4% but excluding the discontinued distribution was slightly positive. Underlying organic growth included gains in our retail stores, while our online business experienced a slight decrease. In retail, we are seeing the benefits of opening new stores over the past year. However, same-store sales were marginally lower due to a renovation of our largest store in Fort Worth, Texas, as Niels mentioned earlier. Competitive pressure remains strong in the online channel but our pricing strategies are gradually improving our market share. Throughout the year, both gross margin and EBITDA margin were affected by the intensified promotional activities aimed at expanding our market position. For the fourth quarter, reported net sales decreased by 8.6%, primarily due to currency fluctuation. Organic growth was down 0.5%, with retail achieving 7% growth and online business showing a slight decline. Gross margin and EBITDA margin before special items in the fourth quarter were impacted by the high level of promotional activities, which have continued into 2026. I'll now move to an update on group financial performance. Please turn 2 slides to Slide #20. Throughout the presentation, details regarding developments in net sales, gross margin, EBITDA margin have already been given. Now I would like to provide a few additional comments on select financial details and key metrics. In 2025, special items amounted to negative DKK 200 million compared to DKK 279 million in '24. These costs can be divided into DKK 130 million for the SAP implementation and DKK 70 million for reorganizations and the integration of Mac Baren. We expect special costs in '26 will total approximately DKK 275 million before gradually tapering off in '27. Higher net financial costs were driven by both increased net debt and the refinancing of our corporate bond, which took place in September '24. We refinanced our existing EUR 300 million bond, which matured in '24 with a new facility of similar DKK 300 million. However, the new bonds were issued with a coupon interest that was almost 3.5 percentage points higher, reflecting the prevailing market rates at that time. Financial costs, including exchange losses, increased by nearly DKK 100 million compared to 2024. We have already addressed the effect of the discontinued distribution of the ZYN nicotine pouch product, which negatively impacted group organic net sales by 1.3%. This implies that the underlying decline for the year was 1.8%. Finally, I'd like to address the decline in return on invested capital, which is a key KPI for us as we strive to meet our new financial ambition. Return on invested capital decreased to 7.9% from 9.4% in '24, while our ambition is to achieve a return on invested capital above 11% in 2030. Excluding the impact of special items, which are included in the calculation, return on invested capital was 9.3% in 2025, almost similar to '24. The decline in return on invested capital for the year was primarily due to lower EBIT as invested capital remained broadly unchanged at DKK 14.5 billion. Please turn to Slide #21. Niels mentioned in his opening remarks, the free cash flow before acquisitions was approximately DKK 200 million below our guidance. The free cash flow was DKK 595 million compared to DKK 931 million in '24, and our guidance range was DKK 800 million to DKK 1 billion. In the fourth quarter, free cash flow before acquisitions was DKK 147 million compared to DKK 604 million in the fourth quarter of '24. The lower cash flow during the quarter relative to our expectation was due to delays in collecting of receivables associated with our ERP implementation in Europe. This issue has now been resolved. Payments are beginning to be recovered, and we anticipate working capital will return to normal levels during the coming months. The delayed payments are expected to have a positive effect on cash flow during the first half of 2026. The effect on working capital during the fourth quarter resulted in an unusually negative contribution from changes in working capital with a reduction of DKK 17 million in the quarter, which was DKK 180 million lower than the positive contribution during the fourth quarter of '24. Typically, working capital changes are positive in the fourth quarter of the financial year. Other factors contributing to the lower cash flow in the fourth quarter included a reduced EBITDA and higher taxes paid, which in the illustration is included in investments and other. Now please turn one slide to Slide #22. In the fourth quarter, the leverage ratio increased from 2.9x by the end of third quarter to 3x by the end of 2025. The increase is due to a decline in EBITDA before special items compared to the fourth quarter of last year. Compared to '24, the leverage increased from 2.6x. Throughout '26, we remain fully committed to lowering the leverage ratio and working towards our target ratio of 2.5x. This is a top priority for us this year, and if our earnings come under greater pressure than anticipated, we will take necessary steps to ensure the leverage ratio is reduced. Now please turn to Slide #23. In November, we announced our capital -- new capital allocation policy, which is guided by a leverage target of 2.5x. This target determines the level of investments and shareholder payout, giving us the financial flexibility to pursue growth opportunities while delivering shareholder returns. It also emphasizes our commitment to maintaining an investment-grade credit rating. We transitioned to a payout ratio-based dividend policy, ensuring dividend distributions are closely aligned with our underlying financial performance. The dividend payout ratio is set between 40% to 60% of adjusted earnings per share. This approach will take effect with dividend allocation related to the '25 financial results and will impact the dividend proposal for the upcoming Annual General Meeting in April. Since our listing in 2016, we have consistently delivered on our shareholder returns and intend to continue doing so. Given the current leverage ratio, we believe it is prudent to propose a dividend payment of 2025 in the low end of the payout range. The Board of Directors plan to propose a dividend payout per share of DKK 4.5 corresponding to a payout ratio of 42%. As we normalize our leverage in the coming years, we intend to create greater capacity for share buybacks, which continue to be an essential component in our overall capital allocation policy. With this, I will now hand the presentation back to Niels. Please turn 2 slides to Slide #25. Niels Frederiksen: Thank you, Marianne. For 2026, we expect the consumer trends to be unchanged for most of our product categories and markets and broadly similar to historic trends. We do appreciate that uncertainties are elevated and the risk for external disruptions remain high. However, we believe we have established good control of our internal processes and operations following the implementation of the SAP solution throughout Europe, and we are now well prepared to execute on our new strategy. For 2026, we expect group net sales growth at constant currencies to be in the range of minus 2% to plus 2%. The expectation reflects that total market volumes for machine-rolled cigars in Europe will decline by 3% and consumption of handmade cigars in the U.S. will decline by 4%. Improving our market shares, growing our U.S. retail and nicotine pouch businesses are expected to offset the volume declines in our core combustible categories. For 2026, we expect the EBIT margin before special items to be in the range of 13% to 14.5% compared with the 14.9% in 2025. The expectation reflects that 2026 will be a year of stabilization and where we will continue investing to facilitate our long-term ambitions in Focus2030. Pricing is not expected to fully offset the impact from cost increases, changes in product and market mix as well as our increased promotional activities to protect and improve our market share positions. On a more technical note, an increase in the amortization of trademarks of approximately 1 percentage point on the EBIT margin before special items is expected to be largely offset by an expected higher income from certain duty refunds. The increase in amortization reflects the group's new strategic direction with stronger focus on power brands, implying that brands outside the scope of power brands going forward are classified with a finite useful lifetime. For 2026, the free cash flow before acquisitions is expected in the range of DKK 950 million to DKK 1.2 billion, reflecting the expectations for net sales and margins as well as the delayed payments from trade receivables, which Marianne talked to, impacting cash flow positively in 2026 with an expected effect on cash flow during the first half of this year. Now this concludes our presentation for today's call. I'll now hand the word back to the operator, and we are ready to take questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question over the audio lines. And the question comes from the line of Niklas Ekman from DNB Carnegie. Niklas Ekman: First question is regarding the guidance for 2026 because at the Capital Markets Day in late November, you talked about an ambition for a low single-digit growth of EBIT. And it looks now like even the upper end of the full year guidance suggests a decline and the low end, a quite significant decline. So can you elaborate a little bit on this? Is there anything that has worsened since the Capital Markets Day in November? Marianne Bock: Thanks for the question. So when we talk about a low single-digit increase in EBITDA, it is over the strategy period. We are believing that 2026, which we also said at the Capital Markets Day is what we call a year of stabilization. We need not only to stabilize the internal disruption that we have seen in '25 but we also need to stabilize both our handmade cigar business and our machine-rolled cigar business. And that will entail investments into regaining market share but also in promotions. So we still believe that over the strategy period, we will see low single-digit growth in EBIT. But in '26, we could see a decline. Niklas Ekman: Can I also ask about your view on margins and potential cost reductions and particularly given the quite steep margin decline we've seen in recent years. You've now have margins that have dropped below pre-COVID levels and the guidance for '26 suggests a further decline. Are you in a stage now where you are looking more actively at your cost base again and maybe at initiating more significant cost reductions in order to curb the margin decline? Or what's your view on that? Marianne Bock: Yes. Thanks again, Niklas. So if we talk margins in '26, margins in '26 will also be impacted by mix, which means that our nicotine pouch business, we expect to grow but we are also seeing declines in our fine-cut business that has very high margins. When we talk about cost programs, we announced at the Capital Markets Day a cost program of DKK 200 million over the coming years. We are, as we speak, executing on these cost programs. We have full plans in place for those DKK 200 million, and we will see that coming in, during '26 and also '27. I would also say that if we see markets are worsening compared to our expectations, we will, of course, look at our cost levels. Niklas Ekman: Okay. Very clear. I'm also curious, when I look through the report, you used to talk a lot about the growth enablers. And now you talk more specifically about next-generation products and the retail stores. Is this a definition that you have removed? And is this because you don't -- you no longer see the international handmade business as a major growth driver? Niels Frederiksen: Yes, it's a good question, Niklas. I think that with the new strategy, you can say that retail expansion and nicotine pouches still play a central role. But the growth in international handmade cigars is still important to us, but we have prioritized doing well in handmade cigars in the U.S. more. So referring to the growth enablers as we originally defined them makes less sense. We now want to be more focused on stabilizing earnings in the machine-rolled cigars, smoking tobacco, growing the handmade with a focus on the U.S. and growing nicotine pouches. So we will try to articulate the degree to which we succeed with these things in a different way than referring to the growth enablers. Niklas Ekman: Very clear. And just a final question. Am I right to assume that buybacks are quite unlikely in '26. When I look at your leverage ratio and your aim to get net debt below 2.5x EBITDA, I guess the only way to get there is if you stick to dividends and not buybacks. So buybacks are unlikely in '26. Is that a right assumption? Marianne Bock: I think the short answer is yes. Operator: Now we are going take our next question, and the question comes from the line of Sebastian Grave from Nordea. Peter Grave: I apologize for those being broadly in the same line of Niklas. But I'll start off with a question on the margin here. So for the guidance of '26, you're guiding for quite steep margin declines compared to '25, even from a fairly low starting point in '25. And I know you talked about increased investments in market shares. But I mean, on the flip side, I would assume that you should see some tailwind from Mac Baren synergies. There should also be some SAP efficiencies and cost takeouts as highlighted in the Capital Markets Day. So at least in my view, it looks like underlying the margin pressure here is way more pronounced than what is -- we can see from the highlighted numbers here. So could you maybe help me understand how this works and how exactly this aligns with your articulated ambitions of protecting earnings in the short term? Marianne Bock: Yes. Yes. Let me start out, Sebastian. And first of all, thank you for asking questions, and then Niels can also elaborate. But if you look at our guidance range, both when we look at top line and also margins, it is quite wide ranges if you compare to our business. And it is a signal of uncertainty on our total markets, how they're going to develop but also uncertainties in the external world. So we are anticipating a slight decline in margins in '26 due to the reasons that I mentioned to Niklas. We are on track on the synergies for Mac Baren. You talk about SAP synergies. There will also come synergies in on the SAP implementation. But as we are still rolling out, we're focusing on that rather than executing on those synergies for now. Niels Frederiksen: Yes. I can add, Sebastian. I think when you look at Europe and machine-rolled cigars, you have the area where you have a lot of mix of product and market. The thing that is, let's say, not new but is more sustained and we can also see it continuing into 2026 is the promotion pressure applied across all sales channels in the U.S. So even though we take price increases and we continue to have a high focus on that, margins are under pressure simply to stay competitive, both on a, let's say, a brand level to regular retail and on an online level competing in the U.S. So these are some of the key dynamics that are in play and which we are obviously working very closely to improve but that is what is reflecting the margin pressure that Marianne also referred to. Peter Grave: Okay. So what I'm hearing you saying, Niels, is that you are in a difficult consumer environment in a structurally declining category with fierce competition. And hence, is there any reason to believe that invest in these currently elevated investments in market shares that they should taper off in the near term, i.e., in '27, '28? Niels Frederiksen: Yes. I think that the way to think about this is that market conditions have intensified, if I can put it like that. And our strategy aims at protecting and enhancing market shares, and that comes with a higher promotion pressure. Our job over time is to let's say, improve or lower that promotion pressure and still do well on market shares but it requires the market conditions to improve. So you can see the combination of total market declines and the -- let's call it, the fight for market share is what