AI Investor Insight

PG 2026 Q2 财报电话会议

Operator: Morning, and welcome to The Procter & Gamble Company's Quarter End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you will refer to The Procter & Gamble Company's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, The Procter & Gamble Company needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. The Procter & Gamble Company believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website www.pginvestor.com a full reconciliation of non-GAAP financial measures. Now I will turn the call over to The Procter & Gamble Company's Chief Financial Officer, Andre Schulten. Andre Schulten: Good morning, everyone. Joining me on the call today is Shailesh Jejurikar, Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for 2026, and Shailesh will discuss strategy, innovation, and focus areas as we start calendar year 2026. I'll close with guidance for fiscal '26, and then we'll take your questions. As we expected, second-quarter top-line results heavily reflect underlying market trends and impacts from base period dynamics. As a reminder, the base period included trade and consumer pantry loading, driven by port strikes and hurricanes in early October, and the fear of additional port strikes in late December. The biggest impacts were on the baby, feminine and family care sector, the fabric and home care sector. These base period impacts were concentrated in the US market. The balance of the company grew organic sales nearly 3% with almost all regions outside the US growing or accelerating in the quarter. Bottom-line results followed the top line. We continue to prioritize full investment in the business. We anticipated this would be the softest quarter of the fiscal year and we remain confident in stronger growth in the back half. So moving to the details. Organic sales were in line with the prior year. Volume was down one point, pricing up a point, and mix was flat for the quarter. Seven of 10 product categories held or grew organic sales. Hair Care grew mid-single digits, Skin and personal care, personal health care, home care, and oral care, were each up low single digits. Grooming and Fabric Care were each in line with a year ago, Baby care and feminine care were each down low singles, and family care was down approximately 10%, primarily due to the base period dynamics we described. As a side note, organic sales excluding Family Care were up 1% for the quarter. Seven of 10 regions grew organic sales, Focus markets were down 1%. Organic sales in North America were down 2%. Volume was down three points, including a roughly two-point headwind. From the base period trade inventory impacts I mentioned. Pricemix added a point of growth. European focused market organic sales were up 1%, Strong growth in France, Spain, and Italy largely offset by a softer period in Germany. Greater China organic sales grew 3% another quarter of growth in what remains a challenging consumer environment, Pampers and SK-II led the growth, each up mid-teens or more. Enterprise markets grew mid-single digits for the quarter, Latin America organic sales were up 8%, with solid growth across Mexico, Brazil, and the balance of smaller markets. In the region. Organic sales in the Europe enterprise market region were up 6% versus prior year, and the Asia Pacific, Middle East, Africa enterprise region grew 2%. Global Exhibit market share was down 20 basis points. 25 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.88 in line with the prior year. On a currency-neutral basis, core EPS was 1.85 Core gross margin was down 50 basis points and operating margin was down 70 basis points versus prior year, Strong productivity improvement of 270 basis points with healthy reinvestment in innovation, and demand creation. Currency-neutral core operating margin was down 80 basis points. Adjusted free cash flow productivity was 88%, and we returned $4.8 billion of cash to shareholders this quarter, $2.5 billion in dividends and $2.3 billion in share repurchases. In summary, we've now completed what we fully expected will be the softest quarter of the fiscal year, We have strong innovation and productivity plans for the back half of the year, We continue to invest in creating superior propositions for our consumers and retail partners. With relevant innovation, powerful brand campaigns, across every touchpoint and continuously improving in-market execution across all channels and platforms. We are fully activated, It's working. So we move with confidence into half two of the fiscal year And with that, I'll turn it over to Shailesh. Shailesh Jejurikar: Thanks, Andre. Good morning, everyone. I want to start by underscoring the point Andre just made. We are confident the interventions and investments we are making now will improve our near-term performance. Strong innovation supported by sharper, consumer communication and retail execution. We are already seeing strong results in parts of the business that have made these near-term interventions. Greater China Baby Care was one of the first categories to make step change and continues to lead growth of the premium and super-premium segments of the market behind consumer insight-driven innovation, and brand communication. Chinese parents want only the best for their baby. Softness and comfort in addition to dryness. The China team created a product that delivers on this insight from first seeing and touching the packaging to feeling the diaper on their baby. They leveraged the Chinese history with silk, The shiny, soft yet strong, luxurious material has been a status symbol for more than two thousand years. Pampers Prestige is the only leading diaper brand that has real silky ingredients in the product. Delivering the ultimate experience of skin comfort and protection. The shiny soft feel package conveys superiority at first touch. Reframing our superior premium line has driven Greater China Baby Care double-digit organic sales growth over the past eighteen months, and increased share nearly three points. More recently, our fabric enhancers team has disrupted a sleepy category through deep consumer understanding. Mexican consumers describe the gold standard smell of clean as rich, tasty, fruity, and floral. Like the scents from shampoos. Downy Intense leverages our internal perfume innovation expertise to create the new high-intensity perfume. The packaging highlights the intensity of fragrance blooming on the bottle like a flower, Brand communication drives awareness of an experience of twenty-four seven smelling, like freshly washed hair. In-store execution of impactful displays with stopping power is increasing trial. These deep consumer insights driving innovation and executed with shopper brand communication and retail execution as spurred Mexico fabric enhancer category growth, and led Downey to double-digit organic sales growth and over two points for value share growth. Other examples where we've accelerated results include the Brazil hair care business, U. S. Old Spice and US liquid laundry detergents businesses. Most of these interventions are starting now in The US The biggest most impactful part of the business. We'll go deeper on these at the CAGNY conference next month. While we work to improve our near-term results, we've also begun a longer-term reinvention of The Procter & Gamble Company. Think of this as the next important phase of constructive disruption that will create and extend our competitive advantages in each element of our strategy. We remain fully committed to the integrated growth strategy that has enabled us to deliver significant growth and value creation over the better part of the past decade and it will in the future. A portfolio of daily use products in categories where performance drives brand choice. In these categories, The Procter & Gamble Company is uniquely positioned to deliver irresistible superiority across product, package, communication, retail execution, and value. We will do this to drive market growth and create value for The Procter & Gamble Company and our retail partners. We will double down on productivity with multiyear visibility to fund capabilities, innovation, and demand creation and to mitigate cost headwinds while delivering financial results at the levels you and we expect. Constructive disruption to stay ahead of and to create emerging trends and opportunities in our fast-changing industry, We will disrupt ourselves. At the core of it all is our organization. Fully engaged, enabled, and excited to serve consumers and win in the marketplace. These strategies, taken alone, are just words that any company could say. The words alone have become a point of parity. The Procter & Gamble Company's point of difference, our competitive advantage, comes from outstanding integrated execution of these strategies across all activity systems in the company and from anticipating what is needed next. We've executed the strategy well for many years. Now we see the landscape around us changing faster than it's ever been in recent memory. Neither we nor our industry in aggregate have adapted as fast as needed. This shows in the growth trends of our categories. Consumer media preferences and information collection are increasingly fragmented with new media platforms, including social media and retail media. Inflation across food, energy, health care, and many other areas of spending has taken a toll on consumers, and how they assess value. This will continue to evolve. The retail landscape is changing. More concentration, but also brand proliferation. Retailers are becoming media platforms. And media platforms are becoming retailers. In summary, the consumer path to purchase is changing every day, is nonlinear, and littered with millions of possible distractions. We expect an even more intense pace of change in the next three to five years. We will adjust to and leap ahead of these disruptions to invent CPG company of the future. The way to break through consistently is to build the strongest brands in the industry. The Procter & Gamble Company has the capabilities and unique opportunity to redefine the brand-building framework to deliver consumer-relevant superiority every day every week, every month, putting the consumer at the center of everything we do. Leading the consumer-relevant brand building and superiority at this space can and will only be delivered by leveraging superior data, superior technology, and superior capabilities to create and extend competitive advantage with consumers, and with retail partners. We define our strengths and opportunity here across three areas. First, we know how to build brands rooted in deep connections with consumers and our industry-leading innovation capability. We have an enormous wealth of consumer data and understanding and we receive a continuous flow of new data every day. Our teams connect with consumers across more touchpoints than anyone in our industry. Product research, shopper research, connected homes, ratings and reviews, social media posts, brand fan websites, and many more. We mine for insights that lead to new product innovation, brand ideas, performance claims, marketing campaigns. Now we are building the consumer connectivity the integrated data platforms, and the technologies that will enhance our team's ability to do this work better faster, and even more consumer-centric than ever before. We have a unique set of innovation capabilities in our industry. Substrate technologies, formulaic chemistry, devices, and now biology. We have years of experience integrating these capabilities to launch new platform technologies and innovations and we see many more ways to bring combinations of these technologies to life in new consumer products. Tide e Tide Evo is just one current example. Technologies, like AI-enabled molecular discovery will enable faster, and more powerful integration of innovation capabilities for faster growth. The second and related opportunity is to create a deeper, holistic connection with consumers to build brand relationships with them in the new media reality. Media fragmentation and emergence of new platforms creates an opportunity for brand builders who can best integrate across touchpoints. AI and Gen AI capability help our teams discover consumer-relevant insights at every step of the consumer path to purchase, grounded in a unifying brand idea. We are creating the individual touchpoint experiences for each consumer at a time. These ideas are activated in claims, demonstrations, visuals that communicate the performance and value of the brand across connected and broadcast TV, online video, social media, e-commerce sites, and in stores. Deep insights translated into a compelling brand idea repeated wherever consumers engage, making the brand easy to remember, reinforcing superior performance, that is worth it for the price paid. The third opportunity is integration with retail partners across the full supply chain and merchandising activity system. Again, the consumer understanding and brand-building capabilities we have from initial brand impulse to purchase transaction to in-home consumption are valuable assets. Integrating these with each retailer's category strategy and business model will enable our brands to create value across all retail formats. This includes activation of our brands in retail media, to convey our superiority and value messages close to the point of consumer purchase decision. Our supply chain capability is already a leader in the industry. Supply Chain 3.0 has driven a more complete system connection from purchase signal back through inventory systems to our production planning and material ordering to ensure consumers find the product they want each time they shop. We are well on our way in this journey across capabilities, data, and technology. We are freeing up capacity and capabilities with the organization redesign we announced, as part of the restructuring in June. We have built a structured data lake stock with petabytes of relevant data. We have built data platforms, AI capabilities, programmatic shelf tools, and media creation and evaluation systems. We have supply chain platforms that can run autonomously reacting to retail demand signals, consumer innovation needs, or productivity opportunities faster than ever before. The next step is to connect the dots. To integrate the pieces from identifying consumer friction point to product idea, to product design, to supply, the creative concept, to purchase transaction, to usage in-home, to post-use evaluation. We will close the loop, and we believe this will create a different s curve for our future growth and value creation centered around our consumer. We are doing many things right in how we are innovating, operating, and building brands today. And I'm confident in the near-term progress we are seeing. We know the opportunities ahead of us are even bigger and we will capture them with conviction and discipline. It took years to build the underlying platforms and capabilities and it will take some time to fully integrate and activate these assets across the company. We know what we need to do and we are excited by the opportunities ahead. In summary, we are confident in the short-term delivery and excited about the mid to long term as we leverage our strengths and unique capabilities to set us apart from the industry. We are inventing the CPG company of the future. We'll expand on these thoughts with some examples at CAGNY, and even more as we get to Investor Day later this year. With that, I'll hand it over to Andre to cover the guidance update. Andre Schulten: Thank you, Shailesh. It's been a challenging start to the fiscal year. With softer consumer markets, aggressive competition a dynamic geopolitical landscape. We expect stronger results in the second half which enables us to maintain fiscal year 2026 guidance ranges across organic sales core EPS and adjusted free cash flow productivity. The growth rates embedded in our near-term guidance should return us to the lower half of our long-term growth algorithm as we exit fiscal twenty-six. And head into fiscal 'twenty-seven. For fiscal 'twenty-six, we continue to expect organic sales growth of in line to plus 4%. Global market growth for our portfolio footprint is around 2%, on a value basis, at the center of our guidance range. We're seeing progress in most regions, and we expect stronger growth in The U. S. As interventions take hold. As a reminder, this guidance includes 30 to 50 basis points of headwind from product and market exits, that are part of our restructuring work. Our bottom line outlook is for core EPS growth of in line to plus 4% versus prior year. This equates to a range of €6.83 to $7.09 per share. This guidance includes commodity costs roughly in line with the prior year. And a foreign exchange tailwind of approximately $200 million after tax, Taken together, no change versus prior guidance. Our fiscal 'twenty-six outlook continues to expect approximately $500 million before tax and higher costs from tariffs. Below the operating line, we continue to expect modestly higher interest expense versus last fiscal year. And a core effective tax rate in the range of 20% to 21%, for fiscal 'twenty-six, combined a $250 million after-tax headwind to earnings growth. We continue to forecast adjusted free cash flow productivity in the range of 85% to 90% for the year, and this includes an increase in capital spending as we add capacity in several categories that we incur the cash costs from the restructuring work. Expect to pay around $10 billion in dividends and to repurchase approximately $5 billion in common stock. Combined a plan to return roughly $15 billion of cash to shareholders in fiscal 'twenty-six, This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity or other cost increases, geopolitical disruption, major supply chain disruptions or store closures are not anticipated within the guidance ranges. With that, I'll hand it back to Shailesh for a few closing thoughts. Shailesh Jejurikar: We continue to believe the best path to sustainable, balanced growth is to double down on the strategy. Stronger integrated execution, to delight consumers with superior products at a superior value. Challenging markets like the ones we compete in today are an opportunity for The Procter & Gamble Company to step out from the back and lead. We're focused on leveraging the industry's best insights assets, capabilities, and people and you expect. to return to the levels of growth and market leadership that we, With that, we'll be happy to take your questions. Operator: If your question has been answered or you would like to withdraw your question, press star followed by 2. Your first question comes from the line of Lauren Lieberman of Barclays. Please go ahead. Lauren Lieberman: Great. Thanks so much. Good morning. So two kind of clear themes in the remarks that I wanted to ask about. So Andre, first, kind of what gives you confidence in the near-term acceleration that you mentioned a couple of times? And to what degree is that about kind of comparisons and base period dynamic versus, like, you know, real fundamental improvement and acceleration. And then, Shailesh, I know we'll get a lot more from you. At CAGNY. But what gets you excited about this longer-term, quote, reinvention of The Procter & Gamble Company? It was a notable choice of words. In the press release and then also in the prepared remarks. Thanks. Andre Schulten: Good morning, Lauren. Thanks for the questions. So let me start with half two acceleration. I think the first positive element of quarter two results is the strength of the business outside of The U. S. If you look at Latin America, 8% growth Europe in aggregate growing 3%. China growing 3% on top of 5% growth last quarter Asia, Middle East, Africa is up 2%. And if you exclude the restructuring exits, it'll be up 4%. So there's real underlying acceleration in the business outside of The US, that is grounded in interventions that we've made in terms of innovation, in terms of commercial strategies, and in terms of doubling down on the precision and quality of execution in those markets. With Latin America really being ahead of the game here. And that's proof for us that the core strategies we're implementing, I think, are the results that we want to see. The US, underlying results, we believe will improve because we don't have the base period headwinds that we saw in quarter two. As you point out, I think that's part of the acceleration we expect in half two versus quarter two, not having inventory headwinds to the degree that we saw in quarter two. But the main element here, I think, is the fundamental execution of the same interventions we made outside of The US earlier. If you recall, The US slowdown was really a little bit delayed versus the balance of the markets. So we started in the rest of the world earlier with the innovation, commercial interventions, and execution. That same playbook is being executed in The US. Early indications where we have done this, for example, the Tide boosted launch, that is now in full distribution as of December, We're seeing results that are giving us confidence The innovation we're launching on Olay, just now on the jars with a new campaign and the launch of treatments at the same time with a new architecture, gives us confidence. The innovation we have on baby care first wave executed now, second wave coming later, TideEVO Coming In The Back Half Of The Year, So There's A Wealth Of Innovation We're Launching. We've Clearly Identified With Our North America leadership the opportunity in sharper execution, across all retail channels, And the team is committed and is turning that into execution changes And then the simple opportunity to leverage the strength of our brands by staying fully invested across the second half in media with even better execution. So all of those elements that we executed outside The U. S. That are showing progress, we feel will work in The US and if we don't see any one-timers anymore in terms of base period headwinds, that will translate into stronger growth. And our objective clearly is to leave the year with share growth in The U. S. Felix, you take the second Yes, I will. Thanks, Lauren. So first, what excites me is plenty of growth opportunities. We see that everywhere. But it's not gonna happen on its own. It will require us to create our own tailwinds Be it playing in a growth segment and driving it like personal care or playing in a segment which wasn't growing like best with Zevo and then having that category grow high singles. We see growth or you take China baby care, another example, where you take an put the odds of growth with the lowest birth rates and all of that and we find a way to grow there. So that's one thing that excites me. The second one is a unique once-in-a-generation opportunity to leverage the shifts in the landscape and our unique strengths and capabilities to set ourselves apart. The media landscape is changing. The retailer landscape is changing. There is a tremendous amount of technology both from a point of what is applicable using AI enabling a lot of other things, but even fundamentally our own product and packaging technologies. And then consumer preference and demographics which are evolving. Then you take those and take our strengths and capabilities brands with large consumer base, If you have a large user base and you're really delivering amazing products you probably have the biggest fan club already right off. The bat. Consumer understanding and consumer data. We have so much data that we have put in. Can get an answer even before getting started. And that flow just continues, and we are further strengthening that. Take the media spend leverage and take the different places we could be using it. That is another huge opportunity. Our R&D spending and capability across multiple areas of technology from formulaic chemistry, sub devices, biology, That just enables us to innovate much more broadly. Shailesh Jejurikar: Product. Another thing to be able to communicate it to consumer. Bring it into packaging, bring it to life with user-generated content. So it's the ability to bring all of that together And the technology platforms and applications we've been building and Andre talked a bit about this, we are I would say we have been building a lot and I would say the future is here. It's just a little uneven. So our job is to integrate and bring it all together. Operator: Your next question will come from the line of Steve Powers with Deutsche Bank. Please go ahead. Steve Powers: Great. Thank you very much, and good morning. I'm gonna ask a question that kinda follows the same structure as Lauren's question. So the first one, on the second half, improvements, if we think about things by category segment versus by geography, I guess, maybe a little bit more detail on where you expect progress and sequential acceleration to manifest most clearly. It sounds like laundry and baby and perhaps skincare what you said, Andre, but maybe just you could elaborate a bit more from that perspective. And then Shailesh, you know, Andre Schulten: You take the China Baby Care. It's one thing to get the insight. Another thing to find a way to put silk in the Steve Powers: If you think about all those different pieces of operational enhancement and reinvention initiatives, How do you think about the path and timeline from here for the company to put all of them together and create those own tailwinds and win in the marketplace you know, across the portfolio consistency? How long does that take in your mind? Morning, Steve. If I look across the businesses, the innovation interventions, the commercial interventions, the execution focus is consistently applied across every part of the portfolio. I would tell you the base period effects are probably a strong help when you look at family care baby care, and even fem care, They were most heavily impacted in the first half of the year. So Family Care, for example, will see strong growth in January, even turning into share growth now. And we expect similar dynamics to happen across Baby and Fem. Baby at a global level is actually growing share, so has returned to share growth in the most recent reading. So the momentum is there. We continue to work on the mid-tier proposition You recall we had innovated on the top tier. That continues to work well. Swaddlers, cruisers three sixty. We've made the innovation interventions on Luvs a year ago. That's working. On Baby Dry, we have a two-phased approach. Phase one is executed. Phase two is coming later, So that's still work to be done. On laundry, fabric enhancers, we have very strong innovation, tight boost that I mentioned before, the biggest laundry liquid upgrade in twenty years. For consumers, and that is taking hold and working. And we're preparing for the TideEVO launch. We have strong innovation across fabric enhancers as well. And as you know, that's still a huge opportunity in terms of household penetration So communication effectiveness and copy quality is improving. In beauty in aggregate, beauty is growing 4%. And we have an opportunity to strengthen growth in skincare in The US. Making strong progress on SK-II, outside of The US, on Olay Outside Of The US, And I think the new launch of Olay that is just coming out with strong retailer support, I think, will accelerate that business. Personal Care has momentum and will continue momentum in The U. S. And globally. So I can continue to go down the list, but think I've given you enough depth to say this is really across the portfolio. It's the same idea, double down on the consumer. Double down on the execution. A double down on the quality of the brand campaign, And I think that's where, you know, Shailesh is putting his focus, if I can speak for him. He's really doubling down in every review on the quality of the brand campaign, the quality of the architecture thinking. And it's stimulating thought. It's stimulating quality of execution. And I think that gives us confidence from a geographic standpoint as we talked earlier to Lauren's question, but also from a category standpoint. Shailesh Jejurikar: Well, thanks, Andre. And I'll just bridge Steve from what Andre said what I'm gonna say. But some of it will be sequential just simply because in US, also, when we make the interventions, we are extremely deliberate about making sure those interventions also drive category growth. So that's also why some of this has to happen with big innovations. But switching to your question. So I think a lot of the way to think about the future is we have, in many cases, already built platforms. Take the core data lake. That I talked about earlier. I mean, that did not happen overnight, cannot happen overnight, requires data capabilities, requires partnerships, but also importantly requires internal cultural change. For people to work the data and systems in a certain way is not a change that you can just do overnight. Even if you have the technology solution, very often the culture chain needs to go along with it. And so a lot of that work has happened or is happening. The timeline, if you asked as you specifically did ask, is I think by the time we really get the future evenly distributed, I think we're talking twelve to eighteen months. But it is not one which is a line of demarcation. So you will see parts of the business and certain businesses better equipped to take on all aspects of the transformation So some businesses may be ahead of others. Some regions may get ahead of others. But the simple answer to your question is really, I think, to get the future evenly distributed will be twelve to eighteen months. Operator: The next question will come from the line of Chris Carey with Wells Fargo. Please go ahead. Chris Carey: Hi, everyone. I wanted to ask about investment levels. The Procter & Gamble Company has recently announced a restructuring program and you're going through some initiatives today, new media platforms. Supply chain integration with an evolving retail landscape, Obviously, there's an expectation for improvement. In sales growth, rebalancing of this I guess, top line and move toward algorithm over time. Can you give us a sense of the sort of cost of this progress, I suppose? And kind of the balance between the restructuring and some of the savings that that's going to allow for you relative to what you feel like is going to be needed You know, potentially, you know, especially if you don't, you know, see that that acceleration that you're gonna be looking for you know, in the coming months. If you if you really wanna stimulate top line for this business over the next twelve to eighteen months? Thanks so much. Andre Schulten: Hey, Chris. Let me take a crack at this. The first part of the answer is many of the investments have been made over the last decade. If you think about the amount of money it takes to build a consistent global ERP platform, the data lake, the data governance structure, data engineering. All of that has been done. So that was part of the results that we that we delivered over the past, I would say, five to ten years. The investment to activate the technology specifically around the innovation capabilities, the media capabilities, won't be significant. It's an investment in scaling, but the underlying technology, the underlying data, that heavy investment is already done. So in that sense, I don't expect major capital or expense investments. On the supply chain side, you see us build capacity. And as we build capacity, that capacity is built in a way that it leverages automation. Digitization, both on the manufacturing side and on the warehouse side, So the elevated investment level in terms of capital is really related to building capacity building capacity in a different way, but not fundamentally more expensive So I don't expect, again, on the capital side, a significant shift. The restructuring we have announced in June, the two-year program, I think, will take us through the majority of the org changes and portfolio changes that we need to make. From there on out, if this works the way we want to, it will basically allow us to grow without incremental investments in organization or people. If you think about it, the objective is to grow productivity sales per head disproportionately once these capabilities are implemented. But we don't think it requires another wave of significant restructuring beyond what we typically have as part of our core earnings. So I wouldn't look at a cliff of investment that comes with this. The second part of your question on return to algorithm, I would say let us get through the next two quarters. And focus on acceleration. And then we'll talk about where we see the next year and how close algorithm we come once we have that reality under our belt. Operator: The next question will come from Dara Mohsenian of Morgan Stanley. Please go ahead. Dara Mohsenian: Hey. Good morning. So, Shailesh, I just want to dial down a bit more into The US market. There's always an opportunity under a new CEO to refocus the organization and tweak areas of emphasis Obviously, there's broad changes in the retail environment, as you mentioned, AI technology, consumer landscape, etcetera, etcetera. And, also, we're coming off a very difficult category growth environment in The US in calendar '25. So just as you look going forward, what are the most important priorities for the organization in terms of driving better execution, reaccelerating that organic sales growth? And specifically The Procter & Gamble Company's part of driving category growth. And part of the question is I'd like to better understand what's changing in terms of areas of emphasis to the strategy plans versus more where you're doubling down on execution and existing plans? Shailesh Jejurikar: Sure. Thanks, Dara. Few areas. So I think as I said, I think if we get the elements of a plan right, I think there is an opportunity to grow the market. So I think that is doable. What are some of the changes, as Andre talked about, the interventions short to midterm that we're looking at and which also bleed into the long term. So it isn't just one separate short and long-term intervention. One is the media landscape has changed very dramatically over the last few years. I think, probably driven somewhat by COVID habits, a bunch of other things. The way people consume media and content has changed dramatically. Adjusting our brand-building plans to fully reflect that change and leverage it is the first. Big intervention we are focused on as we review plans including in The US. The second one linked to the retail landscape, there are a couple. But the first one is linked to when you see which channels are growing where the growth is coming, We need to adjust the kind of innovation we do. The way we are calling it is stronger core, bigger more. Because by definition, what we are finding is just given how challenging it is to get awareness, how important it is for the big items to be there, For instance, even on e-commerce where you can list everything. It's really the first screen or two that matters. And so having the item which has the velocity is extremely important. And so the way to think about it is a stronger core, for example, is the Tide Liquid relaunch. You have an amazing user base You give them a delightful product. They continue using it, use more of it. Attract other people to come use it as well. The bigger more, a good example is the launch of something like TideEVO, which is transformational. So you are going to get consumer attention and engagement. So we're changing the innovation to reflect that both from a point of view of how the media is being consumed, but also how the retail landscape is playing out. The third area of change is, of course, very deliberate on consumer value. Particularly in a market like the US, a lot of it is about strengthening our proposition Again, Tide is a great example of it, but we are gonna have that pretty much across every category where we significantly improve the value by significantly improving the product performance. So that the consumer notices it and feeds the value. So one of the areas that we're looking at across categories is significant strengthening of the propositions and in many of these cases, that do not come with the change in price. So we will be significantly strengthening value. So if I were to just summarize what I just said, it would be adjust to the new media landscape with how we do our brand campaigns. Adjust how we innovate with much more emphasis on a strong core and a bigger mold, And then ensure we're delivering really good consumer value. Operator: The next question will come from Robert Ottenstein of Evercore ISI. Please go ahead. Robert Ottenstein: Great. Thank you very much. And I think you've kinda hinted at this. But let's just talk about The US. And Amazon. You know, our data is showing that it's driving a disproportionate amount of the growth in your categories depending on category anywhere from 60 to 80% or so. You know, how specifically is that impacting your media efficiency and competitive dynamics against smaller brands what do you need to do differently? And perhaps you know, do you have any particular learnings from China that are relevant here? Thank you. Andre Schulten: Yeah. Can I do one? Yeah. I can start. Hey, Robert. A couple of points that I think Shailesh hinted towards I think having the core brand as strong as possible by improving the performance, improving the claims, the e-content, all of that, I think, is the best and most urgent thing to do across the entire portfolio. So when it shows up on the landing page, it shows up as strong as possible. I think that's number one. I think there's an opportunity, specifically if you look at online businesses, The willingness of consumers to go into higher-priced items is still very, very strongly developed. You think about categories like hair care, if you think about categories like skincare, where small brands tend to play is in the upper end of the spectrum from a price per usage component, I think that's an opportunity for us to innovate. Which is you know, stronger core, and a bigger more. And the more, especially online, I think can be premium priced that's where you see innovation. Innovation happening. And in general, the last thing I'll leave you with is taking smaller brands and looking at some of the ideas that these creators are bringing, I think, is good inspiration. So looking at some of these brands and saying, that could be an interesting idea maybe on some of our core business, or it could be an interesting idea to replicate as a line extension There's nothing unique if you think about the ability that the ecosystem of small brands can bring. Not technology-wise, certainly not from a marketing scale perspective, certainly not from a supply chain perspective, but the creative stage is something interesting for us to look at. Shailesh Jejurikar: I'll just add a couple of points, Andre, on this. To what you said, which is firstly, at a broad strategic priority level, we are very, very deliberate about ensuring we win in the fast-growing segments, which may be channels or segments of a market. What is exciting to the point you made, Robert, about the e-commerce growth at a variety of retailers and variety of countries is very often if we can channel that right, it can dramatically grow the market size and category. And if you want to take a stark example and move away from The US for a second, we go to India where our portfolio is slightly different and has been evolving differently. E-commerce is growing probably at 10 times the pace almost of offline. And our share is about 1.8 x. Of our offline business. So we are very deliberate about that, whether it's The US or India or any other market to make sure that happens. The drivers, as Andrew pointed out, of winning there need certain things, which we are making sure we have across the board, which includes content, which includes the item specificity, and making sure those are strong. And growing. And playing with the right portfolio. So those all become very critical elements, whether it's Amazon in US or any other ecom player in The US or outside Operator: The next question will come from the line of Peter Galbo with Bank of America. Please go ahead. Peter Galbo: Hey, guys. Good morning. Thanks for taking the question. And I'm now happy to be contributing very much to the baby care comps in the Galbo household. So I wanted to ask just regarding, Andre, your comments around you know, returning to kinda the lower half of algorithm in the back half on the near term, maybe a bit of clarification there. I think one point in the prepared remarks, talked about your category is growing at maybe two Then there was another comment about if we if we took out, you know, the the the lap, you would have seen organic sales a breeze. So just maybe you can help clarify a bit on what you were trying to say with that comment as I've I've gotten some inbound from folks. On that. Andre Schulten: Hey, Peter. Glad to welcome you to the 2% in terms of terms of value. Enterprise markets are growing at about mid-single digits. China is still negative by about one point. Europe, flat in volume about 1% in value. And the most recent reading in The US, all outlet read, so our data, would indicate about 2% one to 2% of value growth. If you look specifically at the O And D Quarter, They Are There Might Be A Point Of There Is A Point Of Inventory Within Those Numbers. So You Want To Be Optimistic, You Could Say The US structurally could be growing at two to three points. But we have to see where that goes. From our point of view is the actual results, we've delivered 3% growth outside of The US. So that's roughly in line with market growth outside of The US. And we have delivered minus 2% in The US, which is below the market, And a good part of that is the inventory effects. There is a component of reduced share. So I don't wanna gloss over the fact that we have work to do to recover share, Partially, that's already in progress. I talked about family care. We're making progress on laundry. But the recovery in the second half will include both the base period effects moving out of the market and us recovering share So our objective is really to leave the fiscal year with share momentum out in The U. S. And at a global level. Operator: The next question will come from Kevin Grundy of BNP Paribas. Please go ahead. Kevin Grundy: Great. Thanks. Good morning, everyone. Shailesh, I wanted to take a step back and ask for your assessment overall. On the portfolio from a strategy perspective. So it's been over a decade since The Procter & Gamble Company completed its portfolio review. Success as you know the income right away, but ultimately did. And set the company on a very strong path for growth. Now as we talked about on this call, the company finds itself in more of a transitional sort of phase of a reinvention, if you will, as growth has slowed. With that as context, I'd like your view here on whether you are generally pleased with the current portfolio Is The Procter & Gamble Company still in the right segments with in big total addressable markets? Attractive returns on capital and stronger growth? Or do you see it possible certain businesses may make less sense today in The Procter & Gamble Company's portfolio than they may have in years past. So, your thoughts there would be appreciated. Thank you. Shailesh Jejurikar: Thanks, Evan. I split it into a few parts. So first is, I think we are clear that we play in daily use categories where performance matters. So I think we feel very good about that choice. We feel very good about that choice because it's extremely well integrated with the total strategy That's where superiority becomes critical. Whole model works well when we are in categories where daily use categories where performance matters. So I think that is one part of it. Second part of it is what we call the day one loop. We were starting our company today, we would look at our portfolio and say, okay. Are we in the right places? That has been really the genesis or driver of the restructuring that we talked about about six months back. Where we said we need to get out of certain parts of the business because simply them being a drag or we're not where we saw future growth. So there's another part of it, which is just disciplined look, continuous review of which are the right segments, and are we playing adequately in higher growth segments or not. There's a third element of it, which is when we look at categories, are we playing in the right segments? And something Andre just talked about, which is if you look at ecom, you see which category, what segments are growing, and are we present enough in some of those. If you look at social commerce, in some categories and see are we well represented in all segments, And we actually find a lot of opportunity at some of the higher price points in some of the categories in things like social commerce. So that's another aspect of the portfolio that we continue to strengthen. And the final point I would make is we continue to look at where we can build greater strength, and we've always talked about the fact that health and beauty are two areas where we find we have still opportunity to build a stronger presence, and we continue to look at opportunities which come our way there. Operator: The next question will come from the line of Peter Grom with UBS. Please go ahead. Peter Grom: Yes. Thank you, operator, and good morning, everyone. So I guess I just wanted to follow-up on The U. S. And I guess it sounds you sound confident in your ability to see performance improve But I I guess I was trying to just pin down what you're expecting in terms of category growth for the back half of the year. And I wasn't sure in your response to Peter's question around 1% to 2% growth, whether that's kind of the right runway we should expect moving forward or whether the guidance expects to get back to that 2% to 3%. So maybe if you could just elaborate on that, that would be helpful. And then I guess just related, you know, at CAGNY last year, know, there's a lot of discussion around inventory destocking. So just any thoughts or comments on what investors should expect as we anniversary those impacts? Thanks. Andre Schulten: Hey, Peter. Yeah. Thanks for the push on clarifying US category growth. Our base expectation is 2% category growth in the back half. That's what we know. And that's what we're planning on. From an inventory standpoint, hard to predict The only thing I'll leave you with is I would not expect any significant inventory built. In the second half. That's not part of our plan. We expect some level of inventory efficiency to be driven across retailers like they always do. Some of our retail partners are finishing up supply chain interventions, and that will probably lead to some efficiency in terms of inventory levels. So I'm I would tell you a slight headwind from inventory is probably adequate to assume. On a market base that has about 2% of value growth. Operator: The next question will come from Filippo Falorni of Citi. Please go ahead. Filippo Falorni: Hi. Good morning, everyone. I wanted shift maybe to margins. For the second half of the year, is it the right expectation to think that we should see an improving margin trajectory as well considering the assumed improvement that you're embedded in The US market, your highest margin business. And given the commodity outlook looks a little bit more favorable in your guidance, And then below the gross margin line, Shailesh, you mentioned a lot about the interventions that you planning, including The US business. Can you help us quantify where the sizing of those intervention, where would they show up, whether it's with more advertising, more R&D, more promotional investment. Any help, like, sizing and quantifying those impacts will be helpful. Thank you. Good morning, Filippo. Let me start Andre Schulten: At the risk of disappointing you I will not give you margin guidance for the back half. I think the margin will be an outcome and we will have to tactically maneuver to see where we want to invest for the strongest possible growth We focus on top line and we focus on EPS. And as you will have noticed, our guidance ranges on both are relatively wide. And they are wide because the outcomes will vary. There's still a lot of variability. And the most important variability to the margin line will be our conviction and need to invest. And so it's hard for me to give you a good indication of where that's gonna land because it's gonna be entirely driven by our ability and conviction to continue to invest in brands. Where that investment comes, I can start, Shailesh, and you jump in? Think it's mostly in the range of again, the innovation we're launching, and Shailesh talked about improving value by driving significant performance improvements on the core propositions, That will be an investment we're making. That's baked into our assumptions. And the second component is to communicate those investments effectively and consistently across the balance of the year. So the media side is an important part. I wouldn't expect a significant increase year over year. But consistent media spend across the second half. And the third one is trade-related spending to drive trial. Create display visibility, secondary placement in-store, Again, our path chosen is not heavy investment in promotion depth and price. We don't believe that's market constructive. But it will be to drive trial of those superior propositions So that's the third bucket. So product, media and communication, and in-store visibility and trial. Shailesh Jejurikar: No. I think you covered it. Only thing I would say is the ratios of that vary based on the category. So the mix of which one needs a little more on product, which one needs a little more on advertising or visibility will vary. So that's the only point I would add to what you said, Andrew. Operator: Our next question today will come from Bonnie Herzog of Goldman Sachs. Please go ahead. Bonnie Herzog: All right. Thank you. Good morning, everyone. Guess I had a question on your Grooming segment. Organic sales were flat in the quarter, which was a pretty big deceleration versus last quarter with volumes inflecting negative and then margins contracting nearly 300 bps. So could you provide a little more color I guess, on what drove the weakness on volumes? And if there are any other factors behind the margin contraction outside of volume deleverage And then maybe lastly, how should we think about this segment for the second in terms of whether it's innovation and whether the business can accelerate? Thank you. Andre Schulten: Good morning, Bonnie. Think you answered the first part of the question. I think the margin component and the bottom line component is an outcome of the top line. It's obviously a high-margin business. And so if the volume's slowing, that translates into the bottom line slowing, specifically since we don't curtail the investment in the business. Superiority investment across grooming is very important. The timing of the grooming business is heavily related to initiative timing. So year over year, the phasing of Braun initiative, female grooming, and male grooming initiatives is a driver in the quarterly profile that you see. On the second half, like other business, we expect modest acceleration in grooming. Related mostly to The US, And I think the biggest opportunity for our grooming business has continued activation of the portfolio in The U. S. And quality of execution in US stores, and that's what the team is entirely focused on. Shailesh Jejurikar: Just to add maybe a couple of points, Bonnie, to that. One is we see within grooming, a huge opportunity in continuing to drive Venus. That has upside in pretty much every region In many regions, that's growing in the tens and twenties percent growth. So we see a lot of upside on the female grooming side. We see a lot more on appliances as well. And then we are working on innovation, which will have which comes in the in calendar '26, which hope which should further drive category growth. And probably the last point I would make is in US, we are also looking at changing the way our shelves are in many of the retailers and significantly improving how grooming comes across as a shopping experience. Operator: Our next question will come from the line of Kaumil Gajrawala of Jefferies. Please go ahead. Kaumil Gajrawala: Hey, guys. Good morning. If we could talk a bit about usage and volumes, there's so many puts and takes on your quarter. But, know, to the extent that you're able to calculate what actual usage is in the households, has that sort of trended off as we got into the front half of this fiscal year? Is it about the same in the rest sort of within it is just noise? Andre Schulten: I think, Kaumil, it's that is still a huge opportunity in our categories. Usage volume growth is slow. To honestly flat if you look at the front half of the year. Even in the last quarter, both in The U. S. And in Europe. So reacceleration household penetration, reaccelerating user growth is a big part of what we're focusing on. And if you think about it, a lot of the growth in the past few years has been price-driven, right, as we came through the inflationary cycle, the supply chain crisis, all of our categories, And so I think the opportunity for us now is exactly what Shailesh described, It is to improve the value proposition for consumers by diligently constructing propositions that have a perfectly matching performance profile well communicated and executed, without raising the price so we can make the proposition attractive to more households, more consumers, more consistently. So the volume component will have to be a part of how we grow markets. As we talked about the second half, we believe this will take time. So we don't think this is an easy fix nor will it come quickly. So our growth trajectory that I just highlighted, the 2% value growth in The US, which is the assumption for half two, largely assumes that the volume component remains slow. Shailesh Jejurikar: Just add one point reinforcing, Andrew, what you said But as we get on the journey of growth, I think user growth will be one which we place a lot of emphasis on. As Andre said, between user, usage and price mix, I think last five years probably had a due to inflation, a bigger component of price mix. We think the future is gonna be a lot more about user growth as the foundation, and then that typically we get that, we also get the usage growth. Operator: The next question will come from the line of Andrea Teixeira with JPMorgan. Please go ahead. Andrea Teixeira: Thank you. Good morning, everyone. So I was hoping if you have a clear clarification and one question. On the clarification you just mentioned, Shailesh, and Andre, like you're assuming that your 2%, you know, category growth, but are you thinking you can stabilize or even perhaps have share gains with the interventions you were making? And within that, are still seeing some trade down within your branch from, let's say, parts to liquid? Or if that has stabilized. And my real question is on the productivity reinvestment. As you had a very strong productivity in the quarter. So are you thinking of like as you go in terms of reinvestments and all the media initiatives, innovation you've made, and perhaps by spec architecture for affordability. Should we expect that to be canceled out? Or perhaps, as you see this environment and the opportunity to lean into more of a value proposition? How are you thinking of, like, the balance between top line and bottom line? Andre Schulten: Thanks, Andrea. From a share perspective, it certainly is our objective to leave the year with share growth. Both in The US and in the rest of the world. But we also acknowledge that that is an outcome of how well we execute, the competitive environment, other in terms of geopolitical dimensions, consumer health, So that's why we still maintain the range And within the range, you know, if we end up in the mid to higher section, that will probably have an element of share growth If we end up in the lower section, it won't. But be assured, our team's energy is exactly that. We need to grow share, by growing more users, growing more households, and that's where all the innovation and the investment is focused. On the balance between productivity flow through top line and bottom line, I'll go back to what I said earlier, It depends on what we see happening. We will certainly on the side of more investment to drive more user growth drive household penetration in the short term, If we are convinced that we have the right innovation, if we are convinced that we have the right marketing program, the right commercial program, We will double down but we would be diligent in that assessment. So if we feel we've got the right program, we absolutely will continue to reinvest productivity. Operator: The next question will come from Olivia Tong of Raymond James. Please go ahead. Olivia Tong: Great. Thanks. Good morning. I want to talk a little bit about the margin with productivity savings about 70 basis points this quarter. You reinvested two twenty of that which I think highlights your you know, pricing productivity and reinvestment even as demand remains lower. So could you drill into that a little bit more in terms of what limitations there could be over the balance of the year on the price and productivity lever levers, particularly on price. Your implied second-half guidance assumes some fairly strong margin leverage but I want to understand those moving parts. And then in terms of the guidance range, you mentioned to in answer to another question that you can grow even without additional headcount, leveraging sales per employee. What's the risk that you might need to adjust those investment levels you know, as you think about delivering on EPS? Thanks. Andre Schulten: I'll give it a shot, Olivia, but you can certainly follow-up with the IR team to get you more detail. I think the margin productivity side, I feel very good about We will continue to deliver in the range that we've delivered on. Have visibility to the productivity components for the next two to three years. So I think and we have the effect of the restructuring program kicking in. So I feel good about our ability to continue to drive productivity. At the level we need to deliver investment and a reasonable EPS outcome. Again, I won't get into guidance for next year, but it's certainly our objective to make progress towards algorithm. Over the next few quarters. The extent of that progress will not depend on our ability to deliver productivity. I feel very confident about that. It will entirely deliver depend on our ability to stimulate top-line growth, in the market conditions we're facing. And the level of confidence and conviction we have to invest behind that growth in the market. So I'll leave it there. For the longer term, I'll tell you I am fairly convinced that Shailesh will jump in here. That with the restructuring program, the way we're approaching the organization design the way we're integrating technology into the way we work, and the way we want to decrease functional barriers we think that's a powerful path forward to continue to drive organizational effectiveness and honestly free up a ton of capacity of our teams from internal work to focus on what really matters, which is the consumer innovation and execution. Shailesh Jejurikar: I agree with everything, Andre. I would just add a couple of points. To frame what we are trying to do, which is productivity as fuel for growth. Growth as a fuel for EPS. So we really think productivity enables us to do what we need to to get the growth, which gives us balanced top and bottom line growth. So that is really the effort. So as you think of that, and that's really what Andrew was also saying is we're doing the productivity. We're very confident, by the way, in the productivity. But that finally is going success on that is getting us a growing top and bottom line. Operator: The next question will come from the line of Robert Moskow of TD Cowen. Please go ahead. Robert Moskow: You know, The Procter & Gamble Company probably does more than any CPG company to grow categories through innovation and improving performance That that's always been your mantra. But know, when you look at the data, as in terms of, like, the past twelve weeks or even the past year, the percent of products sold on promotion at The Procter & Gamble Company is substantially higher by about 200, 300 basis points. So I'm wondering, do you think this data, like, accurately represents what's what your approach is in market? Or because it would indicate that there is more need to move volume And or or is it inaccurately? Depicting what you're what you're trying to do to improve the volume? Thanks. Andre Schulten: Hey, Robert. I'll give you a two-part answer here. Good question. I think I've repeatedly said that I don't see a reason why the categories will not move back to pre-COVID levels of promotion, which are around 30%. That will happen. It's just a competitive dynamic, a retailer dynamic, a consumer dynamic. And it's happening sequentially over time. The promotion read you're getting is not wrong, but it only captures part of what the market reality is. It doesn't capture forward gift cards. It doesn't capture layered couponing. Which is a significant part of competitive promotion that we're seeing. You're right. Our promotion volume is increasing and probably will increase in the second half, as we execute the innovation part of creating trial for those innovations is to deliver promotion visibility. Not all of those promotions come with deep price discounting. In many cases, they don't. But they show up in the promotion line. So what I'll tell you is our objective is to grow categories. Have we done this consistently over the past twelve months? No. That's our when Shailesh talks about we need to grow users and we need to grow usage, That is the part of category growth that we're striving to drive. And part of that has to be to generate trial because if you don't have new users try superior propositions, you don't get repeat, and you don't get the growth. Shailesh Jejurikar: Thanks. I'll just add one thing to this, which is that as we strengthen our propositions it should strengthen our promotion elasticities as well. Which means we will be less impacted as our propositions get stronger. So that is always something we look for. So there's a balance between ensuring are building a future business, which is less dependent on promotions, but making sure we are not completely losing the plot on competitiveness. Operator: The next question will come from the line of Edward Lewis of Rothschild and Co. Redburn. Please go ahead. Edward Lewis: Yes. Thanks very much. I just Shailesh, wanted to touch on the regional mix of the business. Clearly, your elevated presence in The U. S. Has served you well of late. But as The U. S. Growth slows back to sort of, I guess, more normalized levels, we see continued growth in emerging markets, for example, what you're seeing in Latin America. Do you think about the regional mix of the business? And the advantages that you see the business as having are those regionally agnostic or can they be applied globally? Shailesh Jejurikar: Great question. Let me take a crack at it. So I would say our task always given our business size, and other things is first and foremost to get US growing faster. And I believe it is doable and we have plans to try and do it. That is really part of what we talk about when we say we want to create the future. But we don't we think there are tremendous opportunities on the outside The US, which we are very focused on. And what we have tried to do is get very deliberate about which markets have that potential and then really double down and making sure we are playing to the future there. So a lot of the portfolio choices we have made over the past six to nine months have really been to put us in a position that we are playing in winning segments. Even if I take Latin America, we made the choice to change our business model in Argentina A large part of that enabled us to much better focus on Mexico and Brazil, and we changed the organization structure in the rest of Latin America. Which then enabled us to get much more consumer focused And now we are seeing, as Andrew mentioned earlier, 9% growth in Brazil, That's not the pace the market is growing at. Double digit in Mexico, that's definitely not the pace the market is growing at. So talked about India. A bit earlier in a different context. But, again, playing to the future growth there, which is heavily e-com, mean, having spent a lot of my life there, it's staggering to see the pace of change over the last five years in that space. So very deliberate on the big markets outside The US on how we're going to get the growth. Of course, China still remains a big one. Has a slightly different profile of where it coming from, but still a lot of future opportunities. So we do believe many of these large markets, we are well positioned to play to where the future is going. Andre Schulten: And I would just say it's an end. We need to get The US growing, and we need to grow outside. And I think the good news is, maybe only one point to add, is the margin structure that John and then Shailesh have built in enterprise markets allows consistent investment because we have we can cover the cost of capacity, the cost of capital, So it's not dilutive. It funds itself, and that's the core idea behind expansion and growth in enterprise markets. Operator: Your final question will come from the line of Michael Lavery of Piper Sandler. Please go ahead. Michael Lavery: Good morning, and thanks for the question. Just wanted to come back to some of the share opportunities and how to think about it relative to value for the consumer You've you've talked about the importance of that, but also it sounds like no real price changes are under consideration. You've pointed out some of the premiumization some smaller brands are doing effectively and maybe delivering better benefits and value in that way. But you've also had, of course, some private label strength and share pressure. I guess how do we reconcile all of it? And maybe is it as simple as just a waiting game for the consumer health to improve, or is there more to do to move the needle on how the consumer sees value other than just sort of, you know, trading them up? Shailesh Jejurikar: Yeah. I no. Great question. I would say it's not one thing because a very critical part of delivering value is also having a portfolio. So Luvs plays an important role in baby care in that sense. Similarly, on laundry, we have a portfolio with Gain and Tide Simply, So across markets, we do build that portfolio to ensure we are playing at a variety of price points. And making our products accessible. But if I were to look at the largest opportunities to address growth through value, I would say bulk of them are really in strengthening propositions. And if I look at probably one of our largest core items, which would be tied Liquid, which is a huge, huge business. We're seeing real momentum as we've just significantly improved the product performance. So it's a combination to answer your question. And k. With that, it looks like we have no further So just thank you for joining us this morning, and look forward to seeing you at CAGNY next month. Have a great day. Andre Schulten: Thanks, everyone. Operator: That concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.