is putting the pressure on the market. And we have, of course, an expectation that over time, that will normalize. We've not seen promotion pressure like this and downtrading on this for some time. Peter Grave: Okay. That is fair. And my last question is going back to the ambitions of harvesting some DKK 200 million efficiency gains as you talked about in the I understand that some of these ambitions have already translated to initiatives but can you maybe help explaining how much of the DKK 200 million is already reflected in the '26 guidance and how much we should expect beyond that? Marianne Bock: Yes. So I would -- for the '26, I would think it in the level of around DKK 100 million. Peter Grave: Okay. Okay. So half of the efficiency gains... Marianne Bock: Sorry, Sebastian, then going into '27, we'll be closer to DKK 200 million but probably not fully, and we'll see the last part coming in, in '28. Operator: [Operator Instructions] And we're going to take our next question on the audio line. And it comes from the line of Damian McNeela from Deutsche Numis. Damian McNeela: The first one is on Canada and Australia because I think in the press release last night, you called out challenging conditions there and the impact that, that's had on the business. You did mention in the presentation. Can you talk a little bit about what's happening in those markets and what the outlook for this year is, please? That's my first question. Niels Frederiksen: Thank you, Damian. And if I start with Australia, for those that follow the industry closely, it's maybe no surprise that we have seen an explosion in illicit trade. So a lot of tobacco companies, including ours, have seen earnings decline by quite a bit in Australia. And this is, let's say, increased for us in the sense that we had because of regulatory changes, a relatively higher sales in 2024 than in 2025. So the net impact of Australia on our profitability is quite distinct. So Australia is very much about a total market that is going illicit. And we are not losing market share, but basically losing volume simply because the legitimate market is lower, and it's a high profit market as we debate that will be discussed. For Canada, the situation is a little different. Also here, our market share position is strong and broadly unchanged. But in Canada, there is a -- from time to time, a larger sales into the Indian districts and the government have restricted some of those licenses they issue for selling in Indian districts, and that has affected our sales in Canada in 2025. So those are the 2 main explanations around Canada and Australia and them being among our highest margin markets does affect the average margin and total costs. Damian McNeela: Yes. And just as a follow-up on that Canada point, that's likely to remain the case for the medium term, is it? Niels Frederiksen: It's been -- over the years, this has been an on and off issue. So there's nothing wrong with selling in the Indian districts but they need licenses and sometimes the government takes it away from them and then a period passes and they get reinstated. So we are still of the view that they may come back but there's no guarantees around it. Damian McNeela: Yes. And so the guidance assumes no return for those... Niels Frederiksen: Yes. Yes. Damian McNeela: Yes. Okay. And then in MRC Europe, it looks like margins have stabilized, but market share losses have continued. I was just wondering whether you could sort of call out some of the competitive dynamics in your -- a couple of the bigger markets that you operate in. Just to give us a sense of how the business is performing now that the sort of ERP system is up and running and fully implemented? Niels Frederiksen: Yes. Let me try to give a few examples. So 2 of the key markets in our strategy is France and Spain. And as we have been resolving the inventory availability issues up until the end of 2025, we are seeing that market share is responding positively into 2026 but it's also us recovering from a low level. So we are still saying we have to be patient around how fast we can regain market share into 2026. But at least in these 2 markets, you can say that we have inventory availability back to where we would like to have it. When you look at other key markets in Europe, the situation is a little different. We have markets like the U.K. where there is a higher decline rate of machine-rolled cigars, and there's also a shift from regular machine-rolled cigars where we are strong to increasingly small cigars where we are competing up against some of the larger tobacco companies. So even though those categories grow, the mix in margin become again a net negative. When you then look to the Central European markets of Benelux and Germany. Here, we are, again, still concentrating on getting customer service levels back to where they need to be. And also here, you have in certain markets, this new dynamic of consumers shifting between what we call mainstream small cigars and little cigars, which are also cigars but sold at a lower price and typically in 10-pack cigarette type packaging formats. So it's -- what I'm really saying is it's quite a complicated picture when you look across the markets. What's important to remember is we have really strong market positions in many of these places, France, Spain, Benelux, U.K., and that's what we're trying to leverage to get the market share back. Marianne Bock: And then you were also asking about the competitive situation. And here, we are seeing -- which we've also seen over the years that our competitors are reluctant to take the same level of price increases, which we think is necessary to cover both volume decline and cost increases. Damian McNeela: Okay. So that hasn't changed at all. Marianne Bock: No. Niels Frederiksen: No. Damian McNeela: No. Okay. And then just on -- I guess this is a slightly more philosophical one. You've changed guidance from EBITDA to EBIT margins. I was just wondering if there was anything behind that decision to do that. Torben Sand: Yes, maybe I can answer that. First of all, we believe also now where we have a more distinct and clear focus on return on invested capital, it goes more in line with giving a guidance on EBIT. Secondly, the EBIT level also includes what we have seen in the past few years, increased investments and therefore, depreciation in especially our retail business. And then we have also noticed from kind of studies we have made with the market that it's a more common practice to guide on the EBIT level. So that's the key reasons for us changing that. Damian McNeela: Yes. Okay. That's clear. And then perhaps if I may, one last one, just on the XQS brand. Can you just sort of give a sense of the areas of focus for growth? I mean, obviously, Sweden is pretty strong already. Do you see increased investment behind the brand through the course of '26? Niels Frederiksen: We are seeing increased investments behind the brand, Damian. If you look at the geography, we talk a lot about Sweden. We talk a lot about the U.K., which are 2 important markets for us but we also consider, let's say, Scandinavia at large, and we are opening a new subsidiary in Norway later in the year. They will, of course, also include nicotine pouches in their portfolio. Finland is also in the focus area and certain Eastern European countries. So we are focusing on the European geography to build momentum also outside of Sweden. Operator: Thank you. Dear speakers, I have no further questions. Please continue. Torben Sand: Okay. Yes. Thank you. And I was simply just going to close off the call now. Thank you for listening in. Thank you for the questions. And yes, we will meet again in May after our first quarter results. Thank you, and have a good day. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

83天前Insight Analytics约5分钟阅读

STEM 2025 Q4 财报电话会议

Operator: Greetings. Welcome to Stem's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Erin Reed, Head of Investor Relations. Thank you. You may begin. Erin Reed: Thank you, operator. This is Erin Reed, Head of Investor Relations at Stem. We welcome you to our fourth quarter and full year 2025 earnings call. Before we begin, please note that some of the statements we will be making today are forward-looking. These statements involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. We, therefore, refer you to our latest 10-K and other SEC filings and supplemental materials, which can be found on our IR website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter and full year 2025 earnings release, which is on our website. Arun Narayanan, CEO; and Brian Musfeldt, CFO, will start the call today with prepared remarks, and then we will take your questions. With that, I will turn the call over to Arun. Arun Narayanan: Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. I am pleased to be speaking with you 1 year after assuming the role of CEO, and I could not be more proud of what the Stem team has accomplished over the past 12 months, best-in-class execution, unwavering commitment to our customers and each other and disciplined financial performance. 2025 was a transformative year that methodically, yet decisively reshaped Stem into a software-centric operationally disciplined organization. Every commitment we made and the proof of our strategic transformation is in the results. Today, I will take you through a look back on our fourth quarter and full year accomplishments. After that, I will walk you through our 2026 priorities and show you how we are determined to become the operating system for clean energy projects. And finally, I will give you a preview of guidance for the year ahead. Brian will follow with the detailed financial results and our complete 2026 outlook. In 2025, we delivered on guidance across every metric. Full year 2025 revenue grew 8% year-over-year to $156 million with over 55% of that revenue coming from software and services, evidencing our successful and ongoing transformation. Software, services and edge hardware revenue grew by 25% year-over-year to $141 million. Year-end ARR grew 16% year-over-year to $61 million. In 2025, we substantially expanded gross margins and considerably reduced our operating expenses. We achieved 3 consecutive quarters of positive adjusted EBITDA, resulting in our first ever full year positive adjusted EBITDA of $7 million. We also achieved positive operating cash flow for full year 2025, another first and major accomplishment in the company's history. Throughout the year, we continued to deepen and expand our PowerTrack platform, delivering meaningful improvements in platform stability, performance and customer experience. We added 6 gigawatts of solar assets to a total of 36 gigawatts under management and added $7 million in PowerTrack ARR to reach $41 million. In 2025, we accelerated our R&D efforts, leveraged AI tools and rebuilt our product road maps. We successfully launched 2 new products last year. Both products, PowerTrack EMS and PowerTrack Sage, have resonated well with our customers, and we are encouraged by the early traction. We launched PowerTrack EMS in September 2025, and it is a premier solution for utility-scale projects. This morning, we announced a new engagement with Everyray, a German clean energy developer and EPC. This 100-megawatt hour deal further expands Stem's presence in Germany and reinforces PowerTrack EMS' role as the control backbone for sophisticated utility-scale storage deployments across Europe and other international markets. Commercial operations for those deployments are expected to commence in the summer of 2026. Our expansion into the utility-scale market, both domestically and internationally, gained meaningful traction in the fourth quarter with utility-scale bookings increasing 10% sequentially. Notably, nearly all fourth quarter utility-scale bookings were driven by international solar projects, underscoring growing demand in global markets. I talked with you about PowerTrack Sage, our AI-powered assistant in previous calls, and I continue to be excited about it. We deployed PowerTrack Sage in the fourth quarter to more than 80 customers for a beta trial and the feedback has been overwhelmingly positive. PowerTrack Sage will be generally available at the end of this month. At launch, we will deploy a light version across the entire PowerTrack customer base, embedding AI-assisted capabilities into the core platform from day 1 and accelerating adoption at scale. This universal rollout ensures immediate value realization while positioning AI as a foundational component of the PowerTrack experience. For customers seeking deeper automation, advanced analytics and expanded workflow functionality, we will soon offer premium tiers at incremental cost, creating a clear pathway for upselling, monetization and long-term platform expansion. Finally, our managed services business delivered solid fourth quarter performance, highlighted by a new brownfield agreement. Under this deal, we will operate and optimize a 4-site energy storage portfolio for a Southern California utility. Our services include real-time asset monitoring, enrollment and dispatch into California demand response programs, performance reporting to optimize site dispatches and energy cost savings and more. This is a solid proof point for our differentiated managed services capabilities and validation of our brownfield strategy. Overall, the result of 2025 is this. Stem has established a stable, increasingly profitable, software-centric business model. 2025 was about transformation and achieving stability. 2026 is about operational leverage and building for scale. So let's dive in. As we enter the new year with strong fourth quarter momentum, we are focused on 3 new priorities: Priority #1: Driving operational leverage; Priority # 2: Continuing to strengthen our core business; and, Priority #3, building the foundation for accelerated growth in 2027 and beyond. Now let's dive deeper into each of these in turn. First, driving operational leverage. We have built a sustainable business model. And in 2026, we intend to demonstrate the leverage it creates. Our software-centric model delivers predictable, high-margin revenue and cost discipline is now embedded in the culture of this company. In 2026, we will continue integrating AI across the organization to drive productivity improvements, and we will maintain our relentless focus on cost reductions, cash conservation and working capital management. Second, strengthening our core business. We remain focused on driving core platform excellence for PowerTrack in 2026. The platform maintains its market-leading position in commercial and industrial solar monitoring in the U.S. This year, we will deliver further platform stability, scalability and simplified intelligent UI updates that drive customer value and retention. The domestic C&I solar market, where we already hold significant share, offers moderate growth in 2026, but this is a stable, high retention base that continues to generate recurring revenue. Additionally, we are targeting a brownfield strategy to further increase our market share as well as a range of other adjacent offerings. Our other core business, managed services for energy storage, continues to be a differentiated offering that sets Stem apart from competitors. Our brownfield strategy remains a key focus as does actively pursuing greenfield opportunities. We are scaling in existing domestic markets, leading with our proof of performance and winning with our differentiated offerings. And finally, to priority #3, building for growth in 2027 and beyond. Outside of our core C&I solar and storage businesses, we are focused on expanding our utility-scale footprint domestically and internationally. We are targeting key markets across Europe, leveraging local support infrastructure that we have built and continue to invest in. Both the domestic and international utility-scale storage and solar markets are growing, and we are well positioned to capture rising demand and take share. Power EMS helps us differentiate in the utility-scale space by providing a solution for hybrid solar plus storage sites and also stand-alone BESS sites, which are increasingly common in the utility-scale market. We expect meaningful revenue conversion of PowerTrack EMS bookings to begin at the end of 2026 and the beginning of 2027. While we are bringing PowerTrack EMS to market this year, we are also exploring other ways in which our team's expertise and our technology can deliver value in the clean energy space. This year, we are starting with 2 areas of emerging opportunity. First, as part of our suite of professional services offerings, we are developing AI services that leverage our domain expertise and operational knowledge to help customers identify, prioritize and deploy the current iteration of generative AI solutions in a way that generates real economic outcomes. These offerings are distinct from PowerTrack Sage, and they are focused on helping customers unlock value across their broader operations. And our second area of opportunity is with data centers. More and more, we are seeing data centers adopting renewables as a power source. We believe Stem has the foundational technology and deep expertise in both solar and storage to be a meaningful player in this market. I am encouraged by these options. We see a natural extension of our existing capabilities driving our entrance into the space, and I look forward to updating you all on our progress in the coming quarters. 2026 is an optimization year, focused on margin expansion and operating leverage while we continue to invest selectively in the capabilities that will drive scale in 2027 and beyond. I want to be deliberate about that framing because it shapes how you should think about our trajectory. PowerTrack EMS was launched in late 2025. It accelerates through the end of 2026 and meaningfully scales in 2027 and beyond. Our utility-scale team is building meaningfully in 2026, and this foundation will drive us towards taking share in 2027 and beyond. We believe that the market positions we are strengthening today will pay dividends for years to come. The building blocks we are putting in place span every dimension of the business. On technology: our AI integration, improving stability and scalability. On markets: international expansion and utility-scale expansion here and abroad. On products and offerings: a comprehensive suite from solar monitoring to storage optimization. On operations: building operating leverage and driving operational excellence. Expanding the value chain of our offerings today sets up the foundation for future growth. This is important to note because it ties into our core software-centric vision for Stem. We are determined to become the operating system for new energy projects across solar, storage and hybrid assets and in different market segments and geographies. Before turning it over to Brian, let me introduce the key themes of our 2026 guidance. We are entering the year with a strong foundation from our 2025 execution and believe we are well positioned to execute on our commitments. We expect our software-centric strategy to drive moderate top line revenue growth, strong gross margins and significant adjusted EBITDA expansion, supported by continued software momentum, our expanding product suite and the operational leverage we have built into the business. Brian will provide a more detailed look at our 2026 guidance and also dive deeper into our fourth quarter and full year 2025 financial results. With that, let me pass over the call to him. Brian Musfeldt: Thanks, Arun, and hello, everyone. Let's walk through the results. For the full year 2025, we were in line or above all of the financial expectations we outlined on our third quarter call. We exceeded our profitability guidance, demonstrating the dedication to operational discipline that runs through this organization. For the full year of 2025, total revenue was $156 million, up 8% year-over-year. Most importantly, revenue from software, services and edge hardware, the core of our software-centric model, was up 25% year-over-year to $141 million. Battery hardware resale was $15 million for the year, consistent with our strategic deemphasis of lower-margin business. This shift in revenue mix is precisely what we committed to delivering, and it is reflected in our improved gross margin performance this year. Turning now to the fourth quarter. PowerTrack software revenue continued its strong performance, growing 14% year-over-year and edge hardware revenue grew an impressive 21% year-over-year. Managed service revenue was up 51% year-over-year, driven in part by onetime performance-based revenue, where we exceeded asset operational targets. Battery resale revenue was down from $27 million to less than $1 million year-over-year as expected. Project and professional services revenue increased significantly year-over-year, driven by approximately $11 million of onetime DevCo revenue recognized in the fourth quarter. Excluding DevCo, fourth quarter project and professional services revenue was up 27% year-over-year. I also want to note that as of the end of the year, we have sold or written off all of the project assets associated with DevCo from our financial statements, and we do not intend to make any further investments in DevCo assets moving forward. Now let's take a look at gross margins. For the full year 2025, we achieved record GAAP gross margins of 38% and record non-GAAP gross margins of 46%, driven by decreased battery hardware sales, a favorable software and service revenue mix and improved edge hardware margins. Fourth quarter GAAP gross margins were 49% and non-GAAP gross margins were 45%, continuing our strong results. You can again find the detailed revenue and margin breakdowns we introduced last quarter in our supplemental materials on our IR website. Full year 2025 cash operating expenses were down 41% from 2024, and fourth quarter cash operating expenses were down an impressive 50% year-over-year. We are building sustainability into our cost structure, not temporary reductions, but permanent structural efficiency while simultaneously developing new products and entering new markets. That combination is the foundation of our operating leverage thesis moving forward into 2026 and beyond. The improved margins and significantly reduced OpEx in 2025 drove positive adjusted EBITDA of approximately $7 million for the year, above the high end of our guidance range and representing the first year of positive annual adjusted EBITDA in Stem's history. We achieved 3 consecutive quarters of positive adjusted EBITDA this year, with the fourth quarter coming in at $5 million, a 30% improvement from fourth quarter of 2024. The improvement was primarily driven by improved gross profits and reductions in operating expenses with modest additional benefit related to the final sales of the DevCo project assets. Full year operating cash flow was $7 million, slightly above the high end of our revised guidance. The fourth quarter benefited from the sale of our DevCo project assets and other favorable working capital movements. We ended the fourth quarter and full year 2025 with $49 million in cash, up from $43 million at the end of the third quarter. This is a solid liquidity position that supports our '26 plans. And now turning to our operating metrics. Fourth quarter bookings were $33 million, up slightly from last quarter due to increased software and service bookings, offset by decreased battery hardware bookings. Contracted backlog was $21 million, down 4% from $22 million last quarter due to decreased battery hardware bookings. Our end of year 2025 backlog is 2% higher than it was at the end of 2024 and excluding battery hardware, is 23% higher than prior year. CARR decreased $3 million sequentially to $67 million due to lower managed services bookings and the cancellation of a managed service customer agreement. This customer cancellation driven by adjacent nonscalable product requests outside of our road map, impacted CARR by $3 million, ARR by $1 million and AUM by 0.1 gigawatt hours. Despite this cancellation, total company ARR grew 1% sequentially and 16% year-over-year to $61 million, supported by increased PowerTrack software bookings. Turning now to our full year 2026 guidance. We are encouraged by the strong momentum we carried throughout 2025 and that we bring forward into 2026. We expect that performance to accelerate as we advance throughout the year. For revenue, we expect total revenue in the range of $140 million to $190 million. Within that range, we expect $130 million to $150 million to come from high-margin software, services and edge hardware revenue, our core business. We expect the remaining balance of up to $40 million to be driven by battery hardware resales, which remain opportunistic and are not a strategic priority. We expect non-GAAP gross margins of 40% to 50%, broadly in line with our 2025 performance. Higher battery hardware resales would cause gross margin percentage to trend toward the lower end of that range. We expect adjusted EBITDA of $10 million to $15 million, representing approximately 85% growth at the midpoint versus full year 2025, driven by revenue growth, operating expense discipline and increased operating leverage. We expect operating cash flow of $0 to $10 million, reflecting stable cash generation from operations for the year. And finally, we expect ARR of $65 million to $70 million, representing approximately 10% growth at the midpoint, continuing the momentum from 2025. I'm extremely proud of what the team has accomplished in 2025, and we are continuing to build a strong foundation into 2026 that sets us up for accelerated growth in 2027 and beyond. And I will now pass the call back over to Arun for closing remarks. Arun Narayanan: Thank you, Brian. As I reflect on 2025, I am struck by the scope of what our team accomplished. We delivered a business transformation, executed a financial turnaround, completed 2 new product launches and demonstrated a clear strategic path forward. We said we would do it, and we did it. As I look ahead through the remainder of 2026 and beyond, I am confident. We have 3 clear strategic priorities to guide us in 2026. We have an ambitious but achievable adjusted EBITDA target and multiple growth drivers that derisk execution. And last but certainly not least, we have a team with a proven track record of executing. Our long-term vision is to build a scalable, profitable software and services company that holds a market leadership position in clean energy intelligence. Stem is uniquely positioned to capitalize on the ongoing clean energy transformation with a market-leading platform, a growing product suite and an expanding global footprint. To our customers, we are grateful for your continued partnership and trust. To our investors, we appreciate your support through this transformation and your confidence in our vision. To our team, your execution through a challenging transformational year reflects your talent, your resilience and your dedication. Thank you. With that, I will ask the operator to open the line for questions. Operator: [Operator Instructions] Our first question comes from Justin Clare with ROTH. Justin Clare: I wanted to start off on the PowerTrack EMS launch. So you mentioned that you could see an acceleration for PowerTrack EMS in 2026, but more meaningful scale in 2027. So just wondering how we should think about the timing of bookings for the product. Could we see an increase as early as Q1 or Q2? Or is that more of a second half dynamic? And then just wondering if you could talk through the typical sales cycle and lead times for the EMS deployments. Arun Narayanan: Justin, thank you for your question This is Arun. Good to hear from you again. PowerTrack EMS was launched in September 2025. And the reason we are so excited about it is it is the first time we are able to address a solar and storage solution and address a customer's need completely. If you think about even the press release that we put out today, we are able to work with newer customers in international markets as well as customers domestically as well. And the main sort of aspect of these solutions are geared towards utility-scale projects. Inherently, they are a longer life cycle, and this means that we need to give time to build the business, build the pipeline, engage with the customer and make sure that the solution is a good fit and then work with the customer through the commissioning of the project all the way to revenue recognition. So it does take some time, and we are working on that today. Justin Clare: Okay. And then I guess curious, would you anticipate the revenue [Audio Gap] recurring revenue stream, but maybe you could help us understand that. Arun Narayanan: Yes. So it depends on the components, right? So think about a project that we deploy, it would have hardware, software as well as service components and the mix of these 3 components would be the totality of the contracts that we are executing. Depending on the component we're talking about, the revenue recognition would follow specific time line. So maybe hardware is recognized immediately upon delivery, but the service component would need to run through the commissioning life cycle. So that -- if you look at the Everyray press release that we announced today, we are encouraged by the feedback that we're getting from our customers. That's a 100-megawatt hour project that we have deployed. And just connecting back to the remarks that we made earlier, we are looking at 2026 as a way to build the foundation and then see 2027 as the point at which we're able to scale the revenue. Justin Clare: I see. Got it. Got it. Okay. And then just on the 2026 guidance, it does look like the battery resale revenue up to $40 million. That's a fairly meaningful increase potentially from the 2025 storage resale revenue of $15 million. So just wondering if you could speak to what's driving the increase there, considering you are shifting emphasis toward software and services, are you still seeing demand from customers where they prefer you to do the procurement? Arun Narayanan: I would characterize Stem as a trusted adviser. We have really good relationships with our customer and the ability for our technical expertise in the organization to assist customers through that journey is very valuable to our customers. So we have deemphasized the OEM hardware resale component of the business. But when we see opportunities to help customers meaningfully and it doesn't use up our balance sheet, we do pursue it. And this is how we see the year develop, and that's how we are guiding to it. Justin Clare: Got it. Okay. And then just one more on margins. Wondering if you could give us a sense for how you see the gross margins evolving for software, services and edge hardware in '26 relative to '25. It looks like you could potentially have a higher mix of battery hardware resale, which is lower margin. But overall for the year, it looks like margins could be flat year-over-year. So it implies there could be an expansion in the software margins. So just checking, is that the right interpretation and how we should think about it? Brian Musfeldt: Justin, this is Brian. Yes, I mean, we've guided you to 40% to 50% for the year. And that is obviously at a mix of kind of revenue, software services and hardware. We do break out for you now in our slide deck the kind of detail by each revenue kind of line. You can look at that in the appendix for that. But yes, I think you see that this year, software was over 70% or just north of 70%. So I think you can look at that from a mix perspective and based on our guidance and what we're looking at for improved software revenue will drive that mix up a bit. Operator: [Operator Instructions] There are no further questions at this time. This concludes our question-and-answer session. I'd like to turn the call back over to Arun for closing comments. Arun Narayanan: I want to thank everyone for joining our fourth quarter and full year earnings call, and we look forward to speaking with you next during our first quarter 2026 earnings call this spring. Thanks, everyone. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.