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PNFP 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Pinnacle Financial Partners fourth quarter 2025 earnings call. All participants will be in a listen-only mode. Should you need assistance, signal a conference specialist by pressing 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. We'd like to limit this call to approximately one hour. I'll now turn the call over to Jennifer Demba, senior director, investor relations. Please go ahead. Jennifer Demba: Thank you, and good morning. During today's call, we will reference the presentation and press release that are available within the Investor Relations section of our website pnfp.com. President and Chief Executive Officer Kevin Blair will discuss our newly combined company's future and outline our 2026 financial outlook. Chief Financial Officer, Jamie Gregory will review Pinnacle and Synovus' standalone fourth quarter 2025 results. Finally, Chairman Terry Turner will make some closing remarks. And then our team will be available to answer your questions. Our comments include forward-looking statements. These statements are subject to risks and uncertainties. And the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements because of new information, early developments, otherwise. Except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation. And now, President and CEO Kevin Blair will open the call. Kevin Blair: Thank you, Jennifer. Good morning, and welcome to our fourth quarter 2025 earnings call. As Pinnacle Financial Partners enters its next chapter, we do so with the belief that true success comes from staying grounded in who we are, inspired by where we're headed, and united by a relentless commitment to outperformance. As we do so, we reaffirm our commitment to the investment community with renewed energy clarity, and confidence in the path ahead. Pinnacle's focus is producing strong above-peer revenue earnings per share, and tangible book value growth. Our strategies and plans for execution are clear. Are committed to delivering exceptional client service and industry-leading loyalty as verified by external sources such as Crystal Coalition Greenwich, and J. D. Power. At the same time, we aim to be the employer of choice in regional by fostering a uniquely collaborative empowered, and rewarding culture. These priorities enable us to attract and retain revenue producers at an outsized pace, fueling our continued growth. By pursuing these goals with passion and purpose across the entire franchise, we strive to continue to create exceptional value for our shareholders, and set the standard for growth and profitability in the industry. Our strong performance in 2025 demonstrates the focus of our teams during more volatile economic times in the midst of a pending merger. Legacy Pinnacle grew adjusted diluted earnings per share by 22% in 2025, while Legacy Synovus grew adjusted diluted earnings per share by 28%. The commitment and focus of both firms on creating a differentiated client experience resulted in Legacy Pinnacle's number one Net Promoter Score ranking in its footprint and Legacy Synovus' number three Net Promoter Score ranking in its footprint amongst top market share banks. These results underscore that our team is fully engaged, focused on our clients, and delivering meaningful value for our shareholders. We are a competitive team committed to sustaining top quartile growth profitability. The merger between Pinnacle and Synovus was completed on January 1, just one hundred and sixty days after announcement, demonstrating the strengths of both companies and our resolve to swift and effective integration. Over the past two quarters, both organizations have successfully completed key milestones. These achievements highlight our strategic focus and reinforce a solid foundation for continued growth and operational excellence. The team has hit the ground running in January, already executing across all elements of the proven Pinnacle operating model. For example, the firm has brought legacy Synovus team members into the money morning sales and service meeting series, an anchor of the pinnacle operating rhythm, led by chief banking officer Rob McCabe. This long-standing practice helps teams align around core priorities promotes cross-team collaboration, and establishes shared ambitions and goals around growth hiring, pipeline activities, and service expectations. We are thoughtfully combining the strengths of Synovus and Pinnacle building on similar legacies and shared values, and remaining true to what really sets us apart. Pinnacle's exceptional operating model is our foundation and the engine of our growth guiding us through every opportunity and challenge. We're not just building another big bank, We're scaling with a soul. And now, Jamie will review both Pinnacle and Synovus' standalone fourth quarter 2025 financial results. Jamie? Thank you, Kevin. Jamie Gregory: Even in the midst of a merger integration, both Pinnacle and Synovus continued to demonstrate strong financial performance over the past two quarters. Pinnacle reported fourth quarter adjusted EPS of $2.24 which was stable quarter over quarter and up 18% from the prior year. Net interest income increased 3% from the third quarter and 12% year over year. Balance sheet growth remained well above peers. Period end loans grew at a strong 3% from the prior quarter and 10% year over year, driven by recruiting. Particularly in our expansion geographic markets. Core deposit growth was also quite healthy at 3% quarter over quarter, and 10% year over year. The net interest margin increased one basis point to 3.27%. Meanwhile, adjusted noninterest revenue declined 6% from the third quarter but jumped 25% year over year. Year over year growth was largely as a result of higher service charges, wealth management revenue and income from BHG. As expected, BHG contributed $31,000,000 in fee revenue to Pinnacle. Adjusted noninterest expense was stable quarter over quarter, and up 13% year over year. Pinnacle's fourth quarter credit metrics remained healthy, and capital levels continue to build. Net charge offs were contained $27,000,000 or 28 basis points. 63% of which was from a single non-owner occupied CRE loan. The CET1 ratio ended the quarter at 10.88%. Meanwhile, Synovus reported strong fourth quarter adjusted diluted EPS of $1.45 which was stable quarter over quarter and increased 16% year over year. Results were highlighted by healthy loan core deposit, and noninterest revenue growth. Net interest income increased 2% quarter over quarter and 7% year over year. Period end loan growth was a healthy $872,000,000 or 2% from the prior quarter and 5% from the previous year. Driven by broad-based C and I lending. Core deposits grew a solid 895,000,000 or up 2% quarter over quarter. The net interest margin continued to expand, up four basis points sequentially to 3.45%. NIM was supported by various factors, including continued fixed rate asset repricing the funding cost benefits of the core deposit growth. Synovus also continued to generate healthy, consistent growth in adjusted non-interest revenue. Which grew 6% from the prior quarter and 16% year over year $144,000,000 The drivers were broad-based, and I would highlight $16,000,000 in capital markets fees, up 30% year over year. This performance highlights the team's focus on delivering for our clients while also focusing on the merger integration. Adjusted noninterest expense increased 2% from the third quarter and was up 5% year over year. The linked quarter increase included higher incentive payments and charitable donations. Credit metrics remained healthy. Net charge offs were $24,000,000 or 22 basis points in the fourth quarter. Our common equity Tier one ratio ended the year at an all-time high of 11.28% as we prepared for the merger closing. Also, we retired $200,000,000 of subordinated tier two notes in October before issuing $500,000,000 in December. Both Pinnacle and Synovus continue to be successful in hiring new team members in the fourth quarter, with 41 new revenue producers. This brings the total to $2.17 for both firms together and twenty twenty five. We continue our work to finalize the valuation marks on the Synovus book. Which we expect to be completed later in the first quarter. Our current estimated mark on the balance sheet is generally in line with the original merger expectations. We expect this valuation impact as well as other considerations to result in a CET1 ratio of approximately 10% at the end of the first quarter. Estimate includes the realization of $225,000,000 to $250,000,000 of first quarter merger related expense and excludes legacy Pinnacle equity acceleration costs, which are capital neutral. Since the transaction closed, we have undertaken a meaningful repositioning within the legacy Sonova securities portfolio. As part of that effort, we sold approximately $4,400,000,000 and purchased roughly $4,400,000,000 of new securities with an average yield of 4.7% and estimated duration of four point two five years. These transactions helped us support our level one HQLA position, reduce risk weighted assets, and also serve to eliminate approximately 98% of the PAA associated with the securities portfolio. I will now hand it back to Kevin to review our 2026 financial outlook. Kevin Blair: Thank you, Jamie. Pinnacle's proven revenue producer hiring model allows our balance sheet growth to be more resilient and sustainable regardless of economic growth, interest rate levels, and the like. Loan and core deposit growth in 2026 should be supported by revenue producers who have not yet completed the consolidation of their portfolio to us. We also expect to continue hiring revenue producers at an accelerated pace this year, especially as the former Synovus team embraces the rigors of the Pinnacle hiring process. Our goal is to 250 total revenue producers in 2026. As we look to our first year as a combined company, we expect our period end loans to grow to $91,000,000,000 to 93,000,000,000 or up 9% to 11% versus our combined loans at year end 2025. We expect 35% of this growth to come financial advisers who have been hired in the past three years as they build their book Another 35% to come from specialty verticals and the remainder to come from the legacy market growth. Our loan growth assumptions do not assume any change in line utilization rates or recent pay down or pay off levels. On the funding front, we expect total deposits to grow to $106,500,000,000 to $108,500,000,000 or up eight to 10% this year, driven by the previously mentioned recruiting, core commercial client growth, and momentum from our specialty deposit verticals that support our markets. Our adjusted revenue outlook is $5,000,000,000 to 05/2026, The net interest margin is estimated in the three forty five to three fifty five range, which assumes the immediate benefit of purchase accounting balance sheet marks and more near to medium term fixed rate asset repricing of the legacy Pinnacle loan portfolio. Those benefits are somewhat offset by an increase in balance sheet liquidity over the next several quarters and marginal headwinds from two twenty five basis point interest rate cuts as implied by the recent market expectations. We expect our initial balance sheet profile to be modestly asset sensitive, split between short rate and long rate exposures. We anticipate adjusted noninterest revenue of approximately $1,100,000,000 this year. Growth should be primarily attributable to continued execution in areas such as treasury management, capital markets, and wealth management, as well as a 125 to $135,000,000 in BHG investment income. Adjusted noninterest expense is expected to be 2,700,000,000.0 to $2,800,000,000 in 2026. We expect to realize 40% or $100,000,000 of our annualized merger related expense savings in 2026. Underlying expense growth should be driven by revenue producer hiring from the 2025 and continued hiring in 2026. Also, real estate expansion to support market growth as well as normal inflationary expenses. Excluding legacy Pinnacle equity acceleration costs, an estimated 450 to $500,000,000 of the $720,000,000 in nonrecurring merger related and LFI expense should be incurred this year versus $64,000,000 recognized in 2025. We continue to operate in a constructive credit environment We estimate that net charge offs should be in the range of 20 to 25 basis points for the year which is consistent with 2025 performance for the combined company. Moving to capital, we will target a common equity tier one ratio of 10.25 to 10.75%. Beginning in the first quarter, our quarterly common equity dividend will be $0.50 per share. Our priority on capital deployment remains client loan growth, The board recently authorized a $400,000,000 common share repurchase program that gives us flexibility to manage capital in multiple growth scenarios. Finally, we anticipate the tax rate should be approximately 20% to 21% in 2026. It is a privilege to lead this team at such a defining moment, with our above peer revenue trajectory and the growing benefits of merger related efficiencies, we expect strong earnings performance in 2026. I am more excited than ever about the road ahead. Together, we lay the foundation to build the best financial services firm in the country. We fully recognize that 2026 will bring its own challenges, especially as we prepare for conversion in the 2027. But we are more than ready for the task. Our momentum, unity, and shared ambition give me tremendous confidence in what we will achieve. And now I will turn it over to Terry for some closing remarks before we open the call for questions. Terry? Thanks, guys. Terry Turner: Me start here. As you listen to Kevin and Jamie, I hope you can see why I'm so fired up about what we've created with this merger. Next month will be twenty six years since we put our original founder group together to form a bank specifically to take advantage of the rapidly declining service levels at the large banks that dominated the Southeast at that time. All we had were some deeply held convictions about how you produce long term sustainable shareholder value. First of all, we intended to differentiate ourselves from the competitors based on distinctive service and effective advice. Of course, distinctive service and effective advice sounded like blah blah blah back then, and still does to many even today. I know as an investors, you've never had anybody say they intended to give poor service and bad advice, but truthfully, many do. According to Greenwich, with an 84% net promoter score, we've created the single best client engagement, not just in the Southeast, but in the country. And their data also suggest we've amassed the best relationship managers, the best treasury management capabilities, and the best credit processes in the Southeast. And that talent attraction model, which is proven to be the best in the Southeast, based both on the quantity of talent we've been able to attract and the quality of talent we've been able to attract goes forward in the combined firm under Kevin's leadership led by long term friend and partner Rob McCabe as the chief banking officer. Those proven credit processes that have provided best in class service from our client's perspective and such strong asset quality over decades, continue forward in the combined firm under Kevin's leadership led by Carissa Summerlin as chief credit officer going forward who was the chief credit officer for Legacy Pinnacle. Secondly, we intended not only to attract the best talent, but to excite and engage them in such a way so as to get their best effort. Their discretionary effort, which will always be better than the stereotypical scorecard management approach used by all of our peers. As a matter of employee engagement, Fortune Magazine ranks us as the third best financial services firm to work for in the country. Behind only American Express and Synchrony. Things like granting equity to every single employee so they feel like owners, and including every salary based employee in the annual cash incentive plan are critical to the reliability of our outsized growth that we produced for twenty five years. And, of course, all of that goes forward the combined firm under Kevin's leadership. Thirdly, one of our most important principles was alignment. Aligning shareholders with management and employees. I believe there's overwhelming evidence that shareholder returns are primarily correlated to only three metrics, revenue per share growth, earnings per share growth, and tangible book value accretion. And so at Legacy Pinnacle, all annual management and employee incentives were linked to revenue per share growth and earnings per share growth. Think about that. All 3,500 employees incented to grow revenue and earnings. Over our first twenty five years, we were the fastest revenue grower among banks greater than 10,000,000,000 in assets and the second compounder of earnings per share in the country. And of course, that same incentive methodology now aligns our almost 9,000 employees under Kevin's leadership. All around revenue and earnings growth going forward. And finally, we've always relied on the principle that expectations shape behavior. It wasn't just that we incented all our employees based on revenue and EPS growth rates. We always set our targets for revenue and EPS growth rates to be at least top quartile performance. Think about that. To have targeted top quartile revenue and EPS growth for twenty five years in a row, led to this extraordinary compounding of the metrics that matter most in terms of shareholder return, which again explains the fact that over our twenty five year history, we had the second highest total shareholder return of all the publicly traded banks in the country. And that same target setting methodology is continuing forward in the combined firm under Kevin's leadership. Frankly, we both have been asked if Kevin can run the Pinnacle model. I wanna make sure you understand that I know he can. He is my handpicked successor, and it's my expectation that executing this now proven model with his proven leadership capabilities will propel this firm to levels we would never have achieved on our own. Operator, we'll stop there and take questions. Operator: Certainly. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question and one follow-up. Your first question is coming from Ebrahim Poonawala from Bank of America. Your line is live. Ebrahim Poonawala: Hey. Good morning. Good morning. Guess maybe just starting at the top, Kevin and Terry, around with the module conversion systems conversion next year, Just talk to us two things. One, what can the combined bank not do today that it will be able to do a year from now post conversion? And secondly, as we think about the new banker hiring, new sort of client onboarding, how are you handling that in terms of are they coming on the new systems, old systems? Just color around all of that would be helpful. Thank you. Kevin Blair: Yeah. Ibrahim, this is Kevin. Obviously, as we move to conversion in '27, both companies will be operating on their existing legacy platforms. And so that doesn't encumber our ability to originate new business. It doesn't encumber our ability to be able to expand the share of wallet. We have been successful in both companies being able to use our existing system So there's nothing that's missing. What will change is that we'll move to an end state platform that takes the best best of both organizations. And so there will be capabilities that arise on both sides. When we move to the new platform, there'll be new capabilities, new functionality, new products that we'll be able to offer. So there's revenue synergies that come with that. In the interim, when we bring on, we we know which systems we are moving to when we have a client that's a more complex client, and we onboard them in '26, we're gonna onboard that client onto the end state platform and start to service that, relationship there. Versus having to do another conversion in '27. So the real challenge is you're just having to manage a workforce, a Salesforce that has two sets of products and two systems but it's not stopping our ability to grow the business. As it relates to hiring, again, same situation. As we bring on new team members, if it's in the legacy Pinnacle market, they would be onboarded onto the Pinnacle platform. If it's on a legacy Synovus market, they would, start to sell these Synovus products and use those systems. But again, we have lots of workarounds that we can leverage that it's not gonna create a bad client experience when we go to that, migration. The other thing I would just mention, Terry mentioned it in prepared remarks, the number one thing we're focused on is the Net Promoter Scores. And ensuring that our clients continue to receive that distinctive service and effective advice. And that all comes down to the people. So we can talk about the products and the technology, but the people are staying the same. And that's what builds the strong relationships. Ebrahim Poonawala: Got it. And I guess maybe just another follow-up on I think you mentioned the board approved a $400,000,000 buyback authorization. Give us a sense of when you think you would actually initiate buybacks? Is it more to do with if there's a pullback in the stock, you step in? Or should we expect some level of buybacks to resume starting as early as this quarter? Jamie Gregory: Ibrahim, it's Jamie. Great question. You know, first, first thing I would say is you know, we would love to be buying back stock at these prices. We think we think it's pretty attractive, but you know, as we look at capital ratios and look at, you know, our expectation is that we close the deal. And at 03:31, our CET one ratio is 10%. If you include AOCI, it's 9.8%. Looking at that ratio, we are fine with regards to internal stress tests. We're fine with how we expect CCAR or SCB or any of that to play out. We feel like we do have excess capital. From a headline number, we would screen low relative to category four peers. If you include AOCI at 9.8, we would screen higher than median compared to category four peers. But I kinda give that background as just the fundamental how we think about it. We do not want to screen, the lowest of of a peer group. We don't wanna be at the low end. So it's likely that we will accrete capital, for a time period. And just allow earnings to drop, to to our capital ratios as we go through early twenty twenty six. And then reassess. That's why we put that range of ten twenty five to ten seventy five out there. The one thing I will note is in the first quarter, you can see the capital waterfall The earnings impact of merger expenses, etcetera, will lead to you know, not a lot of capital accretion this quarter. So you should not expect to see share repurchases this quarter It's unlikely you would see them you know, in the second quarter. But then we will reassess as we get into later into the year. Ebrahim Poonawala: Helpful. Thank you both. Operator: Thank you. Your next question is coming from John Pancari from Evercore. Your line is live. John Pancari: Morning. I'm done. On the loan growth front, the loan growth projection implies a a nine or eleven percent range on a pro form a basis. Can you just kind of walk us through your degree of confidence in achieving this given the know, we're hearing the backdrop is getting a bit more competitive. There's a little bit of uncertainty around CapEx related demand. So I guess from a demand perspective as well as from a, underlying organic and the hiring perspective, can you help us just kinda walk through your confidence in achieving that target? Kevin Blair: You know, John, I it starts with, you know, not just talking qualitatively, but when you look at the fourth quarter for the pro form a company, we generated 10% loan growth already. And so to your point, our growth as we shared in the slide deck is gonna come from existing team members that are already in the market. The recent hires that we made in the last three years is well as our specialty growth businesses. And for me, you asked the question about just general client sentiment. We we do a quarterly survey in Legacy Synovus. The clients continue to remain relatively constructive. The backdrop, continues to have some uncertainty. It's no it's not lost on anyone that tariffs still play a risk factor for our clients, but we've seen the economic growth pick up. And when we queried those clients, they expect their business activity to pick up over the next twelve months. So part of that is being in the Southeast. We know we're in a great footprint. So I think our client sentiment is positive. There's still headwinds, but there's been this appetite for capital that I think was delayed resulting from the uncertainty that happened in '25 that we expect to get. But look, said this in the prepared remarks. Unlike other banks, we're not waiting for the economy to grow to be able to generate growth. past year, Jamie mentioned 217 new revenue producers. And although that number needs to go to two fifty on the Sunnova side, I was pleased that our our growth, picked up about 20% year over year. And as Terry said, the real opportunity is for Synovus to start hiring at the same pace that Legacy Pinnacle was hiring. Hiring. And that will generate some growth this year, but the real growth has come from the people that we've hired over the last three years. And and the embedded growth that will come from those individuals continue to build out their book. So I think it's a constructive environment. It will come from being able to hire folks. You've seen this I think we have all the tools, and resources to be able to generate the growth. As we've talked about in the past, the biggest headwinds have been unexpected payoff activities. And we've kind of built that into our forecast this year. Fourth quarter was no exception to that. We saw elevated pay down activities. But the first time, we actually saw a little bit of line utilization, help to offset that. So our production goals are not predicated based on economic growth. It's based on going from a bottoms up forecasting perspective, looking at what each individual can can bring to the table. And that gives us great confidence in being able to deliver that 9% to 11%. John Pancari: Got it. All right. Thanks, Kevin. That's helpful. And then separately on expenses, I know in December, I think, a conference disclosure, you you pushed back your timing of your cost save recognition from 50% in '26 to 40% Can you just remind us what that related to? Is there a risk of future delay in the recognition of the cost saves as you work through the integration. Jamie Gregory: Hey, John. It's Jamie. As we work through this merger, our prioritization first was let's get to close. And we were very successful having a Jan one close on on the deal. And when you, you know, because that moved as quickly as it did, it it basically pushed back some of the systems because they weren't as fast as the close. And so that delay in there pushed back a little bit of the call synergies. I would also say that we've been leaning in on some of the benefits associated with with the deal and and how we've, decided to take best in class benefits on both sides. But those two things really drove the 50% down to 40% on the year one cost saves. But you will note that we didn't change year two. We didn't change the total phase. So it's really a timing, difference. We feel really good about all of the merger math from there. I feel good about our ability to achieve those synergies. But it's really in year one. We just dropped it from the 50 to the 40. John Pancari: Got it. Alright. Thanks, Jamie. Appreciate it. Operator: Thank you. Your next question is coming from Jared Shaw from Barclays Capital. Your line is live. Jared Shaw: Thanks. Good morning, guys. Looking at the the fee income side, you know, what's what's embedded in the fee income guidance for the capital markets business And maybe just some color on how long you think it takes to integrate some of those so those fee income lines? Jamie Gregory: Yeah. Jared, it's it's a great question. I mean, I love that you're focusing in on capital markets because we view that as a big area of opportunity for us. Just in general, both Pinnacle and Synovus have had great success in growing fee revenue. If you look at 2025 and you combine the companies, you have over 10% growth in account analysis fees. You have over 10% growth in overall core banking fees. You have over 10% growth in wealth management fees. But in capital markets that you mentioned, that's been a great success. And and, you know, we've had over 15% growth in swaps, swap fees. But the capital markets platforms are a great area to show what are the opportunities for revenue synergies because we have, you know, the effectiveness of the, swap delivery We also have lead arranger fees and syndications that we can actually grow on both sides But then on the Pinnacle side, they're bringing to the table the ability, for m and a advisory, and that's something that's new to the Sunnova side. So we see strong growth in capital market fees in twenty twenty twenty six, consistent with kinda what you've seen in the past. Double digit growth. Jared Shaw: Okay. Thanks. I guess maybe shifting to the to the loan growth side or back to the loan growth side, you called out the ability to hold higher balances as a result of the bigger balance sheet. How quickly do those higher hold limits flow through? And if we look sort of the slide 25 drivers of loan growth, do you think of that as more part of the contribution from the existing legacy markets? Kevin Blair: That's correct. Yeah. So, Jared, you know, when you it it can happen immediately. I mean, we have new hold limits today. But as you can imagine, not every client needs additional capital above where they are today. But what we've done with our bankers is cross tabulate the current hold limits versus where our appetite is, and it shows where we have the ability to give more capacity to our clients, and we're gonna communicate that so that we're, we'll we'll be able to to generate incremental loan growth as a result of that. Starting this quarter and moving into the future. And I consider that we we included that in the bucket for revenue synergies along with just hiring because I think that's just blocking and tackling. That's allowing us to fully use the capacity of our balance sheet to meet our clients' needs. We're still gonna be, as Jamie said, in the lean arranger business. We're gonna be syndicating deals but there will be some incremental growth there that will allow us to grow loans. But you know, it's not big enough to call out an individual number. I think between hold limits and and utilization, which we would expect, although we didn't build it into our forecast given lower interest rates, we would think both of those areas would just serve as tailwinds to growth for '26 and beyond. Jared Shaw: Thanks. Operator: Thank you. Your next question is coming from Ben Gurlinger from Citi. Your line is live. Ben Gurlinger: Hi. Good morning. Good morning, Ben. Pretty clear that you guys are are are now clearly focused on the the Outlook, and you have a pretty high degree of confidence in the continued legacy Pinnacle hiring trends When you look at kind of what you see today in the market, disrupt disruption, it's not necessarily the legacy footprint of either one of you two, or is is there opportunity to kind of expand hires or even LPOs or is it or is is it something that's still in footprint only focused? I'm just trying to figure out where the the additional or incremental revenue producer might come from. Geographically? Well, look. You we've said we try not to highlight specific markets. It kinda let your competition know where you're coming to play. But I think you should think about any metro market in any of our nine state footprint provides us with an opportunity. And it's I would tell you that disruption is our friend. But the biggest opportunity we have is what Terry said earlier. Is continuing to make this a great place to work. And when, bankers evaluate opportunities to hone their craft, they wanna work for an institution that removes bureaucracy. They wanna work for an institution that allows them to do what they do best, which is serve their clients. And so the best tool we have is continuing to create a team member base that is actively engaged and becomes our biggest recruiters. Because when they join our company, everyone hears from, their peers. And and when they say what a great company it is, it just gives us the opportunity to continue to hire. So we'll hire across the nine state footprint. The biggest opportunity as you've seen on the slides, Pinnacle has been adding at an outsized pace and doing a wonderful job. Rob McCabe and his team have worked with our Synovus geographic leaders to install that hiring model. Which is not an overnight model. As Terry said in the past, we're not hiring headhunters. We're not taking, applications on LinkedIn. Identifying who the best bankers are in each market and continuing to call on those bankers. And, in really emboldening ourselves and showing why this is the best platform for them. So I don't think there's a big risk in generating 250 new hires this year. I don't think there's a big risk in generating 275 the year after that. I think there's adequate opportunity across the market. And that doesn't include where we could continue to expand some of our specialty offerings. Where you could bring on new teams and continue to add more errors to our quiver to support that geographic banking, model. So I'm very confident. And and what I've been impressed with told Terry this, the rigors of their model and the success factor is not by happen chance. It is because they are very good at what they do in identifying those prospects and continuing to follow-up and ensuring that they bring them onto the platform. Ben Gurlinger: Gotcha. That's that's helpful. So it's it's I mean, pretty confidence in in in the net loan growth. Outlook. Via those hires over the next two or three or four years, So I was I was kinda curious. In in terms of just kind of growth, generally, lead with a credit, and you get the whole relationship quickly thereafter. Jamie, if we're thinking about like, if loan growth starts to get overly accelerated, is there an area or avenue that you might gravitate towards rate dependent on kind of backfilling the funding side of that? Before the deposits arrive. Jamie Gregory: Well, you know, if if loan growth happens before deposit growth, which actually is somewhat consistent with the forecast because deposit growth is more back end loaded yes. We would use some higher cost sources to fund that growth. But all of that is embedded in our Everything that we're saying about our margin outlook, etcetera, include seasonality of deposit growth relative to loan growth and our expectations of these bankers that we've hired over years bringing their books over. So you know, it all holds together when you see the loan forecast deposit forecast, and then the underlying quarterly impacts. But, yes, you know, if if loans come in before deposits, yes, we will use, you know, wholesale funding to bridge the gap. Terry Turner: Know, I might just jump in and add, for clarity. I think on the hiring hiring, is what gives us confidence in the long term sustainability of the growth And if you look at the pace at which we're accelerating the growth in hiring, it's a really modest increase in 2026 and not a I wouldn't say a huge increase in 2027. So those are pretty reasonable targets. And what that has to do with is the long term sustainability of the balance sheet growth and, therefore, the earnings of the company. What gives us confidence in the short term ability to grow loans is the people that we have onboarded over the last three or four years. Those people are in the process of consolidating their books of business from where they used to work to us. And we're not looking for anything special. We're simply looking for those people to produce at average rates they have produced for twenty five years. And so, again, the confidence on the loan growth comes from the people that we have already on board. Ben Gurlinger: Gotcha. Thank you. Operator: Thank you. Your next question is coming from Bernard Von Jaszczyki from Deutsche Bank. Your line is live. Bernard Von Jaszczyki: Hey, guys. Good morning. Just just on the NIM, in your '26 outlook, you assume a range of three forty five to three fifty five. Inclusive of the purchase accounting accretion. I know back in mid December, you laid out in size the contributions from from the accretion, from the fixed rate asset repricing. And you know, offset by some of the the the debt and the adding securities, the liquidity measures you're doing. Given the changes you laid out, could you just provide updates there? Jamie Gregory: Yeah. As you look at the margin, the way I would think about it is clearly, the fourth quarter, had Pinnacle had a three twenty seven tax equivalent. Margin. For the Sunnova side, when you mark the book, when you mark all of our assets, you should expect to get to a margin in the three seventy five three eighty area. When you combine those two, you get to, you know, three fifty, low three fifties. And so that's generally how we think about these coming together. The yields on the Synovus book are a little bit lower than they we originally modeled, with the merger because interest rates have declined a little bit when you look at the belly of the curve. And so that's generally the math. That's why the CET one ratio at close will be a little bit higher than we we originally modeled It's why the PAA will be a little bit lower than we originally modeled. Bernard Von Jaszczyki: And then, just on the, the revenue synergies, on Slide 28, the 100,000,000 to 130,000,000 I know it's supposed to be realized over the next two to three years. Does that start you know, in 2027 post the completion of the integration process? Any color you can share? Kevin Blair: It it starts today. I mean, we're we're already working it. So our guidance that we provided for '26 would incorporate some of those revenue synergies as they materialize. Things like we talked about earlier, like hold limits being able to hire new folks, There are certain capabilities on the capital market side that we don't have to be on the same platform. Platforms. Syndication fees, FX. Those, those are being cross pollinated across our organization. And then when you add on some of these specialty verticals I've mentioned in the past, like equipment finance, The the Pinnacle legacy team is already calling in the legacy Synovus footprint. So instead of trying to give you a line item, reconciliation of all those, we'll start to incorporate those into our annual guidance. And we sit here today, I think we're as excited about the 100 to $130,000,000, and and we think we can exceed that target over the next three years. But, yes, the '26 guidance would incorporate the benefits that we see in these early stages. Bernard Von Jaszczyki: Okay. Great. Thanks for taking my questions. Operator: Thank you. Your next question is coming from Michael Rose from Raymond James. Your line is live. Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Maybe just going back to the to the comment in the slide deck just around higher hold limits. I assume that just a step function of a larger balance sheet if you can kind of expand upon that, I mean, do you plan to kind of move upstream? Or is this just hey, we're going to do the same types of loans that we've always done on both sides? And then maybe just syndicate out, you know, less. Just trying to get some better color around that. And then secondarily, if you can just comment on outlook for some of the specialty businesses. I know that's been a big focus, at least Legacy Synovus over the past couple of years. What does that look like as we kind of move through this integration? Thanks. Yeah, Michael. I I think it's the latter of your question. I I don't think that it allowing us to pursue new opportunities up market. We've both companies have been moving up market with middle market banking some of our corporate banking initiatives that we've had in some of the specialty areas. What it really does is just increase that ability to have slightly larger hold limits on those clients. And so as I said earlier, we're not talking about major step functions. It's not doubling the size of the hold limit, but it gives us a little more capacity. And so what you should see from that is slightly, higher, loan size that we would keep on balance sheet. But again, we built a strong syndicated platform to be able to manage our risk overall. And so we'll continue to out some of the larger loans, but it just gives us a little extra capacity. As it relates to the specialty units, you know, as I've said in the past, both sides bring some unique businesses to the table. I get really excited about the equipment finance area, the auto dealer, business that Pinnacle has been building. On the Sunnova side, we have things like asset based lending, structured lending. We have a family office on the wealth management side. Those organizations are working across the broader organization to make sure that their capabilities are well known. And when we have an opportunity to introduce client, we're gonna make those introductions. And so we haven't gone through and shared what the individual growth of each of those businesses will be. But I can tell you, a large portion, as you saw in the pie chart, of our loan growth will come from those specialty businesses. And it's just from the introduction to the other side's footprint and a client base that we haven't called on in the So again, excited about it. We've been having sales meetings on Mondays. Where those individuals have been working to share their products and capabilities, and there's already been joint calling efforts. So we're well underway there, and again, it's gonna generate a large percentage of our growth as we look both on the loan side as well as the deposit side, we have some deposit verticals that we've been focused on that we'll be able to introduce to the to, the other legacy, bankers. Very helpful. And then maybe just as a a follow-up. I know there's some debate about if the asset thresholds get lifted here at some point. I know you guys have some onetime costs built in for that. But you know, those rules do get changed, I assume you'll still use some of that, but I assume some of it that you probably wouldn't or you could slow that pace What would you do with those extra dollars? Would it be kind of further acceleration on the hiring front? Is there other projects or systems that you'd you'd like? I know we're not talking a huge number, but certainly would be helpful for any color. Jamie Gregory: Yes, Michael. Those costs, as we look at it, if a 100,000,000,000 was raised and it was not in our near term horizon with strong organic growth, we would still do the data work we're doing now, which is a large portion of that expense. And so you know, we will still incur a good bit of that expense that we've modeled out even if if that's increased. We would surely save on some headcount in our back office functions. But but we would still continue the work on the on the data side But when you think about what will we do with those expense dollars I I guess I would just reframe that and say that we will spend for good hires with or without those savings from, you know, LFI changing. And so we're gonna lean in to hiring the right talent because we see the, the value to long term sustainable growth, long term sustainable growth in assets and tangible book value. And that's our strategy. So I just would disassociate the savings from LFI or really anything else with the hiring because you know, we are leaning into that really in all scenarios. Michael Rose: Okay. Great. Thanks for taking my questions. Kevin Blair: You, Michael. Operator: Thank you. Your next question is coming from Catherine Mealor from KBW. Your line is live. Catherine Mealor: Thanks. Good morning. Jamie, talked in your prepared remarks about some restructuring that you've already done to the bond portfolio. Can you talk to us a little bit about what you're expecting in terms of the timing for further build in liquidity as we move through '26? Just trying to frame you give us loan growth expectations, but trying to think about what the size of the bond book could look like over the course of the year and how average earning asset growth will build through the year. Thanks. Jamie Gregory: Yep. It's a great question, Catherine. And first, I'll give a little bit of color on the trade. So I mentioned it on the call, but we did a $4,400,000,000 swap in the securities portfolio The way I would think about the securities portfolio from legacy Synovus is our book yield was about three fifty coming, you know, at the end of the year. When you marked it to market you got to about a four forty yield on the securities portfolio. And then we did the repositioning. And the repositioning did multiple things. First, we shortened duration. Second, an improved, liquidity, high you know, HQLA improved. Third, it reduced risk weighted assets Fourth, it eliminated 98% of the PAA associated with securities portfolio. So it achieved a lot of objectives to us. I mean, we're trying to reduce AOCI volatility. We're trying to reduce, PAA. All those things played out with this repositioning. So we're very pleased with how that happened. Those trades, because we did shorten duration, reduced the legacy Synovus security yield to about four thirty five. So when you bring those together, you get a securities portfolio that has a nominal yield of around 4%, a tax equivalent yield of around four fifteen. And so that's kind of where we are in the securities portfolio. As we proceed, through 2026, we do have debt issuances in the forecast. You know, we're contemplating a couple debt ish ones that could be a billion dollars this calendar year. Likely two different issuances. One in the first half, one in the second half of the year. And that's embedded in there. Now consistent with the prior conversations, the impact to average earning assets just depends on the growth of loans and deposits and how all that plays out. But that's at a high level how we're thinking about 2026. Catherine Mealor: Right. Because you still put that $1,000,000,000 of debt in into the '26 number. Feels like. That's right. Jamie Gregory: That's right. Okay. Great. Okay. Catherine Mealor: That help that that's really helpful. And then maybe within that on on deposits, they both on a legacy basis, Pinnacle and Synovus, had a had a nice reduction in deposit cost. Those came in on to better than I was expecting, so that was was great to see. And so maybe can you help us think about as you see this accelerated growth into next year, and I know rates are moving, but let's just kind of on a static basis, where are kind of new deposit costs coming in today, and where should we expect maybe on a pro form a basis deposit cost to kinda settle in outside of any kind of move big move in rates on a pro form a basis. Kevin Blair: So we look at just like the going on rates this quarter, Catherine, on the Sunnova side, it around $3.14, a little higher on the on the, Pinnacle side. But yeah, we expect those to continue to come down. Obviously, we built into rate cuts Just quarter on quarter, our rate paid was off about 30 basis points. So it's still a rational pricing market where, you know, where where you're seeing continued competitive tension is when you're going after high rate CDs. And I think both sides have really rationalized our demand for those. But as we go forward, as Jamie said earlier, part of our growth story is relying on these bankers to bring over their relationships when when when they get the loan. So we're not having to go out and rely on promotional deposits to have to generate the $8,000,000,000 in deposit growth this year. So think you would continue to see those going on rates come down as rates come down. And we'll be very thoughtful. As we've said in the past, can grow deposits as much as we would like. It's just at what rate. And and we're trying to grow them at a marginal rate I always like to give you this from a Sunnova standpoint. When you look at loan rates, for the quarter, we are at $6.23. Deposits, as I said, at $3.14. So you're still getting almost a three ten basis point spread on your new production which, again, we monitor that just to make sure that we're balanced in how we think about the going on yields for loans and what we're having to pay for deposits. Catherine Mealor: Great. Very helpful. Thank you. Jamie Gregory: Thank you. Operator: Your next question is coming from Casey Haire from Autonomous. Your line is live. Casey Haire: Great. Thanks. Good morning, everyone. I wanted to circle back on on the recruiting strategy. So the I think you guys mentioned 41 hires in the fourth quarter. Just wondering what the the success rate was on that. I think it was 90% historically. And then just looking forward, you know, what is the pipe looking like as you guys target two fifty this year? You know, how many offers do you have outstanding? Thanks. Terry Turner: Yeah. I would say on the, success rates or the kill rates for hiring, it remained roughly the same as it has, as it was all year. You know, the average number hired resembled the average for the year. The kill rate was similar for the year. I wouldn't detect any particular difference in our success at closing the recruitment cycle and turning them into hires. I think as we go forward, you heard, what Kevin said, This methodology is just it's just that. It's a routine methodology that we have run for an extended period of time, and it feels like it will produce I would say at least what we've committed, in in our guidance there. Again, if you look at the relative increase for 2026 over 2025, it's pretty modest increase with at least for me, I don't feel like we've hung ourselves out on on some big, big lift here. But, anyway, that that's my thought. Kevin Blair: I don't care if you wanna spot on. And and, look, again, you you don't have to go to the legacy Pinnacle leaders and ask them about their pipelines. They they work them three times a week. What's changing is, you know, our legacy Synovus team is starting to exercise that same process. And they're building their pipeline. So it won't that's why we said over time, that Synovus and twenty six would still lag the hiring that happens at Pinnacle. But by '27, we expect both sides to be adding a similar rate just based on that that building of the pipelines. And I've had the opportunity to be on a lot of, recruiting calls in the the last thirty days, and I can tell you that that they're not slowing down. People wanna be part of this company And ultimately, they have validation from the people that have already joined that this is a great place to work. I I joke with Terry all the time when I talk with the folks at Pinnacle. That have just joined. I said, how's it going? They said, I wish I had joined ten years ago. That's the number one answer I get from those folks. Casey Haire: Okay. Great. And then just so you guys restructured the the Synovus bond book. Just anything else that that you guys are kinda entertaining as you look at the pro form a balance sheet and maybe some updated thoughts on the BHG liquidity event given what's a pretty favorable backdrop for them? Jamie Gregory: You know, we we have a lot different things that we are working on the background on the balance sheet, but it's really too early to to think about you know, whether or not they're they're viable or you know, attractive to us. None of which are are that material to to their earnings outlook. And so we will continue to to look at options to either improve liquidity of the securities portfolio or, you know, reduce risk weighted assets or any anything similar to what we've what we've done in the past. With regards to BHG, you know, those that the team down there just continues to deliver. You can see that. With their performance in 2025. You can see it with the outlook we have in 2026. If you look at the fourth quarter of fee revenue, from BHG, we we had 30,000,000 in in the fourth quarter. Including a true up of $5,000,000 from the third quarter BHG earnings. And so to use the baseline $25,000,000 in the fourth quarter, that's really strong growth as you play it out through 2026. I mean we're talking 25% to 35% growth for for the company. So they continue to perform. And I I go through all that because it just shows that they are focused on their core business. They're focused on growing it, adding value. I think, you know, you know, what whatever they do with liquidity event or how they approach that, all I would just say is that they are positioning themselves well for you know, choosing their own destiny with regards to that. Casey Haire: Great. Thank you. Operator: Thank you. Your next question is coming from Anthony Elian from JPMorgan. Your line is live. Anthony Elian: Hi, everyone. Jamie, on slide 20 through 23, could you provide us with the updated assumptions specifically on the loan marks for 2026? You have a comment in the footnote that says you shifted the mark to longer duration loans, but I'm curious if you could give us some sensitivities to NII if you shift the loan mark back to a shorter duration. Jamie Gregory: Yeah. You know, as we look at our current expectation for the loan marks, we believe that approximately two thirds of the PAA is going to come from residential mortgages, which are clearly long long duration. And so that's the shift that we're referring to there. I would not expect these marks to move materially between products between now and finalization, but that's something that the team continues to work on. And that's that's what basically reduces that PAA benefit, that plus the rate decline in 2026. Anthony Elian: Okay. And then my follow-up I'm curious, could you give us updated thoughts on deposit beta going forward for combined company, assuming the forward curve plays out this year? Thank you. Jamie Gregory: Yes. If you look at the blended deposit beta, in this easing cycle, to now. For both companies combined. You get to about a 48% deposit beta. And when we look forward at the next two cuts, which is our current expectation, we think that a 45% to 50% deposit beta is appropriate for the rest of this year. And clearly, there's a lot of uncertainties that go into that with deposit mix and and pricing and you know, what the Fed actually does. But we think that that's a reasonable assumption, and that's what we're working towards in '20 Thank you. Operator: Thank you. Your next question is coming from John McDonald from Truist Securities. Your line is live. John McDonald: Hi. Good morning. Thanks. Lots of good thoughts on the '26 outlook. Thank you. As we pull up a bit and think about the long term promise of the merger and the case for the stock, could you share some thoughts on the long term earnings power of the company? At announcement, you showed an illustrative EPS of 11.63 using consensus 27. As a base. So maybe just any updated thoughts on that or broadly any puts takes against that or we might think about the The most profitable regional bank, the most efficient regional bank, and the bank that has the highest level of client service that's what gets me excited. Kevin, it feels sustainable over time to me, which is an important idea. I talked about it a minute ago, but the fact that we've already hired people that produce the growth that's immediately in front of us is important. The fact that we can continue to hire people sustains the growth over an extended period of time. And when you put that on top of the footprint, which is the most advantaged footprint in The United States, and then look at the market share vulnerability chart, it just hard to keep me from being excited about what the long term earnings opportunity are for this company. John, you're you're we're passionate about that that that question. John McDonald: Thank you. That's really helpful. Makes sense. Maybe one follow-up just to clean up some credit that have come in. Jamie, just in the world where there's no CECL double count, how does the mark kind of affect, you know, provisioning going forward? Does does taking that mark you know, pre provide for some losses and let you provide a little less and maybe just where the loan loss ratio is starting and how should we think about provision relative to charge offs going through '26? Yeah. John, you know, just think it as you would normally think about it where you know, the the allowance we have today, we we expect to kinda stay in this same area. Given our outlook of of allowance to loan ratio. The only you know, areas where I would say it it kinda prefunds charge off is if it if it's for something that we see in the near term. If you have a specific reserve on on a loan, And so I would just think of it as normal going through 2026. Okay. And then flattish charge offs in the first quarter, you you both had, some in individual kind of one offs in the fourth quarter. Are there still some cleanups that happened in the first quarter? Or maybe just comment on Yes. I mean, look, I think if you step back and look at this quarter, noted a couple of items, not because they're discrete, but we just wanted to provide some attribution for what drove the charge off levels. I think it's important to note if you look at pro form a charge offs, it would have been roughly 25% or 25 basis points for the combined company. And as you saw, our full year guidance is still 20% to 25 But, you know, we're we're working through a couple credits to your point. That we've already reserved for and and likely taking charge offs in the first quarter. So we just expect the levels to stay stable versus where they were this quarter. But we are not seeing anything that's indicative of any systemic change, any asset classes. It's really kind of a status quo for for charge offs. But the first quarter will will kind of be stable with where we're working for. John McDonald: That's clear. Thank you. Operator: Thank you. Your next question is coming from David Chiaverini from Jefferies. Your line is live. David Chiaverini: Hi. Thanks for taking the question. So you mentioned that loan growth should accelerate through the year. Is it reasonable to think kind of mid to high single digit in the first half of the year? And kind of high single to low double digit in the second half of the year? Any any color there would be helpful. Jamie Gregory: Yes. I think that's reasonable. And it's reasonable just based on, as Terry said earlier, as the portfolios continue to be moved over from new hires, it will build throughout the year and and it will accelerate. So I think mid single digit to high single digit in the first half and then accelerating to double digit in the second half. David Chiaverini: Helpful. Thanks. And then in terms of loan pricing, can you talk about any changes in spreads that you've observed in recent months? Jamie Gregory: You know, this quarter, we saw about a 10 basis point decline in spreads versus our internal transfer pricing. So just think about a one and ninety spread on production. That compares to about a 200 basis point spread that we had seen for the first three quarters. So some of that has to do with mix. And the size of we moved up market with our production this quarter. I think maybe that's what's lost and and hopefully I can highlight that now is our production for the combined companies was up 63% versus the same quarter last year. So back to hitting on all cylinders, the team's producing. Some of those loans were in in, kind of our upper market businesses that generally carry lower spreads. But about a 10 basis point decline I you know, we've we've said that that's been a trend that we've been monitoring. I think it's with our expectations, and our guidance for next year would include spreads in that general range. David Chiaverini: Helpful. Thank you. Operator: Thank you. Our next question comes from Christopher Marinac from Janney Montgomery Scott. Your line is live. Christopher Marinac: Hey. Good morning. Just real quick on deposit incentives. Are these any different for the combined company as it would have been separate at Pinnacle and Synovus? Just curious on how deposit incentives are compared across the new company. Kevin Blair: It's what Terry said earlier. Chris, our company is going to be everyone will be incented on the same measurements, which is revenue growth and EPS growth And it's our job as the leadership team to ensure that deposit growth is a key component of that and being able to manage our margin. So everyone's incented on the company making its top of house goals. There are no individual incentives for production any longer, and people won't be focused on filling buckets or meeting a scorecard. It's all gonna be based on top of house. And it's our job to make sure, as I said earlier, that 8 to $9,000,000,000 in deposit growth And support our path forward. For both of you, truly, a job exceptionally well done. With that operator, I'd like to conclude today's call. Thank you for joining us today. That concludes the Pinnacle Financial Partners fourth quarter 2025 earnings call. Have a good day.