83天前Insight Analytics约5分钟阅读

PAGE.L 2025 Q4 财报电话会议

83天前Insight Analytics约5分钟阅读

PDYN 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Palladyne AI Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Brian Siegel, Investor Relations. Thank you. You may begin. Brian Siegel: Good morning, and welcome to Palladyne AI's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me on the call today are Ben Wolff, President and Chief Executive Officer; and Trevor Thatcher, Chief Financial Officer. Earlier this morning, Palladyne AI issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 2025, along with updated commentary regarding backlog and it's reiterated 2026 revenue guidance. A copy of that release, along with the accompanying financial tables is available on the Investor Relations section of Palladyne's website. Today's call will include prepared remarks from Ben and Trevor, followed by a question-and-answer session. During today's call, management will make forward-looking statements within the meaning of the federal securities laws. These statements include, but are not limited to, statements regarding Palladyne's 2026 revenue guidance, expected backlog conversion, anticipated quarterly operating cash usage, product development milestones, commercialization time lines, defense program activity, potential customer adoption, market opportunities and future strategic positioning across air, space, land and maritime domains. Forward-looking statements are based on current expectations, assumptions and beliefs involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others, Palladyne's ability to execute on development programs, convert backlog into revenue, scale production, manage operating expenses, integrate acquired businesses, secure additional contracts, maintain liquidity and navigate evolving defense and commercial market conditions. These and other risk factors are described in detail in Palladyne's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and subsequent filings. Palladyne undertakes no obligation to update any forward-looking statements, except as required by law. In addition, during this call, management will reference certain non-GAAP financial measures, which adjust for acquisition-related expenses, stock compensation, noncash warrant income or expense that are mark-to-market quarterly based on changes in the company's stock price and a tax benefit related to acquisitions. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in this morning's press release. With that, I'll turn the call over to Ben. Benjamin Wolff: Thank you, Brian, and good morning, everyone. Thanks for joining us. This is our first earnings call since I returned to the company 2 years ago and only our second press earnings release. In mid-January, we provided formal revenue guidance for the first time. Today, we are reiterating 2026 revenue guidance of $24 million to $27 million. That is roughly 4 to 5x our 2025 revenue. Additionally, backlog has already increased from approximately $13.5 million at the end of 2025 to nearly $18 million midway through the first quarter. We believe 2026 will be the first full year, where the structural transformation we completed in November, translates into measurable revenue growth. To understand why it helps to step back and look at what we built in 2025. We think about 2025 in 2 phases. The first phase was validation. In the first 3 quarters, we were upgrading Palladyne IQ. We integrated feedback from the U.S. Air Force, potential Fortune 100 customers and others who are using and gaining experience with our first IQ release. That work clarified where our commercial product needed improvement and a directly shaped IQ 2.0, which we completed and started showing to customers at the beginning of January. That resulted in our first signed commercial IQ customer contract a couple of weeks ago. At the same time, we advanced our collaborative autonomous drone product, Palladyne Pilot, and created a swarming variant branded, SwarmOS for Defense and National Security. We signed MOUs with Red Cat and Draganfly and expanded capabilities through military development contracts. We also strengthened the balance sheet, added senior military leadership to our Board and expanded our AI-related patent portfolio. Then in November, the second phase began, transformation. We acquired GuideTech, Warnke Precision Machining and MKR Fabricators. We launched Palladyne Defense. We added avionics design and engineering, proprietary UAV and missile systems, precision components, certified U.S.-based manufacturing and backlog. We moved from being primarily a development-stage AI company to a vertically integrated embodied AI-centric industrial and defense platform company generating meaningful revenues. In short, we exited 2025 fundamentally different. 2026 will be the first full year of operations as a vertically integrated embodied AI-centric industrial and defense company. Now before I talk about execution, I want to address something that underpins everything we are doing. How our AI is fundamentally different. This week, my co-founder, Dr. Garagic and I published a white paper that makes a simple point about our biologically inspired AI architecture. Most AI platforms live in massive, centralized data centers, taking up enormous real estate and consuming tremendous amounts of power. They are in a nutshell built to think. They analyze. They recommend. They identify patterns and connect dots that we humans could never do on our own. These AI platforms are basically Google search on steroids. But machines, think of robots and drones, operating in dynamic real-world environments, can't rely on centralized intelligence that lives in the cloud for a minute-by-minute instruction. Machines in the real world need to react instantly often in a split second, the way we humans do. They can't deal with communications latency or worse communication gaps or failures nor is it economical to have machines continuously connected to the cloud. So the answer is to put the intelligence on the machine itself, enabling these machines to function more similarly to the way we humans do. Nature got it right. The human nervous system does not ask permission for every movement. It reacts at the edge. It coordinates locally. It adapts in real time. It keeps functioning when communication is degraded. That biological model is the inspiration for the architecture we have built into our AI software products. Our autonomy lives at the edge. It operates on the machine. It collaborates across machines. It does not depend on instructions from a centralized set of algorithms that live in the cloud. Our white paper is now available on our website and on LinkedIn. I encourage you to spend a few minutes reading it, and feel free to drop me a note if you would like to discuss it further. SwarmOS enables decentralized edge-based distributed collaboration. IntelliSwarm combines SwarmOS with our BRAIN avionics platform to deliver a fully integrated hardware and software collaborative AI stack for drones and missiles. This is not simply cloud-based AI layered onto hardware. In particular, for defense applications, that distinction is a critical differentiator in contested environments and multi-domain operations. And this capability is the reason we were able to execute across air today and soon space as well. Since closing the acquisitions, we have moved with focus. On the commercial side, Matt Muta joined us from our Board of Directors to lead our commercial and industrial business. We released IQ 2.0 and signed our first customer through a systems integration partner deploying IQ for robotic surface preparation. While this deal is not financially material, it is strategically important. On the defense side, we introduced IntelliSwarm integrating SwarmOS into BRAIN X2. We also branded Project Banshee as Gremlin-X and advanced the development of this mini-bomber drone concept. We successfully demonstrated a cross-platform coordinated swarm using IntelliSwarm on Gremlin-X and SwarmOS on Red Cat drones. This isn't the kind of preprogrammed drone swarms everyone else talks about, rather, this is true autonomous swarming, where each drone perceives, reasons and acts and most importantly, collaborates. I'm often asked about the distinction between automation and autonomy, since many people think these words are interchangeable, they are not. Automation is preprogrammed routinized action. With automation, all of the decisions were made in advance by the humans who programmed the machine. In the machine -- if machine comes across something it wasn't programmed for, it is stuck, dead in the water until a human gets it back on track. With autonomy, the machine makes decisions. Yes, humans can still make decisions too, but that's not the definition of autonomy. What we do is autonomy, not automation. There are similar confusion about use of the word swarm or swarming in the context of drones. Just like there are many different levels of autonomy for self-driving cars, the same is true for drones. Those cool drone light shows with thousands of drones creating pretty images in the sky are a form of swarming, but they are preprogrammed automated swarms with no need or ability to deviate from the choreographed plan. Then there is the limited autonomy that many UAV companies tout today, which enables drones to automatically prevent collisions with one another when flying in close proximity. That is an important, albeit rudimentary form of autonomy. Next, there is full autonomous swarming, which the U.S. military refers to as wolf pack swarming. Wolf pack swarming takes the capability up a notch. This is where an advanced collaborative and hierarchical swarm of drones operates as a cohesive unit with specialized distributed roles, mimicking the behavior of wolfs to hunt, detect and destroy targets while at the same time, avoiding each other and obstacles. Finally, there is SwarmOS from Palladyne. SwarmOS delivers wolf pack swarming, but significantly upgraded with the closest thing there is to artificial instinct and intuition. It adds game theory optimization to predict intent and adapt to friendly and hostile moves, maximizing target coverage for intelligence, surveillance and reconnaissance and mission effectiveness when action is required. These are significant nontrivial distinctions. As you've probably noticed, there was a ton of confusion among OEMs, customers and investors on this very important point. Not all swarming is the same. Not all AI is the same. Not all software is the same. Some is more capable than others. We believe SwarmOS is truly unique and exactly what the Department of War needs. My life would be a lot easier if people in our industry would simply get the words right. So my goal today is to make sure the investment community can sift through the noise and truly understand the difference. As a company, our broader mission is to ensure that our differentiated capabilities are known and understood throughout the U.S. government and the military as well as with partners and defense contractors. We are also extending the same distributed autonomy model into the space domain. Through development work with the Air Force Research Lab, we are expanding SwarmOS to incorporate satellites as another source of sensor data, another node on our distributed information network, if you will, that can add to the knowledge used by our embodied AI to enhance mission effectiveness. Separately, we expanded our relationship with Portal Space Systems, advancing navigation, guidance, spacecraft modeling, embedded software and avionics support for its next-generation space logistics platforms. Our expanded relationship with Portal strengthens our propulsion presence in space today. Over time, propulsion and autonomy architectures naturally intersect, which provides additional future opportunities. Together, these efforts position us across air and space with long-term potential into land and sea-based unmanned systems as well. On the manufacturing side, we recently secured a contract for a missile propulsion subsystem from a major defense prime customer. That contract is another validation of our propulsion, engineering and manufacturing capabilities and expands our footprint in advanced defense programs that will generate revenue this year. We also progressed development across Gremlin-X and new BRAIN variants. And we strengthened our intellectual property portfolio with a new patent issuance supporting decentralized swarming architectures while also submitting applications for 4 new patents related to our AI products and technologies. Let me frame the road map simply. We use the analogy of crawl, walk and run, not a separate strategies, but as stages of maturation. In 2025, we built the path. In 2026, we crawl. Crawl is about proving that the integrated model works at scale, converting backlog into revenue, monetizing development programs, generating product revenue from acquired businesses, executing live demos and trials for SwarmOS, IntelliSwarm and IQ 2.0 and advancing Gremlin-X, SwarmStrike and BRAIN variants toward defined milestones. Then we walk in 2027. Walk is where we expect proof to become repeatability. We expect broader SwarmOS and IntelliSwarm integrations, repeat IQ 2.0 wins, increasing brain deployments, expanding programs and multiple product-based revenue streams. At that point, growth becomes more systematic and less episodic. And then we run. Run is where decentralized embodied collaborative autonomy operates seamlessly across air, space and eventually land and sea, where IntelliSwarm enables larger and more complex distributed systems, where autonomy and propulsion architectures converge, where UAV, missile and avionics revenue scales across multiple defense programs. This is when today's emerging and development-stage products become a scaled portfolio of core products driving meaningful revenue and bottom line growth. 2026 is the first full year where our structural transformation is reflected in operations. We transformed the structure of this company in November. Now we are executing against a defined progression with intention and precision. And we believe 2026 marks the beginning of measurable translation of that transformation into growth. With that, I will turn the call over to Trevor. Trevor Thatcher: Thanks, Ben. I'll focus on the fourth quarter results, liquidity position and capital outlook. Before reviewing the numbers, I want to note that the 2025 fourth quarter and full year results we reported this morning included approximately 6 weeks of contribution from the businesses acquired in mid-November. Revenue for the fourth quarter of 2025 increased 118% to $1.7 million compared to $0.8 million last year. The increase was due to the inclusion of post-acquisition revenues from the acquired companies. Cost of revenue for the quarter was $1.4 million compared to $0.6 million in the prior year period. Research and development expense was $3.8 million compared to $2.6 million last year reflecting continued investment in autonomy software, avionics and product development programs from both Palladyne and the acquired companies. General and administrative expense was $4.7 million compared to $3.5 million in the prior year period. The increase reflects acquisition-related transaction costs, the incremental scope of G&A functions from the acquired businesses and the normalization of compensation for certain employees of the acquired companies, who are not previously receiving market-based salaries. Sales and marketing expense was $1 million compared to $0.6 million last year, reflecting expanded marketing programs and business development efforts. Operating loss for the quarter was $9.3 million compared to $6.5 million in the prior year period. GAAP net loss for the fourth quarter was $1.5 million or $0.04 per share. On a non-GAAP basis, net loss for the fourth quarter was $6.9 million or $0.16 per share. The primary differences between GAAP and non-GAAP results were as follows: a $4.6 million noncash gain related to the change in fair value of warrant liabilities, driven largely by the change in the price of our common stock and public warrants, $1.1 million of stock-based compensation expense, $0.6 million of acquisition-related transaction expenses and a $2.5 million income tax benefit linked to one of the November acquisitions related to the recognition of deferred tax liabilities associated with acquired intangible assets that were offset against fully valued deferred tax assets, creating a current noncash tax benefit. We believe excluding these items provides a clearer view of our underlying operating performance and cash usage. Turning to liquidity, as of December 31, 2025, we had cash, cash equivalents and marketable securities of approximately $47 million. Our fourth quarter net cash burn rate was approximately $10 million, which included $8.5 million in cash used in operations, $5.3 million in cash used for acquisitions, $3.7 million to pay down real estate acquired -- real estate debt acquired from the acquisitions offset by proceeds from ATM sales of approximately $7.3 million net of commissions. Backlog as of year-end was $13.5 million. As Ben mentioned earlier, backlog increased to nearly $18 million midway through the first quarter. That increase reflects new contract wins and is net of normal invoicing activity during current year-to-date period. Looking ahead to 2026, Ben has already announced that we are reiterating the guidance we issued on January 30, 2026, for revenue of $24 million to $27 million. Our 2026 outlook reflects the contribution of the businesses acquired in November, and we expect organic growth across each part of the company on a full year-over-year basis. We currently expect 2026 consolidated quarterly operating cash usage of approximately $8 million to $9 million. The increase from our 2025 run rate reflects ongoing investment in SwarmOS and IQ, incremental investments to bring acquired programs to operational readiness and incremental headcount costs from building out the new defense and commercial team structures. As you recall in our previous commentary, we said that we plan to invest $5 million in Gremlin-X and SwarmStrike alone over the next 12 to 18 months. We selectively added headcount to drive growth on the defense and commercial sides of the business and to bolster support services, consistent with our strategy to translate structural repositioning into operational execution. Based on our liquidity position and expected backlog conversion, we believe we are well positioned to execute our 2026 plan. Operator, we're now ready to take questions. Operator: [Operator Instructions] Our first question comes from the line of Greg Konrad with Jefferies. Greg Konrad: Appreciated all the color and the differentiation and kind of road map going forward. But just thinking about 2026, I think you mentioned you expect organic growth along with M&A contribution. Can you maybe just parse out expectations of some of the growth drivers in the M&A along with kind of Palladyne IQ and Palladyne Pilot? Benjamin Wolff: So we're not breaking out the kind of the categories of revenue from the $24 million to $27 million guidance. I think Trevor mentioned that we're expecting