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AUB 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to Atlantic Union Bankshares Fourth 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 an automated message advising your name is Ray. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Bill Samia, Senior Vice President of Investor Relations. Please go ahead. Bill Samia: Thank you, Olivia, and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury, and Executive Vice President and CFO, Rob Gorman with me today. We also have other members of our executive management team with us for the question and answer period. Please note that today's earnings release and the accompanying slide presentation we are going through on this webcast are available to download on our investor website investors.atlanticunionbank.com. During today's call, we will comment on our financial performance using both GAAP metrics and non-GAAP financial measures. Important information about these non-GAAP financial measures, including reconciliations to comparable GAAP measures, is included in the appendix to our slide presentation and in our earnings release for the fourth quarter and full year 2025. We will also make forward-looking statements, which are not statements of historical fact and are subject to risks and uncertainties. There can be no assurance that actual performance will not differ materially from any future expectations or results expressed or implied by these forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statement except as required by law. Please refer to our earnings release and our slide presentation issued today as well as our other SEC filings for further discussion of the company's risk factors including other information regarding the forward-looking statements, including factors that could cause actual results to differ from those expressed or implied in the forward-looking statements. All comments made during today's call are subject to that safe harbor statement. And at the end of today's call, we will take questions from the research analyst community. Now, I will turn the call over to John. John Asbury: Thanks, Bill. Good morning, everyone, and thank you for joining us today. Atlantic Union Bankshares reported strong fourth quarter financial results, reflecting disciplined execution and successful integration of the Sandy Springs acquisition. We believe the adjusted operating financial results for the quarter showcased the organization's earning capacity. While merger-related charges continue to affect this quarter's results, the underlying operating performance supports our continued confidence in achieving the strategic goals associated with the Sandy Spring acquisition, namely, the targets for adjusted operating return on assets, return on tangible common equity, and efficiency ratio. With the core systems conversion completed in October and only modest residual merger-related expenses anticipated in the first quarter, we expect the noise associated with our merger-related expenses to decline. This means that we will be positioned beginning with Q1 2026 to report unadjusted results that more clearly demonstrate the financial strength and operating efficiency we are committed to delivering for our shareholders. Our commitment to creating shareholder value remains unwavering. We believe Atlantic Union is well-positioned to deliver sustainable growth, top-tier financial performance, and long-term value creation for our shareholders. We believe the strategic advantages gained from the Sandy Spring acquisition combined with continued organic growth opportunities due to our robust presence and attractive markets reinforce our status as the premier regional bank headquartered in the Lower Mid-Atlantic. I'll briefly cover our Q4 and full year 2025 highlights and share market insights before Rob presents the financial review. Here are the highlights for our fourth quarter. Quarterly loan growth was approximately 6.3% annualized, ending the year at $27.8 billion. Our pipelines were higher at the end of the fourth quarter than they were at the start of the quarter, which suggests we are on track for loan growth consistent with our full year 2026 outlook. While forecasting loan growth remains challenging in the still uncertain economic environment, we continue to expect 2026 year-end loan balances to range between $29 billion and $30 billion inclusive of the negative impact from loan fair value marks. We observed a return to more typical commercial line utilization levels in the fourth quarter. Loan production reached a record high in Q4 as our team gained momentum. Despite ongoing economic uncertainty, the Sandy Spring core system conversion and the CRE loan sale executed at the end of 2025. Additionally, we observed growing confidence among our client base which combined with seasonally strong lending trends further supported our robust performance in the quarter. Our deposit base experienced typical year-end fluctuations due to activity from large commercial depositors with some of these balances returning during the early weeks of the first quarter. Our FTE net interest margin increased by 13 basis points to 3.96%. While improvement in accretion income contributed modestly, the main driver was our ability to reduce deposit costs while holding loan yields relatively flat compared to the prior quarter. Loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates. Importantly, this also demonstrates we are putting our interest rate accretion income and principal repayments from the acquired fixed-rate loan portfolios to work as those loans renew or reprice to higher market rates. Fee income was strong, primarily driven by loan-related interest rate swap fees and fiduciary and asset management fees, with both benefiting from the Sandy Spring acquisition. About 27% of interest rate swap income this quarter came from former Sandy Spring customers. While Sandy Spring had a nascent swap program, AUV swap program is well established and mature. We expect ongoing growth in this area, though it's important to note that swap income may vary from quarter to quarter. Overall, credit quality showed continued strength and improvement. With our fourth quarter annualized net charge-off ratio coming in at one basis point. The net charge-off ratio for the full year was within our guidance at 17 basis points. Leading asset quality indicators remain encouraging. Fourth quarter non-performing assets as a percentage of loans held for investment declined a further seven basis points to 0.42% from 0.49% in the prior quarter. Criticized and classified assets remain low, 4.7%. We believe credit underwriting, client selectivity, and loan loss performance have consistently been traditional strengths of Sandy Spring Bank and American National Bank, reinforcing our continued confidence in asset quality. Before we discuss unemployment rates, I want to clarify we are comparing November to September figures since October data is unavailable due to the government shutdown. Taking a step back, Virginia's unemployment rate remained unchanged at 3.5% in November, compared to September. Demonstrating notable resilience, especially since the national unemployment rate rose by 0.2 percentage points to 4.6% during the same time frame. Maryland's unemployment rate rose to 4.2%, a 0.4 percentage point increase at September. This change aligns with our expectations, particularly considering the November data now includes federal government workers who took buyout plans. Despite the uptick, Maryland continues to outperform the national average during the same period. North Carolina's unemployment rate edged up 0.1 percentage point to 3.8%, remaining well below the national average. Although we do anticipate some further increases in unemployment across our markets in our CECL modeling, we expect these levels in Virginia, Maryland, and North Carolina to stay manageable and below the national average consistent with Moody's current state-level forecast. We remain confident in our markets and consider them among the most attractive in the country. For those who missed our Investor Day last month, I want to revisit a key slide from our Investor Day presentation as its message remains essential. We have deliberately and thoughtfully built a distinctive valuable franchise outlined in our strategic plan delivering on our commitments, and establishing the banking platform we set out to create. With this strong foundation, we believe we're well-positioned to capitalize on the expanded markets gained through the Sandy Spring acquisition, drive continued growth in Virginia, and pursue new organic opportunities in North Carolina and across our specialty lines. Our full Investor Day presentation details our market approach for the next three years, and I encourage everyone to watch it. With disciplined execution of our prior acquisitions and no additional acquisitions currently planned during this phase of our strategic plan, our focus now shifts to demonstrating the franchise's earnings power and capital generation ability. It's time to show that our efforts and investments have been worthwhile. After dedicating capital to strategic investments over the past two years, to complete the company we envisioned and worked so diligently to build, and consistently communicated our plans to do so, we believe we are now seeing clear tangible benefits from these efforts. In summary, 2025 was a pivotal year for AUB. We remained agile and responsive while managing a significant merger integration, a major CRE loan sale, and navigating macroeconomic headwinds including federal government restructuring and unpredictable tariff policies. Despite these challenges, we delivered operating results that we believe will stand out among our peers. With that, I'll turn the call over to Rob for a detailed review of our quarterly financial results before we open the floor for questions. Rob? Rob Gorman: Well, thank you, John, and good morning, everyone. I'll now take a few minutes to provide you with some details of Atlantic Union's financial results for the fourth quarter and full year 2025. My commentary today will primarily address Atlantic Union's fourth quarter and 2025 financial results presenting on a non-GAAP adjusted operating basis, which for the fourth quarter excludes $38.6 million in pretax merger-related costs from the Sandy Spring acquisition. For the full year 2025, it excludes the following items: pretax merger-related costs of $157.3 million, pretax gain on the sale of CRE loans of $10.9 million, and the pretax gain on the sale of our equity interest in Cary Street Partners of $14.8 million. That said, in the fourth quarter, reported net income available to common shareholders was $109 million and earnings per common share were $0.77. For the full year 2025, reported net income available to common shareholders was $261.8 million, and earnings per common share were $2.03. Adjusted operating earnings available to common shareholders were $138.4 million or $0.97 per common share in the fourth quarter, resulting in an adjusted operating return on tangible common equity of 22.1% and adjusted operating return on assets of 1.5% and an adjusted operating efficiency ratio of 47.8% in the quarter. For the full year 2025, adjusted operating earnings available to common shareholders were $444.8 million or $3.44 per common share. Resulting in an adjusted operating return on tangible common equity of 20.4% and adjusted operating return on assets of 1.33% and an adjusted operating efficiency ratio of 49.7%. As John mentioned, we believe these adjusted operating results for return on tangible common equity and the efficiency ratio put us in the upper quartile of our peer group for the full year of 2025. Turning to credit loss reserves at the end of the fourth quarter, the total allowance for credit losses was $321.3 million, which was an increase of approximately $1.3 million from the third quarter primarily driven by loan growth in the fourth quarter. As a result, the total allowance for credit losses as a percentage of total loans held for investment decreased one basis point to 116 basis points at the end of the fourth quarter. Net charge-offs decreased to $916,000 or one basis point annualized in the fourth quarter from $38.6 million or 56 basis points annualized in the third quarter due to the charge-off of two commercial and industrial loans in the third quarter. The net charge-off ratio for the year came in at 17 basis points in line with our 15 to 20 basis points guidance. Now turning to the pretax pre-provision components of the income statement for the fourth quarter. Tax equivalent net interest income was $334.8 million, which was an increase of $11.2 million from the third quarter primarily driven by a decrease in interest expense resulting from lower deposit costs and increases in interest income on loans held for investment and the securities portfolio, which was partially offset by a decline in other earning asset interest income primarily driven by lower average cash and cash equivalent balances in the fourth quarter. As John noted, the fourth quarter's tax equivalent net interest margin increased 13 basis points from the prior quarter to 3.96% primarily due to lower cost of funds, partially offset by a slight decrease in earning asset yields. Cost of funds decreased 14 basis points from the prior quarter to 2.03%. The fourth quarter due primarily to lower deposit costs reflecting the impact of Fed funds rate decreases starting in September 2025. Earning asset yields for the fourth quarter decreased one basis point to 5.99% as compared to the third quarter due primarily to lower investment in other earning asset yields, partially offset by slightly higher loan yields. As John mentioned, loan yields stayed relatively steady despite the Fed rate cuts and its impact on our variable rate loan yields due to increased accretion income, higher loan fees, and the repricing of renewed and new fixed-rate loans at current market rates. Noninterest income increased $5.2 million to $57 million for the fourth quarter from $51.8 million in the prior quarter. Primarily driven by a $4.8 million pretax loss in the prior quarter related to the final settlement of the sale of CRE loans executed at the end of 2025 as part of the Sandy Spring acquisition. Adjusted operating noninterest income, which excludes the pretax loss on the CRE loan sale in the third quarter, the pretax gain on the sale of our equity interest in Cary Street Partners in the fourth quarter, and the pretax gains on the sale of securities in both the third and fourth quarters remained relatively consistent with the prior quarter at $56.5 million primarily due to a decline in service charges on deposit accounts of $1.1 million, $400,000 of which was driven by temporary post-conversion fee waivers for Sandy Spring customers. A decrease in other operating income of $807,000 primarily due to lower equity method investment income and seasonally lower mortgage banking income of $727,000 offset by higher loan-related interest rate swap fees of $2.5 million due to higher transaction volumes, and increases in fiduciary and asset management fees of $1.3 million primarily due to increases in estate fees, personal trust income, and investment advisory fees. Reported noninterest expense increased $4.8 million to $243.2 million for 2025 primarily driven by a $3.8 million increase in merger-related costs associated with the Sandy Spring acquisition. Adjusted operating noninterest expense, which excludes merger-related costs in the third and fourth quarters and amortization of intangible assets in both quarters, increased $1.4 million to $186.9 million for the fourth quarter up from $185.5 million in the prior quarter. This was primarily due to a $2.4 million increase in other expenses driven by an increase in noncredit related losses on customer transactions. A $1.7 million increase in marketing and advertising expense. These increases were partially offset by a $1.4 million decrease in FDIC assessment premiums due to lower assessments in 2025 and a $1.2 million decline in furniture and equipment expenses, which was primarily driven by lower software amortization expense related to the integration of Sandy Spring. At December 31, loans held for investment net of deferred fees and costs were $27.8 billion, an increase of $435 million or 6.3% annualized from the prior quarter. At December 31, total deposits were $30.5 billion, a decrease of $193.7 million or 2.5% annualized from the prior quarter. Primarily due to decreases of $260 million in demand deposits largely driven by typical seasonal patterns and $14.5 million in interest-bearing customer deposits. These were partially offset by an increase of approximately $81 million in brokered deposits. At the end of the fourth quarter, Atlantic Union Bankshares and Atlantic Union Bank's regulatory capital ratios were comfortably above well-capitalized levels. In addition, on an adjusted basis, we remain well-capitalized as of the end of the fourth quarter. If you include the negative impact of AOCI and held-to-maturity securities unrealized losses, in the calculation of the regulatory capital ratios. During the fourth quarter, the company paid a common stock dividend of $0.37 per share which was an increase of 8.8% from the third quarter's and previous year's fourth quarter dividend amount. Of note, on a linked quarterly basis, tangible book value per common share increased approximately 4% to $19.69 per share in the fourth quarter. As noted on Slide 17, we are maintaining our full year 2026 financial outlook for AUB that was provided at our Investor Day in December. We expect loan balances to end the year between $29 billion and $30 billion while year-end deposit balances are projected to be between $31.5 billion and $32.5 billion. On the credit front, the allowance for credit losses to loan balances is projected to remain at current levels in the 115 to 120 basis point range and the net charge-off ratio is expected to fall between 10 and 15 basis points in 2026. Full tax equivalent net interest income for the full year is projected to come in between $1.35 billion and $1.375 billion inclusive of accretion income. As a reminder, we consider accretion income resulting from acquired loan interest rate marks as a built-in scheduled accounting tailwind to our GAAP earnings and net interest margin as the accretion income related to the loan interest rate marks gradually transitions to core cash earnings over time as the loans obtained through acquisitions either mature or get renewed at current market rates. As a result, we are projecting that the full year fully tax equivalent net interest margin will fall in a range between 3.94% for the full year driven by our baseline assumption that the Federal Reserve Bank will cut the Fed funds rate by 25 basis points in April and in September in 2026, and that term rates will remain stable at current levels. On a full year basis, noninterest income is expected to be between $220 and $230 million while adjusted operating noninterest expense is expected to fall in the range of $750 million to $760 million, including the expense impact of our North Carolina investment and other 2026 strategic initiatives. Based on these projections, we expect to generate annual growth in tangible book value per share of between 12-15% and produce financial returns that will place us within the top quartile of our proxy peer group, and meet our objective of delivering top-tier financial performance for our shareholders. In summary, Atlantic Union delivered strong operating financial results in the fourth quarter, and in 2025. And we remain firmly focused on leveraging this valuable Atlantic Union Bank franchise to generate sustainable profitable growth and to build long-term value for our shareholders in 2026 and beyond. I'll now turn the call over to Bill to see if there are any questions from our research analysts community. Bill Samia: Thanks, Rob. And, Lucia, we're ready for our first caller, please. Operator: Thank you, ladies and gentlemen. Just as a reminder, if you would like to ask a question at this time, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. First question coming from the line of Janet Lee with TD Cowen. Your line is now open. Janet Lee: Good morning, Janet. John Asbury: Yeah. Good morning. Janet Lee: I want some more clarifications on your 2026 guide, which was reiterated from your Investor Day in December. Is there any sort of range that you're gravitating towards, whether that's higher end or lower end of that interest income given the higher launching point for QNIM, but although I do expect that NIM will grind down from there in 2026. And it looks like there are different puts and takes in terms of deposits coming in below given seasonality and loans were a little bit above what you guided. So I wanted to see what would put you at the higher end versus lower end, what your baseline expectation is. Rob Gorman: Yeah. So as we've said, Janet, you know, we're guiding to mid-interest income between $1.35 billion and $1.375 billion. To come on the higher end of that, it's really gonna depend on somewhat of do we get elevated accretion income as we saw this quarter? We're not modeling that going forward into 2026. We've got that coming down a bit. Also, I think the other component there is, can we continue to lower deposit costs as the Fed reduces the Fed funds rate? We're taking a bit of a conservative approach on that. Of course, that's dependent on the competition out there and the needs for funding loan growth that we anticipate. So really, we're kind of in that range, but on the higher end, if we could see cost of funds come down a bit more than we're projecting, that would probably lead us to the higher end and accretion income would also add to that confidence if we see that coming in a bit higher. Also, as you know, loan growth could also play a part in that regarding to mid-single digits if we see a higher loan growth and term rates remain high with a steep curve. We could see that coming in at the higher end as well. Janet Lee: Got it. Thanks for the color. And if my calculation is correct, I see the cumulative interest-bearing deposit beta to the rates coming down in the high 40% range, do you still forecast that mid-fifties beta? Or is that a little lower heading into 2026? And I see that there was a deposit remix into more interest-bearing checking, which I assume are lower cost than the other ones. I wanted to see what drove that remix in the quarter and whether that's going to reverse in the quarters ahead. Thank you. Rob Gorman: Yes. So on that, Janet, in terms of the betas, we're still guiding to an interest-bearing deposits guidance of mid-50s, 50 to 55 percent, which is in line with when rates were going up. I think we ended up the prior through the cycle. Beta was around 55% for interest-bearing deposits. On a total deposit basis, we're in that 40 to 45 range. I calculate that we're about 50% betas to date if you go back to when the Fed started cutting in September. And about 40% total deposits. So we're kind of staying in that range. We have seen we've been aggressive on lowering deposit rates. About $12 billion to $13 billion, we've been able to reprice fairly quickly as the Feds come down. That's a good thing to offset our variable rate loan book that reprices with Fed funds. So that kind of is a balancing act there. So in terms of what was the other the end of the other question you had there? Just Janet Lee: Deposit remix? Rob Gorman: Oh, yeah. So there have been some reclasses that have occurred post the Sandy Spring conversion. So there's some of that that's kind of moved in one category to another. That's primarily probably the main driver of that. So don't expect that to shift too much going forward. Level set that now. Janet Lee: Got it. Thank you. Bill Samia: Thanks, Janet. And, Olivia, we're ready for our next caller, please. Operator: Our next question coming from the line of David Bishop with Group. Your line is now open. David Bishop: Hi, Dave. John Asbury: Hey, John. How are you doing? David Bishop: Good. Thank you. Hey. I think I heard you say during the preamble that the loan pipeline had increased relative to that coming into the quarter. Just curious if there's any numbers you can put around it or percent increase and how you're thinking about near-term loan growth here as you talk to your commercial clients? Are you starting to see some traction across the legacy, Sandy Spring portfolio, and is that some of the drivers we saw in the C&I growth this quarter? John Asbury: Yeah. I would say that we had a modest increase in total pipeline by end of year end of quarter versus beginning of quarter. That's really important and a bit unusual for Q4 because as you can see, Q4 was a big quarter. Now as we expected, it was very much back-end loaded. We were teams were super busy over the month of December. The typical phenomena is you would expect to see the pipeline somewhat clean down. In other words, normally, it takes a while for it to rebuild. So we were pretty excited to see that it was continuing to refill, so to speak, over the course of the quarter. And I would just say that what we're hearing, we can see the pipeline. The feedback we're getting from our market leaders is quite encouraging. So we feel pretty good about things. In terms of the outlook. That's part of what's giving us confidence in our mid-single-digit guidance. And it feels pretty Dave Ring, you can comment on this, but what we heard is pretty broad-based in what we see. David Ring: Yeah. I guess I would only add that our folks are very optimistic going into the year. With good pipelines across the footprint. Yep. It's not in one place. Yeah. Including the former Sandy Spring franchise, to be clear. David Bishop: Great. And then, John, maybe a holistic question. You know, change in the governor's branch in there. Just your view here from a business-friendly climate, do you think that's gonna have much of an impact in terms of the Commonwealth's growth capacity and business climate? Thanks. John Asbury: Yes. Thank you. No, we feel good about the outlook here in our home state of Virginia. Virginia has a long tradition of business-oriented moderates in these statewide offices, governor of US senate, and I feel quite confident that, you know, the new governor will continue that tradition. David Bishop: Great. I'll stop there and hop back in the queue. John Asbury: Thank you, David. And, Olivia, we're ready for our next caller, please. Operator: Our next question coming from the line of Steve Moss with Raymond James. Your line is now open. Steve Moss: Hi, Steve. John Asbury: Good morning, John, Rob, Bill. Maybe just following up on the loan pipeline here. Just kind of curious where are you guys seeing loan pricing shake out these days? And also, where is in order reverse deposit costs were at quarter end? Rob Gorman: Yeah. So on the loan pricing side, we're seeing about, you know, $6 to $6.20 loan pricing both on the variable and the fixed-rate loans. So we expect that will continue. It really depends on where short-term rates are, obviously, the variable rate side. And where term rates are. But the spreads seem to be holding up pretty well on top of those indexes. And in terms of the deposit cost at the end of the at December is what you're asking, Steve? Yeah. We're below 2% on that. It's about $1.96 coming out of December. Steve Moss: Okay. Appreciate that. And then in terms of just kind of thinking about the core margin here, I apologize if I missed it, but just curious do you continue to expect core margin expansion here throughout the year and kind of how you're thinking about the cadence if that's the case? Rob Gorman: Yeah. We think core margin will expand a bit. Some of that's coming off, you know, where we talked about the acquired loan book is repricing and coming back into core. So from a loan yield point of view, that's helpful. In terms of fixed-rate loans, coming on about 100 basis points or so higher than what the portfolio yield is. If the Fed cuts more than a couple of times, we probably will see some stable loan yields or margin, or we could see some contraction a bit. But our call is a couple of cuts next year, which is manageable. And as I mentioned, we're able to reduce some of our deposit costs, which I think that's the Fed funds fairly quickly, which will offset some of the variable rate loan impacts of further cuts. So in all, I think we'll see some modest core margin expansion based on those factors. Steve Moss: Okay. Appreciate that. And then just in terms of following up on the purchase account accretion, just curious updated thoughts around the full year number for that? Rob Gorman: In terms of 2026, Steve. Yeah. We thought you know, we're currently modeling $150 and $160 million in 2026. As you know, that can fluctuate. We saw a bit higher than expected in the fourth quarter. So that can fluctuate, but give or take our baseline modeling in the guidance we provided from a margin perspective and net interest income perspective is in the $150 to $160 range. Steve Moss: Okay. Appreciate that. And John, maybe just one for you on, you know, North Carolina's expansion. I know you talked about it a fair amount last month. Just kind of curious as you continue to expand down there in the market, what are the good things you're seeing? Maybe what are some of the challenges you know, as you're building out down there? John Asbury: Yeah. Well, I think that we're making good progress in terms of the efforts to expand the commercial teams, and Sean O'Brien is your head of consumer and business banking. Sean, you can speak to just sort of the latest in terms of the branch build-out. Sean O'Brien: Yeah. We continue to move quickly and have plans for our 10 branches to be open in Raleigh and Wilmington here in the next year and a half, two years, and we're hiring staffing across the bank to make sure there's teams to support on both the wholesale and consumer side. So progress has been very good there as far as finding good sites and finding teammates. We think we're on track, Steve. Steve Moss: Okay. Great. I appreciate all the color here, I'll step back. John Asbury: Thank you. And, Olivia, we're ready for our next caller, please. Operator: Next question coming from the line of Brian Wudzinski with Morgan Stanley. Your line is now open. Brian Wudzinski: Hey, good morning. John Asbury: Hi, good morning. Brian Wudzinski: Yeah. So sticking with the loan growth. So at Investor Day last month, you talked about several different focus areas for organic loan growth over the next few years. There's the Sandy Spring footprint, North Carolina, and also the specialty banking businesses. I was wondering if you could talk a little bit about where you're seeing the most traction in the fourth quarter given how strong growth was. What you see is sort of the near-term driver across those three buckets? Versus what may take some more time to materialize. David Ring: Yeah. We could talk for hours on this one. Let's not do that. You know, we've seen the Sandy Spring part of the franchise really turn the corner from integrating the bank and getting trained up to positive results in the fourth quarter and a really good pipeline going into the first quarter. North Carolina, steady as she goes there. We're hiring into that market. So there's ramp-up periods for folks that we'll see, I think, really nice results over the course of 'twenty-six. But they also have turned the corner. They're also growing, and their pipelines are good as well. And on the specialty side, we have hired the head of healthcare banking, which we talked about in that meeting. And the other specialty businesses actually contributed largely to some of the growth we've had. John Asbury: And then here in Virginia, which would be, you know, the single largest concentration what we were so pleased to hear this week as we did our check-in with all of the commercial market leaders and credit officers is seeing strength across the state. Not and so that's actually really good to see. So we feel pretty good about the setup, Brian. It feels pretty well diversified. Brian Wudzinski: That's great to hear. And, you know, you highlighted the 6% annualized growth in the fourth quarter. Pipeline is up, sounds like production is up. Any puts and takes in terms of how we think about, say, 2026 relative to what you just did in the fourth quarter? Is there any seasonal benefit in the fourth? Was the end of the government shutdown a material tailwind? Or does it feel like you can sort of maintain this cadence over the course of the year? John Asbury: Q4 is traditionally seasonally strong. In my experience, across the industry and that's because businesses are strongly motivated to get things done before year-end for reporting purposes, planning purposes, tax purposes, you name it. So you can always expect to see a seasonally high Q4. Q1 traditionally is somewhat slow. Normally, because so much goes on at the very end of the year. So, you know, we would expect to see the typical pattern, which is it'll build as the year goes on. There's usually a little dip in Q3 as people go on vacation. Frankly. There are some yeah. There are there's normally some element of seasonality, but we see the opportunities there. So we'll see what happens. Brian Wudzinski: Really appreciate the detail, and thanks for taking my questions. John Asbury: Thank you. Thanks, Brian. And we're ready for our next caller, please. Operator: Our next question coming from the line of Catherine Mealor with KBW. Your line is now open. Hannah Wen: Good morning. This is Hannah Wen stepping in for Catherine. Thank you for taking my question. John Asbury: Of course, Hannah. Hannah Wen: Had a question on deposits. We saw a decline in deposits this quarter, and I was wondering if you could provide any guidance on the outlook for deposit growth into next year. John Asbury: Yeah. Let me start by saying we saw the typical, for us, end-of-year decline that happens really in the last two weeks of December. It's not at all uncommon, and we saw it again to where some of the larger commercial depositors will have various payments that they're making. And so you see this downdraft in noninterest-bearing deposits. It happens late, and that's what was going on. Over the course of the quarter, we did continue to run down some higher-cost sort of less relationship-oriented deposits that came out of Sandy Spring in particular. So you've got a seasonal element going in there, and you see the deposit base kind of settling in. Rob, do you want to speak to the outlook for 2026? Rob Gorman: Yeah. So, you know, if you look at our guidance, we're really guiding to about off the fourth quarter base. About 3% to 4% deposit growth for the year. We think that's achievable. Both on the commercial and on the consumer side. You know, we've got more treasury management opportunities in the former Sandy Spring footprint. So there's some opportunities to grow there. So we're feeling pretty good because really low single digits is what we're calling for. Hannah Wen: Okay. Thank you. John Asbury: Thank you. Thanks, Hannah. And, Olivia, we're ready for our next caller, please. Operator: Our next question coming from the line of Steven Skun with Piper Sandler. Your line is now open. Steven Skun: Hi, Steven. John Asbury: Good morning. Steven Skun: Yeah. Good morning, guys. Thanks. So one quick clarification, John. I think you said most of the expenses related to the Sandy Spring deal are kind of in the numbers here, maybe some marginal benefit in 1Q? How should we think about I know we've got the full year guide, but just the run rate for expenses in the first quarter off of this, you know, what I think was around $204, $205 million here this quarter? On an adjusted base? Rob Gorman: Yeah. So Steven, the way to think about that is you're gonna see kind of a flattish quarter in the way we're modeling it. Flattish quarter, first quarter, and it starts coming down a bit over the remaining years. Of course, you understand there is some seasonality in the first quarter as FICO resets, bonus payments are made, unemployment taxes go up. And then we have some merit increases going in. So that'll be kind of the high watermark as well, which is typical. And then start to come down. If you look at it from an operating excluding the amortization of intangible expense, we're calling for, on average, call it, about $188 million a quarter going forward, but it will skew a bit higher in the first quarter and starts to drop off in the subsequent quarters. John Asbury: Rob, what can we say about what's left of Sandy Spring related expenses? Rob Gorman: Yeah. So our well, I think we it's not all in the numbers yet. But we've achieved the cost savings. About $80 million is what we had projected. 27.5%. In the numbers, it's probably about annualized, about 60 some odd million there, call it 60. We're getting another five coming out of the fourth quarter. So that will get you to that $80 million mark. So there is some benefit that you'll see in the first quarter. That's why we're kind of calling for flattish in the first quarter because it's offset by some of these other seasonal items. But you should see that come through going out in the second to fourth quarter. Of course, we also have investments that are being made in North Carolina in some strategic investments we made, which we noted in Investor Day. So those are kind of all in the numbers that I'm talking about. And I referenced there's some residual remaining expenses in Q1, which is think meaning from a merger-related Yes, like merger one Yes. We have a couple of IT decommissioning expenses and a few related to some leases that we're getting out of maybe less than $5 million is our projection for the first quarter. And then merger-related. That's it. It's all over. That is done. Steven Skun: That's great. That's extremely helpful detail. Appreciate it. And maybe I know you kind of noted the progression in North Carolina that potential expansion is still pretty much on path for build out over the next year and a half to two years. Is there any impetus to kind of accelerate any of your plans? Or push maybe deeper into the hiring activity? It seems to be the norm across the spectrum today. Everybody seems to want to hire as many people as they can. With the dislocation we're seeing across the industry. So just wondering if that any of your plans there could accelerate or if you feel like there's a lot of capacity still within the team just given the integration with legacy Sandy Springs into the AUB platform? John Asbury: That would principally be, I think, a commercial or wholesale banking question. Do you want to answer that, Dave? David Ring: Yeah. I mean, this is not the time you necessarily want to hire a banker because you're gonna have to pay their bonus. You mean this time of year? Yeah. This time of year. But we have a pipeline, a strong pipeline of people that we would expect to bring on board, you know, after bonuses are paid at the other institutions. And we currently have a lot of capacity within the team. We have 20 bankers sitting in the market already in Carolina. New Carolinas. And they're very active. And so we're gonna continue to grow using those bankers, but also build out the rest over time. But you should expect to hear about more hiring, you know, March between March and August during the year. We feel we do feel good about the team and our capacity. We're sort of always in the market to some extent, but it yeah. Yeah. We wouldn't expect to see, like, some big announcement that there's some big expansion per se but we'll see how it goes. But there's no constraints on Correct. Hiring. It's just Yes. Hire at least you can. We have a long track record of you know, as we can expand, you know, with the right talent, we tend to do that. And it to make it work out. Little harder to accelerate on the consumer side because you got the branch build-out and things to get yeah. So it's more of a wholesale side. We'll, yeah, we'll push as hard as we can. But it's depending on the hiring capabilities there. Steven Skun: Great. And then just maybe lastly for me, I mean, you've got a lot on your plate clearly in terms of the North Carolina expansion. Obviously, hoping to accelerate growth overall. In terms of uses of capital. But as earnings continue to ramp higher and capital build should accelerate here, at what point do you think you entertain maybe share repurchases or other paths for that you know, soon to be building excess capital over time? And is there a kind of a threshold you wanna hit a capital level first before you'd entertain that? Rob Gorman: Yeah. I think we've been clear that we will entertain share repurchase probably the 2026 of this year. Really looking at excess capital, anything beyond the 10.5% CET one would be what we'd be looking for. To utilize consider excess capital to be in the repurchase market. So we're on track for that as we go through the first for the second quarter of this year. So we said, we could be in the market late in the second quarter or in the third quarter. John Asbury: And I'm glad you asked that question. You saw that we grew tangible capital by 4%, approximately 4% in one quarter. And we're doing exactly what we said we would do. We've invested capital to build the franchise, to secure our positioning, to put us on this profitability and capital generation footing, and now we're receiving the benefits of that. And we've been clear that we are guiding toward 12 to 15% annualized tangible capital growth. So we are going to be in a good position, as Rob said, where we'll be able to consider share buybacks. Steven Skun: Yeah. Fantastic. It feels like everything's laid out before you. Appreciate the color, guys. John Asbury: Thank you, Steven. And, Olivia, we're ready for our last caller, please. Operator: We have a follow-up question from David Bishop. Your line is now open. David Bishop: Hi, Dave. John Asbury: Hey, John. Real quick, I guess, a question for Rob. You noted the in other expenses, noncredit related customer losses. Is that is that fraudulent? Type losses? Just curious what sort of drove those other expenses higher. Rob Gorman: Yeah. That's mostly what that is. Fraud is episodic. And, you know, it can come and fit some spurts and that's what you're looking at. Because it was elevated just a couple of items or issues that came up in the fourth quarter. Hopefully, they don't recur, but yeah, you know, they're here to yeah. Do you get these scams that move around the industry? And then there'll be something else. That's episodic. Yeah. We don't But that's what that run rate. Issue. David Bishop: Got it. So within your OpEx, you know, guidance, for the first quarter to flattish, would that be flattish off the reported sort of 2.04 you know, point six on an adjusted basis, or would it be know, sort of two zero two adjusting for the fraud? Rob Gorman: Yeah. It's kind of in each yeah. Kind of around that range, you know, two zero three, two zero two, two zero three, including the amortization. Just because there's, you know, ads. Think about it as yeah. We may not see that level, but there's other things that'll come in from a seasonal point of view. David Bishop: Got it. Appreciate that color. John Asbury: Thanks, Dave. And thanks, everyone, for calling. We look forward to speaking with you in three months. Have a good day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

69天前Insight Analytics约5分钟阅读

ESSITY-B.ST 2025 Q4 财报电话会议

Sandra Åberg: Good morning, and welcome to Essity's presentation of the Q4 and full year 2025 results. Here to take us through the highlights, we have our CEO, Ulrika Kolsrud; and our CFO, Fredrik Rystedt. After the presentation, we will open up for your questions. [Operator Instructions]. With that, let's get started. I'll leave over to our CEO, Ulrika. The floor is yours. Ulrika Kolsrud: Thank you, Sandra. And also from my side, welcome to this webcast. The final quarter of 2025 confirms that we are standing strong in a continued challenging market environment. We continue to grow in our strategic segments, such as Incontinence Care, Wound Care and premium products in Professional Hygiene, and we strengthened market shares across our different branded categories. We're also strengthening our profit margins. Actually, we are strengthening our profit margins in all 3 business areas in the quarter, and we delivered a stronger result than last year's same quarter. When it comes to volumes, sequentially, we have a stronger volume, so stronger volume in Q4 versus Q3. Looking at quarter over last year's quarter, however, there was a flat volume growth. And that, together with the fact that we are then lowering prices in order to compensate for lower input costs is resulting in that we are reporting a negative organic sales growth. And that underpins the importance of the initiatives that we took last quarter to accelerate profitable growth. We are now operating in the new organizational setup with decentralized decision-making with end-to-end accountability and with even sharper focus on our most attractive categories and segments. And we are starting to implement our cost-saving program. In the quarter, we also strengthened our position for profitable growth by acquiring the Edgewell Feminine Care business in North America. And now with the brands Carefree, Stayfree and Playtex in our bag, we are more than doubling our Personal Care sales in the U.S., in line with our focus on high-yielding categories in attractive geographies. Another key highlight of the quarter is that we again got recognized for our strong sustainability performance. So we were awarded for the EcoVadis Platinum Medal, recognizing our sustainability performance, placing us among the top 1% companies worldwide that they are assessing when it comes to sustainability performance. And also, we have been placed on the CDP prestigious A list. I would say sustainability performance is important in all of our business areas, but not the least in the health care sector. Many of our customers in the health care sectors have high ambitions when it comes to sustainability. One good example of that is one of our biggest customers, NHS, in the U.K. They continue to pursue ambitious sustainability agenda even if there is financial pressure, with increasing demand for health care and funding under pressure. And speaking about funding under pressure, we talked already last quarter about that we see in some selected markets that there are some cuts in funding, and we continue to see that, for example, in Indonesia. That does not, however, prevent us from growing. Quite the contrary, we have a positive organic sales growth in Health & Medical, and we grow volumes both in incontinence Care as well as in Medical Solutions. If we double-click on the Medical business, this is the 19th consecutive quarter that we grow the Medical business, and we grow in all 3 therapy areas. A critical success factor behind this good performance in Health & Medical is, of course, our strong and unique offers that we have. And we continue to strengthen those offers. In the quarter, we upgraded one of our flagship products in the TENA assortment, the belted TENA Flex product. This product is specifically easy and ergonomic for caregivers to use on bedridden patients. And in this quarter, then we upgraded it with an even better comfy stretch belt. The elasticity is better, so it adapts easier to different body types and thereby, you can use this product for more patients. Also in the quarter, we relaunched one of our unique offers in the Advanced Wound Care assortment, the Cutimed Siltec Sorbact product. And in connection with that, we kicked off a new brand campaign for Cutimed on the theme of imagine a world where wounds would heal faster. And in this campaign, we showcase how our unique offers are helping health care to improve patient outcomes and reduce health care costs, thereby improving health economic -- or bringing health economic benefits. And it's, of course, leveraging these unique advanced solutions that is helping us and contributing to our performance in Wound Care and allowing us to gradually strengthen our positions in this category. Strengthened positions is also the theme if we go to consumer goods. In the quarter, we strengthened our branded market shares in 65% -- more than 65% of our business. And this is not only attributed to one of the categories, but it's actually contributing from all different -- all 4 categories. Looking at Incontinence Care, there, we strengthened our market shares, and also it's a fast-growing category. So as a result of that, we saw very good growth in Incontinence Care. In Feminine Care, we were impacted by a one-off, but underlying, we continue to perform very nicely also in this category, and that is demonstrated through the market share development that we see. In fact, in feminine, we grew our market shares in 80% of our business. And we had also some good records that we saw in the quarter. One very exciting of those is that we now in Mexico have 62% market share in Feminine Care. And as you know, Mexico is one of our most important markets for Feminine. Another exciting development in the quarter in Feminine was that we now are back to growth in Knix washable absorbent underwear. And that is thanks to new retail listings, higher prices, as well as product launches. Then if we move to Baby Care and Consumer Tissue, here, we saw an organic net sales decline. And this is for the same reasons that we have talked about previous quarters. So in Baby, we are impacted by the lower birth rates and also the fierce competition that we see, and consumers being more price sensitive than what we have seen before. And in Consumer Tissue, it's the weak consumer sentiment that makes the growth happening mostly in the mid- and low-tier segments, and we also lost some private label contracts due to pricing. Then it's very encouraging to see that we are growing our branded business, both in Baby as well as in Consumer Tissue. And that's a testament to the effect of our launches and our marketing activities. They are really paying off. And we continue to have a very high activity level in Consumer Goods. As you can see here on the slide, there are many different launches to talk about in the quarter. But in the interest of time, I have to choose one of them. And I choose to talk about the upgrade of our thin assortment, our thin towels in feminine care in Latin America. So having thin feminine pads is, of course, more discrete and comfortable than using thick pads when you have menstruation. But even so, many women actually choose thick pads because they don't fully trust the leakage security of the thinner ones. Now with this upgrade, we are introducing a new core technology that we call SmartPROTECT that manage even sudden gushes and thereby increased leakage security. And for that benefit, we have 2 -- actually 2 benefits of that. One is, of course, that we strengthen our superiority even further in this ultra-thin segment in the market, but also that we move consumers from the thicker pads to the thinner pads, which is a benefit because we normally have higher profitability in this segment. Now the activity level was also very high in Professional Hygiene in the quarter. Here, market growth continues to be depressed following the weak consumer sentiment, and we see that as impacting our sales. But we are responding to that by continuing to have selective price adjustments, continuing to work with joint sales plans together with our distributors, and also adapting our assortment. In this situation, it's super important to be competitive in all different price tiers. And in the quarter, we launched some what we call volume fighter specifications to make sure that we are at the right price point for the customer. We expect this to pay off in the coming quarters, but what has already paid off is really our push in the premium segments. So we continue to see strong growth in our premium segments in Professional Hygiene like Tork skincare and Tork PeakServe. We also continue to develop these products even further. So in the quarter, we launched an automated sensor-based dispenser for PeakServe in addition to the manual one that we have already. And that will broaden the relevance of this premium solution in the market. We are also broadening the relevance of our center feed dispenser solutions. The center feed dispenser solution allows you to take one sheet at a time, which is more hygienic and it also controls consumption. So it's cost efficient for our customers. Now in some segments, it's more important with design than in others. A good example of that is in restaurants that have an open kitchen. Then, of course, you are very dependent on a good-looking dispenser. And if you see on this picture, the black stylish dispenser here is what we launched in the quarter, and that is really a very strong fit into these type of environments. I would even call it decoration. It's really nice. Also, we launched a new refill paper with natural color that also has a lower price point. And that is then an excellent choice for those customers who are either very price sensitive and/or want to work with their sustainability image. Now all of these innovations that I'm talking about, they have 2 purposes. I mean, one is to expand the relevance of the product, but also, of course, to drive product superiority. And with product superiority, we mean that it's the preferred choice by customers and consumers. And looking across categories in 2025, we reached a record level when it comes to product superiority. And that, of course, makes us very well equipped to continue on that positive market share growth that we have seen in the fourth quarter of 2025. And now after all of these talk about products and innovations, I'm sure you guys want to hear a bit about the figures behind this. So over to you, Fredrik. Fredrik Rystedt: Thank you, Ulrika, and I will put a few numbers to what you have been talking about here. And as you can see, and you've already mentioned it, we actually had, in terms of organic sales, a negative development during Q4. And this is basically driven by price decline and a slight volume decline. It's maybe worth noting or perhaps repeating what you said, Ulrika, we are taking market share. So this is very much a market issue. And if we actually look at the sequential development of volume, it's always a little bit of seasonality. But nevertheless, you can see that we actually grew our volume sequentially between Q3 and Q4 with just under 2%. So it's a good momentum despite the fact that we have a decline versus Q4 of 2024. I mean, some of you will actually remember that Q4 of '24 was very strong. So we also have a bit of difficult comparable. Now as before, the volume decline is very much driven by Baby, or same as in Q3, our Baby business, our Consumer Tissue business and also Professional Hygiene, and these all are leading to the group decline of volumes of minus 0.2%. So just really brief, Health & Medical, you've said it, Ulrika, we had a good volume development in Inco Health Care and Medical. And if you look at the Medical area, actually all therapy areas and especially Wound Care, so that story you will remember. And if you talk about price and mix, largely flat in Health & Medical. Consumer Goods, Inco really, really doing very well in terms of volume, Inco Retail. Feminine is as well. It's a little bit -- it's positive volumes, just under 1% of positive volumes. And that is actually despite a fairly weak market in Europe. So overall, you can say we are growing, but the European market is a bit challenging. Ulrika talked about a onetime issue in Feminine, and that is related to an adjustment that we have made of customer rebates in Latin America. So we've increased those, and that has actually impacted sales and the pricing components, and this is why you see a negative organic sales growth for Feminine. And this is temporary for the quarter. It will go back to normal in the next quarter. And if you actually adjust for that, we have stated that the underlying growth is good. And so what we mean by that is that growth would have been -- organic sales growth would have been low single digits, to give you a little bit of perspective. When it comes to Baby, again, we are gaining in our branded business in the Nordics, but we are continuing to lose in the rest of the retail branded business in Europe. And overall, volumes are down with approximately about 4%. That's also for the market as a whole. So it's not just us, but it is a very competitive market in Europe. And this is also why we are losing volumes. And finally, Consumer Tissue, we're struggling a bit with volume there, minus 2%. And this is all actually related to private label. We have talked about this before. So there is no news here. We have lost a few contracts on the back of pricing. And of course, we have always prioritized margin over volume. But of course, we don't want to lose volume. So we have selectively actually reduced prices in Consumer Tissue. And hopefully, that will pay off as we go forward. HoReCa, we've talked about Professional Hygiene, and this is, of course, still leading to a slight volume loss of about 0.5%. And there are signs here of at least stabilization of the HoReCa markets. So here, we're hoping for better conditions going forward, but there time will tell. And to summarize maybe for the group, minus 0.2% in terms of volume, minus 0.9% in terms of price and mix is actually flat. So that sums it up a bit. Then if I go to the margin, you can see that we've actually -- we've improved our margins, both if you compare between Q4 of '24 and Q4 of '25 and sequentially. And it's not only for the group, it's actually for all the business areas. Gross profit, as you can see, increasing by 180 basis points, and this is on the back of lower COGS as we flagged when we talked to you last or after Q3. So that actually happened. And we've maintained a very good price management in the quarter, all of that leading to that very good improvement of the gross profit margin. The COGS reduction is all about, I should say, raw material energy, but we actually -- and this is a little bit of -- we're proud of that. We managed under tough conditions to reach also our COGS savings of just above SEK 500 million. So you will know our target for the year was SEK 500 million to SEK 1 billion, and we said we were struggling to reach that range, but in the end, we actually managed to do that, and that contributed to that margin enhancement. As you can see, and we've said that, we want to fuel our growth. We want to fuel our innovations that we put on the market. So we are spending more in terms of A&P, and that's both percentage of sales-wise and as an absolute number. When it comes to SG&A here, you see that it's actually favorable. So we have reduced in terms of absolute. Also in constant currency, we have reduced our spending in terms of SG&A. And this is due to, of course, a tight cost control. That's not surprising to you. We've reduced our travel, as an example, with more than 30%. We have a bit of lower bonus accruals. And there is also a bit of onetime here that is positive. So it's not as good as you see here. There is a bit of onetime. But if you look at the overall group, there is also positive and negative onetime impacts in the result. So overall, all the onetime impacts are balancing off for the group as a whole. But all in all, we're quite proud of our SG&A performance. So let me then just talk a little bit about the SG&A program, the cost saving program that we have launched previously. And as you know, we're aiming for a run rate saving of SEK 1 billion towards the end of '26. Now we are actually aspiring to reach quite part of this saving already throughout this year, but that will be more towards the latter part. So you can expect more of the savings. So far, we have realized very, very little, and we've also put fairly little in terms of restructuring charges. We expect the cost of this program to be a bit over SEK 1 billion, so approximately SEK 1.1 billion in restructuring charges. Let me end this part with a little bit of guidance for Q1, as we normally do. We expect actually COGS to be slightly lower, partly from savings, but also a little bit from currency or positive currency impact in raw materials. So slightly lower COGS, that is what we expect. And we are expecting a slightly higher SG&A. And please remember, I'm now giving you guidance Q1 of '26 versus Q1 of '25. So we are expecting slightly higher SG&A, and this is primarily driven by higher A&P in line with our ambition to fuel growth. And customary, and you know that, we also give you a little bit of guidance for the full year, and we expect CapEx, to start with that, between SEK 8 billion to SEK 8.5 billion, a bit higher than we had in '25. And this is actually partly phasing and just ambitions to grow as we go forward. We expect other cost or the corporate cost, if you will, to be approximately SEK 1.3 billion, so very similar to this year -- or to 2025. The structural tax rate to be between 25% to 26%. And then finally, on the COGS savings, we remain with our estimated range of SEK 500 million to SEK 1 billion. So let me move on then to the cash flow side. We're quite pleased with the cash flow here in Q4. This is driven by obviously a good cash surplus. The margin was good. So this was a good operating cash surplus, but we also had good working capital management. So inventory days came down a little bit, continue to do that. And we had unchanged credit days, both in receivables and payables. So all fine in terms of working capital. And net cash flow was also quite strong. And this cash flow has driven a continued strengthening, of course, of our balance sheet. So net debt-to-EBITDA is approximately 1.0 here, as you can see at the end of the year. We've continued to repurchase shares in line with our program that we launched with SEK 3 billion. And so far, we have purchased 9.2 million shares or totally SEK 2.4 billion. So we are roughly about 80% through this year's program. So let me then finalize with a little bit of overview of 2025. In many aspects, this was a good year. We had an organic sales growth of 0.9%, and this is despite challenging market conditions. We actually had growth in all our business areas. We maintained our volumes and price management remained strong for the entire year. In terms of margin, we've already talked about that, but it was a very good year in terms of margin. In fact, if you look at that operating margin of 14.1%, it's the second highest we've ever had. It's second only to the artificially high margin during the pandemic that was caused by all the panic buying, for those of you who remember. So this is, from a historic perspective, a very attractive margin. And then turning a little bit to what does that imply? And some of you may have seen from the report that our EPS growth was, if you look at it, between 2024 and 2025 in nominal terms, roughly about 1% growth. Now of course, the Swedish krona has strengthened a lot. So if you actually look at the EPS growth in comparable currencies, you will see a growth of roughly about 8%. And this is quite consistent with the long-term growth of about 6% if we start with the birth of Essity as the first year. So continued good performance. And this is, of course, on the back of good margins, the growth we've had and of course, also a shrinking finance net as our net debt has reduced. Finally, then the Board has -- or will propose to the AGM a dividend increase of SEK 0.50 to SEK 8.75. This represents an increase of about 6%. And if you look at, once again, from the birth of Essity, you can say this is consistent with the growth that we've had, roughly about 6% or a total growth of 52%. So with those words, leaving over to you, Ulrika. Ulrika Kolsrud: Yes. Thank you, Fredrik. And with that, we are leaving a solid 2025 behind us. We finished the year with stronger market shares with continued growth in our strategic segments and not the least with strengthened profit margins. It's been, from an external perspective, a quite turbulent year with a lot of geopolitical uncertainty and the weak economy. And that has, of course, impacted also our industry. And we see that the resilience that we have shown during this is really a sign of strength. As Fredrik has shared, we have grown organically during the year. We have strengthened our profit margins, and we have now the strongest profit margin in 5 years, and we have delivered a solid result. So we are proud over this, but we're also determined to accelerate our profitable volume growth and to speed up our progress towards our financial targets. And therefore, the initiatives that we've launched earlier than in 2025, with the reorganization with the cost saving program and with the acquisition of the Edgewell Feminine Care business in North America. And we bring those initiatives with us together with then the very strong financial position we have into 2026, where we remain fully committed to our strategy to drive profitable volume growth. And we will do that by, first and foremost, making sure that we have the customer and consumer at the center in everything we do. We will also do that by continuing on the path to strengthen our market shares and our product superiority. We will, of course, integrate the Edgewell acquisition to strengthen our Personal Care position in North America. And we will implement our cost save programs, both the COGS cost save program that Fredrik was talking about as well as then the SG&A cost save program, where we have the ambition to reinvest the majority of that into fueling profitable growth. And also, we will fully leverage our new organizational setup with end-to-end accountability with more decentralized decision-making and also with even sharper focus on our most attractive parts of our business, so that we can unleash the full power of our fantastic Essity teams, and also to make the boat go faster. Speaking about our fantastic Essity teams, you have the opportunity to meet some of them if you join us in our Capital Market Day on the 7th of May. We will host that in our Mölndal office in Sweden, which is our largest office. And you don't want to miss the opportunity of hearing more about our strategy to drive profitable growth and to be able to see some of our R&D laboratories in this facility as well as production facility in the neighborhood. So I really hope to see all of you there. Sandra Åberg: Thank you, Ulrika, and thank you, Fredrik, for that walk through. Now we are ready to take your questions. [Operator Instructions]. Ulrika and Fredrik, are you ready to open up for questions? Ulrika Kolsrud: Yes. Sandra Åberg: Perfect. We have the first question from Niklas Ekman, DNB Carnegie. Niklas Ekman: Can I start asking about kind of your priorities for '26 here? Obviously, volumes have been weak now for some time. And now you have a couple of quarters with a pretty strong margin expansion. How do you view that now in '26? Are you willing to sacrifice some of that margin in order to restore volume growth? Or are you more optimistic maybe about the market now having had some kind of cyclical headwinds, that they might turn to some tailwinds in '26? Or you're thinking there on the mix between organic volume growth and margins and what your priorities are? Ulrika Kolsrud: Well, as we have talked about previous quarters as well as in this quarter, we are doing selective price adjustments in order to fuel volume growth. And also, we have the intention to increase our A&P investments. We have seen that the investments that we do in A&P is paying off very nicely, as you saw in the market share development. So that we will do. And then the volume growth will give us operating leverage and thereby also securing the profit margins. And since we talk about this and how to drive volume growth, I want to mention one thing that we're also very proud of in 2025 that will support volume growth in '26, and that is our innovation delivery in the year. We increased our share of sales that is generated through innovations and also the superiority record that I talked about earlier. That shows that we are strengthening our offers to consumers and customers, and that is the base for driving volume growth. And then, of course, we need to make sure we have the right price positioning and that we support those fantastic offers with A&P investments. Niklas Ekman: Very good. But do you see any risk of margins? Or are you looking at maybe sacrificing some of these strong margins now to accelerate growth? Or do you think that you can do both? Ulrika Kolsrud: Our ambition is to do both. I mean, in some areas, of course, when we have selected price adjustments, that will have an impact on margin short term. But in other areas, we have opportunities to go in the other direction. So that is a continuous work that we do to optimize this. Fredrik Rystedt: Maybe to add, if I may, Niklas, as you are aware of, and we communicated last quarter that the cost saving program will generate fairly significant savings. And of course, we are aiming to use those funds to actually do what Ulrika was talking about here in terms of fueling growth, both in terms of selective price decline, but also A&P spend. So this is a way to make sure that we can do both, just to emphasize. Sandra Åberg: Next up is Charles Eden from UBS. Charles Eden: You mentioned the lower volumes and prices in Consumer Tissue private label. Are you able to quantify the organic sales decline for that business in Q4? And can I ask whether the continued challenges of this unit makes you reconsider whether this asset is indeed core to Essity going forward as you concluded at the most recent strategic review of this asset? And then if I can sneak a clarification question, it's the usual one for me, Fredrik, on the group EBITA bridge. Of the SEK 749 million cost of goods sold tailwind in the quarter, can you help break that down between raw mats and energy distribution? I've got the SEK 190 million benefit from COGS savings in Q4 from the press release. Ulrika Kolsrud: If we start with the second question, maybe there with the reconsidering, I mean, we are continuously looking at our portfolio in evaluating and optimizing our portfolio. Then Fredrik, maybe you can help on the details of private label... Fredrik Rystedt: COGS... Ulrika Kolsrud: Yes, and the private label part. Fredrik Rystedt: Yes. Charles, we are not giving the details specifically as to the individual components. So I'm not going to say that. But of course, we already alluded to that the majority of the decline in volumes of the 2% or just under 2% is coming from there. But it's worth noting that the performance or actually EBITA is really, really good with Consumer Tissue private label. And we always have a bit of volume volatility in Consumer Tissue private label. So I don't think you can draw the conclusion that it's a bad business. In fact, it actually is generating quite a healthy margin and good profit. It's just that for the time being, volume is actually low. Should I answer also -- you were asking for the breakdown of COGS, right? Was that your question there? Charles Eden: Yes. Fredrik Rystedt: So the majority was related to raw materials. So that was about 2/3, give and take. And then we had energy, how should I say, more or less the rest. And then if you look at the other COGS, which was basically volume decline or less absorption plus new lines, et cetera, that was about the same as the cost saving program, so to give you a little bit of indication. Does that answer your question, Charles? Charles Eden: Yes, it does. Thanks, Fredrik. Sandra Åberg: Then let's move to the next question. Warren Ackerman from Barclays. Warren Ackerman: Warren Ackerman here at Barclays. Could you maybe sort of dive a little bit deeper on the A&P spend? You're talking about the increase to help drive the volume. I get it's going to be funded from the savings. But are you able to say -- I think it's around 5% of sales at the moment. But how much do you want to increase that by? And what is your current A&P mix in terms of online digital, and how do you measure the returns on that investment? What kind of tools do you have to sort of figure out where and how you allocate that spend? It sounds like it's going to be a big part of the story for this year. So just keen to understand a bit more on the details. Ulrika Kolsrud: And I can answer to some extent today, but I would also then invite you to the Capital Markets Day and talk more about this in detail. But of course, we are eager to measure the return of our marketing investments. So we do that on a regular basis. And it's by doing research on what we produce as well as following up that the activation is having the effect that we expect, both when it comes to purchase intent, when it comes to awareness and, at the end of the day, that it's generating the sales and the repurchase that we are expecting. So that we do on a continuous basis to make sure that we allocate the investments to where they do the best job for our brands. That was one question. The other question was more about how much we intend to increase A&P. Fredrik Rystedt: Yes, we haven't specified that. And of course, it's connected also to the innovation that we put on the market, because that always has an impact on the A&P spend. But generally speaking, we are, of course, convinced and, Ulrika, you gave a couple of examples here that A&P in general is fueling growth and is also profitable. You were asking there, Warren, about how we actually track profitability, return on market investments that we do. We believe we are reasonably good at it. Of course, as you always know, it's really very difficult to exactly have a scientific way of measuring. But we think we are pretty okay with measuring return of market investment. So to allocate where to put it, I think we are doing it reasonably okay. So we can't give you exact answers to your question as to how much or exactly how much the return is. It varies a lot. But generally speaking, we will increase, and we think we know where to increase. Warren Ackerman: And maybe just to clarify quickly, Fredrik. I guess I'm going to press you a little bit from a modeling point of view, I mean another way to ask it is, of that SEK 1 billion savings, how much of that will be sort of allocated to reinvestment? Or maybe another way to ask it is that 5%, how does that benchmark against peers? I mean, from a modeling point of view, do we stick in 6%? Or I mean, because it's sort of like it's quite a big swing factor. So any kind of help would be useful. Fredrik Rystedt: Yes. It's a great question. And of course, we got this question last quarter that is this going to impact in the end the EBIT margin or EBIT line. And we said, yes, it will, indirectly. So it's not so that we are putting the savings to our income statement or to the EBIT line immediately. We are investing it. And through that return on market investment, we believe that over time, we will both get operating leverage for growth and then, of course, margin enhancement. And it's not all about A&P, it is also about a combination of selective price increases that we partly have already done, but will do and A&P increases. So it's actually both. It's very difficult to give you specific details on exactly where, it's many different combinations. But over time, we think it will be profitable. Your final question as to how do we compare. Quite difficult to answer that. We are making a lot of benchmarking and trying to kind of adjust for the differences in structures and categories. But I think overall, there is an upside for us to do this. Sandra Åberg: Let's continue then with a question from Johannes Grunselius from SB1 Markets. Johannes Grunselius: I have a question on COGS again, if you can dive in a bit more there. Because Fredrik, you mentioned here, you will have slightly lower COGS year-over-year in Q1. In Q4, you obviously had a tailwind year-over-year of SEK 749 million. It's such a huge COGS base. So maybe you can provide a range or something on the year-over-year tailwind in Q1, that would be very appreciated, if you can give any indications, please. Fredrik Rystedt: Yes, we can. So thanks, Johannes, for the question. And we have chosen to guide only on COGS as a totality, because understanding all the ins and outs doesn't make things easier to actually grasp. So we are typically reasonably accurate when it comes to the estimate of the entire COGS number, and this is why we are giving it to you. But as I said, raw material is largely -- they're a bit in and out there, or positive and negative, but it's largely going to be a bit positive as energy as well, perhaps, if we compare then Q1 versus Q1. We're going to continue to have a little bit of unfavorable volume comparisons. We're going to have a bit of new -- or cost for new lines that we will have -- we're putting in place in Q1, and then we'll have a bit of cost savings. So all in all, this will give a slightly lower cost. The main driver actually still being raw material. And if you think about the main driver of raw material, it's actually mainly favorable FX actually. Johannes Grunselius: Okay. Okay. Can I put it the question in this way, if we look at COGS sequentially, are you thinking about more stable COGS? Or are COGS perhaps up a bit Q1 over Q4? Fredrik Rystedt: It's mainly stable. Mainly stable, you can say. Sandra Åberg: So let's move to the next question. Aron Adamski from Goldman Sachs. Aron Adamski: First, I had a follow-up on growth expectations for 2026. I mean, against the backdrop of lower input cost environment that you highlighted, would you expect price to be negative for the entirety of '26? And given that context, would you expect to achieve a better organic sales growth in '26 than you have done in '25? And then second, a quick follow-up on the A&P discussion. Can you please give us a sense of how the advertising step-up is going to be phased through 2026? Is it going to be more front-loaded? And therefore, could we expect the margin delivery to be relatively weaker in the first half of the year, given everything you said on volume, price adjustments and the cost savings delivery? Ulrika Kolsrud: I almost forgot the first question after the third question. What was the first question again? Sorry. Aron Adamski: Sorry, just on pricing expectations for '26. Ulrika Kolsrud: Yes, it was pricing and volume expectation, that's true. So I mean, we need to be agile and want to be agile when it comes to pricing because it's, of course, dependent on what happens in the market environment. So we are adapting to both, of course, what happens with input costs, but also what happens when it comes to demand and need to adapt to that situation as well as being fully equipped to capture the market growth when the wind is turning. So therefore, of course, there are scenario planning and so on, but to be agile is most important. When it comes to organic growth, yes, our ambition is clearly to move towards our financial target with 3% organic growth. So our ambition is to accelerate our growth. But again, we are in a volatile environment. So it's so important for us, and that's why it's so great to see that we are strengthening market shares in this quarter, because when the market is as volatile as it is, what we can focus on a lot is to win the relative game. And what we see in the quarter is that we're doing exactly that. And what's also important for us is that we win where it matters the most, and that is to drive our strategic segments. So that was an answer to say that we need to stay agile and see what happens in the market and then adapt to that. Sandra Åberg: Perfect. Aron, does that answer your question? Aron Adamski: Yes. Just on the second question on the phasing of margins, I suppose, for 2026, maybe if you could give us a bit more color on how the step-up in A&P is going to be phased and how is that going to impact the margin phasing through the year? Fredrik Rystedt: Maybe I can -- we don't give those kind of detailed guidance, as you've seen, Aron, but just maybe as a little bit of still a hint or 2, maybe even. First of all, you can see that Q4, as we have just reported, was higher than Q4 of '24. So that step-up has already actually happened. And if you remember, I mentioned -- maybe you weren't participating, but I actually mentioned that we do expect higher SG&A cost in Q1 on the back of higher A&P. So this gives you a little bit of hint. So we believe that the higher A&P cost will be there immediately -- actually already is there, higher, if you see the numbers. Sandra Åberg: Now let's move to Tom Sykes, Deutsche Bank. Tom Sykes: Would you be able to say how the A&P to sales for you differs by category? And just what are the categories which would have the greatest elasticity to increased A&P spend, please? And maybe just in addition is, what's happening to your trade retail spend? And how big is that in the COGS costs presumably? Ulrika Kolsrud: Well, if we look at A&P to sales, it's the categories that you find in Personal Care that has the consumer brands that has the biggest A&P spend in relation to sales, or I should say A&P investment rather in share of sales. Then if you look at a category like Wound Care, for example, you have a much lower A&P in relation to sales. There, it's much more about the sales force and equipping the sales force with the right products and support. And you find that fueling growth is through the sales force. And then we have everything in between there. Tom Sykes: Okay. And in terms of sort of the elasticity, where do you think the best place to allocate incremental A&P is? Was it just across the board? Ulrika Kolsrud: Yes. This is more about where we have our most attractive segments and categories. We want to invest the most where we have the highest potential for profitable growth and the strongest reason to win. So I think what you've seen here also now is that we have had good effect of investing, for example, in Feminine Care as well as in Incontinence Care. But we do want to fuel growth across our categories, but that should give you an indication. Fredrik Rystedt: And I guess, Tom, your question on trade spend, are you referring then to promotional activity there, I guess, right? Tom Sykes: Yes. I guess it's yes. That's spend with retailers. Fredrik Rystedt: Yes. And that is by far Consumer Tissue traditionally. So the promotional -- the percentage of all products sold under promotion is by far highest in Consumer Tissue. Tom Sykes: Okay. So that's just sitting in reduction of your revenues? Is it... Fredrik Rystedt: It's a pricing issue. It's a way -- you can say the pricing activity, they're strategic, so kind of headline pricing, and then you've got tactical pricing. And so promotion is a tactical -- it's what you do on a more temporary basis. So it's not list price adjustment. Tom Sykes: I get some of it. Sorry. Is there not spends that you would do on the websites of major retailers to get up the ladder of people searching for particular categories? I mean, that wouldn't -- or do you just include that in pricing? Ulrika Kolsrud: No, there is also brand communication and marketing that we do through the retailers or in connection with the retailers. So that is one element. But to Fredrik's point, when it comes to price campaigns, that you see in the sales. Tom Sykes: Okay. But just to clarify, does all your, if you like, A&P type spend, setting aside any promotion and price reductions, does all of that sit in the A&P line? Or does some of it sit also in the COGS line, because it's trade spend that goes on? Fredrik Rystedt: Not in COGS. It's not in COGS. It's either sales or A&P. So in this case, what you're referring to is A&P. So it's not COGS. I'm not sure how that could be possible. But we can talk about that offline, but it's not in COGS. Promotion is in sales and marketing in A&P. Sandra Åberg: Perfect. Next question comes from Karel Zoete from Kepler. Karel Zoete: I have 2 questions, if I may. The first one is in relation to M&A. You've done last year, one acquisition, but the market is difficult certainly in places such as Latin America. What's hindering you from doing more M&A? Or why haven't we seen more acquisitions over the last 18 months given the difficult markets? And then the second question is more in relation to Asia. I think there's still an agreement within that they can use some of your brands. What's the status of this? Is this going to be renegotiated in the coming year? Or do you have plans to build operations yourself selectively to capture some of the growth in the Asian market? Ulrika Kolsrud: If I start with the M&A question, maybe you can answer to Asia later. We continue to work actively with M&A, identifying potential targets and assessing potential targets. As you know, it's part of our strategy to grow both organically, but also inorganically. So we clearly have the ambition to do value-creating M&As. But we are, to that point, very disciplined to make sure that they are value creating. So that is, of course, always what we're doing in the screening to make sure that, that is the case, and always judging what is the most value creating, is it organic growth or inorganic growth. And you could argue, of course, when it comes to valuation, that in order to bridge the potential valuation gap, we need to find quite a lot of synergies then to secure that value creation. So the short answer is that we have the ambition to drive more M&As and are working on that actively. Fredrik Rystedt: So Karel, when it comes to Asia, the story isn't really different there. When we divested Vinda in 2024, there was a license agreement for these brands, and that expires in 2027. Now as we sold the company, we also granted an option for the buyer to continue licensing these brands also in the future against, of course, a license fee. And that option has not yet been translated into an agreement. And of course, we remain unsure of whether that will actually happen. So there are 2 possibilities here. One is that we continue with the license agreement subject to the buyer actually exercising on that option, or if they don't, then, of course, we get those brands back in Asia. So we cannot give you an answer at this point of time as we actually don't know. Sandra Åberg: Let's move then to Misha Omanadze, BNP Paribas. Mikheil Omanadze: I just wanted to zoom in a bit more on your end market dynamics where you already provided some helpful color. And overall, it seems that the markets remain challenging. If you were to look at your biggest category geography exposures, where would you say you saw the biggest sequential change from the previous quarter in both positive and negative direction in terms of end market trends and consumer environment? Ulrika Kolsrud: I wouldn't say that we've seen any big movements between quarter 4 and quarter 3. It's been quite stable when it comes to market environment. Sandra Åberg: Next question comes from Henrik Bartnes from ABG. Henrik Bartnes: One question for me, please. You have historically talked about seasonally lower volumes in Q1 compared to Q4. And if we look at Q1 sequentially, how should we think about volumes this year? Are there any indications that this year won't show any seasonally lower volumes? Fredrik Rystedt: I can maybe answer. First of all, we don't give volume estimates. We can only report what has historically been the case in terms of seasonality. So as you rightly say, seasonality would suggest that volumes in Q1 are lower than Q4. It's not actually one and the same for all our business areas or categories. Some don't have that. But in general, if you look at the group as a whole, clearly, volumes are typically, I should say, lower in Q1 versus Q4, but we are not giving an estimate for '26 specifically. Sandra Åberg: Let's now move on to Celine Pannuti from JPMorgan. Celine Pannuti: So my question is coming back on the Consumer Goods performance with price/mix negative. I think you mentioned that you had to roll back some pricing in order to keep some of your customers. I think it was in private label. Does that mean that going forward, we still have to annualize that, and so we'll have continuous negative pricing. I also said you mentioned there was a one-off impact from Latin America. So if you could give us a bit of an idea on that go forward. [indiscernible]. Sandra Åberg: Sorry, your sound is not working really. So we can't really hear your question. Maybe we can just start with the 2 questions you had now, because then we have to move on. Is that okay? Celine Pannuti: Perfect. Sandra Åberg: Good. Fredrik Rystedt: Yes. I think I got the question whether the price/mix -- the negative price/mix in consumer goods would flow into Q1 or Q2? Was that the question, Celine? Celine Pannuti: Yes. I mean, I would presume it annualizes if you have made some pricing concessions. And then the question, is there any other price negotiation that you are going through now in retail? Fredrik Rystedt: Yes, right. No, again, we can't comment on, obviously, price negotiations. That's more commercially related, I can't do that. But of course, as we have lower prices now in Q3 and Q4 and especially here in Q4. So there has been a price decline in Consumer Tissue. That will, of course, obviously continue into Q2. So in short, we'll see those price impacts coming or continuing in Q1 and Q2 potentially. Celine Pannuti: And just how material is the Latin America impact that you mentioned? Fredrik Rystedt: Yes, we are not actually giving you the exact number there, Celine, and this is for commercial reasons basically. But if you actually look at -- I gave you a little bit of guidance. It's always interesting when you say you're not going to give a number and then you almost do it anyway. But I'll do it because if you look at the minus 0.6% in terms of organic sales growth for Feminine in the quarter. And then we also stated that without that sales, organic sales growth would have been low single digit. That gives you a little bit of indication as to the size. So this is a bit -- of course, for the group, not a lot, but for Feminine, it is a bit, and it comes out as pricing. So that's temporary. That will not be there in the next quarter. Sandra Åberg: Perfect. Thanks for your question, Celine. Now we will move to our final question, and that question is from Oskar Lindstrom, Danske Bank. Oskar Lindström: Just a slightly different question from me. Following the Edgewell acquisition and an acquisition by another company, you're not going to be sharing, I understand, the brands Stayfree and Carefree between you. Who owns those brands? And who is paying royalties or fees to whom? Ulrika Kolsrud: Well, we own the brands in the geographies that we are operating the brands with. So in those geographies, it's our -- we can actually then do what we think is commercially right to do with those brands. Fredrik Rystedt: So in short, no royalties paid to anyone. Oskar Lindström: Wonderful. That's all the questions I had. Ulrika Kolsrud: That's what you wanted to know. Thank you for that interpretation. Sandra Åberg: Thank you, Oskar, for that question. And now it's time to wrap up. But before we end, I would like to hand over to you, Ulrika, again, for final remarks. Ulrika Kolsrud: Yes. Well, thank you, Sandra. Thank you for joining us today. We are leaving, as I said, a solid 2025 behind us, where I think our resilience has really been a critical success factor. And it's especially great to go into 2026 with this good market share momentum that we have talked about today. And finally, I look forward to see you all on the 7th of May in Mölndal, Sweden. Sandra Åberg: Yes. Thank you for that, Ulrika, and thanks to you for joining. If you have any further questions, just reach out. We will be road showing in Stockholm today virtually next week, and we will also be in London next week. So see you there. And take care, and have a good rest of the day. Bye for now.