to see growth in all of those areas. And that's just through new customer relationships, new contracts, et cetera, across all 3 parts of the business: manufacturing, the UAV side of the business and then the AI side of the business. So we're expecting growth in all 3 of those areas, but we're not giving any specific guidance on the specific growth in those 3 categories. Greg Konrad: And then you also kind of laid out a 2026 and some of the key items for 2027. How do you think about growth going forward? What are the big drivers and just how you're thinking about maybe some decisions or key contracts that we should expect to be watching for in 2026 for that transition? Benjamin Wolff: So on the defense side, which obviously is where there's an awful lot of action for a lot of reasons, we are aggressively pursuing participation in a number of different programs, both as a prime and as a sub. One of the great benefits that we have with the way we've structured the business following the acquisitions is we have, as we think about it, multiple shots on goal in the ability to both be a prime and also to be a sub, and we've got contracts that are today representative of that. We expect to get more of those. There are an awful lot of opportunities when you start talking about collaborative swarming, collaborative autonomy at the Pentagon. And so we're aggressively engaged in that. And similarly, on the hardware, both manufacturing side and the subsystem side and complete systems as it relates to UAVs. So expect to see us aggressively pursue those opportunities. As you know, Greg, those programs can take a long time. Fortunately, we've got an administration today that has accelerated that path, but it still can be a time-consuming process with a number of steps between kind of first RFI to the point that you actually have money coming in the door. Our team understands that process extremely well. We've got a number of folks on the team that are experienced with securing those kinds of contracts. So we're very optimistic about where that's going to head over the next 12, 18, 24 months. I think we have a lot of tailwinds for us on that side of the business. I specifically just mentioned the AI side, but also on the IQ side of our AI business, we continue to have great traction with the Air Force on the trials that they've been doing with IQ in the aircraft repair and maintenance venue. And we are hopeful that we'll see some expansion in that. So don't just think about our work with the Pentagon as just on the swarming side, it's also on the industrial robotics AI side. In terms of the commercial side, we mentioned that we've got our first IQ customer, which happened, frankly, in a relatively short time frame compared to some of the other engagements that we've had. I think that's a testament to the maturity level and the development efforts that we put into IQ 2.0. So we expect to see some real growth on the commercial side. One of the things I should point out is that our acquired businesses have both defense and commercial businesses. So the manufacturing side, we do manufacturing for the commercial sector on our UAV and aeronautical business, obviously, we do some stuff in space that we've talked about. We do some stuff that is not directly Pentagon focused. So we're excited about the fact that we've got this dual path, dual approach of both defense and commercial activities. I think that will pay benefits, big dividends over the years as we see demand from both sides ebb and flow. So I think we've hedged our bets pretty well. Greg Konrad: And if you don't mind, I'm just going to ask a couple more. I hope that's okay. Benjamin Wolff: Sure, please do. Greg Konrad: So you brought up a missile contract, which has obviously been -- and I think you're also doing some stuff around loitering munitions and missiles and production ramps have been a big focus of the administration. Can you maybe just talk a little bit more about what you're doing on the missile side, how much visibility you have into that contract and ramp and maybe where you see some other future opportunities? Benjamin Wolff: So we've got the benefit, Greg, of being involved in both new missile efforts, new program efforts as well as being a supplier into existing long-standing large missile programs. So we're seeing a lot of that whole landscape. There is a lot of interest in developing higher quantities of lower cost, higher precision missiles of all different sizes and capabilities, and we are playing in that space. The great thing about the way we've designed the business now is we can soup to nuts be participating in that missile process, everything from initiating design of a brand-new concept all the way through manufacturing of a complete system or subsystems. So we're very active in that space. We like that space because it is an opportunity for a lot of innovation, coupled with our AI to make a huge difference. And it's not, frankly, a space that is quite as crowded as some of the other drone and UAV marketplaces are. Greg Konrad: And then just a clarification question. You said quarterly $8 million to $9 million usage, was that free cash flow or cash flow from ops? Benjamin Wolff: Trevor, do you want to take that one? Trevor Thatcher: Yes. That's our expected cash used in operations. So there could be other cash flows coming in, whether those are from ATM sales or those are not considered in that number. Greg Konrad: Is that $8 million to $9 million cash flow from ops, I mean historically, the business has been really CapEx-light? Just thinking about the manufacturing element, and you mentioned some investments. How are you thinking about CapEx going forward? Trevor Thatcher: Yes, we do have CapEx assumptions baked into that. There are some needs across the business. I wouldn't say they're significant right now. And as things progress within the development of our products, we'll reevaluate that and make the investments where we need to. But as of right now, we don't see any real significant CapEx needs. Greg Konrad: And then maybe last one for me. I mean, the business has evolved a lot. I think in the past, you talked about, you have the target business model from a profitability standpoint. Can you maybe talk a little bit with the new mix, how you're thinking about gross margins? Is there a particular revenue level for profitability, just some of the changes that we should accept with the new business from a profitability standpoint? Benjamin Wolff: Do you want to take that one, Trevor? Trevor Thatcher: Yes, we're -- yes. So we're not -- we've given guidance on revenue. We're not at a point where we're going to be giving guidance on anything below that. It's still early on with these new acquired businesses. And we expect that as things develop as we see progress made both on the customer front and on our product development milestones that we'll start sharing more guidance around things below revenue line, the revenue line. But right now, we're just going to stick to that revenue guidance that we've given. Benjamin Wolff: I'll give a little more color beyond that. There's no reason that we see that the margins that we've talked about historically for our AI business will be materially different than what we've talked about. We're still bullish on that in terms of software-like margins. And we -- I think we have talked about the fact that on the hardware side, we're focused on higher-margin opportunities. We don't want to get into really low-margin businesses. And so far, I think we're doing a good job at that. So while Trevor is absolutely correct that we don't want to give a specific number at this point, we're focusing on those higher margin opportunities so that we keep our margins across the entire enterprise relatively robust. Operator: Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: As it relates to your partnerships with Red Cat and Draganfly, what are the obstacles or tasks that remain to get the system into production and/or the OEMs given them the ability to bid on procurement with your technology? Any updates would be great. Trevor Thatcher: Sure. I'll take them one at a time, Brian. On Red Cat, we have been doing extensive testing with them over the last X number of months. That has been going very well. We're going through the certification process that they have established for their vendors. Our system is a little more complex and capable than many other software platforms that are out there for drones. And so it has been a lengthier process, making sure that we can actually deliver on all of the things that our specifications say we can. I think we're at the end of that process now. So we expect to be certified on Red Cat drones virtually any time. And that has culminated in us then negotiating a broader, more in-depth and detailed partnership agreement with them, a real implementation agreement, and we expect that to be signed. I think it may be signed even today or certainly within the next few days. So that is the next step in getting to the point then that they can actually start offering our system to the government. We've been doing joint demonstrations for the government so far, and all of those have gone well. On Draganfly, we're still in the process of implementing and porting our code onto their platforms. So that has not yet been completed. No real roadblocks other than everybody is busy, and we've got a lot of -- all of us have a lot of things on our plate, but I expect that to happen this quarter. And so we're making progress on that one also, and we've got a number of other discussions with other OEMs going. So I'm very bullish about where we are with drone OEMs. Brian Kinstlinger: Great. And then you mentioned your first commercial IQ contract. Can you talk about the timing of expectations for both IQ and Pilot for first production units? Benjamin Wolff: Well, I mean, the first sale of IQ 2.0 is a production deployment. And so that's going to happen in -- I think, in the coming weeks. The contract has been signed, and we're ready to start implementation on that. So that's up and ready to go. And I think at this point, we've talked before that it's generally, in our view, a 12- to 18-month sales cycle. This one happened to come together much more quickly than that. So it is possible for it to come together more quickly. But we're in the process now of exposing customers of all different shapes and sizes in terms of size and number of locations and all that kind of stuff to the new highly capable 2.0 version, and we'll see how quickly we can make some sales come together. So we're firing on all the cylinders on IQ 2.0. On the drone swarming capability, that really is not a onesie-twosie kind of sale, as you can imagine. That is larger contracts, larger volumes and those, by definition, take longer to come together. We have a task in front of us to get the customer base out there to understand that this is an incredibly capable and unique type of swarming autonomy that doesn't exist. When other -- as I mentioned in my comments, when other people talk about swarming, it's not this kind of swarming, just like there are different layers of autonomy in self-driving cars, there are different layers of autonomy in things that fly, and we are at the most advanced edge of that. So our biggest mission, Brian, right now is to get the marketplace to understand that the capability exists, that it's not science fiction. It doesn't have to be on the road map for 2032. It could be on the road map for 2026. And so that's our mission in front of us. Brian Kinstlinger: I guess my follow-up to that would be, how are you educating the end customer, which, to me, at least given war would be the federal government, of course, how are you educating them and how educated are they right now? Benjamin Wolff: So we're just at the beginning stages of the education process and education involves a lot of meetings, followed by demonstrations. So you start with PowerPoint presentations, which, of course, people are tired of seeing PowerPoint presentations. So you do the PowerPoint presentation to many, many different people as many shots on goal as you can get and then you promptly follow that up by say -- by saying, but it's not just PowerPoint, come out to the field, we'll do a demonstration for you tomorrow if you're ready. Brian Kinstlinger: Great. And then obviously, it's only been a week with the war, if you call it in Iran. Two things. First of all, is that leading to delays in conversations because everyone now is focused on that? Is it leading to more urgency and more rapid conversations? Maybe talk about, if at all, in one week, it's changed the procurement process? Benjamin Wolff: So I haven't seen any change other than additional inquiries and interest levels. Fortunately for us, the folks that are involved in defining requirements, learning about new technologies, figuring out how to integrate those new technologies into the battlefield, they're not out in the field, they're very much focused on trying to get our country prepared for what happens tomorrow, the day after tomorrow, next week, next year and for the years to come. So we haven't seen any impact in a negative sense, but certainly a lot more awareness of what modern warfare looks like, and that creates significant tailwinds for us. Brian Kinstlinger: Great. My last question is, you talked a lot of about R&D, but maybe you could just rank your top R&D priorities for 2026. Benjamin Wolff: At the top of our list is getting material advancement on our 2 UAV platforms, the Gremlin-X and the SwarmStrike. That's a significant part of our R&D effort. Continuing to evolve and enhance the capabilities of both SwarmOS and IQ, I think those are the 4 R&D priorities. And fortunately, for us, all of the contracts that we have that are development contracts with the U.S. government and the Department of War, they are all in line one way or another, with the advancement of those capabilities and technologies. We are, from time to time, given the opportunity to participate in things that are outside of that kind of main swim lane and we declined to pursue those because we are very focused on those 4 primary objectives for 2026. Operator: [Operator Instructions] Our next question comes from the line of Mike Latimore with Northland Capital Markets. Mike Latimore: I guess just on the backlog topic, maybe can you talk a little bit about which orders or types of products led to the increase in backlog from 10 to 18 as a big change this quarter already. And then as you look to the -- sort of for the go-gets for the rest of the year, what are some of your better prospects in terms of the types of agencies or products that you might be selling to kind of get the rest of the backlog in here? Benjamin Wolff: We're not going to get into a detailed breakdown of the backlog at this point, Mike. But I will tell you that as I think both Trevor and I alluded to, we see significant opportunities across all 3 business units that we have. It's too early for me to predict kind of which ones are going to come out on top. But there is just a tremendous amount of momentum that we're seeing in the business. And so we have a lot of confidence in being able to give you the guidance that we have and to watch that backlog continue to grow meaningfully over the course of the year. Mike Latimore: Great. And then as you go out and sell to new prospects, can you talk a little bit about the value of having these 3 segments? Like how is your sales include all 3? How do you make the pitch that these 3 bring in a significant advantage to a prospect? Benjamin Wolff: Yes. Let me give you kind of a generic example, but it is based, in fact, on one project that we're currently trying to secure. This is a new development program for a weapon system, and we were able to present the ability to go from white paper concept all the way through to both component manufacturing and complete assembly and include our intelligence to deliver a holistic platform system that achieves all of the stated objectives. And that soup-to-nuts approach had all -- had engineers and business people involved from all 3 divisions collaborating. I got to tell you, this is -- just backing up for a second. This is one of the better integration efforts from an M&A effort that I've ever seen. The teams are working together as if they've been working together for years and years, seamless. So that's an example of being able to go attack a response to a government inquiry about a new weapon system where before, we would have been a minor player or just one part of a bigger team, we were able to present a complete unified proposal. And that's exciting. So I think there's going to be a lot more of that in the future. The other thing that the acquisitions do for us kind of outside of just a single programmer project is we wind up with a much broader set of relationships across the whole defense sector that allows us to go to the customers of one of those business units and present the opportunities that we have through our other 2 business units. And that has already paid dividends. So we're excited. I think the analogy of 1 plus 1 plus 1 equals a lot more than 3 has so far proven to be very much true. Mike Latimore: Okay. Great. And then just on the SwarmOS, can you talk a little bit about how you're going to price that? Is there a way to kind of think about a license per, I don't know, 10 drones or something? Or just a little bit more clarity on how you price this? Benjamin Wolff: Yes. So our focus is licensing it on a per drone basis. And we've said historically -- in the past, we've said that we expect it to be priced somewhere between 5% and 10% of the total drone system cost. And so far, the engagement that we're having with customers is kind of right in line with that. So bigger, more expensive, more capable, more sensor laden UAV platforms, the cost will be higher, smaller, lower cost, less capable drone systems, more single-purpose type things, things like that will be lower cost. But so far, we're not getting any pushback on that general approach to pricing. Having said that, I'll remind you that we still have to land our first major customer. Mike Latimore: Yes. Would the prospects for SwarmOS be more likely to be with smaller, say, short-range drones or bigger long-range drones? Or is it too early to say? Benjamin Wolff: I think it's everything in between. I mean our ultimate vision is you've got some larger, longer duration fixed wings that have our software on them from one OEM, able to communicate and engage in swarming capability with shorter duration, lower cost, more tactical drones. You can imagine scenarios where a loitering ISR platform is in the air for 5, 10 hours. You've got different sorties of quadcopters that come in to theater to perform a specific mission set. Maybe they have not accomplished all of that mission. A second sorting comes in and instantaneously is downloaded with what the latest and greatest information from the fixed wing oversight loitering ISR platform has. That kind of a cohesive real-time autonomous swarming capability can expand across all of the different drone or UAV sizes and that's where the real value comes in. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.