69天前Insight Analytics约5分钟阅读

GSBC 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Great Southern Bancorp's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, [Christina Maldonado]. Please go ahead. Unknown Attendee: Good afternoon, and thank you for joining Great Southern Bancorp's Fourth Quarter 2025 Earnings Call. Today, we'll be discussing the company's results for the quarter and year ended December 31, 2025. Before we begin, I'd like to remind everyone that during this call, forward-looking statements may be made regarding the company's future events and financial performance. These statements are subject to various factors that could cause actual results to differ materially from those anticipated or projected. For a list of these factors, please refer to the forward-looking statements disclosure in the fourth quarter earnings release and other public filings. Joining me today are President and CEO, Joseph Turner; and Chief Financial Officer, Rex Copeland. I'll now turn the call over to Joe. Joseph Turner: Okay. Thanks, Christina, and good afternoon to everybody on the call. We appreciate you joining us today. Our fourth quarter and full year 2025 results reflect the sustained success of our core banking operations and our commitment to long-term tangible book value appreciation despite a volatile economic environment. Throughout the year, we remain focused on preserving net interest margin, protecting credit quality, controlling noninterest expense and opportunistically repurchasing our stock. For the fourth quarter, we reported net income of $16.3 million or $1.45 per diluted common share compared to $14.9 million or $1.27 per diluted common share in the year ago quarter. For the full year, net interest income totaled $71 million -- net income, I'm sorry, totaled $71 million or $6.19 per diluted common share. These results happen because of resilient net interest income, strong asset quality, and prudent asset liability management despite ongoing loan and deposit competition and fundamental economic pressures. Net interest income for the 2025 fourth quarter totaled $49.2 million, which was a decrease of $371,000 or 0.7% compared to the prior year quarter. As you'll recall, we did lose the income from our terminated swap during the fourth quarter. We lost most of that income and the quarterly income had been $2 million. So that's the primary reason for the small decline. Additionally, we have lower loan balances, which resulted in some lower interest income. But despite those factors, effective management of funding costs reduced interest expense and mostly offset the decrease in interest income. This resulted in net interest margin expansion. Our margin grew from 3.70% this quarter, 3.7% from 3.49% in the year ago quarter. Core deposits remained relatively stable, reflecting continued customer engagement and the underlying strength of our relationship-based banking model. Net loans receivable totaled $4.36 billion at year-end, representing a decline of $333.5 million or 7.1% from where they were a year ago. We had declines in multifamily residential, commercial construction, one- to four-family and commercial business. The decrease primarily reflects elevated payoff activity as capital markets have eased during the year. Though loan production remained active, we continue to maintain a conservative underwriting posture focusing on pricing structure and borrower stream. Additionally, construction lending remained steady through the quarter and the full year into 2025, supported by a solid level of unfunded commitments. On the funding side, total deposits decreased $122.8 million or 2.7%. This really was almost exclusively in the brokered category that category declined $108.7 million. We did have a decline of $87.3 million in our core CDs or the CDs originated through our system of banking centers, but that was almost completely offset by the growth in our interest-bearing checking accounts that was $75 million. Deposit markets remain competitive across both core and brokered channels and we continue to balance pricing discipline with customer retention. We will continue to monitor repricing opportunities as interest rates and competitive dynamics develop and utilize nondeposit funding sources when appropriate. Credit quality remains a clear area of strength at year-end. Nonperforming assets for the fourth quarter totaled $8.1 million, representing 0.15% of assets. Compared to the linked quarter, nonperforming assets increased $319,000. We did not record a provision for credit losses on outstanding loans in the fourth quarter of 2025. We also recorded net recoveries of of $22,000 for the quarter compared to net charge-offs of $155,000 during the same quarter a year ago. For all of 2025, we recorded recoveries of $11,000. These results reflect stable borrower performance and the effectiveness of our underwriting and portfolio monitoring practices. Expense management remained a focus for the company during the year. Noninterest expense for the fourth quarter of 2025 was $36 million, down about $947,000 or 2.6% from the year ago quarter. The year-over-year decline was really exclusively a result -- in the year ago quarter, we had a $2 million charge associated with the settlement of a contract matter. And obviously, that did not recur this quarter. We did have some higher net occupancy and equipment expense that's driven by investment in facilities and really primarily driven by investments in technology. For the fourth quarter of 2025, we reported an efficiency ratio of 63.89%. Looking forward, our priorities remain centered on maintaining strong capital and liquidity, supporting our customers and communities, maintaining strong credit metrics and deploying capital thoughtfully. Though loan growth may remain challenging and economic conditions fluid, we believe our conservative approach and sound balance sheet management will continue delivering long-term value for our stockholders. With that, I'll turn the call over to Rex for a more detailed review of our financial results. Rex Copeland: Thank you, Joe, and good afternoon, everyone. I'll now provide a more detailed review on our fourth quarter and full year 2025 financial performance and how it compares to both the prior year period and the linked quarter. For the quarter ended December 31, 2025, we reported net income of $16.3 million or $1.45 per diluted common share compared to $14.9 million or $1.27 per diluted common share in the fourth quarter of 2024 and $17.8 million or $1.56 per diluted common share in the third quarter of 2025. For the full year, net income was $71.0 million or $6.19 per diluted common share compared to $61.8 million or $5.26 per diluted common share in the prior year. Net interest income totaled $49.2 million for the fourth quarter of 2025 compared to $49.5 million in the prior year quarter and $50.8 million in the third quarter of 2025. Interest income totaled $73.4 million for the fourth quarter of 2025 compared to $82.6 million in the fourth quarter of 2024 and $79.1 million in the third quarter of 2025. The year-over-year change primarily reflects the discontinuation of the previously terminated interest rate swap that Joe mentioned earlier, which was providing $2 million roughly in quarterly income prior to the fourth quarter. Also, along with that, we had lower average loan balances and lower average market interest rates in the fourth quarter of '25 compared to the fourth quarter of 2024. While market rates move lower, the impact on loan yields was somewhat moderated as cash flows from lower rate -- fixed rate loans originated in prior years were redeployed into loans with comparatively higher rates. Interest expense totaled $24.3 million in the 2025 fourth quarter, reflecting continued reductions in deposit and borrowing costs as repricing dynamics moderated and wholesale funding remained well managed. In addition, we repaid $75 million in subordinated debt in June of 2025, which resulted in $1.1 million in lower interest expense in the fourth quarter 2025 compared to the fourth quarter of 2024. These reductions in funding costs mostly offset the downward pressure we saw on interest income. Our proactive loan pricing in conjunction with disciplined management of funding costs resulted in net interest margin expansion as we realized an annualized net interest margin of 3.70% in the 2025 fourth quarter compared to 3.49% annualized in the year ago quarter. Noninterest income totaled $7.2 million for the fourth quarter of 2025 compared to $6.9 million in the prior year quarter and $7.1 million in the third quarter of 2025. The small increase in noninterest income was due primarily to a $289,000 increase in late charges and fees on loans resulting from the early payoff of really primarily one commercial real estate loan in the 2025 fourth quarter. Total noninterest expense for the fourth quarter of 2025 was $36.0 million compared to $36.9 million in the fourth quarter of 2024 and $36.1 million in the third quarter of 2025. The year-over-year decline primarily reflects, as Joe mentioned earlier, the $2 million decrease in other operating expenses, which resulted from the litigation and contract matter that we spoke of earlier. These reductions were partially offset by a $1.2 million increase in net occupancy and equipment expense, driven primarily by higher computer license and support costs related to core systems and disaster recovery enhancements, charges associated with branch closures and lease facility asset adjustments and seasonal expenses related to things like snow removal and some adjustments to real estate taxes. Our efficiency ratio was 63.89% in the fourth quarter of 2025 compared to 65.43% in the fourth quarter of 2024 and 62.45% in the third quarter of 2025. Turning to the balance sheet items now. Total assets ended the year at $5.60 billion down from $5.98 billion at the end of 2024 and $5.74 billion at September 30, 2025. Total net loans, excluding mortgage loans held for sale, totaled $4.36 billion at December 31, 2025, down from $4.69 billion at December 31, 2024, driven by primarily declines, as Joe mentioned, in multifamily, construction, one- to four-family residential and commercial business loans. And while the loan demand remains selective, the pipeline of unfunded loan commitments remain solid with the largest portion related to the unfunded portion of booked construction loans. Liquidity remained strong at year-end with cash and cash equivalents totaling $189.6 million. In addition, the company maintained access to approximately $1.63 billion of additional borrowing capacity through the Home Loan Bank and the Federal Reserve Bank. Total deposits were $4.48 billion at December 31, 2025, reflecting a decrease of $122.8 million or 2.7% compared to December 31, 2024. The reduction was primarily driven by a decrease in brokered deposits of $109 million and a decrease in time deposits of $87 million. Those are retail time deposits, not brokered. This was partially offset, as Joe mentioned before, by increases in interest-bearing checking deposits, which totaled about $75 million. As of December 31, 2025, we estimated that uninsured deposits, excluding deposit accounts of the company's consolidated subsidiaries were approximately $720 million, representing roughly 16.1% of total deposits. Asset quality remained excellent with nonperforming assets representing 0.15% of total assets at year-end, consistent with both the linked quarter and prior year quarter. During the fourth quarter of 2025, we recorded net recoveries of $22,000, an improvement from $155,000 in total net charge-offs recorded in the fourth quarter of 2024. For the full year 2025, we recorded net recoveries of $11,000. For the year ended December 31, 2025, we did not record a provision for credit losses on the portfolio of outstanding loans compared to a provision of $1.7 million recorded in 2024. In the fourth quarter of both 2024 and 2025, we did not record a provision for credit losses on the portfolio of outstanding loans. However, as a result of increased unfunded commitment balances, we recorded a provision for unfunded commitments of $882,000 in the 2025 fourth quarter, down from $1.6 million provision recorded in the fourth quarter of 2024. Capital levels remained a key strength at year-end. Stockholders' equity was $636.1 million at December 31, 2025, an increase of $36.6 million from $599.6 million at the end of 2024. Stockholders' equity represented 11.4% of total assets and book value per common share was $57.50 at year-end 2025. The increase in stockholders' equity over the prior year was driven primarily by full year earnings, improvements in unrealized losses on investment securities and interest rate swaps and proceeds from stock option exercises, partially offset by cash dividends declared and common stock repurchased throughout the year. Tangible common equity increased to 11.2% at December 31, 2025, compared to 9.9% at year-end 2024, reflecting the combined impact of retained earnings and improved market valuations within the securities portfolio. We ended the year with capital levels well in excess of regulatory requirements, providing flexibility to support the balance sheet, return capital to shareholders and navigate changing economic conditions. During the fourth quarter of 2025, we repurchased 241,000 shares of our common stock at an average price of $59.33. And during the full year 2025, we repurchased 755,000 shares of our common stock at an average price of $58.35. In the fourth quarter of 2025, our Board of Directors also declared a regular quarterly cash dividend of $0.43 per common share, consistent with the previous quarter. For the full year ended December 31, 2025, the Board declared regular quarterly cash dividends totaling $1.66 per common share. Overall, our balance sheet remains well positioned, supported by strong capital levels, ample liquidity and a healthy loan portfolio. That concludes my remarks. We are now ready to take your questions. Operator: [Operator Instructions] Our first question is going to come from the line of Damon DelMonte with KBW. Damon Del Monte: First question just regarding the margin. A pleasant surprise this quarter. I think given the impact from the swap, we're expecting the margin to come down pretty substantially, but you were able to offset that, it looks like with some lower funding costs. So just kind of curious as to how you think about the margin here as we start off 2026. Rex Copeland: I think so far, we -- as you said, we performed a little better than we thought we might in the fourth quarter with that. We were able to bring some of our funding costs down, we're trying to manage that pretty proactively with the different avenues that we have to provide funding whether it's deposits or wholesale funds, et cetera. So we're trying to work through that and manage those -- the cost side of it. I think what we're seeing, too, on the interest income side, we are seeing some of our loans, which were put on the books maybe a few years ago at maybe some lower short-term fixed rates, and some of those are renewing or we're just getting repayments on those and we're able to redeploy those funds in a little bit higher rate -- the current market rate than we had on the books before. So it's a combination of a few of those things. Obviously, the first quarter, there's fewer calendar days. That shouldn't affect the margin percentage as much per se, but dollar-wise, we'll expect to be down some because of just a number of days in the quarter. Damon Del Monte: So do you think you're able to manage it so there's just a modest amount of compression? Or I mean, do you think you can make it -- have it go higher from here? Rex Copeland: I don't know that -- I mean, you can jump in, Joe. I don't think we can expect to see it go higher necessarily. Joseph Turner: Yes. I think, Damon, until the Fed takes some action, I think we will see our -- maybe our core CD portfolio since that's sort of a lagging portfolio, maybe some of that will reprice and we'll see some interest expense go down there, but that's not a very big portion of our deposits. Most of our deposits reprice pretty well immediately. And so I think we've probably gotten about all we can done on the deposit portfolio. So there won't -- there probably won't be any more improvement there. The loan portfolio, as Rex said, I guess, if there is a bias, it would be a slight bias to go maybe a little bit higher, but it's not very meaningful in the overall scope of our level of net interest income. So I mean, as we said, we don't give guidance. But I think looking at the fourth quarter, I don't see anything that would make it be a whole lot different than that. Damon Del Monte: Okay. Got it. And then with respect to the outlook for loan growth, it sounds like you're continuing to have good production, pipelines are healthy, but you continue to face elevated payoffs. Do you expect those payoffs to slow down at all to a point where we can get some net growth here in 2026? Joseph Turner: Yes. I think it's still going to be a challenging loan growth market for us because there's just -- while there's good activity, it's not great, and there still is outsized loan portfolio or loan payoffs. So I think that's going to be our challenge going forward. Rex Copeland: In the fourth quarter, we did have 1 or 2 kind of unique loans. They were short-term loans and they paid off, and we knew that was going to happen. So that was one sizable one for sure. And we did generate new loans and had some growth. Some of the loans are construction deals where they are not going to fund immediately, but others were ones where they were existing projects, and so we did fund those day 1. I think there will just be, like Joe said, there will be some more continuation of that. But I don't know that I see that -- I don't have a lot of clarity as far as what might pay off. We do have a pretty sizable multifamily portfolio. And I think that was where we saw quite a bit of the repayment with the exception of the one loan I mentioned was in that multifamily. So it's hard to know exactly the timing and magnitude of how that's going to go. Joseph Turner: Yes. It really is hard, Damon. I mean we try to keep track of it. We try to guess, but it's sort of up to the borrowers. Some of them choose to maybe pay us off with a debt fund. Some of them choose to take a sale that's maybe at a lower price than they would be able to sell it for maybe a year or two down the road. So it's sort of the ball is in the borrower's court to a big extent. So it's really hard to give you any guidance on that. Damon Del Monte: Got it. And then if I could just ask one more question on expenses. Fourth quarter came in much better than what we were looking for. Should we kind of expect an uptick off of this quarter's level, just kind of given a reset with salaries and benefits and things of that nature? Joseph Turner: Yes. I mean, I think that's fair. Rex Copeland: We do have a lot of our employee base does have annual normal increases and a lot of those happened at the beginning of the year. Payroll taxes will reset. And generally, there will be some increase in that compared to the fourth quarter. So there are some factors, as you say, there that play into that. Operator: Our next question is going to come from the line of John Rodis with Janney. John Rodis: Joe, just sort of back to the loan question from before. Loans were down 7% this year. I know payoffs are hard to predict, so I appreciate that. But do you think maybe you've seen at least the worst of it? Or do you think loans could be down a similar amount in '26. Joseph Turner: It's just really hard to say, John. Obviously, I hope we've seen kind of the worst of it. We really like our loan portfolio. And we're working hard to originate stuff. So I hope that's kind of like a high watermark for paydowns. But because loan repayments is such a big part of the calculation, it's just hard to kind of guarantee that one way or the other. Rex Copeland: I continue to originate and -- but we are also maintaining some pricing discipline, obviously, credit term discipline. So we're going to continue that. We want to maintain credit quality obviously. So there's been growth, new loan originations in 2025. We just had payoffs that were outpacing a bit. John Rodis: Okay. That's helpful, Rex. Rex, just on the securities portfolio, how should we think about that going forward? It was down a little bit this year? What sort of cash flows do you expect for the year? Rex Copeland: Yes. I mean, the portfolio is about the same now as it has been for most of the year. So nothing really different about it. So probably similar type -- assuming rates don't change a whole lot, probably similar type of payments. Maybe since rates are lower now than they were to start 2025, maybe there'll be a little bit more repayment. But the portfolio is mostly, as you can see from our filings, it's mostly mortgage-backed. It's all agency stuff, some SBAs,some municipality stuff, but by and large, the bulk of it is going to be some sort of an agency pass-through types and things of that nature. So we do get some monthly payment stream from it, but it's not large amounts necessarily. The portfolio is fixed rate stuff. So it's not changing around based on rates from that standpoint as far as our yields and such go. So I don't know that -- I mean it's not probably going to be dramatically different in '26. I wouldn't think unless the rates move down enough that there's a kind of a larger amount of prepayments that go on. John Rodis: Okay. And as far as the cash flows, you're not really reinvesting right now, are you? Rex Copeland: No, we've pretty much been taking the cash flows and reinvesting in loans. John Rodis: Yes. Okay. Okay. Just one more question on the buybacks. You guys have been fairly active. And I think for the press release, you leave almost 700,000 shares currently. All things equal, would you expect to repurchase most of that this year? Joseph Turner: I mean, we're -- Yes, we like where our stock is trading at, John. Obviously, it's a little bit higher than it was in 2024, but I mean, our book value is a little higher, too. So I mean I think even with the recent run-up in stock price, we're still trading at less than 115% of book. So we see that as a good value. And particularly while we're not growing a lot, a good use of capital. John Rodis: Yes. You've definitely got the capital to support it. Joseph Turner: Thanks, John. Operator: And I'm showing no further questions at this time. And I would like to hand the conference back over to Joe Turner for closing remarks. Joseph Turner: All right. We appreciate everybody being on the call today, and we'll look forward to talking to you in April. Thank you. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

69天前Insight Analytics约5分钟阅读

NWFL 2025 Q4 财报电话会议

Kristen Lancia: Thank you, Michelle. Good morning, everyone. Welcome to our Q4 2025 Earnings Conference Call. With me today are James Donnelly, CEO, and John McCaffery, CFO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on the Investor Relations section of our webpage. Comments made by any participant on today's call may include forward-looking statements. These statements are subject to various risks and uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied. We assume no obligation to update any forward-looking information. Please refer to our most recent Form 10-Ks and other subsequent reports filed with the SEC for more information about risks related to forward-looking statements. During our discussion, we may refer to certain non-GAAP financial measures. These measures are used for analysts, investors, and to evaluate ongoing performance. A reconciliation of these measures to GAAP financial results is provided in our presentation materials. I will now turn the call over to James Donnelly. James Donnelly: Thank you, Kristen. Good morning to everyone. We ended 2025 on a positive note and with good momentum, as the team achieved strong results by continuing to serve our customers and communities. We maintain focus on our mission to make every day better, even while we closed on the Presence Bank acquisition. We expanded our net interest spread by 62 basis points, increasing net interest income 62% compared with 2024. Net income and earnings per share more than doubled on an adjusted basis, and we improved returns on both average assets and tangible equity. By nearly any measure, 2025 was a great year. The improvement in our results and financial position are a result of our portfolio repositioning we completed in December 2024, as well as strong loan and deposit growth. That activity combined resulted in a more robust balance sheet and higher quality earnings. That was the right thing to do for our bank, our customers, and our shareholders. It served us well in 2025 and should continue to benefit us in 2026. Our biggest achievement in 2025 was announcing and preparing for the acquisition of Presence Bank, which closed on January 5. Presence Bank is a nearly 106-year-old institution that shared our values, culture, and commitment to high-quality customer service. With this acquisition, we have grown our asset base by 20%, increased our size by adding four branches in the coveted Southeast and South Central Pennsylvania region, and have enhanced our talent base with additional excellent employees. These additions better position us to serve our communities and bring value to our customers, whether they be small business owners looking to invest and expand their enterprises, homeowners looking to utilize the equity in their residences to fund college education for their children, or consumers using online tools to help manage their finances. I am pleased with our performance in 2025 and proud of what we were able to accomplish. We have had great momentum, achieving strong results, and were able to do the additional work to close the Presence Bank acquisition at the beginning of this year. Looking forward, we have established four strategic priorities as we enter 2026 to continue to build on that momentum. The first is to successfully integrate all activity with Presence Bank in the acquisition. With the acquisition now closed, we are moving forward with a sense of urgency to integrate the two organizations, driving uniform systems and operating practices across the new combined entity. We will be bringing the acquired businesses and branches under our new brand and unifying all the branches. This alignment enhances the brand recognition and makes it easier for customers to connect with us online, in a branch, or in a community. We will also engage in open conversations across locations and functions, evaluating current practices of each company, and adopting the best-in-class policies. That will allow us to serve our communities in the best way possible. One example is our use of AI, which is foundational in the second objective of exploring ways to increase operational efficiency and elevate customer experience. Presence Bank has implemented advanced AI tools in their commercial system, which we are adopting as part of our integration. We are using AI to supplement and enhance the work of our talented credit officers in drafting credit narratives, summarizing financials, and confirming required documentation. This will allow us to underwrite deals more quickly and to do more deals with our existing team. As we move with our integration, we will evaluate these tools and deploy those that increase operating efficiency across our organization. This will empower our employees to focus on high-value activities that improve customer experience, which is critical to the success of our company. Although we are moving forward with a sense of urgency, we are not rushed, and we will be thoughtful and measured in our progress to limit and eliminate disruptions for our customers and our employees. Third, we are focused on strengthening our talent pool and deepening our leadership bench. As a regional bank with a prominent presence within the communities we serve, it is much more than a cliché to say that our people are our greatest asset. Whether teller, customer service representative, branch manager, regional manager, or executive leadership, our entire organization is committed to the proposition of delivering financial solutions along with an outstanding experience for all of our customer engagements. Beyond that, as members of our community, our team members act in ways that make our communities better. With the Presence Bank acquisition, I am pleased to welcome Janakah Min as our new Chief Operating Officer. We have also recently added Larry Witt as the Chief Information Officer and Doug Byers as the Market Executive and Head of Treasury Management. Finally, I am pleased to welcome Joseph Carroll and Spencer Andres to the Norwood Financial Corp. board of directors. All of these additions, plus the entire Presence Bank team, make us a stronger bank, and I am excited to see what we are able to accomplish together. Our results in 2025 were strong before adding these growth areas served by Presence Bank. I think they will only make us better and stronger. Finally, everything we do as an executive leadership team is designed to increase shareholder value. John McCaffery will cover the nice accretion that we have added to shareholder value in 2025 as we have grown the balance sheet and profitably later in this call. Let me say an impressive testament to our shareholder focus. We will manage our deposits and assets to maintain our strong financial position, ensuring that we are positioned to continue serving our communities for years to come. We will actively grow our assets through increased deposits and investment decisions, as well as strategic M&A when an attractive and fairly valued target is available. Finally, we will combine these activities with a capital allocation framework that includes returning cash to shareholders through a reliable and growing dividend. I firmly believe that these priorities will allow us to continue to create value and build momentum in 2026 and beyond. I will now turn the call over to John McCaffery to walk us through the results. John McCaffery: Thank you, James. Good morning, everybody. I am going to just walk through the fourth quarter results. And for the fourth quarter, we again demonstrated our ability to improve financial results, continuing the trend that began with our balance sheet repositioning back in December 2024. Our net interest income increased by $5 million on a linked quarter basis, but the margin itself did drop three basis points. This was due to loan growth in the quarter as well as some seasonal outflow of municipal deposits on a temporary basis. Below the margin line, our quarterly results do continue to include merger charges. We had about $520,000 in merger charges in the quarter. We have adjusted our returns in the press release to be able to show you performance ratios that reflect the impact of these expenses. We also reported last year's numbers net of the loss on the securities. Well, so, again, trying to look at a pre-provision net revenue number across the entire span of the press release. Our unadjusted pre-provision net revenue decreased by 2% on a linked quarter basis and an adjusted basis, mostly due to higher expenses during the quarter. We will get to that in a minute. Excluding losses from sales securities related to our portfolio repositioning in 2024, noninterest income for the year increased in the same period, most of the growth coming from fees on our loans and deposit products. Quarterly expenses year over year were up 1.5% from the fourth quarter of 2024. On a linked quarter basis, expenses were up 5% due to several factors in the quarter, including lower loan volumes resulting in lower expense deferrals, and we had some vesting of risk of stock for long-term retiring employees in the quarter. In addition, we had some elevated incentive accruals based upon the improved performance in 2025. Credit metrics continue to improve year over year. Nonperforming loans as a percentage of total loans decreased, and our reserves to nonperforming assets increased. The overall theme of the quarter was continued profitable growth, sound balance sheet management, and benign credit. These themes have aligned to deliver a solid quarter and leave our company well-positioned for the future. James Donnelly and I will now be happy to answer any questions you may have. Operator, please provide instructions for asking a question. Operator: Thank you. To ask a question, please press 11 on your telephone and wait for your name to be announced. Ross Haberman: And to withdraw a question, please press 11 again. Please press 11 on your telephone. Okay. I am not showing any questions at this time, so I will now turn it back over to James Donnelly. James Donnelly: Thank you. And thank you once again for joining us this morning. We are pleased with our accomplishments in 2025 and optimistic for what we will achieve in 2026. With a larger asset base, expanded geographic coverage, and a stronger team to serve our customers and our communities, I believe that our best days are ahead, and I look forward to updating you as we continue to make progress. Have a great day. Ross Haberman: This concludes today's conference call. Thank you for participating, and you may now disconnect.

69天前Insight Analytics约5分钟阅读

TRST 2025 Q4 财报电话会议

Operator: Good day. And welcome to the TrustCo Bank Corp NY Fourth Quarter Earnings Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. Before proceeding, we would like to mention this presentation may contain forward-looking information about TrustCo Bank Corp NY. As intended to be covered by the Safe Harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Actual results, performance, or achievements could differ materially from those expressed in or implied by such statements due to various risks, uncertainties, and other factors. More detailed information about these and other risk factors can be found in our press release that preceded this call. And in the risk factor and forward-looking statements section of our annual report on Form 10-K. And as updated by our quarterly reports on Form 10-Q. The forward-looking statements made on this call are only valid as of the date hereof. And the company disclaims any obligation to update the information to reflect events or developments after the date of this call, except as may be required by applicable law. During today's call, we will discuss certain financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP. The reconciliations of such GAAP, non-GAAP measures to the most comparable GAAP figures are included in our earnings release, which is available under the Investor Relations tab of our website at trustcobank.com. Please also note that today's event is being recorded. A replay of the call will be available for thirty days, and an audio webcast will be available for one year, as described in our earnings press release. At this time, I would like to turn the conference call over to Mr. Robert J. McCormick, Chairman, President, and CEO to begin. Please go ahead, Robert. Robert J. McCormick: Good morning, everyone, and thank you for joining the call. I'm Rob McCormick, the Chairman of TrustCo Bank. I'm joined today as usual by Mike Ozimek, our CFO, who will go through the numbers, and Kevin Curley, our Chief Banking Officer, will talk about lending. Results announced yesterday are the culmination of years of strategic long-term planning and nimble near-term execution. We resisted risky lending concentrations, borrowing, and other gimmicks in favor of building solid customer relationships through the delivery of top-notch loan and deposit products and services. This enabled us to keep our cost of funds low and grow loans, leading to a healthy margin expansion. We deployed capital through the continuation of our century-long dividend payout, a robust stock repurchase program, and our bedrock practice of lending gathered deposits right back in the communities we serve. All of these factors together contributed to a 38% increase in net income and a return on average assets of almost 33% for the quarter. Total shareholder value returned three times that of our proxy peers year over year, stellar performance by any measure. Now Mike will go through the details, and Kevin will provide some color on lending. Michael M. Ozimek: Thank you, Rob, and good morning, everyone. I will now review TrustCo's financial results for the 2025. As we noted in the press release, the company continued to see strong financial results for the 2025, marked by increases in both net income and net interest income TrustCo Bank during the '25 compared to the 2024. Performance is underscored by rising net interest income, continued margin expansion, and sustained loan and deposit growth across key portfolios. This resulted in a fourth-quarter net income of $15,600,000, an increase of 38% over the prior year quarter, which yielded a return on average assets and average equity of 0.978% and 9.99%, respectively. Capital remains strong. Consolidated equity to assets ratio was 10.66% for the 2025, compared to 10.84% in the 2024. Book value per share at 12/31/2025 was $38.08, up 7.1% compared to $35.56 a year earlier. During the 2025, TrustCo repurchased 533,000 shares of common stock under the previously announced stock repurchase program, resulting in 1,000,000 shares or 5.3% of common stock repurchase year to date. The maximum allowable under the stock repurchase program. And we have also renewed the stock repurchase program, which now allows for the repurchase of up to 2,000,000 shares or another 11.1% during 2026. We remain committed to returning value to shareholders through a disciplined share repurchase program which reflects our confidence in the long-term strength of the franchise and our focus on capital optimization. Credit quality continues to be consistent as we saw non-performing loans modestly increase to $20,700,000 in the 2025 from $18,800,000 in the '24. Non-performing loans to total loans increased to 0.39% in the '25 from 0.37% in the fourth quarter of 2024. Non-performing assets to total assets was 0.34% for both the fourth quarter of 2025 and 2024. Our continued focus on solid underwriting within our loan portfolio and conservative lending standards positions us to manage credit risk effectively in the current environment. Average loans for the '25 grew 2.5% or $126,800,000 to $5,200,000,000 for the '24, an all-time high. Consequently, overall loan growth has continued to increase, and leading the charge was home equity lines of credit, which increased by $54,100,000 or 13.5% in the fourth quarter of 2025 over the same period of '24. The residential real estate portfolio increased $50,600,000 or 1.2%. Average commercial loans increased $24,500,000 or 8.6%. And installment loans decreased $2,400,000 or 17.3% over the same period of '24. This uptick continues to reflect a strong local economy and increased demand for credit. For the '25, the provision for credit losses was $400,000. Retaining deposits has been a key focus as we navigated through 2025. Total deposits ended the quarter at $5,600,000,000, up $166,000,000 compared to the prior year quarter. We believe the increase in these deposits compared to the same period in '24 continues to indicate strong customer confidence in the bank's competitive deposit offerings. The bank's continued emphasis on relationship banking combined with competitive product offerings and digital capabilities has contributed to a stable deposit base that supports ongoing loan growth and expansion. Net interest income was $43,700,000 for the '25, an increase of $4,800,000 or 12.4% compared to the prior year quarter. Net interest margin for the '25 was 2.82%, up 22 basis points from the prior year quarter. Yield on interest-earning assets increased to 4.24%, up 12 basis points from the prior year quarter. And the cost of interest-bearing liabilities decreased to 1.84% from the fourth quarter of 2025 from 1.97%. The bank is well-positioned to continue delivering strong net interest income performance even as the Federal Reserve contemplates rate changes in the months ahead. The bank remains committed to maintaining competitive deposit offerings while ensuring financial stability and continued support for our community's banking needs. Our wealth management division continues to be a significant recurring source of non-interest income. At approximately $1,270,000,000 of assets under management as of December 31, non-interest income attributable to wealth management and financial services fees represent 44% of non-interest income. The majority of this fee income is recurring, supported by long-term advisory relationships and a growing base of managed assets. Now on to non-interest expense. Total non-interest expense, net of ORE expense, came in at $26,500,000, down $1,500,000 from the prior year quarter. ORE expense net came in at an expense of $161,000 for the quarter, as compared to $476,000 in the prior year. We are going to continue to hold the anticipated level of expense not to exceed $250,000 per quarter. All the other categories of non-interest expense were in line with our expectations for the fourth quarter. We would expect 2026 total recurring non-interest expense, net of ORE expense, to be in the range of $27.7 to $28,200,000 per quarter. Now Kevin will review the loan portfolio and non-performing loans. Kevin M. Curley: Thanks, Mike, and good morning to everyone. Our average loans grew by $120,800,000 or 2.5% year over year. The growth was centered in our residential loan portfolio, with our first mortgage segment growing by $50,600,000 or 1.2%, our home equity loans growing $54,100,000 or 13.5% over last year. In addition, our commercial loans grew by $24,500,000 or 8.6% over last year. For the fourth quarter, actual loans increased by $60,700,000 compared to the third quarter. Purchase mortgage loans, including refinances, grew by $42,400,000. Home equity loans increased by $17,000,000, and commercial loans were up by $2,000,000 for the quarter. Overall, residential activity improved during the quarter. For purchase and refinances, we did see a slight uptick in activity, and we were able to close more loans during the quarter. As we have said in the past, we are well situated in the market and will capture more growth as these segments pick up. Also, as a portfolio lender, we are uniquely positioned to manage pricing and promotions to increase lending volume. Our home equity products continue to see consistent demand as customers continue to use their equity in their home for home improvements or paying off loans at high rates such as credit cards. In all our markets, rates continue to be moving in approximately 25 basis points range. Our current rate is 5.875% for our base thirty-year fixed-rate loan. We also offer a low-rate five-one arm and a very competitive home equity credit line product. Overall, we are positive about our loan growth in the quarter and remain focused on driving strong results this year. Now moving to asset quality, at TrustCo, we work hard to maintain strong credit quality in our loan portfolio. As a portfolio lender, we have consistently used prudent underwriting standards to build our loan portfolio. Our residential loans originated in-house, on key underwriting factors that have proven to lead to sound credit decisions. These loans originated with the intent to be held by us for the full term rather than originated for sale. In addition, we have no foreign or subprime loans in our residential loan portfolio. In our commercial loan portfolio, which makes up about 10% of our total loans, we focus on relationship-based loans secured mostly by real estate within our primary market areas. We also avoid concentration of any credit to any single borrower or business and continue to require personal guarantees on all of our loans. Now for our numbers. Asset quality for the bank remains very strong. Early-stage delinquencies for our portfolio continue to be steady. Charge-offs for the quarter amounted to a net recovery of $14,000, which follows a net recovery of $176,000 in the third quarter, and $457,000 over the past year. Non-performing loans were $20,700,000 at this quarter end, $18,500,000 last quarter, and $18,800,000 a year ago. Non-performing loans to total loans was 0.39% at this quarter end, compared to 0.36% last quarter and 0.37% a year ago. Non-performing assets were $22,100,000 at quarter end versus $19,700,000 last quarter and $21,000,000 a year ago. At quarter end, our allowance for credit losses remained solid at $52,200,000 with a coverage ratio of 253%, compared to $51,900,000 with a coverage ratio of 281% last quarter, and $58,200,000 with a coverage ratio of 267% a year ago. Rob? Robert J. McCormick: Thanks, Kevin. We're happy to answer any questions. That's our story. Operator: Thank you very much. If you change your mind, please press star followed by 2. I'll pause for any questions to come through. Our first question comes from Ian Lapey from Gabelli Funds. Your line is open, Ian. Please go ahead. Ian Lapey: Good morning, gentlemen. Congratulations on a great quarter and year. Robert J. McCormick: Thank you. Ian Lapey: Just a few questions. Maybe start with asset quality. Obviously, it's great to see another quarter of net recoveries. But I did notice an increase in the New York commercial NPLs of about $1,700,000. Was that one relationship or a couple? Maybe you could expand a little bit on what happened there. Kevin M. Curley: I think it's two relationships, Ian. And they're multi-families. Like, one is in the city of Schenectady, and one is in the city of Albany. Ian Lapey: Are those typical where you have good collateral and personal guarantees? Kevin M. Curley: Oh, yeah. We don't have an unguaranteed loan in our portfolio, Ian. Ian Lapey: Okay. Good. These particular cases, it's they're both retirees who are knowledgeable with regard to this and think they've relocated to Florida. At least one of them has. Ian Lapey: Okay. And then a couple on expenses. First, the other expense was up a little bit 2.55 versus 1.7 in 3Q. Anything in particular driving that? Michael M. Ozimek: No. I mean, just at the end of the year, we just, you know, there's some of the benefit plans that we look at. We also took the opportunity for tax purposes to, you know, fund the TrustCo Foundation for about a half $1,000,000 just to be able to take the tax benefit of that. So there's a few larger expenses that we put through in the fourth quarter, but nothing really notable. Ian Lapey: Okay. And then for the I thought I heard for the guidance for the '26 expenses, you said 27.7 to 28.2. Excluding other real estate. Is that right? Michael M. Ozimek: Yeah. Yeah. It just gives us a little breathing room going into next year. But there's nothing really that's really driving us up. Ian Lapey: Okay. So because that is a decent uptick from the run rate this year. Is that anything in particular? Or is that sort of across the board? Michael M. Ozimek: It's really just across the board. There's nothing really standing out there. Just like I said, just kinda give us a little bit of room for next year. Okay. I would expect us to probably be on the lower end of that range. Ian Lapey: Okay. And then lastly for me, for the branches, they declined by two. What's the outlook? I know you've mentioned last call, Rob. You were looking at Pasco County in Florida. What sort of your expectation for branch growth or declines in the '26? Robert J. McCormick: You touched on the expenses earlier, Ian, and we are pretty cheap people when it comes to that. So we want to get in at the right price and who knew Pasco would be as difficult it would be to find a location as it is. But we are still actively looking in Pasco. There's a lot of mortgage business there. There's a market change down there. They're pushing people further north. And as Tampa becomes less affordable and some of the other West Coast cities become unaffordable, they move into Pasco. So we are still looking for a location there. We want to do it the right way. Ian Lapey: Okay. Great. Again, congratulations. A great year. Robert J. McCormick: Thanks for your interest, Ian. Operator: As a reminder, to ask a question, please press star followed by 1. This concludes our question and answer session. I would like to turn the conference back over to Robert J. McCormick for any closing remarks. Robert J. McCormick: Thank you for your interest in our company. We hope you have a great day. Operator: Thank you. The conference call has now concluded. Thank you for everyone attending. You may now disconnect your lines.

69天前Insight Analytics约5分钟阅读

OFG 2025 Q4 财报电话会议

Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning. Thank you for joining OFG Bancorp's conference call. My name is Nikki, and I will be your operator today. Our speakers are José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors, Maritza Arizmendi, Chief Financial Officer, and Cesar Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the fourth quarter 2025 section. This call may feature certain forward-looking statements about management's goals, plans, and expectations. These statements are subject to risks and uncertainties outlined in the Risk Sectors section of OFG's SEC filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterward. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Instructions will be given at that time. I would now like to turn the call over to Mr. Fernández. José Rafael Fernández: Good morning, and thank you for joining us. We are pleased to report our fourth quarter and 2025 results. Let's go to Page three of the presentation to review the fourth quarter. Earnings per share diluted were up 17% year over year on 2% growth in total core revenues. This was driven by disciplined core operations and a favorable tax benefit. Asset quality and credit metrics were sound and well controlled throughout the quarter. During the quarter and year, in line with our strategies, we saw increased commercial loans, and broad acceptance of our flagship mass market Libre account and mass affluent Elite deposit account. Performance and credit metrics remained strong. Capital continued to grow, and we repurchased $40 million of common shares in the fourth quarter. Maritza will go into more detail on these numbers shortly. Please turn to page four. We accomplished many of our strategic and financial goals last year. Earnings per share increased 8.3% on a 2.8% increase in total core revenues. Total assets grew 8.4% to a record $12.5 billion. Core deposits grew 5% to $9.9 billion. Loans grew 5.3% to $8.2 billion with commercial loans growing to $3.5 billion now representing 43% of our loan book. In addition, new loan production increased 11.5% to $2.6 billion. We repurchased close to $92 million of shares and increased our dividend 20%. Business activity is robust in Puerto Rico, the outlook. Economic growth is positive, and businesses and the consumer are resilient. Having said all that, one of our biggest strategic and financial accomplishments of 2025 was the progress we made with our digital-first strategy. Please turn to page five. Over the last two years, we have clearly emerged as a leader in banking innovation in Puerto Rico. Our digital focus gives us a differentiated approach and provides customers with a unique enhanced experience. In 2024, we introduced the Libre Account for the mass market and the Elite account for the mass affluent market. Both Libre and Elite have been successful in attracting deposits from new and existing customers. In addition, we enhanced our Oriental Biz account suite making treasury management easier and more secure for small businesses, driving a 5% increase in commercial customers during 2025. We have further enhanced the customer experience through technology. In 2025, we launched our omnichannel platform. This provides customers with a seamless banking experience anywhere they choose to interact, transforming the branch into a place for building customer relationships. With our intelligent banking model, customers now receive tailored insights based on cash flows and payment habits. Helping them access and monitor their finances with real-time value-added tools to improve their financial life from their mobile phones. Please turn to page six. All this has directly contributed to our increased market share in retail deposits and a 4% growth in retail customers. To put this into perspective, we have provided data showing our progress over the last two years. As you can see, OFG is well-positioned for continued success in the coming years. Now here's Maritza to go over the financials in more detail. Maritza Arizmendi: Thank you, José. Let's turn to page seven to review our financial highlights. All comparisons are to the third quarter unless otherwise noted. Core revenues totaled $185 million, an increase of $1.4 million. Total interest income was $197 million, a decrease of $3 million. This reflected higher average balances of loans and cash at lower average yields. This was partially offset by higher average balances of investment securities at slightly higher yields. Total interest expense was $44 million, a decrease of $1 million. This reflected higher average balances of deposits and borrowings at lower average rates. Total banking and financial service revenues were $33 million, an increase of $3.4 million. This mainly reflected increased wealth management revenues due to $2.3 million in annual insurance commission recognition. The other income category was a loss of $1.11 million compared to a profit of $2.2 million in the third quarter. The change reflects $6.1 million for accelerated amortization of technology-related assets. Gains of $3.9 million on the sale of nonperforming loans and $1.1 million on the sale of free real estate. Please note that the third quarter benefited from gains from OFG Ventures investment in fintech hubs. Looking at non-interest expenses, they totaled $105 million, up $8.5 million from the third quarter. This reflected $3.3 million in professional services fees related to performance-based advisory costs. This was part of the cost savings renegotiation of our technology service contract. $2.5 million of business rightsizing and $1 million related to the previously mentioned acceleration of technology-related assets. Compared to the third quarter, there were $1.7 million in increased costs related to an additional accumulation of performance bonuses, expanded marketing activities, and the sales of foreclosed assets. For 2026, we currently expect that total non-interest expense to be between $380 million to $385 million. Income tax was a benefit of $8.5 million due to two discrete items. $12.9 million from the expiration of a tax agreement from the 2019 acquisition of Scotia and Puerto Rico and USVI operations and $3.9 million from a release evaluation allowance of deferred tax assets at the holding company level. Excluding discrete benefits, the estimated tax rate for 2025 was 21.8%. Looking at some other metrics, tangible book value was $29.96 per share. Efficiency ratio was 56.7%, return on average assets was 1.81%, and return on average tangible common equity was 17.2%. Now let's turn to Page eight to review our operational highlights. Average loan balances were $8 billion, up slightly from the third quarter. This reflected increases in Puerto Rico commercial loans, partially offset by lower balances in auto and residential mortgage. Loan yield was 7.73%, down 70 basis points. This was mainly due to the effect on variable rate commercial loans from the Fed's 50 basis point rate cut in the fourth quarter. New loan production was $606 million compared to $624 million. This reflected decreases in Puerto Rico and U.S. commercial and consumer lending, partially offset by increases in auto and residential mortgage lending. Average core deposit balances were $9.9 billion, up almost 1% from the third quarter. This reflected increases in retail, commercial, and government balances. By account type, it reflected increases in demand, time, and saving deposits. Core deposit cost was 1.42%, down five basis points. This was mainly due to the lower cost of government deposits. Excluding public funds, the cost of deposit was 102 basis points compared to 103 basis points in the third quarter. Investments totaled $2.8 billion, down $96 million. This reflected principal paydowns and maturities and it was partially offset by purchases of $25 million of mortgage-backed securities and residential mortgage securitization of $21 million. Average borrowings and broker deposits were $787 million compared to $769 million in the third quarter. The aggregate rate paid was 4.03%, down eight basis points from the third quarter. End of period balances were $897 million compared to $746 million. This reflected increased broker deposits for liquidity management. End of period cash at $1 billion was 41% higher reflecting increased core and brokered deposits. Net interest margin was 5.12% within the range we had expected. Please turn to page nine to review our credit quality and capital strength. Credit quality continues to be resilient. Provision for credit losses was $31.9 million, up $4 million from the third quarter. This reflected $21 million for increased loan volume, $5.1 million for a specific reserve on a Puerto Rico telecommunications commercial loan, $2.4 million related to the U.S. macroeconomic factors, and $1.7 million in charge-offs from the sale of nonperforming loans. Net charge-offs totaled $27 million, up $6.7 million. Net charge-offs included $4.8 million related to the sale of nonperforming loans, of which $3.1 million had been previously reserved. Looking at other credit metrics, we observed the typical seasonal pattern of higher delinquency and nonperforming levels during the year-end period. Despite this, overall credit quality remains within expected ranges. Early delinquency rate was 2.8%, down from the third quarter and down year over year. Total delinquency rate was 4.18%, up from the third quarter but down year over year. The nonperforming loan rate was 1.59%, due to the move to nonaccrual classification of the Puerto Rico telecommunication loan that I mentioned. On the capital side, our CET1 ratio was 13.97%. Stockholders' equity totaled $1.4 billion, up $15 million, and the tangible common equity ratio decreased eight basis points to 10.47%. To summarize the year, loans and core deposits both grew about 5% in 2025. This year, we expect loans to continue to grow in low single digits. We also expect retail and commercial deposits to increase with Libre plus Elite, Oriental Biz, and our digital offerings driving customer growth. As for the large Puerto Rico government deposits, $500 million moved this month to our wealth management business as an advisory account. The remaining $600 million is staying a variable rate for deposit. Net interest margin was 5.27% for 2025. Looking ahead, net interest margin should range between 4.95% to 5.05% in 2026. That takes into account two more 25 basis point cuts, the effect of the partial exit of the government deposit, and the incremental cost of funding to replace it. Noninterest expense totaled $89 million in 2025. We currently expect them to be between $380 million to $385 million this year. Credit should remain steady, reflecting the strong economic environment in Puerto Rico. Our effective tax rate for 2026 should be around 23%, excluding any possible discrete items. Capital should continue to build, enabling us to continue to return capital to shareholders through dividends and buyback shares on a regular basis. Now here's José. Thank you, Maritza. Please turn to Page 10. José Rafael Fernández: The Puerto Rico economy continues to be steady with a sustainable long-term outlook. Liquidity is solid, businesses and consumers remain resilient, and unemployment is low. Public reconstruction funds and private investments are providing economic tailwinds. Manufacturing investments are continuing from multinational companies seeking onshoring solutions, particularly in the pharmaceutical and medical devices sectors. Having said that, we always have to closely monitor all the global macroeconomic and political uncertainties these days, and their potential impact on Puerto Rico. Turning to OFG, the success of our differentiated positioning has been evident over the last several years. We will continue to focus on the client experience with enhanced product tailoring strategies. Our Libre plus and Elite accounts offer AI insights and tools not available elsewhere in Puerto Rico. Commercial loan and deposit account growth is benefiting from deeper relationships and services, and credit and asset quality are sound and well controlled. The technology investments we make and our continuous improvement culture are starting to produce tangible efficiencies. All of these give us confidence in sustainable long-term growth across our core businesses. As always, we could not have achieved these results without the hard work of our dedicated team members. We're very thankful to them and excited about our future. With this, we end our formal presentation. Operator, let's start the Q&A. Thank you. Operator: If you have a question at this time, please press 1 on your telephone keypad. Press 2. Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad. We'll take our first question from Kelly Motta of KBW. Please go ahead. Your line is open. Kelly Ann Motta: Hey, good morning. Thanks for the question. Maybe to just kick it off with credit, given that provisions were a bit elevated for the second quarter now. Can you provide additional color into the larger Puerto Rico charge-offs this quarter as well as there was some movement in NPLs with some sales? Can you provide more color as to what was done there and what migrated back in? Thank you. José Rafael Fernández: Hi, Kelly. This is José. I'll let Cesar take that question. Cesar A. Ortiz-Marcano: So the charge-offs that you're looking at in the quarter are the result of a sale that we performed that released $17 million in nonperforming loans during the quarter. And that release triggered charge-offs, etcetera. But the result at the end of the day was a gain of $3.9 million. We reported. Offset, of course, by the entry of a telecommunications loan that was recorded as nonaccrual nonperforming during this quarter. So that's basically the movement in nonperforming during the quarter in commercial. So, only one loan, and it's not something that it's across the portfolio. We just see this as very idiosyncratic. Maritza Arizmendi: Yeah. And just to add, and I shared a little bit on prepared remarks. There was a charge-off related to the sale, of about $4.8 million, and a big portion of it was already reserved. It was about $3.1 million that was already set. Kelly Ann Motta: Got it. And then on loan growth, I mean, you've been talking about auto being more competitive in prior calls and such. In terms of your outlook, for low single-digit loan growth ahead, can you provide additional color in terms of what's the driver of that? Is the expectation that auto will be kind of more muted like the past two quarters? José Rafael Fernández: Yep. Yeah. Yeah. That's a great point. We see auto starting to stabilize at these levels. As again, in Puerto Rico, you also are starting to see a stabilization in the new car sales. So we look at auto balances to be down in the year between 2-3%. We also see commercial loans up 5-6% during the year. Both Puerto Rico and US. So with that kind of a setup, see consumer going up a bit. Mortgage also is trending down, but less than in years past. We see low single digits as a reasonable target for us for loan growth overall. Kelly Ann Motta: Got it. Last question, if I can just sneak it in, is on your expenses. $380 to $385, you know, relative to your operating is relatively flat year over year. Can you provide like your confidence in that and the drivers of those increased efficiencies? Maritza Arizmendi: Well, yes, thank you for your question, Kelly. The range reflects our continuous investment in technology and people capabilities talent. To continue driving the digital-first strategy that we are deploying constantly in the bank. And we have seen certain efficiencies. Like, this year, we have, like, you look at our full-time equivalent employee, there are 30 less, 30 people. 60. Sixty altogether. No? So we continue to expect that number to go down. But we need to continue reinvesting. That's why we see expenses to continue to be flat this year, but we're thinking that by the end of the year, we will start seeing some of that saving and in 2027 and 2028, we see savings to accelerate. And we will see that more in a time you will wait for 2027, 2028. Yep. José Rafael Fernández: It's something that we've always been very cognizant of. These investments in technology they certainly have enhanced the customer experience in a significant way, and it's providing us the ability to grow and differentiate ourselves. But it also has a very intentional effort to bring efficiencies to the bank. And is the first year where we are seeing in 2026, we're seeing the expense range flattening it out. And it has everything to do with a little bit of what we've done in the past, but it's being more importantly on the culture of a continuous improvement and how do we look at processes to simplify them, make them more agile, and really try to eliminate interactions and processes that are very manual and with very little value add, try to convert them into technologies and use the blockchain and all the technology, all the robotics and all. We are starting to use all those things. And we feel more confident in our expense ranges in 26 for sure. And we will continue to work hard to bring additional expense reductions in '27 and '28. Maritza mentioned. Kelly Ann Motta: Great. Thank you so much. I'll step back. Appreciate the color. José Rafael Fernández: Yep. Thank you, Kelly. Thank you. Operator: Our next question comes from Arren Cyganovich of Turist. Please go ahead. Your line is open. Arren Cyganovich: Thank you. Good morning, José, I was wondering if you could talk a little bit about what you're viewing as the best strategic initiatives or your focused on strategic initiatives for 2026. Maybe relative to 2025, it seems like you're making a good push on the deposit side and, of course, always investing in technology. José Rafael Fernández: Yes. Thank you, Arren. So as we will continue to enhance our retail efforts. It's not something that we're gonna decelerate. So we will continue to invest in enhancing the customer experience and adding additional functionality to our omnichannel platform and drive additional benefits for our customers on the retail side, and you'll see some of those playing out throughout 2026. In 2026, our focus is gonna be much more on commercial. And we see a good opportunity as you saw, we grew 5%. Our commercial customers last year. And I think we have an opportunity here to continue to translate the same strategies that we have done in terms of technology and digital translate it as it is appropriate on the commercial side. And it's gonna be a journey. It's gonna be three years or so for us to be able to deploy all this and all that stuff. Well, that's where we're gonna be putting more effort. We see an opportunity for us to keep growing our commercial business and we think the Puerto Rican economy is supporting that. And I also as a bank feel compelled to invest in small and mid-sized clients and help them grow because that's critical for the growth of our economy here in Puerto Rico. We're really focused on the Puerto Rico market, and we feel that we have a great opportunity there. Arren Cyganovich: Thanks. And on capital return, I think we just said that she expects capital to build so to return capital to shareholders. I'm just trying to balance the two. What's the expectations for account for return for 2026? José Rafael Fernández: I think the fourth quarter capital actions that we took in terms of the buyback I think it's going to become more given our valuation. Right? Given the way the market is valuing our stock and given the multiples that they're assigning to us versus our peers, we feel the best use of our capital after loan growth and balance sheet growth is buying back shares. And so we will continue to be very intentional there. We certainly will also look at the dividend. But, again, we see some differentiation in the valuation there, and we feel that it's the best way to reward our shareholders by buying back shares. Arren Cyganovich: Great. And then just lastly, some clarification on your answer about expenses. The expense reductions in '27 and '28, is that more so thinking about the efficiencies that you're going to get from actions you're making this year? It's like And Correct. And then I guess I'm just thinking, like, is it actually gonna go down, or is are you gonna Yeah. Yeah. Yeah. So going down and some erosion on top of that. José Rafael Fernández: I don't wanna put the cart in front of the horses. Right? But I tell you, you're working we're working very hard to bring additional efficiencies during 2026 that will play out in '27 and '28. We will give you more details as we execute on those initiatives. But as Maritza mentioned, we are looking at FTEs and where can we redeploy our people talent to more customer-facing and value-add building relationships type of talent versus having FTEs sitting behind a desk in operations and servicing and pushing papers and dealing with Excel spreadsheets to manage different functions. And I can give you an example. We have been able to optimize the entire fraud management processes just simply by using robotics and being able to eliminate several FTEs that were basically managing fraud on a daily basis. And those are some of the small examples that we can provide. And I'm sure, you know, many banks in the US and in Puerto Rico are also doing the same. We're trying too hard to bring down expenses. Not without investing in technology, investing in our people, and continuing to do the right thing for the long term of our franchise. Which is critical for us. It's important. Arren Cyganovich: Great. Thank you. José Rafael Fernández: Yep. You're welcome. Operator: Thank you. We will move next with Brett Rabatin of Hovde Group. Please go ahead. Your line is open. Brett Rabatin: Hey. Good morning, everyone. Wanted to start on the margin and just on the fourth quarter, wanted to get a little better color on the linked quarter change in the loan yields. Which had been fairly stable up until this quarter. So this the 17 basis point linked quarter change, was just hoping to figure out how much of that was the large nonaccrual loan and any other comments on the loan portfolio yield change linked quarter? Maritza Arizmendi: Yep. My name is Alex. Yeah. You. Thank you, Brett, for your question. And you know, remember that we are asset sensitive and we continue to be asset sensitive and this quarter, as I mentioned in my prepared remarks, the loan yield went down basically because of first, 50 basis point cost during the quarter, but also we have the full effect of the September 25 basis cost. So that's one of the main drivers for the reduction in the NIM, and we were able to compensate that to our government deposit variable rate because it also got a reduction there. But it reflects our asset-sensitive positioning. Yep. I think also, you're also on the loan side. You're starting to see since we have moved our auto originations to higher significantly higher quality, we have been able to we are also seeing a slight decrease in the yield coming in on the auto lending side. And that's just a testament to the credit quality that we're bringing in, better credit quality. Brett Rabatin: Okay. That's helpful. And then just thinking about the margin guidance for '26, it was nice to see that the funding cost which were up a little bit in 3Q, moved back down in the fourth quarter. Is the margin guidance for 26%, does that reflect some additional leverage to lower funding costs from here? You know, one of the key things that's always been a question is Puerto Rico has lower cost deposits. The mainland, you know, how much can those go down? As rates go down given they're already fairly competitively priced? Maritza Arizmendi: Yeah. The reality is when you look forward for this year, 2026, we will have a change in our funding mix because the $500 million exit, $500 million exiting the bank, you know, moving to the wealth management business. And we will replace that with wholesale funding, and that carries a higher cost of about 25 basis point to 40 basis point depends on the term of that wholesale funding, but the reality is that we will have that change. And that's part of the impact of the NIM. But when you look at 2026, 2026 will have the full effect of the 75 basis point cut that happened in the last part of 2025. Will have all that full effect, plus we are also foreseeing two additional cuts during 2025. And we are sensitive. We have more assets repricing than the deposit side. And that's why we are giving that indicative in the margin. Okay? That guidance. And when you look at 2024 basis 2025, it reflects that. You know, we had a margin in 2024 of 5.43%. This year, it was 5.27%. It was about 16 basis points reduction, and it's related to the rate cuts that 100 basis point late 2024. And this year, 75 basis point end of 2025. Brett, and could also add as you saw this quarter and you saw throughout 2025, core deposits, excluding government, went up. On the retail side as well as on the commercial side. And that is also something that we expect to help mitigate what Maritza just said. Right? Because the more core funding that we bring in, it's gonna be cheaper than wholesale funding. So you know, our margin guidance is the margin guidance, and that's how we see it. But we're gonna be working hard to beat that margin guidance as you guys can expect. So we'll update everybody on the first quarter when we talk again. Brett Rabatin: Okay. If I could ask one last one, the other thing I was hoping to figure out was if you look at slide 20, it has the auto portfolio net charge-off rate. It was a little bit higher in the fourth quarter as were NPLs. And just wanted to see if the higher level in 4Q, if that seems to be an anomaly, a year-end cleanup of the portfolio or what have you. You know, versus something maybe you're seeing with the book? Cesar A. Ortiz-Marcano: Yeah. Seth, I can take that one. This is a like Maritza mentioned before, it's typical that the seasonality of the portfolio starts very low in terms of delinquencies and nonperforming loans in the first quarter of the year, and then it tickles up until the fourth quarter. And at the fourth quarter, got the upper level of that equation. But next year jobs, if you compare this next year job, we usually compare it to last year. Same period last year. And what you saw what you see there is 1.63 last year. But that was benefited by because we sold charge-off portfolio. Without that sale, that number would have been 1.86%, and we are right now at 1.81%. This quarter. So it is a positive sign. But, you know, but again, the seasonality of the portfolio will result in an increase in delinquency in this quarter, but we expect that benefit in the next quarter. You're gonna see a positive effect on all those metrics. José Rafael Fernández: Yeah. Cesar A. Ortiz-Marcano: Okay. So it's That's helpful. Central and lower. Brett Rabatin: I'm sorry. The year is no. It's just end of the year seasonality. And we'll keep on keep you guys updated in the first part of the year and see if that turns around again. But that's what we've seen in the last three years. We'll be watching closely in the part of this year to see if that replicates again. Brett Rabatin: Okay. Okay. Great. Thanks for all the color. José Rafael Fernández: Yeah. Thank you for your questions, Brett. Operator: Thank you. Our next question comes from Timur Braziler with Wells Fargo. Please go ahead. Your line is open. Timur Felixovich Braziler: Hi, good morning. Maybe bigger picture on the credit. Hi. Can you hear me? José Rafael Fernández: Operator, we can't hear anymore. Timur Felixovich Braziler: Here. One second. How about now? Can you hear me? Operator: Hello. Timur Felixovich Braziler: Can you hear me now? Operator: Timur, we are able to hear you. One moment, please. Sure. Timur Felixovich Braziler: Hey, and for the interruption speakers, are you able to hear us? Is this better? José Rafael Fernández: I can hear now I can hear Okay. Timur Felixovich Braziler: Perfect. Sorry about that. Maybe just a bigger picture on credit. You know, if we look at kind of 1% full-year charge-off rate, is that kind of a good proxy for where we are in this post-pandemic cycle? And then if you look at the allowance ratio, you know, year over year, you added a little bit over $25 million to allowance. You built that to almost, you know, 2.46% of loans. I guess, how do we think about the allowance build in 2025, what that might portend for charge-off activity in 2026, and then you know, what does a stabilized level of credit activity look like going forward here? Maritza Arizmendi: Well, I think that the 1% range that you mentioned is within what we can expect here in the in HR two. If you look at 2025 without any specifics of the sales or any particular case, that should be a good run rate. When we think about how we build the reserve, please be mindful that there's some specific reserve at the end of this year related to the telecommunication loan. So that's a very isolated case, very specific. So setting that aside, I think that we could continue monitoring credit and building this stuff as needed, but 1% net charge-off delinquency remaining this the level that we're managing this year. Maybe we won't be reserved at the same level because of the specific that we have this quarter, but definitely it could be about flat from what we have right now. Excluding any specific case that we have managed during the year. Okay? Timur Felixovich Braziler: Got it. And then the telecom credit this quarter, was there anything incremental that happened in 4Q that drove the activity? Or is this just really recalibration of maybe what the other banks were talking about in the third quarter and you guys kind of catching up to that same level of reserving in the fourth quarter? Cesar A. Ortiz-Marcano: No. It's basically, we receive financials every period. So last period, you know, they didn't, you know, warranted right away, you know, no closed out. But this period, it repeated the deterioration of the on the financials. So basically, we decided, yeah, this is a situation that merits the no approved status. Maritza Arizmendi: Yeah. And at the end, this is a loan that is continuing to pay. You know, it stays paying. So what we're doing is being prudent on giving the specific situation of the company that comes from the outcome of a merger we decided to put it in. Timur Felixovich Braziler: Got it. That's great color. Thank you. And then just last for me, you guys have had really good success rolling out some of these retail deposit products during the course of 2025 that have been, you know, differentiated from what the island typically sees. I'm just wondering from a competitive standpoint, what's been the reaction? And as you think about, you know, Puerto Rico ex public fund deposits, during 2026, during 2027. Does it feel like the competitive nature is shifting now, and do you still think you can maybe get those lower with these rate cuts, or is the competitive nature such that even with these rate cuts, the cost of the core Puerto Rican deposits are likely continuing to rise here? José Rafael Fernández: Yes. I think the competitive landscape is slowly but surely intensifying. I think each institution has its own drivers. Right? And some of the drivers that come in from the reinvestment in the investment portfolio at a higher yield gives flexibility to be more competitive and more aggressive on some of the CD offerings and stuff like that. So I'm not saying that we are going out crazy here in the market in Puerto Rico in terms of deposits, but it's slightly and slowly but surely getting more intense in terms of deposit competition. Also, be aware that we have credit unions, US credit unions that have been for the last three or four years very aggressive. They remain so. And that is also part of the equation here in Puerto Rico, these tax-exempt credit unions. They have another lever there that allows them to be more aggressive on the deposit side. So that's our strategy is to target the mass and the mass affluent. We have come up with the products. We have come up with the in terms of our platforms and technology and the way we do the business. That's the formula that we're using. And it's paying off. I'm sure, our friendly and larger competitors are also doing their thing, and I'm sure they're going to be very competitive throughout. So it's just now blocking and tackling and trying to achieve organic growth on the loan side and on the deposit side. And it's exciting for us at this juncture how we are well-positioned to achieve both. Timur Felixovich Braziler: Got it. Thanks for the color. Appreciate it. José Rafael Fernández: Yep. Thank you, Timur. Operator: Thank you. We will move next with Manuel Navas with Piper Sandler. Please go ahead. Your line is open. Manuel Navas: Hey, good morning. I just wanted to follow-up on that last question. Has there been any price response from other players on the island from your new, Libre and Elite products? And where are those having the most success? Yeah. Happy to hear a little bit more on those two products as well. José Rafael Fernández: So there's no need to have a price response because we're not paying high yield. So, I don't know where the idea that we're kind of bringing in higher yields or so. It's actually, the Libre account is a noninterest-bearing account. So I don't know where that comes from. But Elite does pay 1.28% average cost of funds on the balances that we have. And that is the way we approach the mass affluent, and it's paying off, and it's doing well. Because it's not about the rate only. It's about what we offer as a product and what is the value that we bring into the equation here. And it's not only a rate. It's more than a rate. It's the functionality. It's the accessibility. It's the everyday, every time, anywhere, wherever you are. And the fast, the agile way we service our customers in any that they have with us. That brings us the ability to attract, deepen, and expand relationships across markets that we operate, which is here in Puerto Rico. So reaction from the competition, zero. There's no increase in competition in terms of rates here. What we're seeing is more on a targeted basis, CD rates, and that's what I have mentioned earlier, Manuel. Manuel Navas: Alright. I appreciate that. And it is pretty early innings, but are you seeing that deeper relationship? Are you seeing younger clientele in these accounts as well given they're a little bit more digital forward? José Rafael Fernández: Actually, that's a good point, Manuel. Given Puerto Rico's demographics, what we're seeing is that I'll share this information 75% of the accounts that we're opening on the Libre account are new customers. 40% of those are 29 years or younger. And to us, that is extremely positive. Because it allows us to build a long-term relationship and build a long-term franchise with them. So it's exciting times for us. That's kind of the crux of the matter. You actually pointed out one of the great things that is going on in the last couple of years. Manuel Navas: I appreciate that extra color. Going back to the NIM for a moment, as you're targeting a little different auto client and commercial loans are adjusting. What are kind of some of your new yields coming on, especially in those two categories in auto and commercial? José Rafael Fernández: So commercial, remember, our commercial originations are 50% fixed, 50% variable. And the rates are depending on the type and the size of the commercial loan, but it ranges between, let's say, 275 to 350 basis points above the term that we're lending at. So that's kind of I'm giving you a range, and it can get on the lower end when it's a larger account, a larger loan, or if it's a small business or a larger commercial account or loan. So that's on the commercial side. On the auto side, I think the yields are in the eight handle, eight and change. It is coming from the higher eight levels. It's now stabilizing around eight thirty or eight forty or something like that, between eight thirty and eight fifty. And it's all about, certainly competition, but also us originating close to 90% of our loans in prime and super prime loans. Manuel Navas: That's really helpful. And then I guess my last question is, is there a level, I appreciate the commentary around the buyback. The pace was a little accelerated in the fourth quarter. Do you think we stay at this fourth quarter pace? And is there any price sensitivity, or where is there some price sensitivity on repurchases? José Rafael Fernández: Oh, I'll repeat what I said earlier, Manuel, because we don't have a price target. We do see the market being of penalizing us a bit in terms of the multiples that they're pricing us at. So I think we kind of look at the market in general. We see where we can deploy our capital in terms of loan growth. This year, we're probably going to grow single digits, as I said earlier, low single digits. Because of what I mentioned earlier on the auto. So we might have more ability to deploy capital through buybacks throughout the year. But we don't have a set number or a set stock price to go after. It's just part of our natural ongoing capital management strategies. Manuel Navas: I really appreciate the commentary. Thank you. José Rafael Fernández: Yep. Thank you for your questions, Manuel, and welcome to the calls. Cesar A. Ortiz-Marcano: Thank you. Yeah. Thank you. Operator: And once again, if you would like to ask a question, please press star then the number one on your telephone keypad. And at this time, there are no further questions. I will now turn the call back over to management for closing remarks. Arren Cyganovich: Thank you, operator, and thanks again to all our team members. José Rafael Fernández: Thanks. To all our shareholders who have listened in. Looking forward to our next call. Have a great day. Operator: Thank you. This does conclude today's program. Thank you for your participation, and you may disconnect at any time.