83天前Insight Analytics约5分钟阅读

HRPMF 2025 Q4 财报电话会议

Antti Vuolanto: Good morning, and welcome to Herantis Pharma's Full Year 2025 Results Webcast and Business Update. My name is Antti Vuolanto, I'm the CEO. And together with me, I have here CFO, Tone Kvale. During the webcast, we will review the key highlights of the past year and provide you an update of the business and R&D. After the presentation, we have a Q&A session, and you are welcome to submit questions throughout the webcast. With that, let's get started. And first, the necessary forward-looking statements and then a short reminder of what Herantis Pharma is and then we go into the last year's highlights. So Herantis Pharma, we are a clinical-stage public company listed here in Nasdaq First North Growth Market, Finland. And with our lead asset, HER-096, we aim to stop the progression of Parkinson's disease by protecting dopamine neurons from further degeneration and also support their functional restoration. We have just also announced that we have completed a Phase I program. We have solid safety data. We have shown efficient brain penetration. We have strong biomarker data, showing biological response in Parkinson's patients. And basically, we are ready to start a Phase II efficacy signal finding trial. So just a reminder what HER-096 is. It is a first-in-class peptide targeting key drivers of Parkinson's disease, specifically modulation of the unfolded protein response pathway, so proteostasis. And we have also shown a robust impact on mitochondrial function as well. HER-096 design is based on a protein, a neurotrophic factor called CDNF or cerebral dopamine neurotrophic factor. And we have shown in preclinical settings that, yes, we capture the full activity of the CDNF protein in terms of protection of the neurons and supporting the neurons for functional recovery. So if we think about the clinical and therapeutic profile of HER-096, we do have a disease modifying and symptomatic potential based on preclinical studies and earlier studies with the CDNF protein, so we can slow or even halt the neuron degeneration in midbrain, which is relevant for Parkinson's disease. As already mentioned, we have a biological validation with the biomarker data from Parkinson's patients. We have robustly confirmed the brain penetration after the subcutaneous administration. So we believe that we have all the ingredients that HER-096 can really be a game changing therapy that could really stop the progression of the Parkinson's disease, which currently is not possible. So there is an unmet clinical need in the disease. The current treatments can treat the symptoms, but not the disease itself. And many patients don't get a symptomatic benefit or they might have significant side effects. And also the effectiveness of the current treatments declined over time when the disease progresses on the background, always regardless of the current treatments. And of course, as a consequence of that, there is a huge market potential for HER-096. Parkinson's News Today is an organization who has evaluated that the estimated economic impact of Parkinson's disease globally is around USD 277 billion annually. So it's a huge impact on societies. It's forecasted that therapeutic market in PD will grow to USD 13 billion by 2033 (sic) [ 2034 ], and this is from global data. And we -- there are also estimates that from the currently approximately 10 million patients until 2050, there will be 25 million patients. So we are in the middle of a very large unmet clinical need, and we want to be among the first ones to really address this. So this was the short introduction to Herantis, and let's go into the highlights of 2025. So I'll start this with the business highlights. So a year ago, in February '25, we announced that we successfully completed a directed share issue. We raised EUR 5.2 million, and that was obviously used for finalizing the Phase Ib and being able to deliver the great data. We announced the top line data from the Phase Ib trial with Parkinson's disease patients in October. The trial met its all primary and secondary endpoints. So we demonstrated very nice safety profile and also the robust brain penetration in the Parkinson's patient's brain. In November, we announced that we have completed a 6 months preclinical toxicology study with HER-096, and this is, of course, a major milestone towards to be ready for Phase II trial as this kind of a long-term preclinical tox study is a prerequisite for starting a long Phase II efficacy trial. And right after the reporting period, we also have provided, actually, a lot of good news. So in early days in January, we reported the biomarker data showing that we have a very clear evidence of biological response to HER-096 exposure in Parkinson's disease patients. In early February, we announced a directed share issue. We raised EUR 4.2 million. And further in February, we announced that we have been selected for EUR 8 million Horizon Europe grant that will be used for supporting the conduct of the Phase II clinical trial. But let's go into the financial figures, and Tone will go through those. Tone Kvale: Yes. Thank you. So full year 2025 compared to last year, the total operating expenses, they went to the same level, but the difference you can see on the loss side is that, in 2024, we had the EIC Accelerator grant program, which ended now in 2025. So we got more grant in 2024 compared to 2025. We are spending the money on -- most of the money goes directly to the science. We spent it on finalizing the Phase Ib trial. We're also preparing for the Phase II and the development of biomarkers is also a big part of the costs. And then last year, we raised money in February 2025, and we had finance expenses relating to that. And we are continuing the focus on investor relations and partnering activities. So when it comes to the cash, we ended the year with EUR 2.6 million in the bank compared to EUR 2.1 million in 2024. Right after we closed the books, we had a successful fundraising and raised gross EUR 4.2 million. With the cash we have as of today, it takes us into Q1 2027. So to be able to start the Phase II clinical trial, we need to raise more money. So for the financial position, just going through the kind of -- some of the balance items for 2025. If you look into the balance sheet, you see that the long-term debt increased from EUR 2.1 million in 2024 to EUR 3.4 million in 2025 million, and that is due to the research funding, which we are receiving from Michael J. Fox and Parkinson's U.K. This is very good money that we have spent now on the Phase Ib. We had a temporary negative equity by the end of the year of EUR 1.7 million, but that went positive when we raised the money in February. And as Antti mentioned, for the financial events, we had the successful fundraising, and also we was selected for the EUR 8 million grant from Horizon, which is going to be spent on running the Phase II trial. So that's really good that we have the cash coming in. Antti Vuolanto: Very good. Thank you. And let's move on with the short business update. So as mentioned, we have a completed Phase I program, just a small short recap of what the Phase I program told us and what will be the next steps. So the Phase Ia clinical trial that we completed a couple of years ago was a single ascending dose study in healthy individuals. And we also had elderly individuals there to take cerebrospinal fluid samples to show the brain penetration profile of HER-096. And the main findings were very good safety and tolerability profile of the single dose. We demonstrated efficient brain penetration in elderly healthy individuals, and the brain penetration was, in a way, very much aligned with the preclinical findings we had reported earlier. And we also have very favorable pharmacokinetic profile considering the administration. And now we completed a Phase Ib clinical trial where we first had a couple of additional elderly individuals for single administration to complete the -- some of the pharmacokinetic work, and then we had Parkinson's patients in 2 cohorts or 2 dose levels, 200- and 300-milligram doses and placebo patients as well. And these patients received active -- they received HER-096 or placebo treatment for 4 weeks, 2 administrations per week. And the main findings, we continue to see good safety and tolerability profile in Parkinson's patients. We established the pharmacokinetics in the cerebrospinal fluid in these patients. And of course, then we have this biological response in biomarker analysis, which I will also provide some more insights here and recap of the webinar that we held early January. About the safety profile, here is a very high-level summary of the systemic safety findings from patients or healthy individuals receiving HER-096 dosing. So basically, on the systemic level, we didn't see any treatment emerged adverse events, no serious adverse events, no dose-limiting toxicities, and we didn't reach, obviously, the maximum tolerated dose. And this was very much aligned with the preclinical studies. The main incidence that we saw was related to the injection site. They were mild and transient and self-resolving. So exactly aligned with preclinical findings. And this is, of course, very good. And then the second part of the results is obviously the HER-096 presence in the cerebrospinal fluid. And this data summarizes what we learned from the Parkinson's patients in the Phase Ib with 200-milligram dose, we ended up close to 100 nanograms per ml, with 300-milligram dose, close to 150-nanograms per ml. And again, this is very much aligned with the preclinical data, and these levels are comparable to those levels that we have seen in preclinical settings to provide the maximum efficacy in those models. So we believe that 300-milligram dose will be a very good dose for going forward with Phase II, and this is also supported by the biomarker data. And just a short recap of what did we see in the biomarker data. And just a reminder that we analyzed different sample types with different technologies, but the main comparison was the change that we observed when we compared the before dosing sample of the last dose compared to the before dosing sample of the first dose. So a cumulative effect of 4 weeks exposure to HER-096. So we had samples from CSF, so demonstrating what happens in the CNS, central nervous system, and there, we showed an effect on proteostasis and oxidative stress and inflammation. So basically, really closely related to unfolded protein response pathway and then mitochondrial function as well. Then we had samples that is called Neuronal-enriched extracellular vesicles. So particles that comes from the central nervous system, the sample is taken from the blood. So we can't, for sure, say that all the signals come from the CNS, but maybe majority of that. And again, we see changes in mitochondrial functions and also inflammation, very much aligned with the mechanism of action. And then from plasma and blood, we also saw changes in proteostasis and in mitochondrial functions. So this multiple layers of data showing very concordant results across different sample types, different location or where we derive the samples shows that there is a very clear biological response, and this is a true response in Parkinson's patients, and the response is aligned with the mechanism of action. So if I summarize on one slide what we see. So at the baseline, Parkinson's patients, they have chronically activated unfolded protein response pathway. So there is a dysfunction of proteostasis, there is also lower activity of mitochondrial function. So mitochondria are the energy factors of the cell, and there is elevated oxidative stress. So overall, the stress level is high and the viability functionality is low. After HER-096 dosing, we see elevation of proteostasis activity. We see elevation of mitochondrial function activity. We see a decrease in oxidative stress. So we have decreased the stress and increased the viability functionality. And then, of course, the very good question is, as this is the data from the first month, what happens after a longer treatment period. And we, of course, believe and hope that it will result in symptomatic improvement and disease modification. And this is, of course, the purpose of running the Phase II trial to demonstrate this in Parkinson's patients, which would then allow going forward with the commercialization path. So if I summarize where we are with HER-096, we believe that we have reduced development risk based on the very successful Phase Ib trial. We have established very nice safety profile, confirmed brain penetration. We have biomarker-confirmed biological activity. So we believe that we have much reduced translational risk. We are ready for Phase II. So we are planning a signal-seeking proof-of-concept efficacy trial in approximately 100 early-stage Parkinson's patients. It will be a multicenter European study if we run that ourselves. And we are currently nearing the confirmation of the study design. It's not completely ready yet, but we, of course, will inform the market when we are ready to do so. HER-096 is very much differentiated asset. So it's a first-in-class molecule. We are addressing unfolded protein response pathway as the only company in clinical development. With that, we target the core drivers of Parkinson's pathology. And we really have designed from the beginning the asset to really modify or stop the progression of the disease. And of course, what we are currently doing, we are looking at the different routes and options, how we can execute the Phase II, and we are in discussions with strategic partners. We are in discussions with investors. We also confirmed the EUR 8 million EU Horizon grant that will support the conduct of the study. And we are also looking at different non-dilutive opportunities there might also be. But of course, we will inform the market as soon as we have anything material on this resourcing of the Phase II efficacy trial. I want to highlight the strong external validation and financial support that we have for HER-096. Parkinson's U.K., the Michael J. Fox Foundation, they have -- or they did finance the majority of the Phase Ib clinical trial with almost EUR 4 million research financing, and we obviously continue to discuss with them how they could support the conduct of the Phase II. We have also had very strong support from the European Union. We completed one -- a biomarker development program of EUR 2.5 million grant that was completed a year ago -- approximately a year ago. We have secured EUR 15 million investment commitment from EIC fund from which we have now utilized EUR 4.2 million. So over EUR 10 million still exist in that commitment. And we just announced EUR 8 million support for the Phase II trial. So we have been quite successful in achieving this validation. And I have to highlight that all of these financiers and the financing, it's like really competitive vehicles and opportunities. So we have been really happy that we -- our science and the commercial potential has been evaluated to be really strong among these organizations. So as a summary, we believe that HER-096 is a potentially game-changing therapy that could become the first disease-modifying treatment for Parkinson's disease. We have huge market opportunity. We are backed by a long research, robust external validation. And one thing that I didn't address yet is that the broad functionality of HER-096 in the basic biology of aging cells, improving the tolerance against different stress factors, may open wide therapeutic opportunities in other neurodegenerative disorders or even beyond CNS indications. By these words, I think we will end the business update, and we are ready to start the Q&A session. Tone Kvale: Yes. And we have received questions and you can just continue sending in questions via the webcast. The first one is, can you provide an update of your Phase II plans? And when do you expect to initiate it? Antti Vuolanto: Yes. So as I mentioned, we are currently in a way, finalizing the study design. So we are also, in addition to that, considering regulatory preparation, should we have regulatory discussions on the protocol. What we can say is that we are planning a double-blind, placebo-controlled, randomized efficacy and safety trial in early-stage Parkinson's patients. And we are engaged with several European really top-notch investigators, also within that EU consortium that won the grant. And also, of course, the recent fundraise, EUR 4 million helps us to prepare for the Phase II and also gives us the freedom to really find out the right financial ways of resourcing the Phase II. And as mentioned, the trial will be most likely conducted within Europe if we run that ourselves. However, we are making sure that we are also open regulatory wise to be able to open trial sites elsewhere, for example, in the U.S., if there is a need, for example, if there is a partner or there is an investor who would have an incentive to open up a site also elsewhere than in Europe. Tone Kvale: Good. Next one is regarding the Horizon grant and congratulations with that. How will this impact the company on a strategic point of view and also from a financial point of view? Antti Vuolanto: Yes, of course, EUR 8 million for conduct of Phase II. It decreases the capital need for running the Phase II with full amount. It is, of course, also very beneficial for our shareholders as that's non-dilutive. So I think that's great. But in addition to that, of course, Horizon EU grants, they are really competitive grants vehicles and being selected for the grant shows that, first of all, we have great science, but we also have great commercial opportunities there. And that, in a way, brings a quality stamp as we were winning this grant. Tone Kvale: Good. Next one is based on your current cash position and the benefit from the grant, what additional capital do you need and will be required to be able to start the Phase II trial? And maybe I can just take that one. As you know, we raised EUR 4.2 million in February, and that will help us now kind of continuing the preparation for the Phase II. We got the Horizon grant of EUR 8 million, and that is earmarked the Phase II. So of course, that is helping us a lot for that one. But in addition, we think we need -- of course, we haven't -- the final design of the trial is not ready yet, but we think in the range between EUR 20 million and EUR 25 million is needed as an additional capital on top of this to fully fund the trial and also the ongoing operation during the trial period. Next one. Is the Phase Ib biomarker data good enough to secure a partnering agreement? Antti Vuolanto: Well, that's a very good question. Of course, the full Phase I like data package that we have, the safety data, the pharmacokinetic data and also the biomarker data, it's a great package. And when we have discussed this package within the partnering discussions or with other stakeholders like the patient organizations or informed investors, everybody congratulate that you could not get much more within a Phase I clinical program. However, it might not be appropriate to start speculating about exactly whether this could trigger a partnering agreement or not because there are many different kinds of pharmaceutical companies. They have different objectives and there might be different like deal structures that we investigate. So of course, we will inform the market as soon as there is something material. But before we have anything material, we can't speculate too much. Tone Kvale: Yes. Next question. Congratulations with the 2025 progress. The Phase Ib biomarker analysis showed modulation of various PD-related pathways. How will these biomarker findings inform endpoint selection and patient certification for the Phase II? Antti Vuolanto: Yes, of course, we are really happy that we have seen changes in the core pathways, including the proteostasis and mitochondrial function. Maybe for patient selection, the challenge is that how we can exploit that data when we are screening the patients. And we believe that we need to select early-stage patients. And in Phase II, we need to carefully design what is the primary endpoint and then select patients in such a way that they show characteristics that are measured by the primary endpoint. So that's the focus there. Tone Kvale: Good. I think there was no more questions. So maybe some closing remarks. I think just from my side, we see that we have a really strong external validation of our science during 2025. So I think the future looks good. What do you think? Antti Vuolanto: Yes, I fully agree. So I think 2025 was a very successful year. We were able to complete a fairly large clinical trial within the time and the budget, which is not for certain in clinical development. The data is great. We have a very good momentum. We have got really good feedback. And now we just need to go forward and beyond and ensure that we can run the Phase II clinical trial. And of course, within Phase II trial, providing the first efficacy signal. That's the trial where potentially the value creation is quickest among the, let's say, clinical studies. So we look really forward -- positively forward for this year and what this year will bring. And we hope to be able to update the market about the future development related to finalizing the Phase II clinical plan and then also how we resource the trial within due course. So thank you for joining us today. Thank you for submitting the questions. And I hope you will follow us intimately going forward. Thank you.

83天前Insight Analytics约5分钟阅读

AAALY 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, welcome to the Aareal Bank AG Full Year 2025 Investor and Analyst Conference. I'm [ Moritz, ] the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jurgen Junginger, Head of Debt IR. Please go ahead, sir. Jürgen Junginger: Agenda covers our results for 2025, our outlook for '26 and an update on our strategic plan, Aareal Ambition. I'm joined today by our Management Board, our CEO, Christian Ricken; Nina Babic, our CRO; CFO, Andrew Halford; and Chief Market Officer, Christof Winkelmann. Christian and Andy will take you through our presentation, which will be followed by a question-and-answer session. Now I'm pleased to hand over to Christian. Christian, the floor is yours. Christian Ricken: Yes. Thank you very much, Jurgen. Good morning to everyone, and thank you very much for attending today's call. Before turning to today's presentation, I would like to refer briefly to the recent events in the Middle East. There is no doubt that geopolitical uncertainties have increased, tensions have escalated, there is heightened caution across most business areas. We are aware of that. As a result, investment activity in many sectors may slow or become less predictable for some time. So far, Aareal has not been directly affected by the events of the last week nor more broadly by geopolitical events over the last year. However, we are, of course, monitoring the situation very closely. Now let me turn to our results for 2025 and our outlook for 2026. And I will also provide you an update on our strategic plan, Aareal Ambition. Starting with Slide 3. First, our results for 2025. And as you can imagine, this slide, this chart has become my actual favorite chart because it's a very well reflection of the delivery of the bank. We target an adjusted profit for the year of over EUR 375 million, which we comfortably achieved. On the basis of this good result, the management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. The adjusted operating profit after the additional EUR 55 million charge was EUR 326 million, which is very similar to the equivalent profit in 2024. Turning to our 2 business segments, both achieved strong results for 2025. Banking & Digital Solutions made a significant contribution to group profits and Q4 average deposits, including retail rose to EUR 17.8 billion. New business in Structured Property Financing reached EUR 12.4 billion for the year, which was a record result. Much of this volume came from Europe, and I will say more about our regional approach later. By the end of 2025, we had reduced nonperforming loans to EUR 1.1 billion. We are planning to bring this balance below EUR 1 billion in the current year, and we are confident we can achieve this in the first half of the year. Our capital ratio continues to be solid with our CET1 fully-phased ratio at 15.5% at the end of 2025. At this conference last year, we introduced our new strategic plan, Aareal Ambition, and I'm pleased to report that we are well on track. As a result, we are well placed to reach our target of around 13% adjusted post-tax return on equity in 2027 still. Our increased focus on Banking & Digital Solutions and our repositioning in the U.S. in Structured Property Financing underpin this progress. I will further -- I will provide further comments on our Aareal Ambition plan later in this presentation. Before moving into the details of our results, I wanted to illustrate the importance of both of our business segments to the overall results. I'm on Slide 4 now. As you can see, Banking & Digital Solutions has contributed significantly to the group's operating profit in each of the last 3 years since the return of, as I would call it, normal interest rates. BDS deposits, including retail rose to an average of EUR 17.8 billion in the fourth quarter of 2025. The business has around 4,300 clients and currently executes payments transactions amounting to EUR 167 billion every year. I would like to thank the staff in this business for their efforts in 2025 and their continued commitment. In Structured Property Financing, the loan volume is over EUR 34 billion, spread across over more than 20 countries and 5 property types. I also would like to thank the staff in this business for their diligence and care as we have grown by taking a conservative approach to risk. I will now hand over to Andy, who will provide further details on our results for 2025. Andy, over to you. Andrew Halford: Thank you very much, Christian, and good morning to everybody. So Slide 6, let me just pick up some of the high-level numbers. So net interest income was down 12% to EUR 934 million, which was mainly the expected impact of lower interest rates. Loan impairment charges are down by 19% to EUR 322 million. As Christian just mentioned, this includes the additional charge of EUR 55 million to support the repositioning of the U.S. business, which includes a faster reduction in U.S. office loans. The efficiency measures that we put in place led to a reduction of 8% in adjusted administrative expenses, which fell to EUR 317 million. The cost-income ratio for 2025 was, therefore, 33%. The other components line includes a EUR 20 million positive one-off, which arose in the second quarter from the successful restructuring of a former legacy nonperforming loan. Overall, adjusted operating profit was EUR 381 million, excluding the additional EUR 55 million charge and EUR 326 million, including the charge. Nonrecurring items amounted to EUR 30 million compared to EUR 34 million the previous year and related to efficiency measures, IT infrastructure investments and other material nonrecurring items. The effective tax rate for the year was higher at 40%, which includes charges arising from the repositioning of the U.S. business. AT1 costs are up by EUR 8 million compared to 2024. This is because our new AT1 issue overlapped with the previous AT1 for about 3 months. Taken together, the adjusted post-tax return on equity was 7.5%, excluding the additional loan impairment and tax charges arising from the actions taken to support the repositioning of the U.S. business. Our solid CET1 ratio fully-phased increased to 15.5% at the end of the year compared to 15.2% at the end of the previous year. Now let's move to Slide 8 and the key profit and loss account items for Banking & Digital Solutions. As Christian has highlighted, BDS continues to make a significant contribution to the bank's overall profitability. In 2025, BDS contributed an adjusted operating profit of EUR 152 million, which is down by 7% compared to the previous year, but this is more than accounted for by the decrease in net interest income, which is down 9% to EUR 246 million. The impact of lower rates is fully in line with our expectations. However, it was offset in part by the strong growth in the housing industry deposits. In BDS, the customer base and share of wallet is constantly growing. Admin expenses are down by 4%, benefiting from tight control of costs and nonrecurring items reflects the investment in digitization that we are making to provide a seamless customer journey. On Slide 9, we look further into Banking & Digital Solutions' net interest income and admin expenses. Net interest income, although down compared with 2024, was above expectations. As I just explained, the impact of lower interest rates was as expected, but was partially offset by the growth in deposits. This growth was continuous during 2025, and therefore, net interest income increased throughout the year. I'll come back to deposits on the next slide. Admin expenses were tightly controlled with strict cost discipline maintained. Turning to Slide 10, which focuses on deposits. Our strong deposit franchise continues to reduce our dependence on the capital markets. As I've mentioned, deposits grew throughout the year. Housing industry and retail deposits in total rose to an average of EUR 17.8 billion in the fourth quarter of 2025. This is an increase of 4% since the fourth quarter of 2024 and an increase of 7% since the first quarter of 2025. Retail deposits have structurally improved and now have an average initial lifetime of around 4 years. The steady increase in housing industry deposits in 2025 reflects our successful sales efforts. These deposit volumes have gradually increased in recent years and reached an average of EUR 14.7 billion in the fourth quarter of 2025. Rental guarantee deposits and maintenance reserves have grown continuously. Sight and term deposits are largely stable. When interest rates returned in 2022, there was a shift from sight to term deposits as depositors sought to capture income. This transaction -- transition has now ceased and today's sight deposits only reflect clients' operating cash and therefore, are expected to be very sticky. Now let's turn to Structured Property Financing and to Slide 11. Net interest income is down 13%, reflecting the impact of lower interest rates and is in line with expectations. Loan impairment charges are significantly down, including the additional charges, admin costs are down benefiting from the efficiency measures that we have introduced. Overall, SPF contributed EUR 174 million to the group's adjusted operating profit. As noted earlier, the other components line includes the positive one-off effects of the restructuring of the former legacy nonperforming loan and the tax charge includes charges arising from the repositioning of the U.S. business. Turning to Slide 12. Let's look further at net interest income from SPF. As I've just said, net interest income was in line with expectations. The result was impacted by lower interest rates. For example, the euro short-term rate decreased from 3.8% at the end of 2024 to 2.3% at the end of 2025, a significant reduction. Net interest income was also affected by proactive strengthening of our subordinated funding and by the weakness of the U.S. dollar. Those factors were partially offset by the growth of our loan book. Turning to Slide 13 and to SPF's admin and loan impairment charges. The efficiency measures adopted across the group are also reflected in the admin expenses of this business segment, which are down 9% to EUR 222 million in 2025. Including the additional EUR 55 million charge, loan impairment charges are significantly down by 19% compared to 2024. Excluding this charge, the decrease would be 33%. Loan impairment charges are heavily biased towards the U.S. and U.S. office loans in particular. Risk costs for the rest of the business are at or below normal levels. At this point in the cycle, we are, therefore, freeing up capacity primarily from U.S. office to redeploy it into the European markets where the returns are presently very strong. I'd now like to hand back to Christian, who will talk about business developments in more detail. Christian Ricken: Thank you, Andy. Now let's turn to Structured Property Financing's new business on Slide 14. We achieved record new business, as I already said, of EUR 12.4 billion in 2025, which was well ahead of our target of EUR 9 billion to EUR 10 billion for the year. Newly acquired business amounted to EUR 8.1 billion, which was up EUR 1.8 billion compared to 2024. The average loan-to-value ratio for newly acquired business was still a conservative 57%, which provides a comfortable risk profile. Gross margins were also good, averaging 234 basis points. Renewals were around similar levels to the previous year. Those figures continue to demonstrate that we are actively identifying attractive market opportunities. Sustainability has been and continues to be an integral part of lending decisions. In 2025, we again supported the green transformation of commercial properties with EUR 5.1 billion of green loans included in our new business numbers. Looking at the geographical distribution of new business, 78% was in Europe, 15% in the U.S., 4% in Canada and 3% was in the Asia Pacific region. As planned, we have increased our focus on Europe and reduced activity in the U.S., concentrating on premium assets and long-standing trusted partners. Our strategy on asset classes has also evolved. Hotel finance continues to be our largest area of new business. However, we are currently taking a more selective approach to new office financing while maintaining our increasing conservative financing of Logistics and Residential, especially Alternative Living properties. Let's now turn to the next slide, which shows our current portfolio. We are at Slide 15. The portfolio totaled EUR 34.3 billion at the end of 2025. This is within the targeted range of EUR 34 billion to EUR 35 billion. As you can see from the 2 pie charts at the bottom of the slide, we are still highly diversified, both by region and property type. We continue to have a clear focus on properties in the major metropolitan areas. We are not financing new construction. Have exposure of only 10% in Germany and no exposure at all to Russia, China or the Middle East. In the U.S., we are focusing on our core strengths. For example, hospitality-related asset classes. We have significantly reduced the U.S. office portfolio, which is down by 1/3 compared to the balance at the end of 2024 and want to reduce this portfolio further. Green loans stood at EUR 11.3 billion at the end of 2025, representing around 1/3 of our total loan book. These loans include the financing of refurbishments as we continue to support commercial properties green transition. Turning to Slide 16 and to nonperforming loans. We are continuing a very active management of nonperforming loans and the balance stood at EUR 1.1 billion at the end of 2025. This is down by 29% compared to the balance at the end of 2023. U.S. office nonperforming loans are down by around 40% over the same period. The Stage 2 coverage ratio stood at 3.1% with the ratio -- sorry, with the Stage 3 ratio at 29% at the end of 2025. The nonperforming loan ratio stood at 3.2%. The U.S. office market remains challenging and U.S. office loans continue to represent over half of total nonperforming loans. More than 25% of the U.S. office loans is nonperforming compared to less than 2% for all other categories. Business outside the U.S. is performing significantly below our long-run average cost of risk. As we have explained, management has taken action to support the repositioning of U.S. loans. We are, therefore, confident that we can reduce total nonperforming loan balance below EUR 1 billion during the first half of 2026 already. Now let me hand over back to Andy for an update on our funding, liquidity and capital positions. Andrew Halford: Thank you, Christian. So on to funding, liquidity and capital. Slide 18 shows our broadly diversified funding mix, solid liquidity ratios and capital markets activity. Following a very active year, liability terms have been successfully extended. Deposits represent around 45% of our total funding volume. The largest part comes from the housing industry with an additional EUR 3 billion from retail deposits. As I mentioned earlier, these retail deposits now have an average initial lifetime of around 4 years. Our liquidity ratios are solid with a net stable funding ratio at 113% at the end of the year and the average liquidity coverage ratio at 209% for the fourth quarter. We're pleased to report that during the year, Fitch revised Aareal Bank's outlook to positive from stable and confirmed its senior preferred rating at BBB+. We demonstrated our full access to the capital markets during 2025. We increased our AT1 capacity by approximately EUR 100 million by replacing the former outstanding EUR 300 million issue with a new issue of USD 425 million, and we issued EUR 100 million of Tier 2 capital. In addition, we completed 3 benchmark Pfandbriefe transactions totaling EUR 2 billion and private placements totaling SEK 1.85 billion. Those were Aareal's first Swedish currency issues since 2006. We also completed our first Significant Risk Transfer or SRT transaction in the fourth quarter. Investors assumed a portion of the credit risk attached to a EUR 2 billion portfolio of European commercial real estate loans in return for a risk premium. This transaction strengthened our capital efficiency. Next, let's look at the Treasury portfolio, which is shown on Slide 19. The Treasury portfolio stood at EUR 9 billion at the end of 2025, up from EUR 8.2 billion the year previous. In terms of asset classes, the portfolio comprises public sector borrowers and covered bonds. It, therefore, has a strong liquidity profile. High credit quality requirements are reflected in the ratings breakdown. 