69天前Insight Analytics约5分钟阅读

AMAL 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Amalgamated Financial Corporation Fourth Quarter 2025 Earnings Call. Today's presentation is listen-only with Q&A to follow. A replay of the call and the accompanying slides are available on our Investor Relations website. Please review the forward-looking statements and non-GAAP disclosures on Slide two. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Jason Darby, Chief Financial Officer. Please go ahead, sir. Jason Darby: Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me today is Priscilla Sims Brown, our President and Chief Executive Officer. Additionally, Sam Brown, our Chief Banking Officer, is here for the Q&A portion of today's call. We'll be continuing with short prepared comments this quarter to get to your questions faster and avoid repeating details you've already reviewed in the earnings materials. I'll now turn the call over to Priscilla. Priscilla Sims Brown: Good morning, everyone, and thank you for joining us. 2025 is in the books, and Amalgamated shine brightly. I have to start by expressing my deep praise and gratitude to all my amazing colleagues at the bank. You are builders, creators, and advancers of our mission to help those who do good do better. We offer unwavering support to our customers. We admire your courage and conviction to serve, and we feel privileged to be your banking partner. And to our shareholders, thanks for believing in us and in our business model. You are the capital engine that makes us go and grow. I'll get to more on growth in a couple of minutes, but first, I want to start by recapping another excellent quarter for Amalgamated. Jason Darby: Core earnings was 99¢ per diluted share, again showing the consistency of our earnings power and teeing us up to deliver consistent growing returns on tangible common equity. We had a record-breaking quarter for deposit gathering, generating nearly $1 billion of new deposits. Absolutely incredible, and not even in an election year. This smashes our previous record set way back in 2020 during the peak run-up to the presidential election. Our net interest margin expanded again, and we booked almost $170 million in net new loans. One of our best quarters ever. A lot to like there. So let's dive in a bit more. Deposit gathering was on fire. On-balance sheet deposits grew $179 million to $7.9 billion, and our off-balance sheet deposits increased $789 million to $1.1 billion. Our political deposits increased $287 million to $1.7 billion, as our share of the fundraising taking place ahead of November's midterm elections continues to grow. It's important to note that all of our customer segments experienced deposit growth again this quarter. Not-for-profit grew an eye $388 million, Social and philanthropy grew $122 million, and our climate and sustainability segment grew $77 million. This across-the-board strength demonstrates the mission-aligned differentiated competitive advantage that only Amalgamated possesses. Turning to loans. We delivered strong growth with loans increasing $167 million or 3.5% to $4.9 billion. Loans in our growth mode portfolios, including multifamily, CRE, and C&I, increased by 7% or $218 million, a nice from the 3.3% growth achieved in the third quarter and 2.1% growth achieved in the second quarter. We continue to benefit from the addition of several C&I experts we added to our team, and we expect to deliver more growth in 2026 as we continue to expand our reach on the West Coast. Our PACE portfolio also saw a nice acceleration with total assessments growing $38 million or 3% to $1.3 billion in the fourth quarter. The strength came from over $27 million in growth in C PACE, where there's a range of opportunities. We continue to ramp up with the new originator partnership we discussed with you last quarter. The question now is where is all of this leading? We believe Amalgamated is ready to grow significantly. We're ready to cross $10 billion in assets and have made and will continue to make the necessary investments in people and technology. The business model is a winner, and we have an exceptional proven management team that can carry the bank into its next phase. While Amalgamated has seen its fair share of specific challenges during our four and a half years as a team, banks broadly have been operating through extraordinary environmental challenges. From the pandemic and inflation shock to sharp swings in growth asset prices, and deposit behavior all of which transformed credit demand and risk. In The US, we have experienced the fastest rate hike environment in sixty years, the longest inverted yield curve in forty years, and the largest Fed-driven liquidity drain on record. Thinking of these things really helps put into context the success Amalgamated Bank announced today compared to five years ago. Through these massive challenges, our bank has grown from $6 billion nearly $9 billion has become one of the most reliably profitable banks in the country, now employs nearly 500 people and is making a bigger and longer-lasting impact than ever. Our outstanding management team navigated what was arguably the most difficult banking conditions in modern memory with a steady hand and adherence to a clear strategy. Our expectations for growth and performance in the future will be bold for sure, and Jason will outline some of this in his 2026 guidance in just a few moments. Our team's demonstrated track record provides a clear precedent for future achievement as Amalgamated Bank advances toward its full potential. Jason, take it from here. Jason Darby: Thanks, Priscilla. The big theme we've been communicating this morning is growth. As Priscilla noted, we have taken the right steps to position the bank for responsible expansion and 2026 guidance outlined some of our plans. But this quarter also marks a milestone as 2025 concludes the fifth fiscal year since Priscilla joined the bank, and it's worth briefly reflecting on that progress. Slide three illustrates Amalgamated's remarkable growth across multiple metrics during this era. And beyond the numbers, the strategy guiding this progress is clear. Profitability is a North Star inextricably tied with mission purpose, a capital base to match the size of the balance sheet, the balance sheet as a source of strength and asset quality consistent with well-run peers. And when we got started four and a half years ago, our first priority was to rebuild trust. Today, we can confidently say we did what we set out to do. We now look forward to driving the next phase of Amalgamated's growth building on this solid foundation. Before we get to guidance, let's review the quarter. In addition to the markers Priscilla mentioned, here are some other key highlights. Net income is $26.6 million or $0.88 per diluted share and core net income the non-GAAP measure, $30 million or 99¢ per diluted share. The spread between GAAP and core earnings per share was almost entirely related to a $41.9 million sale of performing residential loans with sub 3% coupons that resulted in a $3.8 million pretax loss. GAAP and core earnings were bolstered by the recognition of a $1.5 million tax credit, which I'll talk about more in a moment. Excluding that benefit, core net income would have been a solid $27.5 million or 91¢ per diluted share, on par with the prior quarter. Our net interest income grew by 1% to $77.9 million which exceeded the high end of our guidance range. Additionally, our net interest margin increased six basis points to 3.66% driven by a 16 basis point decline in our cost of funds as we benefited from the Fed's recent rate cuts. Core noninterest income was solid at $10.1 million continuing its steady improvement over the past four quarters. Driven primarily by trust income and banking fees. It now represents 11.4% of core revenue, reflecting meaningful progress towards our 85/15 revenue diversification objective. Expenses ticked up a bit during the quarter, largely related to non-core severance costs in our residential lending unit, core expense of $44.9 million was right in line with our annual target of $170 million. We are very happy with our core efficiency ratio of 51.13%, And as expenses have risen as expected, revenue growth has kept pace and sets us up well for 2026. Overall, it's another solid quarter with continued strength across our key performance metrics. Most notably, tangible book value per share rose 87¢ or 3.4%, and tier one leverage was strong at 9.36%. We returned capital to shareholders through buybacks of $8.7 million and our $0.14 quarterly dividend, And earlier this week, we announced a $0.03 dividend increase to $0.17 based on our confident outlook for 2026 earnings. Now just a quick note on the tax credit I mentioned earlier. This quarter's credit reflects a new tax planning approach that runs credits through the tax provision instead of noninterest income. And because of this change, past tax credit recognition will no longer be classified as noncore credits recognized under this new approach will be considered core. We've added a slide on page seven to explain the change, and we'll keep it in for a bit to help clarify any tax line volatility as we build our inventory of credits. The key point we're reducing noncore adjustments to make our financials simpler to understand. Asset quality metrics remained solid overall, but there were some credit turbulence during the quarter. We marked for sale the non-accrual multifamily asset identified in Q3, which contributed to an elevated charge-off ratio and added approximately $800,000 to provision expense. In our DC market, one borrower showed stress related to the rapid rehousing program restructuring resulting in increased reserves of $1.9 million and a related $7.5 million increase in nonaccrual multifamily loans. This also was the source of the entire increase in multifamily criticized or classified assets during the quarter. We are currently working with this borrower to restructure portions of their portfolio, and we believe we are adequately reserved this time on the nonaccruing loans. The other loans with this bar that moved into classified and criticized the quarter benefit from additional equity partners to support ongoing rightsizing activities. And while this development is unfortunate, our total exposure to DC's rehousing program beyond this relationship is low, with all loans graded past as of the quarter end. Now let's move to full year 2025 performance. We've updated our targets to actual results for easier comparison, In what began as a very challenging year, we exceeded all our key performance goals and maintained consistent upward momentum, issuing two guidance increases during the year and ultimately exceeding those projections. Looking ahead to 2026, I'll wrap up my comments where Priscilla started. Talking about growth. We believe our business model will deliver reliable growth across multiple dimensions. With our full year 2026 guidance, we aim to hit the following revenue and profitability ranges: Net interest income of $327 million to $331 million or roughly 10% to 11% growth, and core pretax pre-provision earnings of $180 million to $183 million or nine to 10% growth. For performance targets, we aim to deliver core return on average assets growth to 1.35% core return on tangible common equity growth to 15%, and balance sheet growth of approximately 5%. And for expense discipline targets, we aim to deliver return to core positive operating leverage of between 34%. Growth in technology spend of about 18% to continue to scale the business and annual core OpEx growth to $188 million. Underpinning these targets is quarterly net loan growth of one and a half to 2%. That builds on the momentum we established in the 2020 and considers the effect of our runoff portfolios. This guidance reflects our commitment to disciplined execution and value creation, We enter 2026 with clarity, confidence, and intent to deliver quality returns on tangible common equity consistently. Closing with Alens in the 2026 based on its target average balance sheet size at approximately $8.7 billion. We estimate net interest income to increase to between $79 million and $81 million and we also expect our net interest margin to rise from the fourth quarter primarily from increased yields from the loan growth that came on late in the quarter. We're now happy to take your questions. So operator, please open up the line for Q&A. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Mark Fitzgibbon with Piper Sandler. Please proceed with your question. Mark Fitzgibbon: Hey, guys. Good morning. Good morning. Hi, Priscilla. So first question I had, I was curious how you're thinking about the outlook for the provision in 2026 based on what you see today from a credit perspective. Would you expect credit cost to generally, you know, be a little bit lower than what we saw 2025? Just curious on, you know, macro thoughts on that as well as the effective tax rate for the new year. Jason Darby: Yeah. Great. Hey, Mark. It's Jason. The provision outlook for the coming year is roughly the same from an actual perspective as we've recognized for 2025. Maybe a little bit of improvement there but I wouldn't, on the margin, say it's very significant. I think the reason for that is more rooted than just the normal charge-off activity we've seen through the consumer solar portfolio. And we don't expect that to abate very much in the coming year. Albeit, it would be nice if that came through in a more recovered fashion because that would be benefit through the provision line. Then we're just keeping a more conservative approach to the overall provisioning just given some of the that we went through in the current year. That said, we still think that the provision expense overall is a very manageable number relative to the core earnings progress that the bank will show, and it actually will not detract from the earnings per share growth that we're looking forward to in the coming year. From an effective tax rate perspective, this is an area I think we've spent a decent amount of time focusing, new tax strategy on. We have the opportunity to make more inroads on our effective tax rate. We're targeting to start off a 26 and a half percent ETR and that takes into account a small inventory of tax credits related to this new strategy we've deployed we also think there's potential upside on the ETR throughout the year as we work to build up more of these tax provision related credits as we go. And, hopefully, we'll be able to show a lower ETR. But for now, we're modeling out 20 and a half percent. Mark Fitzgibbon: Okay. Great. And then since you guys are so close to it, I'm curious how you're thinking about political deposits over the next couple of quarters. I think you peaked prior to the presidential election in the third quarter last year at about $2 billion. Given where I think you're $1.7 today in total on and off balance sheet deposits, do you think we'll see that by the third quarter soar you know, past that $2 billion level? Are you based on what you see today as pipeline fundraising strong? Any thoughts there would be appreciated. Priscilla Sims Brown: I'll ask Sam to address that, Mark. But I will say, you know, we have been pleasantly surprised, as you know, every cycle in that our projections or our actuals from the prior cycle have been surpassed. So you're right on the 1.7, and we certainly expect to build through till the election. And Sam, do you have more thoughts on that? Sam Brown: Yeah. Mark, I'll just say that, you know, you're you're you're exactly right. That, you know, we're really pleased with about our 20% growth quarter over quarter in political. That has certainly been right trend with what we've put out in disclosure. You're exactly right that that usually peaks right you know, about about a month before the election actually happens, and then we see that wind down. You've seen since we've been putting out data since 2018, you know, there's a little bit of a you know, kind of inflationary impact cycle over cycle just as the contribution limits get larger each year. And we certainly see that as well. But I think if you look at the trend, you look at the performance quarter over quarter, I think it's a good kind of straight line dashboard to where we this will head and very consistent with prior quarter's performance. Prior election cycle performance. Mark Fitzgibbon: Okay. Great. And the last question I had, it looked like you had really strong multifamily growth this quarter. I was curious is, assume it probably wasn't in New York City or was it across other parts of your footprint, any thoughts there would be appreciated. Thank you. Sam Brown: Yeah. We were we were really proud of that. Obviously, it's a great great quarter for multifamily. I think, you know, really exciting that, you know, slightly under half of that actually came outside of New York City, which is really good geographic diversification for us. Proud to see, you know, multifamily and all of our physical footprint locales. And so we think that that is is also bolstered by pipeline going forward. And so we think that we will definitely continue see good geographic representation in multi. Mark Fitzgibbon: Thank you. Thank you. Operator: Our next question comes from the line of David Conrad with KBW. Please proceed with your question. David Joseph Konrad: Hi. Good morning. I had a question. You know, I thought I thought the NIM expansion was really impressive. In a down rate quarter, really. Just wanted to follow-up on the on the commercial loan yields and the impact on NIM. What what are the yields that you're you're booking now in the pipeline and and kind of the mix of fixed versus floating? Jason Darby: Sure. Hey, David. It's Jason. So yeah. The the NIM for the fourth quarter was really nice. We we're still able to see some baseline loan yield expansion despite the fact that we had some contraction on the posted numbers, but that really relates to the item that we talked about last quarter, which had that onetime recapture flowing through the interest income line. On the whole, loan yields were rising, but we also had quite a bit of benefit from the rate cuts in our deposit betas being higher than we model. And I think that bodes well for how we would set up for margin expansion heading into 2026, the bring on rates we are looking at probably somewhere in the 5.9 to 6% range for C and I for multifamily and series, probably in the five seventy range. So the overall rates are I think, in line with where market generally is, for quality credits. But as we've talked about before, the real advantage for the bank gonna be in the repricing of the older real estate loans. And those are coming off this year in the four thirty range. So we're gonna get a decent clip there. In terms of just the overall repricing benefit. Obviously, we still have the PACE portfolio, which comes on at higher rates in that high sixes, even close to 7% range. So the ability to add yield is pretty strong there. And then just looking outward, I think the bank is really in a great place to steadily have margin expansion throughout the year. David Joseph Konrad: Great. And maybe, you know, with all the deposit growth, just following up on the PACE portfolio, and the outlook for growth there. And is there any any limitations that you look out a few years in terms of percentage of the securities book or percentage of capital with that with that portfolio? Because it seems like such a strong yield. Jason Darby: Yeah. From a concentration perspective, we have lots of on our balance sheet to add CPE. So no real restriction there in terms of the ability to add assets in a meaningful way from a growth perspective. I'll ask Sam to talk a little bit more about the prospects of growth in just a moment. But the opportunity for CPAS yield is very, very strong as we've seen. The risk-adjusted returns are excellent. And there's a green space that's continuing to develop in the C PACE market. As more and more municipalities throughout The United States added to the capital stack. So the bank's ability to be first mover in that area is going to be really good. Gonna be taking advantage of a partnership that we've established that drives lower dollar value CPaaS, but more volume, which we think will add a lot of opportunity for us. And going forward, C PACE is going to be an opportunity to trade down on our traditional securities portfolio. So from a balancing perspective, we still feel overweight on traditional securities. You saw a little bit of this movement this quarter where we traded down on traditional securities to the tune of about $200 million to fund the combination of loan growth and CPaaS, and I expect you'll see more of that. We continue to move out into 2026. You wanna talk about growth potential? Sam Brown: Sure. Thanks, David. So I think one of the great things about the quarter was really just realization on something we've talked about in the past about increasing the percentage of C PACE to resi PACE. And as you saw our origination in the quarter, you know, three quarters of that came from the commercial side, which is really something that we been focused on, and we see that going forward as a real source of income for us. I think that $27 million number on commercial PACE is certainly something that we see as based on where we want to be going forward and feel good about that number as a supplement to the loan activity. And I think you can continue to expect to see more of. David Joseph Konrad: Great. Thank you. Nice quarter. Jason Darby: Thank you. Thank you. Operator: And we have reached the end of the question and answer session. I would like to turn the floor back over to Priscilla Brown for closing remarks. Priscilla Sims Brown: Thank you, operator, and, thank you for those those good questions. Amalgamated Bank has delivered a strong, consistent performance through one of the most challenging operating environments in modern banking, growing earnings, expanding margin, and improving capital while many peers struggled with deposit volatility, credit concerns, and rate shock. Over the last several years, it has combined disciplined balance sheet management including appropriate commercial real estate concentration, high on balance sheet, and contingent liability. And above peer capital ratios with a focused values aligned client franchise that has continued to attract mission-driven deposits. Looking forward, Amalgamated is well positioned because our business model sits at the intersection of resilient market opportunities and powerful secular trends. What we've already established deep relationships and differentiated capabilities. This team's track record of mission meets performance combined with a flexible balance sheet and multiple earnings levers, provide a strong platform for sustainable growth and outsized relevance as the industry continues to evolve. I look forward to updating you on our progress on our first quarter call and accepting your questions, in between. Thank you again for your time today. Operator: And this concludes today's conference. You may disconnect your line at this time. Thank you for your participation, and enjoy the rest of your day.

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INDB 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Independent Bank Corporation Fourth Quarter twenty twenty five Earnings Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. Will then hear automated message advising your hand as raised. Withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Brad Kessel, President and Chief Executive officer. Please go ahead. Brad Kessel: Good morning, and welcome to today's call. Thank you for joining us for Independent Bank Corporation's conference call and webcast to discuss the company's fourth quarter and full year 2025 results. I am Brad Kessel, President and Chief Executive Officer. And joining me is Gavin Moore, executive vice president and chief financial officer and Joel Rahn, EVP, Head of Commercial Banking. Before we begin today's call, I would like to direct you to the important information on Page two of our presentation, specifically the cautionary note regarding forward looking statements. If anyone does not already have a copy of the press release issued by us today, you can access it at the company's website, independentbank.com. The agenda for today's call will include prepared remarks followed by a question and answer session, and then closing remarks. I'm pleased to report on our fourth quarter and full year 2025 results as we advance our mission of inspiring financial independence today with tomorrow in mind. Our vision is a future where people approach their finances with confidence, clarity, and the determination to succeed. Our core values of courage, drive, integrity, people focus, and teamwork are the blueprint our employees live by. We strive to be Michigan's most people focused bank. Independent Bank Corporation reported fourth quarter two thousand twenty five net income of $18,600,000 or $0.89 per diluted share, versus net income of $18,500,000 or $0.87 per diluted share in the prior year period. For the year ended 12/31/2025, the company reported net income of $68,500,000 or $3.27 per diluted share compared to net income of $66,800,000 or $3.06 per diluted share in 2024. Highlights for the '25 include an increase in net interest income of $1,000,000, that's 2.2% over the '24. A net interest margin of 3.62%, that's eight basis points up on a linked quarter basis. A return on average assets and a return on average equity of 1.35% and 14.75% respectively. Net growth in loans of $78,000,000 or 7.4% annualized, from 09/30/2025. Net growth in total deposits less brokered deposits of $57,500,000 or 4.8% annualized. An increase in tangible common equity ratio to 8.65% and the payment of a $0.26 per share dividend in common stock on 11/14/2025. Our fourth quarter performance marked the culmination of another remarkable year with our organization excelling on all fundamentals. Over the past year, we increased tangible book value by 13.3% and delivered near record earnings. Meanwhile, our dividend payout ratio was 32% for the year as we continue to recognize the value of returns for our shareholders. During the fourth quarter, we realized continued net interest margin expansion, strong loan growth, and increased non interest income. In addition, our credit quality metrics remain positive with watch credits and non performing assets below historic averages. In anticipation of continued strong earnings, we repurchased shares and executed a tax credit transfer agreement during the fourth quarter which is expected to reduce tax obligations and enhance earnings per share. Looking ahead to 2026, our confidence is bolstered by a robust commercial loan pipeline and our ongoing strategic initiative to attract and integrate talented bankers into our organization. Moving to Page five of our presentation, deposits totaled $4,800,000,000 at 12/31/2025. An increase of $107,600,000.0 from December 31, 2024. This increase is primarily due to growth in savings and interest bearing checking reciprocal and time balances that were partially offset by decreases in noninterest bearing and brokered time deposits. On a linked quarter basis, business deposits increased by $20,400,000, retail deposits increased by $64,100,000.0 offset by a $28,600,000 decrease in municipal deposits. The deposit base is comprised of 47% retail, 37% commercial, and 16% municipal. All three portfolios are up on a year over year basis. On Page six, we have included in our presentation a historical view of our cost funds as compared to the Fed fund spot rate and the Fed effective rate. For the quarter, our total cost of funds decreased by 15 basis points to 1.67%. At this time, I'd like to turn the presentation over to Joel Rahn to share a few comments on the success we're having in growing our loan portfolios and provide an update on our credit metrics. Joel? Joel Rahn: Thank you, Brad, and good morning, everyone. On page seven, we share an update of loan activity for the quarter. We continue to experience solid loan growth in the fourth quarter with total loans growing by $78,000,000 or 7.4% annualized as Brad just referenced. For the year, we increased our loan portfolio $237,000,000 or 5.9%. Our commercial portfolio led the way with $276,000,000 or 14.2% growth. Commercial loan generation continued its strong trend in Q4 with $88,000,000 in quarterly growth or 16% annualized. Our residential mortgage portfolio grew by $7,200,000.0, and our installment loan portfolio decreased $17,000,000 for the quarter. Our strategic investment in commercial banking talent continues to supplement our loan growth. During the fourth quarter, we added an experienced banker in Metro Detroit, and in total, we have 49 bankers comprising eight commercial loan teams across our statewide footprint. During the year, we added a net of five experienced bankers to the team. Looking ahead, we believe we will continue low double digit growth of our commercial loan portfolio in 2026. Our pipeline remains solid, it's comparable to January '25. We continue to see market opportunities from regional banks in both talent and customer acquisition. They're seeing steady organic growth from existing customers. Looking at the commercial loan production activity on a year to date basis, mix of C and I lending versus investment real estate was 57% and 43%, respectively. And for our commercial portfolio, our mix is 67% C and I and 33% investment real estate. Page eight provides detail on our commercial loan portfolio concentrations. There's not been any significant shift in our portfolio over the past year with the portfolio remaining very well diversified. Our largest segment of the C and I category is manufacturing, $183,000,000 or 8.3% of the portfolio. In the investment real estate segment of the portfolio, the largest concentration is industrial at $202,000,000 or 8.8%. We outlined key credit quality metrics and trends on page nine. We continue to demonstrate strong credit quality. Total nonperforming loans were $23,100,000 or 54 basis points of total loans at quarter end, up slightly from 48 basis points at 09/30. It's worth noting that $16,500,000 of this total is one commercial development exposure that we discussed last quarter. We continue to work through the challenges of this particular project, and are appropriately reserved for any loss exposure. Past due loans totaled $7,800,000 or 18 basis points, up slightly from 12 basis points at 09/30. It's not reflected on the slide, but worth noting that we realized net charge offs of $1,600,000 or four basis points of average loans for the year. This compares to $900,000 or two basis points in 2024. At this time, I would like to turn the presentation over to Gavin for his comments including the outlook for 2026. Gavin Moore: Thank you, Joel, and good morning, everyone. I'm going to start on Page 10 of our presentation. Page 10 highlights our strong regulatory capital position. I'd like to note our tangible common equity ratio has moved back into our targeted range of 8.5% to 9.5%. Additionally, 407,113 shares of common stock were repurchased for an aggregate purchase price of $12,400,000.0 in the year 2025. Turning to page 11. Net interest income increased $3,500,000 from the year ago period. Our tax equivalent net interest margin was 3.62% during the 4Q 2025 compared to 3.45% in the 4Q 2024 and up eight basis points from the 3Q 2025. Average interest earning assets were $5,160,000,000 in the 4Q 2025 compared to $5,010,000,000 in the year ago quarter and $5,160,000,000 in the 3Q 2025. Page 12 contains a more detailed analysis of the linked quarter increase in net interest income and the net interest margin. On a linked quarter basis, our fourth quarter '25 net interest margin was positively impacted by two factors. Change in interest bearing liability mix added nine basis points and a decrease in funding cost added 13 basis points. These were offset by a change in earning asset yield and mix of 13 basis points as well as interest charged off on a commercial loan, that was negative one basis point. On page 13, we provide details on the institution's interest rate risk position. The comparative simulation analysis for the 4Q '25 and 3Q '25 calculates the change in net interest income over the next twelve months under five rate scenarios. All scenarios assume a static balance sheet. The base rate scenario applies the spot yield curve from the valuation date. Shock scenarios consider immediate, permanent, and parallel rate changes. The base case modeled NII is slightly higher during the quarter due to nine basis points of model margin expansion. The NIM benefited from mix shifts in both assets and liabilities. On the asset side, solid commercial loan growth was funded by runoff in overnight liquidity, investments in lower yielding retail loans. Funding costs benefited from growth in non maturity deposits and a decline in wholesale funding. The NIM further benefited from a reversal of excess liquidity in the 4Q 2025. DNI sensitivity position is largely unchanged for rate changes of plus and minus 200 basis points. The bank has slightly more exposure to larger rate declines minus three and four hundred and larger benefit from larger rate increases plus 300 or 400. The shift in sensitivity for larger rate moves is due to shifts in non-maturity deposit modeling primarily caused by 50 basis points of Fed cuts during the quarter. Currently, 8.3% of assets reprice in one month and 49.2% reprice in the next twelve months. Moving on to page 14. Non interest income totaled $12,000,000 in the 4Q 2025 compared to $19,100,000 in the year ago quarter and $11,900,000 in the third quarter twenty twenty five. Fourth quarter twenty twenty five net gains on mortgage loans totaled $1,400,000 compared to $1,700,000 in the fourth quarter twenty twenty four. The decrease is due to lower profit margins and lower volume of loan sales. Mortgage loan servicing net was $900,000 in the fourth quarter twenty twenty five compared to $7,800,000.0 in the prior year quarter. The change due to price was a gain of $200,000 or $0.01 per diluted share after tax in the 4Q 2025, compared to a gain of $6,500,000.0 or $0.24 per diluted share after tax in the year ago quarter. The decline in servicing revenue compared to the prior year quarter is attributed to the sale of approximately $931,000,000 of mortgage servicing rights on 01/31/2025. As detailed on page 15, noninterest expense totaled $36,100,000 in the fourth quarter twenty twenty five as compared to $37,000,000 in the year ago quarter and $34,100,000 in the 3Q 2025. Compensation expense decreased $300,000.0, primarily due to lower performance based compensation expense, lower medical related costs, and lower payroll tax expense, and higher deferred loan origination costs due to higher commercial loan production. That was partially offset by higher salary expense. Data processing costs decreased by $300,000.0 from the prior year period, primarily due in part to a reimbursement from the core provider for billing overages and other credits received. That was partially offset by smaller increases in several other solutions and onetime charges relating to special projects. Income tax expense included a $1,800,000 benefit or $0.09 per share resulting from the execution of a tax credit transfer agreement related to the purchase of $22,900,000 of energy tax credits during the three month and full year ended 12/31/2025. That's compared to no such benefit in the prior year. Gonna move on to page 18. This will summarize our initial outlook for 2026. The first column is loan growth. We anticipate loan growth in the mid single digit range, and are targeting a full year growth rate of 4.5% to 5.5%. We expect to see growth in commercial with mortgage loans remaining flat and in installment loans declining. This outlook assumes a stable Michigan economy. Next is net interest income where we are forecasting growth of seven to 8% over FY 2025. We expect the net interest margin expansion of five to seven basis points in the first quarter twenty twenty six with successive quarterly increases of three to five basis points, primarily due to decreasing yields on interest bearing liabilities that's partially offset by a decrease in earning asset yields. This forecast assumes 0.25% cuts in March 2026 and August 2026 while long term interest rates increased slightly from year end 2025 levels. A full year 2026 provision expense for allowance for credit losses of approximately 20 to 25 basis points of average portfolio loans would not be unreasonable. Moving to page 19. Related non interest income, we estimate a range of $11,300,000.0 to $12,300,000.0 quarterly. We estimate total for the year to increase three to 4% as compared to 2025. We expect mortgage loan origination volumes to decrease six to 7% and net gain on sale to be down 14 to 16% compared to the full year 2025 results. Our outlook for noninterest expense is a quarterly range of $36,000,000 to $37,000,000 with the total for the year five to 6% higher than 2025 actuals. The primary driver is an increase in compensation and employee benefits, data processing, loan and collections, and occupancy. Our outlook for income taxes is an effective rate of approximately 17% assuming the statutory federal corporate income tax rate does not change during 2026. Lastly, the board of directors authorized share repurchases of approximately 5% in 2026. Currently, we are not modeling any share repurchases in 2026. That concludes my prepared remarks, and I would now like to turn the call back over to Brad. Brad Kessel: Thanks, Gavin. We've built a strong community bank franchise, which positions us well to effectively manage through a variety of economic environments, and continue delivering strong and consistent results for our shareholders. As we move through 2026, our focus will be continuing to invest in our team, investing in and leveraging our technology while striving to be Michigan's most people focused bank. At this point, we would now like to open up the call for questions. Operator: We will now begin the question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. First question comes from the line of Brennan Hawken of Hovde Group. Your line is now open. Brennan Hawken: Hey, good morning, everybody. Hope you're doing well. Brad Kessel: Good morning. Brennan Hawken: Let me just start off here kind of on market outlook here in Michigan. Can you just kick it off by offering your latest thoughts on the opportunity set you're seeing, particularly in Michigan given the M and A dislocation? And I guess if you added five commercial bankers in 2025, like, what what would the ambition set look like for banker ads in '26? Joel Rahn: Well, I'll take it. And Brennan, this is Joel. Good question. I would think in terms of our talent acquisition expectation, it's similar. We'll have some departures with retirements, etcetera, that we have to cover. But I think a net add of four to five bankers this year would be reasonable to expect. And in terms of opportunity in Southeast Michigan, we do think there will be opportunity there. It's just beginning. And so I think there's, you know, typically, the account side window opens first, and it can be some time before the customer feels the impact. But we're watching it closely and feel that it'll be accretive for us. Brennan Hawken: Okay. Thanks, Joel. Maybe one more for you before I step back. Just on the loan growth outlook for, I guess, 5% at the midpoint, I guess, like, typically, I think of your bank as a high single digit organic grower. So I guess just given the market opportunity you see what's pushing that range down to the mid single digit area? And and is there upside if payoffs behave a little more rationally in '26? Brad Kessel: Brennan, this is Brad. I'll jump in there, and I'd just say that over the last few years, we've actually reshaped the balance sheet. And particularly with the loan portfolios and our strategic emphasis. So of course, we've got the rundown in the investment portfolio, which has been funding our loan growth. But within the loan portfolios, the largest emphasis and where we've been investing in talent has been in Joel's group, that's the commercial banking team. And that has driven what I'd call the outsized growth rate for our company for that line of business. At the same time, we still have a very strong and robust lending talent and teams in the consumer and mortgage banking groups. Yet we're just putting less on in those categories on our balance sheet. And in fact, we forecast in '26 some shrinkage in the consumer portfolio. And that's not so much coming out of the branch channel. The shrinkage is really coming off of less originations from our indirect lending group. Which is as we've shared in the past, has always two focuses. One is marine, and the second is in RV. And we really have just not seen the same volume that we saw several years ago coming through the RV channel. The marine is still pretty good, but so when you add that all up, what ends up happening is you have double digit growth in commercial, but the lower level of net growth in mortgage and consumer get us to that somewhere mid single digit overall loan growth projected for 2026. Does that make sense? Brennan Hawken: Yeah. No. That that that's a helpful framework to view it through. I I guess just I'll sneak in one more on a related topic then. Just given how much of the loan growth has been funded by securities cash flows in the recent past, what is the outlook for that dynamic this year? Gavin Moore: Yes. So we got about a $120,000,000 of forecasted runoff in securities for 2026. And that that will fund loan growth. So we continue to intend to continue to remix that asset mix through next year. Brennan Hawken: Fantastic. Thank you for taking my questions. Joel Rahn: Thank you. Operator: Thank you. One moment for our next question. Question comes from the line of Damon DelMonte of KBW. Your line is now open. Damon DelMonte: Hey. Good morning, Hope everybody's doing well today, and thanks for taking my questions here. First one, just on the margin and the guidance provided around that. Gavin, just wondering if you could kind of walk through the cadence again for kind of what you expect here in the first quarter and then the forthcoming quarters after that? And then what were some of the drivers behind the optimism for a rising margin? Gavin Moore: Yeah. So, we're looking at five to seven basis points of expansion in Q1, and then Q2, '3, and four, we're forecasting three to five basis points of expansion each quarter. And that gets you to the overall forecast of, you know, 18 to 23 basis points on a year over year, full year basis. What's going on there is a couple things. One, just the benefit of we have two rate cuts in the forecast of March and August. We feel really good about our ability to see that 40% plus beta on the repricing down of deposits. The yield curve shape right now in terms of the forward yield curve is beneficial. The five to seven point of the curve is actually drifting a little bit higher. So we're creating we're getting some more slope in that respect. And then also, it's the continued repricing of below market assets as we go into 2026. Does that make sense, Damon? Damon DelMonte: It does. Yep. I appreciate that color. And then kind of just broader on capital management, just kinda given where capital levels are and you do have a buyback in place, just kinda wondering, I know it's not in your guidance and your forecast, but just kinda wondering what your appetite is for buybacks? And then also, you know, how how do you view the M and A landscape right now? Are there any interest in trying to pursue a merger with another company? So just kinda curious on your thoughts around that. Gavin Moore: I'll start with capital and then hand it over to Brad. I I would just say that we're really excited about the capital build and outlook for the organization. And that provides us with a tremendous amount of flexibility, and that's really what we're focused on. Obviously, the dividend is very important. We just announced a significant increase of over seven and a half percent. The board approved and we wanna continue to have a stable and growing dividend. But with that capital build, it's going to allow us the flexibility to do share repurchase when we think the price makes sense. So I just really am excited about the capital position today. Brad? Brad Kessel: Yeah. Very good, Gavin. And in regards to the M and A and M and A in the Michigan market, of course, you've got the Fifth Third Comerica which well, that's not directly impacting us. Indirectly, as it goes back to Joel's remarks, we think there's an opportunity for talent and customer acquisition. Across the state, today, we have 80 plus or minus Independent Michigan based community banks. I think we'll see consolidation at a similar pace to what we've seen historically in Michigan. And that's probably somewhere between 4-6%. Who they are, I'm not sure. Our appetite, we would be very interested depending on the specifics. And so that would include sort of strategically or geographically, how does it fit the footprint, the overall size, you know, and not wanting to maybe well, wanna be cognizant of all the other good work we've got going on organically. So I think the culture, obviously, would be very important. The metrics need to work in it. We need to materially add to EPS and at the same time, we're very respectful of not wanting to dilute our existing shareholders. So I would just step back and just say M and A for Independent is, it could very well happen but is not a requirement for us to continue the success that we've experienced historically over the years. Damon DelMonte: Great. That's excellent color. I appreciate that. That's all that I had. Thank you very much. Gavin Moore: Thanks, Damon. Operator: One moment for next question. And our next question comes from the line Nathan Race of Piper Sandler. Your line is now open. Nathan Race: Hey, guys. Good morning. Thanks for taking the questions. Gavin, just going back to the margin discussion, could you update us just in terms of how much cash flow you have coming off the bond portfolio each quarter and what the magnitude of or the amount of loans that you have that are repricing higher and what that amount looks like in terms of that yield pickup? Gavin Moore: Yeah. Give me one sec. So the bonds, the run rate for 2026 is a $120,000,000. And that's I think it's fair you could model that as pro forma or split it up equally per quarter. On the loan side... Nathan Race: Maybe to ask another question while you dig that up, Gavin. Brad, just thinking, you know, more holistically about the balance sheet composition. Just curious what the appetite is to maybe trade some of your excess capital. And, obviously, you guys are gonna be building capital at pretty strong clips just given the profitability profile. But just what the appetite is, maybe trade some regulatory capital to maybe reposition the securities book, whether it's on the AFS or HTM side of things? Brad Kessel: You know, that's a good question Nathan. And we revisit that strategy regularly. Historically, we've sort of nibbled at selective investment sales and, generally where we can earn it back within a reasonable time frame. But we've had the book. It's running off. And I'm not sure you're really gonna see Independent needing to accelerate that, taking losses, and I just that's not really in the strategy at this point. Nathan Race: Okay. I appreciate that. Maybe one more from me. Just in terms of what you're seeing or expecting from a charge off perspective, I appreciate the provision guide, and charge offs have been really well behaved over the last several quarters now. But just any thoughts maybe, Joel, in terms of any normalized expectations around charge off range going forward? Joel Rahn: Yeah. I think we see it being very similar to the past few years. We really don't see any big change in that profile. And I can't recall, Gavin, if in your guidance, if you had any specific range there. Gavin Moore: Well, we said the provisioning would be 20 to 25 basis points. And that provision's gonna be a function of more loan growth than anything. Brad Kessel: But I think the charge off history, recent history has been really, really well. And I think probably it is unrealistic to expect that indefinitely. The charge offs really today have been in the consumer loan portfolio. And the biggest driver has been quite frankly, due to a customer passing away and then getting the collateral back in and then disposing of it. But I think somewhere in our recent history, maybe a little bit higher, could be modeled on a go forward basis. Joel Rahn: Agree with that. Gavin Moore: Nathan, I I have the details for your question on cash flow repricing. Average quarterly for 2026 is gonna be about $105,000,000 at an exit rate on average of $5.50 at current speeds, CPRs. Nathan Race: And that's the commercial book or just overall, Gavin? Gavin Moore: That fully... I mean, that's the entirety of our fixed rate portfolio. So that includes mortgage. Commercial is going to run about for the year, it's about $220,000,000. My totals were off. Let me... total commercial is around $220,000,000 for the year. Nathan Race: Okay, quite substantial then. Yeah. That's all I had. I appreciate all the color, guys. Thank you. Joel Rahn: Thanks, Nathan. Operator: Thank you. One moment for our next question. And our next question comes from the line of John Rodis of Janney. Your line is now open. John Rodis: Hey, good morning guys. Gavin, just following up on the securities portfolio. You said runoff of roughly $120,000,000. Does that all... I mean, are you looking to reinvest any into the securities portfolio at this time? Or I think looking at my prior notes, I think you said sort of targeting securities portfolio, you know, 12 to 15% of assets. Is that still sort of the thought process? Gavin Moore: That is, John. And I don't think we'll get through 2026 without doing any securities purchases. John Rodis: Okay. But if you look... I know 2027's a long way away, but could you maybe hit a bottom then, I guess? Gavin Moore: Yeah. I anticipate in 2027, within 2027, we'll start to reinvest. 12 to 14% of total assets is still a target for us in terms of triggering investment purchases. So that's still the strategy there, John. Brad Kessel: Yeah. Okay. John Rodis: Thanks, Brad. Brad, maybe just a follow-up on the M and A question. You guys talked about through the normal course of business sort of adding a handful of bankers each year. I mean, would you be open to picking up a team of lenders or anything like that? I know it gets a little bit tougher when you add teams as far as culture and stuff like that, but what are your thoughts? Brad Kessel: Yeah. I mean, that has not been the pattern historically. But I would say we'd be open to that. Joel, what what are your thoughts on that? Joel Rahn: Yeah. Certainly open to it. That doesn't happen very often. It's fairly rare. And we've just had really good success in just going after one banker at a time. And so I would expect that's where the majority of our ads will continue to come. Brad Kessel: Sort of one banker at a time and then building a team. Joel Rahn: Correct. Yeah. John Rodis: Okay. Thanks, guys. You're sort of breaking up a little bit, but I think I get the picture. Thank you. Brad Kessel: Thanks, John. Operator: I'm showing no further questions at this time. I'll now turn it back to Brad Kessel for closing remarks. Brad Kessel: In closing, I would like to thank our Board of Directors and our senior management for their support and leadership. I also want to thank all our associates. I continue to be so proud of the job being done by each member of our team. Each team member in his or her own way continues to do their part toward our common goal of guiding customers to be independent. Finally, I would like to thank each of you for your interest in Independent Bank Corporation and for joining us on today's call. Have a great day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