100% of the portfolio has an investment-grade rating with 87% having a rating of AA or higher. Asset-swap purchases ensure that there is low-interest rate risk exposure. The portfolio is almost exclusively in euros and has a well-balanced maturity profile. Turning now to capital on Slide 20. Our ratios continue to be solid. Our CET1 ratio was up from 15.2% a year ago to 15.5% at the end of 2025 on the Basel IV fully-phased basis. Growth in the loan portfolio increased risk-weighted assets but was overcompensated by the reduction in risk-weighted assets that came from our first SRT transaction that I just referred to. This transaction had a total positive CET1 effect of around 0.5 percentage points. Both the Tier 1 ratio of 17.6% and the total capital ratio of 21.1% were further strengthened by the additions to our AT1 and Tier 2 capital during the year. Our leverage ratio at 7.2% at the end of the year is well above regulatory requirements. Now I'll hand back to Christian, who will cover our outlook for 2026 and provide an update on our strategic plan Aareal Ambition. Christian Ricken: Yes. Thank you, Andy. I'm turning now to the outlook on Slide 22. Macroeconomic and geopolitical uncertainty factors are, of course, difficult to predict, and we are monitoring developments closely. However, let me repeat that so far, we have not been affected by current geopolitical events. We are successfully reducing our exposure to U.S. offices. And more broadly, we see a slight improvement in sentiment towards the entire commercial property sector. As a result, Aareal has moved forward into 2026 with confidence. For 2026, we are targeting an adjusted operating profit approaching EUR 400 million. This level of adjusted operating profit would result in an increased adjusted post-tax ROE approaching 8%. In the Banking & Digital Solutions business segment, we expect total deposits to increase further to an annual average of around EUR 17.5 billion. In Structured Property Financing, we aim to keep the credit portfolio at around EUR 34 billion and reduce nonperforming loans below EUR 1 billion in the first half of 2026. Now moving on to Slide 24. I will provide an update on our strategic plan, the Aareal Ambition. We launched Aareal Ambition very successfully in 2025. Let me briefly remind you of the targets we showed you last year. We have 4 strategic targets. They are, first, to strengthen our core businesses; second, to expand our activities; third, to enhance efficiency; and fourth, to maintain a disciplined approach. We are applying these targets across the group. This means that we are continuing to grow our Structured Property Financing activities selectively. In Banking & Digital Solutions, we are targeting growth from existing housing market clients and by further -- by moving further to adjacent markets, for example, the Netherlands. We are also optimizing the scalability of our infrastructure. And on the risk, capital and funding side, we are maintaining discipline over our capital and liquidity ratios. So let's now look at each of these objectives in a little bit more detail. Moving on to Slide 25. The group is now positioned with 2 growth engines within one bank, and this is how we will move forward. In Structured Property Financing, we are sharpening our focus and emphasizing our key areas of competitive strength. This means that we are mainly concentrating on Europe and on hospitality-related asset types. In the U.S., we are actively adjusting the mix and size of our business. In Banking & Digital Solutions, we are accelerating growth. We are targeting an increase in deposit volumes by both nationally and internationally and introducing lending to the housing industry or I would better say, reintroducing lending to the housing industry. In addition, we are building an integrated deposit management platform to serve both our corporate and retail clients. On the risk funding -- sorry, risk, capital and fundings, our objective is strong capital generation and continuation of our solid capital ratios. We also intend to further reduce nonperforming assets. Our infrastructure objectives center on AI and cloud-led technology to create a resilient, efficient and modern platform for the group. In parallel, we will continue to execute our cost efficiency program. Turning to Slide 26 on Structured Property Financing. As I have said, we will grow our areas of competitive strength. And as always, we will continue to adopt a conservative approach to risk while seeking attractive returns. There will be greater emphasis on Europe and greater focus globally on hospitality-related asset types. In the U.S., business will continue to reduce office loans. As a result of these actions, we expect loan volumes to remain stable at around EUR 34 billion. We are also continuously leveraging and broadening our off-balance sheet financing business. We expect to continue to have a portfolio of around EUR 7 billion in these capital-light activities. Moving on to Slide 27 and to Banking & Digital Solutions. We are accelerating deposit growth and expanding our product range. We are currently focused on housing industry customers in Germany. Our first objective is to add new customers, new markets and new channels. We plan to add new groups, for example, small property managers. We plan to add new markets, for example, the Netherlands, France and Spain. And we plan to add a new channel for retail deposits, we plan to have our own platform in addition to the existing option of platforms like Raisin. We also aim to add new ERP partners. Our second objective is to expand beyond the housing industry and into other B2B segments and to do so in Germany and internationally. And thirdly, we are introducing lending services to the housing industry where we have a strong relationship, knowledge and expertise. To support these initiatives, we will continue to invest in digitized end-to-end bank processes and digital product offerings. As a result of these initiatives, we are now targeting combined housing industry and retail deposit volume of more than EUR 18 billion in 2027 compared to an annual average of around EUR 17 billion in 2025. We will also be targeting lending to the housing industry of around EUR 1 billion by 2027. Next, risk, funding and capital on Slide 28. Here, we continue to have 2 major KPIs. We are targeting a Basel IV CET1 fully-phased ratio of at least 13.5%, unchanged on the objective, which we introduced last year. Secondly, we aim to reduce nonperforming loans as a percentage of the loan portfolio to under 3%. To achieve this, we will continue with strong capital generation supported by capital management. We will also continue to optimize funding sources and the risk return from our treasury portfolio. We will, of course, maintain Aareal's conservative approach to risk, proactive credit risk management and our solid balance sheet. Turning now to Slide 29 and to infrastructure. Our objective is an AI and cloud-led transformation along with continued execution of our efficiency program. We aim to create a state-of-the-art platform to support the group's business in the future. As I said, our objective is a modern, resilient and efficient platform. We are also actively driving a technology and efficiency mindset across the bank while streamlining operations and digitizing processes as part of our efficiency program. Our new infrastructure-related KPIs are to achieve gross savings of an additional EUR 40 million in total and a cost-to-income ratio of around 30% by 2027. Moving on to Slide 30. We confirm our 2027 target for the adjusted post-tax return on equity at around 13%. As we have shown on earlier slides, management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. Excluding the additional charge and the tax impact of repositioning in the U.S., the 2025 adjusted post-tax return on equity was 7.5%. Looking to the future, 2 main factors are expected to drive the increase in return. Firstly, an improved risk profile will reduce our cost of risk on an ongoing basis. And secondly, as I have just described, we are accelerating growth in Banking & Digital Solutions, assuming a normalized CET1 ratio of 13.5%, which takes us to the targeted adjusted post-tax return on equity of around 13%. Turning to Slide 31. Let me highlight our ambitious 2027 targets. As I have just demonstrated, we aim for an adjusted post-tax return on equity of around 13%, a CET1 fully-phased ratio of at least 13.5%, a cost/income ratio of around 30% and an NPL ratio of around 3%, a lot of 3s, but these are our targets. And we continue to be on track to meet those. Now moving to our closing slide, I want to round up with a few key takeaways. Both our business segments achieved a strong operating performance in 2025. We have significantly reduced loan impairment charges and costs. Management was able to take action to support the repositioning of our U.S. business. We have successfully launched our strategic plan Aareal Ambition, and we are well on track. We are sharpening our focus in both businesses. And we are confirming our adjusted post-tax return on equity target of around 13% in 2027. Andy, I and the team will now be pleased to take your questions. Operator: [Operator Instructions] And the first question comes from Corinne Cunningham from Autonomous. Corinne Cunningham: Three from me, please. First one, if you can give us a bit more background on what's happening with margin development. You've told us what's happening for new, and you said renewals. I think you said renewals were flat margins. So maybe just a bit more color on what's happening there and guidance on NII going forward. And on the SRT, can you explain the interaction between what's going on in the background in capital? You had a positive impact from the SRT, but your capital ratio was flat. Obviously, you made a loss, but any other moving parts in there with RWAs, please? And then last point, if you can give us a bit more background specifically on what the EUR 55 million, and you call it repositioning of the U.S. portfolio. But does that basically just mean additional provisioning to make assets easier to sell? If you could explain what that means in more detail, please? Christian Ricken: Okay. Thank you very much. So yes, I would like to allocate the question to my dear colleagues. So Christof will take the first one from the market's perspective; Andy, you would talk to the SRT and Nina, you cover the EUR 55 million. Christof Winkelmann: Yes. So also good morning from my side to everybody. To the question as to how the spread is between new versus existing business or prolongations, they are plus/minus within the average number that we've given you. We don't really publish the individual numbers, but you can take plus/minus 10 basis points from the published figure is where the range is for prolongations and new business for us. Andrew Halford: Let me just pick up on the CET1, the SRT question. So simple math, 15.2% a year ago, the SRT gave us about 0.5 percentage point benefit, 15.7%, and we ended the year at 15.5%. So 0.2% reduction from sort of trading, if you like. That is just primarily the impact of the slightly bigger loan book that we had over the year and hence the slightly higher RWAs. So that's the pretty simple composition of the movements of that number. Corinne Cunningham: Sorry. I was just going to ask Q-on-Q, I was looking more Q-on-Q. And is that literally the same, so higher loan book? Or were there other things specifically in Q4? Andrew Halford: No, it is exactly the same. There is nothing abnormal. Nina Babic: Cunningham, I will take the question on the EUR 55 million, the management action, which we have taken. So what is behind that? So in the end, it's a support for us going forward. So it's nothing on the year 2025. It's as an overlay booked for us, giving us a support on the U.S. repositioning going forward. It's not allocated on any kind of nonperforming loans, but gives us also leeway going forward to stay cautious and to follow up on our very cautious and conservative approach with regard especially to the U.S., as you have seen also on the NPL book, the main part of it is allocated on U.S. office. So that's why we want to stay active here and progress on the targets I've just described. Operator: Ladies and gentlemen, this was already the last question. So I would now like to turn the conference back over to Jurgen Junginger for any closing remarks. Jürgen Junginger: Thank you for joining us this morning. But as always, the IR team is happy to take follow-up calls if you have further questions. So have a good day, and thank you again for listening. Thanks. Bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.

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