69天前Insight Analytics约5分钟阅读

EQBBF 2025 Q4 财报电话会议

Olof Svensson: Good morning, everyone, and welcome to the presentation of EQT's full year results. We have a lot to cover today. Per will start off by reflecting on our strategic positioning and today's announcement that we're entering the fast-growing secondaries market by joining forces with Coller Capital. Teaming up with Coller strengthens our ability to serve clients globally and it unlock growth opportunities for both firms. The transaction is accretive to our fee-related earnings. It accelerates our growth outlook and it will further diversify our platform. Before handing over to Per to share more details, let me share a few highlights on 2025. First, it was our most active exit year ever with fund exits and realizations for co-investors of EUR 34 billion. We invested EUR 16 billion across our strategies globally while providing a co-invest ratio for our clients of close to 1:1. It was a pivotal year for EQT's expansion into evergreens and open-ended strategies across the globe with new product launches and accelerating inflows. We continued to deliver on our fundraising agenda, more than doubling gross inflows to EUR 26 billion. All our key funds continue to develop on or above plan, and our more recent vintages in particular performed strongly. EQT delivered total revenue growth of 16%, while keeping head count largely flat year-over-year. So with those remarks, let me hand over to Per to go through things in more detail. Next slide, please. Per Franzén: Thank you, Olof. Good morning, everyone, from Davos. We have very exciting news to share this morning, and we'll come back to Coller shortly. I'll start by saying a few words about the private markets industry and our strategic positioning. EQT remains well positioned to navigate a fast-changing world and to capture the growth opportunity ahead. There are a number of forces shaping our industry. The geopolitical backdrop remains volatile. We continue to see private market investors wanting to rebalance their portfolios as they are looking to achieve a better global diversification. At EQT, we are well positioned to navigate this environment and to help our clients achieve their strategic portfolio objectives. We want to be the most attractive global provider of international alpha. Through our global sector teams, we engage with our clients to align on their pipeline priorities. And with the help of our local teams in more than 25 countries, we can move quickly in times of market dislocation to unlock attractive thematic opportunities. The combination of our global sector teams with our strong local presence helps us deliver structural uncorrelated alpha as often the sources of alpha across those various countries and regions are uncorrelated. A good example of the investments that we've made into our global platform and how it's paying off is Japan. We built our local presence in Tokyo over many years. And in 2025, we were able to reap the benefits of those investments. In our private capital strategies, we created 2 attractive public to private opportunities, and we continue to have a very attractive pipeline in Japan going forward. The second force, AI that I'd like to touch upon, that will have an impact on most sectors and businesses that we invest into, including, of course, also our own industry and how we run our business at EQT. At EQT, we keep on investing in our AI capabilities. On the investment side, we continue to back AI-driven tailwinds in our early-stage strategies. We make investments into native AI companies. Harvey and Lovable are 2 good recent examples. In our infrastructure platform, we keep on investing into globally leading data center platforms. One of our companies, EdgeConnex is a good example of that, but also into fiber assets and into energy platforms. We're also driving AI adoption across our organization, deploying advanced solutions that enable better decision-making and help us realize synergies across our platform. Over time, we believe that this will help us run our business in a better way, but also in a more efficient way. Private wealth and insurance remain 2 attractive growth opportunities where we see new capital pools emerging. We're making the necessary investments to build our capabilities in those areas, and we expect to see significant capital inflows in this part of our business. Coller will be a catalyst for the insurance segment as we will get access to their capabilities within structured solutions. The rise of secondaries continues, and this part of the market will also going forward, outgrow the rest of the industry. There's a number of structural forces driving that growth. Private markets have grown in size and in relevance. And in some regards, they've become more complex, and we also see public and private markets converging. Clients want to be able to ride the winners, and they want to stay invested in compounding open-ended structures. On the other hand, there's also been a lack of distributions in our industry post pandemic, we saw a slowdown in dealmaking. And as a result, many firms are not able to raise new funds, and that has created more and more zombie funds in our industry. And all of this drives a need for clients to be able to restructure their private market portfolios and to find good liquidity solutions. And in this context, Coller will be an important enabler and really further strengthen our ability to be that strategic partner for our clients. Finally, we see the consolidation of the industry accelerating. Not everyone in the private markets will be able to navigate this environment. We'll be able to make the necessary investments to capture that growth opportunity ahead. So size and reach matter more than ever when it comes to creating real alpha and when it comes to serving clients in the best possible way. And our global platform, our size, being the largest private markets firm in the world outside of the U.S., will continue to be a true differentiator for us. Next slide, please. At EQT, we remain committed to our long-term strategic ambition to keep on building the most attractive scaled private markets firm, delivering industry-leading performance and solutions for clients. By continuing to be that client-centric firm focused on delivering attractive risk-adjusted returns for investors, real alpha, we will also be able to attract the best talent in our industry to our organization and to our portfolio companies. And really that way, creating that virtuous circle that will give us the license to keep on scaling our firm and as a result, over time, also delivering attractive sustainable value creation for shareholders. Next slide, please. In 2025, we made good progress on our strategic ambitions, and we executed well in a volatile environment. We took the opportunity to simplify our organization to ensure that we can remain that entrepreneurial, fast-paced, high-performing organization. We successfully completed a number of leadership transitions. We streamlined our organizational structures and reinforced our focus on accountability, performance and efficiency across the platform. We also integrated our client relations, capital raising and capital markets teams, creating one unified platform well set up to deliver a seamless experience for institutional clients and private wealth distribution partners. And all of this makes us also well prepared to add Coller now as a new business line to the EQT platform. In 2025, we stayed disciplined in our investment pacing, producing a record year for co-investments. We facilitated EUR 14 billion of co-investment opportunities for our clients. That is up from EUR 12 billion in 2024. And we want to -- this is an important tool for us to also going forward, create those deep strategic relationships with the institutional investors. And we want to -- we remain committed to continue to produce that most attractive co-invest to fund commitment ratio in our industry. We did a superb job really in driving realizations in a tricky exit environment. 2025 was actually our most active exit year ever with EUR 34 billion in total of realizations, and that includes EUR 14 billion of realizations out of co-investments that were done together with our clients. And that is just massive outperformance compared to the wider private markets industry in terms of those realizations. A good example is our equity strategy, which is our oldest strategy at EQT. In that part of our business, we sent back close to 30% of NAV, which is approximately 3x the industry average. And notably, we set a new record for distributions and capital gains from a single investment. So in Galderma, in 2025 alone, we realized more than EUR 9 billion of proceeds for fund investors and for our co-investors. And this actually excludes the stake sale that we have announced to L'Oreal that is yet to close. And this investment has generated more than $20 billion so far in capital gains for investors. As a result of that strong performance, we saw a good fundraising momentum. We more than doubled gross inflows to EUR 26 billion. Our evergreen offerings targeting the private wealth segment saw inflows of approximately EUR 2 billion. And we also introduced our first open-ended institutional product, which is exciting. This is the second generation of our active core infrastructure strategy. And the portfolio in Fund I is performing very nicely, and we really see a strong client interest for this fund. Next slide, please. As you've heard me say, I think, many times before, we have actively been looking to establish a presence in the secondaries market for some time now, actually. And this is one of the fastest-growing parts of our industry and building our capabilities in this area is really critical so that we can become an even more stronger and attractive strategic partner for our clients. And so today, I'm just very, very pleased to announce that we have reached an agreement to join forces with Coller Capital. This is really a highly strategic and complementary combination. By joining forces with Jeremy and his team, we want to build a market-leading secondaries platform together. We really have a very high bar for any M&A that we do at EQT and the fit must be just very, very strong. And in this case, from a strategic, performance, culture perspective, Coller checks all the boxes. The strategic fit between our 2 firms is simply excellent. It's highly complementary. And most importantly, the cultural fit, the values fit is very strong. Similar to EQT, Coller is a performance-driven and entrepreneurial organization focused on delivering consistent long-term solutions and returns for investors. And just like EQT, Coller also has that constant improvement mindset and that relentless drive to continue to drive innovation and stay ahead of the curve. At EQT, we like to say everything can always be improved everywhere at all times. Coller's version of this is better never stops. I'm very excited to welcome Jeremy and the entire Coller team to our firm. And I really look forward to working closely with Jeremy as part of the executive leadership team. And together, we will be just incredibly well placed to deliver the most attractive solutions and the most attractive performance for private market investors and to really fully capture that growth opportunity ahead that we see in secondaries. I'll now hand it over to Gustav, who will cover the highlights from our 2025 results together with Olof and Kim, and I believe starting with fundraising. So next slide, please. Gustav Segerberg: Thank you, Per, and good morning, everyone. In 2025, we executed strongly on fundraising across the platform and more than doubled inflows versus last year. Starting with the key funds. Fundraising for BPEA IX continued with strong momentum, having raised $14 billion as of today. We expect to close at the $14.5 billion hard cap in the first quarter. Fundraising for EQT XI continues to be off to a strong start, further helped by the strong exit pace during 2025. Note that in our reporting fee-paying AUM, it does not include EQT XI until activation. And later this year, we expect to launch fundraising for Infrastructure VII. So moving over to our other closed-ended strategies. We are advancing our Healthcare Growth and transition infrastructure fundraisings, having raised approximately EUR 3 billion combined, and we expect to conclude fundraising for Healthcare Growth momentarily. In the fourth quarter, we activated our latest European real estate logistics fund. The fund is expected to close in Q1, and our reporting fee-paying AUM includes almost EUR 3 billion of commitments versus the size of the last fund at EUR 2.1 billion. And then finally, on evergreens and open-ended institutional strategies. In 2025, EQT launched 3 new evergreens, Nexus Infrastructure and Nexus ELTIF Private Equity distributed in Europe and APAC, and a U.S. domiciled private equity vehicle. Hence, our evergreen offering consisted of 5 vehicles at the end of 2025, and we raised close to EUR 2 billion in 2025, while reaching an NAV of around EUR 3.5 billion by year-end. And just last week, we launched a U.S.-domiciled evergreen structure for infrastructure. During the year, we've also introduced our first open-ended structure for institutional clients, as Per mentioned, with our active core infrastructure strategy. This fund is yet to be activated and is not in our fee-generating AUM number as of year-end. However, we continue to be very excited about the prospects of scaling this strategy in the coming years. We've also decided to pursue our first continuation vehicle based on EdgeConneX. This will be an open-ended structure that will allow us to continuously support EdgeConneX's long-term growth opportunity. And with that, I will hand over to Olof to cover investments and realizations. Next slide, please. Olof Svensson: Great. Thank you, Gustav. So looking at the investment activity in 2025, I'd say it reflects our global sourcing machine and our thematic focus. 45% of the EUR 16 billion of fund investments were invested in Europe, about 1/3 in North America and the remaining 20-ish percent across APAC. We invested in a number of high-quality businesses throughout the year, be it the cloud-based software companies such as Fortnox or NEOGOV; industrial tech businesses like Fujitec in Japan or as Per mentioned, AI native investments such as Lovable and Harvey. In real estate, we continue to see attractive risk/reward dynamics. And in our flagship and transition strategy, we invested in areas such as energy, grids, AI infrastructure and transportation companies. And on that note, please do make sure to take the Arlanda Express when you next come and visit us in Stockholm. In total, we provided a further EUR 14 billion of co-invest for our clients, a co-invest ratio of close to 1:1. EQT X and Infrastructure VI are now about 60% to 65% invested, while BPEA IX is 5% to 10% invested. We expect to activate EQT XI around midyear 2026 and Infra VII around year-end. Next slide, please. Turning to exits. It was a breakthrough year in 2025 for exits. Volumes in the EQT funds amounted to more than EUR 19 billion or 70% higher than last year's volumes. Around 2/3 of the fund exits were from funds in carry mode. In addition, we realized EUR 14 billion for our co-investors. The strong activity means that we reached the ambition communicated at the start of the year to execute more than 30 exit events across our key funds. Key fund exits were made at an average gross MOIC of 2.6x above our target return levels. Roughly 40% of the fund exits were minority sales and secondary buyouts. Early in the year, we announced a minority sale in IFS at a gross MOIC of 7x. This is an example of how we actively work with portfolio construction, sending back EUR 3 billion to fund investors while continuing to own an asset that is expected to have an outsized impact on the fund returns for EQT IX. 1/3 of the exits were equity capital markets transactions. And as a result, EQT retained its position as the most active private markets firm across global equity capital markets for the second year in a row. Looking ahead, we believe that fund exits in 2025 is a relevant proxy for '26 if markets continue to be favorable. Our gross pipeline for 2026 is, in other words, similar to 2025 when we had gross realizations of close to EUR 20 billion. And with that, I'll hand over to Kim. Kim Henriksson: Thank you. Thank you, Olof, and good morning, everyone. All of our key funds continue to perform on or above plan. And during the year, key fund valuations increased by 8% on an FX-neutral basis, but let's look at performance by vintage. 4 out of 5 funds raised in 2019 or before are performing above plan, and most of these funds are in exit mode and already derisked. Funds raised 2020 to 2021, which are still in value creation mode, performed predominantly well with value creation of 10% plus on an FX-neutral basis. We did face some headwinds related to idiosyncratic events in a few individual portfolio companies. But with 350 portfolio companies globally, we will always have certain underperforming assets. Risk-taking is part of our model. As a reminder, historically, about 10% to 15% of our investments have returned less than 1x gross MOIC, while the total portfolios have still delivered on or above target returns. In 2025, we also realized some assets with subpar performance, enabling us to refocus on the part of the portfolio where we can create more value. Overall, underlying operational performance was solid across the portfolio and particularly so in our latest generation of key funds, which increased by 15%, excluding FX. 1/3 of our investments in these funds are already performing ahead of plan. Next slide, please. In 2025, carried interest and investment income increased to EUR 448 million on the back of the strong exit activity in funds in carry mode. Looking into 2026, we expect that carried interest will continue to be paced by the key funds already in carry mode. And please note that the figures on this page are based on a simplified and illustrative on-plan scenario. To date, the 4 funds in carry mode have recognized EUR 1.3 billion of carried interest and roughly EUR 600 million remains, and we continue to expect the remaining carry from these funds to be recognized over a multiyear period. The next 2 funds expected to enter carry mode, Infra IV and EQT IX are currently executing on their value creation and realization plans. And we do not expect these funds to enter carry mode in 2026, in line with our previous communication. The final bucket includes the most recent key fund vintages, which are still in value creation mode. In total, the remaining illustrative carry potential in the key funds activated as of today is approximately EUR 9 billion. This is a simplified round number based on a number of assumptions, which are outlined in the appendix. Next slide, please. Let's now look at the financials in a bit more detail. In 2025, we grew fee-related revenues by 9% and delivered a fee-related EBITDA margin of 52%, reflecting also the continued investments we make in our business, for example, the build-out of the evergreen offering. As you know, we initiated and completed a number of efficiency measures during the second half of 2025. And as a result, the number of FTEs was broadly flat year-over-year. We expect to see the full year cost effects of this in 2026 and therefore, expect mid-single-digit total OpEx growth this year. Run rate savings from the efficiencies will, to a degree, be reinvested to support future growth in our priority growth areas, including focused geographies such as Asia and the U.S., focus areas such as AI capabilities, private wealth and of course, the build-out of our new secondaries business. We're ramping up marketing and brand spend, which will remain at meaningfully higher levels going forward. We remain committed to reaching a 55% plus fee-related EBITDA margin at completion of the current fundraising cycle. And we're highly focused on efficiency, scaling and automating parts of our work, including through increased AI adoption. We will continue to keep you posted on this progress and how we see the OpEx outlook beyond 2026. Let me also come back later in the presentation on how the combination with Coller impacts our financials. The Board has proposed a dividend of SEK 5 per share for 2025, representing a growth rate of 16%. And during 2025, we distributed approximately EUR 460 million in dividends to shareholders. And in addition, we repurchased shares for around EUR 300 million. Let me also spend a brief moment on our new revenue disclosures. We have, in our income statement, introduced the concept of fee-related revenues, which consists of the underlying management fees, fee-related performance revenues and transaction, advisory and other fees. Fee-related performance revenues are revenues from our evergreen products that are measured and received on a recurring basis and do not require the realization of underlying assets to materialize. Transaction, advisory and other fees include fees from, for example, debt and equity underwriting and other capital markets activities. With that, I will hand over to Per to cover the Coller combination. Next 2 slides, please. Per Franzén: Thank you, Kim. As I mentioned earlier, secondaries and solutions is becoming an increasingly important part of the private markets ecosystem. GPs are looking for ways to hold on to their best assets for longer, driving the growth of continuation vehicles or GP-led secondaries and LPs are seeking strategic liquidity tools and the ability to actively rebalance their portfolios where LP-led secondaries are a key enabler. And secondaries have now become one of the fastest-growing parts of our industry, and that the market actually grew by more than 40% in 2025 and is expected to more than double from now until 2030. And continuation vehicles are today driving close to 20% of global exit volumes. Next slide, please. With Coller, we're really happy that we found the right partner to enter this segment at scale. Coller shares our values-driven culture, a strong performance mindset and that drive to constantly innovate for clients with an entrepreneurial approach. As a pure-play dedicated secondaries firm, Coller is 100% complementary and a perfect match for us. I'll now hand it over to Gustav to tell you more about Coller's track record, Coller's offering and its client base. Next slide, please. Gustav Segerberg: Thank you, Per. As a pioneer in secondaries, Coller has led many of the first in the industry, such as leading the first ever GP-led transaction almost 30 years ago and continuing to innovate across product categories and client channels. Coller has 35 years of proprietary data from more than 25,000 companies has incorporated AI-enabled underwriting into its investment process. This enables faster and more precise investment decisions, aligning very well with EQT's data-driven investment approach and leading AI capabilities. Their strong investment track record and ability to innovate has allowed them to expand from a single flagship fund in 2021 to today having a multiproduct and multichannel offering investing across both private equity and private credit secondaries. The private equity secondary strategy recently held a successful final close of Fund IX at USD 10.2 billion of fee-generating commitments, up more than 35% compared to the last generation. Since launching the private credit secondary strategy in 2021, Coller has already been able to raise 3 funds with a total of close to USD 5 billion in fee-generating commitments. Next slide, please. The team also shares our strategic commitment to the private wealth opportunity, and their journey closely resembles ours. They -- like us, they have a very deliberate and disciplined focused on product development to launch and ramp up products across asset classes and geographies. Since 2024, Coller has launched 4 evergreen products in total with the current combined NAV of more than USD 4 billion. And expansion continues to show great momentum and inflows are around USD 200 million per month. Coller also recently announced a strategic partnership with State Street along with State Street's investment in Coller. Their partnership gives a unique opportunity to go after the 401(k) market in the U.S. We look forward to exploring what we can do together to strengthen the global distribution of the combined evergreen platform. Next slide, please. Insurance is 1 of the most interesting capital pools in private markets. However, insurance companies operate in a highly regulated environment with strict requirements around capital charges, duration matching, liquidity, ratings and asset-liability management. To participate at scale credit exposure, secondaries and strong structure capabilities are required. This is an area where EQT on a stand-alone basis has been limited on a structural basis, and where Coller today is the clear market leader. Coller is the preferred partner to insurance clients with deep relationships and in-house structuring expertise. They have reached over USD 5 billion in structured products in the last 2 years, including the largest CFO backed by secondaries at USD 3.4 billion. This is a significant growth opportunity for the combined platform and where EQT's scale will be a key enabler. Next slide, please. We believe that this combination and more diversified secondaries platform by bringing together complementary strengths, we can accelerate innovation, deepen client relationships across both institutional and private wealth clients. Together, EQT and Coller are very well positioned to accelerate insurance-related product -- and to Per. Next 2 slides, please. Per Franzén: Thank you, Gustav. In 2025, we took the opportunity to simplify our organization and to clarify our governance to put us in the best possible position to be able to accelerate our strategic M&A agenda. So today, we are very well prepared to add Coller to EQT and to support Jeremy and the team to accelerate their growth independent investment committee. Next slide, please. The Coller team has demonstrated strong fundraising momentum, most recently with the successful close of Fund IX and has earned the strong client trust to expand into new strategies such as credit secondaries over recent years. Today, Coller has around 600 clients and more than half of those will represent new client relationships for EQT. At the same time, EQT brings a base of around 1,400 institutional clients, of which more than 900 clients are not currently invested with Coller, representing a significant opportunity to accelerate growth across the combined platform. The client bases are also complementary. EQT has a strong footprint with sovereign wealth funds, while Coller is more heavily weighted towards private wealth and insurance. So together, we will be able to offer clients a broader and more flexible range of solutions from primary investments to tailored liquidity solutions within one global platform with a real focus on generating alpha and performance. I'll now hand it over to Olof to comment on the transaction structure. Next slide, please. Olof Svensson: Thank you very much, Per. So let me talk about how we have structured this to ensure alignment of interest and this growth orientation. The transaction entails 100% of Coller and EQT will be entitled to 35% of carried interest in all the future funds in line with the EQT setup. We are also acquiring 10% of the carried interest in Private Equity Fund IX that Per just referred to. The deal construct includes a base consideration of $3.2 billion with a growth-oriented contingent consideration in 2029 of up to $500 million. The contingent consideration is structured to incentivize strong growth in the business with full consideration dependent on delivering high 20s, almost 30% fee-related revenue growth until 2029. The base consideration of $3.2 billion will be funded in newly issued EQT AB shares, creating a strong alignment to drive value. At closing, the shareholders of Coller will own approximately 6.5% of EQT, where Jeremy is the main shareholder of Coller's business today. Closing of the transaction is expected in the third quarter of '26. And with that, I'll hand over to Gustav to give us the combined fundraising outlook. Next slide, please. Gustav Segerberg: Thanks, Olof. I'll start on the evergreen side, where the joint offering will compromise more than 10 vehicles distributed across U.S., Europe and Asia. In terms of inflows, Coller increases the H2 2025 annual run rate to around EUR 4 billion. As only 7 out of the 10 plus evergreens where operational during that time frame, we hence expect 2026 to be significantly higher than the H2 2025 annual run rate. We believe that there are significant revenue synergies for the evergreens through the strengthened combined private wealth organization. By leveraging EQT's banking relationships to further accelerate Coller's distribution reach and by jointly tapping into EQT's brand and marketing capabilities. For reference 100% of Coller's evergreen inflows are incremental to fee-generating AUM. Next slide, please. So we are now a bit more than 1 year into our current of that EUR 100 billion based on the funds activated. 2026 is set up to be a very active fundraising year for EQT with 3 flagship funds, a number of other closed-ended strategies and of course EUR 25 billion to EUR 30 billion to the total amount effectively increasing it to roughly EUR 125 billion to EUR 130 billion. And with that, I will hand over to Kim. Next slide, please. Kim Henriksson: Thanks, Gustav. First, a few words on the latest flagship fund, the introduction of credit secondaries and the expansion into private wealth evergreens and structured products. Fee-related revenues were approximately $330 million, nearly all of which were management fees. This number includes catch-up fees as Fund IX was activated in July 2023 and closed on 31st of December 2025. However, it does not reflect the run rate management fees from evergreens due to fee holidays for some products in 2025. From 2026 onwards, all private wealth evergreens will be charging full fees. Across funds, the average fee rate is about 1% and in general, charged on committed capital. It's worth noting, though, that the private wealth evergreens in general charge somewhat higher fee rates with NAV as the fee base and that we see this channel growing faster than the closed-ended funds. Expect Coller to generate fee-related revenue of between $350 million to $375 million. Adjusting for catch-up fees, fee-related revenue is expected to grow in the range mentioned, the 2029 contingent consideration is based on growth in the high 20s. On costs, Coller has a similar profile to EQT, where the majority of operating expenses are salaries and other personnel-related costs. Then fee-related EBITDA margin at around 50%. Next slide, please. So what does the above then mean for the combined platform? We expect Coller to accelerate our fee-related revenue growth from day 1. In terms of carry, the acquisition will not impact our outlook for a number of years since the first fund where EQT has right to carry is a 2024 vintage. As I mentioned, today, Coller has a somewhat lower fee-related EBITDA margin than EQT. But in the near to midterm, however, we expect Coller to be in line with EQT's margin and to grow fee-related expenses. As a result, we maintain our ambition to reach a 55% fee-related EBITDA margin at completion of the current fundraising cycle. I'll now hand over to Per for some concluding remarks. Per Franzén: Adding Coller to EQT is a significant milestone in the development of our firm. Secondaries represents one of the fastest-growing parts of the private markets industry. We're confident that Coller is the best possible platform to build a market-leading secondaries franchise being a pioneer in the space with more than 3 decades of track record and experience. Next slide, please. The combination really means a step change for EQT in terms of scale, growth and revenue profile. Coller will add approximately EUR 28 billion of fee-paying assets under management and EUR 42 billion of total AUM. We will have a combined AUM of approximately EUR 312 billion. And to our business, we also significantly diversify our fee-related assets under management. Secondaries will represent about 15% initially of that fee-related fee-based assets under management, but it is expected to represent a significantly larger share over time. The acquisition will enhance our growth profile, and we aim to double Coller's fee-generating assets under management in less than 4 years. This means that 5 years from now, the mix of EQT's business will be much more well balanced across our business lines, private capital, infrastructure, real estate and secondaries. And we also see a very attractive opportunity to accelerate growth and scale of our real estate platform in the years ahead. Finally, we now manage strategies that, to some extent, are somewhat also countercyclical, if you will, creating an even more resilient and well-diversified revenue profile. As we look ahead with this transaction, we have created a platform that is even better positioned to attract and retain the best people in our industry and to continue to serve our clients, a more attractive, resilient and higher growing platform. With that, I open up for questions. Operator, please. Operator: [Operator Instructions] Olof Svensson: Operator, can I say a few words before we have the first question? Operator: Yes, please proceed. Olof Svensson: Thank you. So as you can imagine, Per is on a tight schedule in Davos today. So our suggestion is that we keep the Q&A open for about 45 minutes. And to make sure that everybody has time to ask questions, I would very humbly and politely suggest that you keep it to 2 questions each. And as always, we're, of course, available for any follow-ups after the call today. So let us aim for that and really looking forward to the Q&A session. Operator: And now we're going to take our first question, and it comes from the line of Oliver Carruthers from Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Two questions on Coller, please. So I guess you're acquiring a revenue fee stream in a growing asset class that's accretive to EQT, but you've also acquired this knowledge base in wealth. So can you talk to how you think this might help as you build out your existing wealth and evergreen business? And do you think this will accelerate the uptake of your existing Nexus products? So that's the first question. And the second question on this transaction. I may be wrong, but I don't think Coller has a dedicated infra secondary strategy. And so my guess would be that EQT is one of the largest global value-add infra managers, could add value here? And is this a kind of white space that you could go after? Because it feels like the use case for GP-led secondaries in infra could be even higher than it is in private equity over time because you have these platform build-outs like EdgeConneX that are very long-term assets that need capital and maybe don't fully belong in drawdown funds. So any thoughts there would be helpful as well. Per Franzén: Good questions, Oliver. I think the answer is that in both of those areas, on the private wealth side, evergreen side as well as on the infrastructure side, we see attractive growth opportunities ahead and are both good examples of why we're stronger together. But Gustav maybe you want to elaborate? Gustav Segerberg: Yes, happy to do that. And just echoing what you said, Per, so to speak. I think on the evergreen side, of course, this -- what this enables us, we get 2 strong evergreen organizations, both from a sales perspective, from a product development perspective, where we get to a completely different scale on a combined basis. So I think there's a lot of opportunity there, including joint products going forward in at least a midterm perspective. I think same on the infra side. This is, of course, one of the key areas where we see that there are complementary capabilities in terms of that Coller is very, very strong on the secondary side. We are very, very strong on the infra side and as well on the real estate side. So going forward, we see that this is, of course, a very interesting growth opportunity for us to attack on a joint basis and where we combined will have a very good right to win in that aspect. Operator: Now we're going to take our next question. And the question comes from the line of Arnaud Giblat from BNP Paribas. Arnaud Giblat: I've got 2 questions, one on Coller and one on your infra business. On Coller, could you -- when I step back and just look at who are the largest GP-led secondary fund, typically, there are quite a few, including Coller before the acquisition, being independent and not having a very large direct business. So I'm just wondering how you're thinking about that? Do you see a need to operate a bit at arm's length? How is that going to be pitched to investors? I'm just wondering if there's any risks around that and how you intend to put that to investors. My second question is -- thanks for the update on -- in terms of what you intend to do with EdgeConneX and wrapping that into a longer-term structure. I'm just wondering if you could give us a bit more detail in terms of the mechanics, how much of enterprise value would EdgeConneX come into this continuation or long-term fund? And how you're thinking about fundraising around that? Per Franzén: Good questions. I'll let Gustav talk about EdgeConneX and provide more details on that transaction. In terms of the combination with Coller. As I mentioned in my presentation, right, I mean, we've really organized ourselves in a way so that it's very easy to add on a platform such as Coller and also to have that platform continue to be run in a very independent way so that the Coller team can serve clients and its stakeholders in the right way and in the best possible way going forward. And that's the intention also with the combination. That's how we'll organize ourselves. As I said, Coller will have an independent investment committee going forward and will be a separate business segment of EQT, where we will, of course, collaborate as was mentioned earlier, is in the areas around branding, marketing, also on the client relations side, where we can leverage the strong combined sales force that we have, both on the institutional side and on the private wealth side, right? And that's also how previous transactions have been structured and done in this space in the past, and that's what we intend to do also here when it comes to the combination between EQT and Coller. And Gustav, why don't you address the question on EdgeConneX? Gustav Segerberg: Absolutely. So due to where we are in the process, I can't go into, let's say, details about the size or the terms at this point in time. So we'll come back to you on that at the right time. I think what we can say in general is, so to speak, that we're super excited about this opportunity because, of course, it allows us to really continue to support the company for the long term as there is a very, very significant growth opportunity here in the data center area, so to speak. And therefore, it was also important for us to create this into an open-ended structure. Operator: Now we're going to take our next question and it comes from the line of Hubert Lam from Bank of America. Hubert Lam: I've got 2 of them. Firstly, I just wanted to check your expectations for exits in 2026. I think you said you expect it to be similar to 2025. Just wondering why not better? And also, does this mean that we should expect a similar carried interest as in 2025? The second question is on Coller. Can you talk about the opportunity you see with State Street and the partnership there? And do you see this as a way to enter the U.S. target date funds and maybe the outlook for this partnership going forward? Per Franzén: Thank you for those questions. I'll start by addressing the first one, then I'll hand over to Kim to provide more details, and Gustav can talk about the partnership opportunity with State Street going forward. So when it comes to exit volumes, right, I mean, it's important to keep in mind that 2025 was a record year in the history of EQT for us, right? I mean we sent back EUR 34 billion of proceeds to clients, 3x industry average in our equity strategy. So the beauty, of course, the benefits of having a truly global diversified platform the way we have it at EQT is that in certain years, there will be higher amounts of distributions in relation to NAV in certain strategies. And then in other years, there will be a step-up in other parts of the business. And so that's what you should expect in 2026, right? In 2026, we do expect a pickup in distributions coming out of our infrastructure platform, for instance. And yes, I just wanted to provide a little bit of that background and color as to the outlook for 2026. And Kim, maybe you want to elaborate a little bit on the details and carried interest. Kim Henriksson: Yes. And what Per just said, how that sort of translates into carried interest really then goes into the framework I talked about earlier, where the carry will predominantly come from the funds that are in 2019 vintages or before. And you saw yourself that there's about EUR 600 million of carry left in those funds to be recognized, whereas the 2 flagship funds not -- next to come into carry mode are not expected to -- with the current exit plans it being carry mode still in 2026. So that's the guidance we can give you at this point in time. Gustav Segerberg: And maybe I'll touch upon the State Street partnership. I think, first of all, we're super excited about having State Street as a shareholder in EQT and the partnership that they already have in place with Coller. Of course, there is a lot happening in the private market side connected to private individuals and in the U.S., especially the target date funds and the 401(k) opportunity. We think that there is tremendous opportunities here, both in the form of over time broadening the partnership with State Street, and that's something that we look forward to having a positive dialogue with them around. But also when you think about how the target date funds operate and what's required to be able to win in that channel, it's very clear that secondaries is going to be a very attractive and key component of that solution, also given the need to trade on a daily basis which when you think about it from a primary versus secondary perspective, would just make it easier. So I think all in all, we're very excited about it. As we've talked about, we think that the 401(k) opportunity is very significant, but then it will also take time. And this, of course, is an important step for us in that journey to really create products that fit into that type of client base. Operator: Now we're going to take our next question. And it comes from the line of Ermin Keric from DNB Carnegie. Ermin Keric: Do you hear me now? Per Franzén: Yes, we can hear you. Ermin Keric: Maybe just you mentioned that you expect an increase in evergreen flows in 2026. Could you quantify that? And sorry, then the second question would be on branding. You're saying that you're increasing your spending on that. Could you give us any more kind of details on how much you expect to spend on branding and put it in context to what you spent before and also how the success of those efforts are measured? Per Franzén: Good questions. I'll leave both of them to Gustav and Kim. Gustav Segerberg: Yes. Maybe I'll start with the first one. I'm not going to quantify it into a number. I think that if you think about -- if I were you, I would think about it in 2 aspects. First of all, as I talked about, during that time frame, 7 out of the 10 or 10-plus were operational. So that kind of gives you, I think, a first piece of the puzzle of seeing how that could then be in the 2026 flow. I think the second piece of it is -- it's really that out of the 7 and of course, the remaining 3, 4 products, we still see an acceleration of the flows as we're ramping it up, so to speak. So I think what we're saying is that we expect that number to be significantly above the EUR 4 billion in 2026. Kim Henriksson: On the brand and marketing topic, in order to have a successful spend of brand and marketing, you first need to build a sort of organization and have the processes, et cetera, in place. And that is what we have been doing over the last few years, and we now have that foundation, which allows us to spend money efficiently externally on marketing campaigns and on brand events and branding more generally. The -- we're not going to go into the specific numbers here on a line-by-line basis, but it's -- the amount we will spend is a multiple of what we have done historically, but from a fairly low base to start with, I would say. Then it is a science of its own in terms of how this money will be measured, and it's quite different from a directed marketing campaign where you can sort of measure the exact clicks, et cetera, where from a more branding campaign where it's more about brand awareness, et cetera, in the market. But we have a great team focused on that with very specific sort of follow-up processes that are going to be in place. Operator: And the question comes from the line of Isobel Hettrick from Autonomous Research. Isobel Hettrick: Isobel Hettrick from Autonomous Research. So in your presentation, you touched on the significant number of new LP relationships the transaction opens up for both you and Coller. Can you provide some color on how you're thinking about the cross-selling opportunity from both ways, so existing EQT clients investing in new secondary funds and vice versa over time. So perhaps with reference to BPEA, how have you seen cross-selling develop since you acquired that manager? And what can we read across to Coller? Per Franzén: Good question. I'd say it's not only that we have a track record in terms of achieving cross-selling synergies on the institutional side from the merger with Barings. And we, of course, also acquired Exeter before making the Baring's transaction. And I think we have good data points and evidence from both of those transactions in terms of the synergies that we can generate. Gustav can provide more details. And then, of course, what's different also this time around is that the private wealth opportunity has developed further. And here, we really see an opportunity for us to leverage all of the investments that we've been making into our capabilities, into our brand, into our marketing in those areas, right? So -- but Gustav, why don't you elaborate? Gustav Segerberg: Yes. No. But I think as you say, Per, there, we have experienced from it both from Exeter and BPEA. Of course, BPEA is not fully closed yet, but what you will see in the appendix is that around 25% of the capital in BPEA IX is from, let's say, original EQT clients. I think the equivalent number for Exeter on the latest U.S. fundraise there is about 15%. So we -- I think we have good track record of showing that there is significant cross-selling opportunities in these transactions, of course, going both ways in it. And in this specific transaction, as Per points out, the private wealth opportunity, there is significant cross-selling opportunities there. And then, of course, we also have the insurance side where over time, there can also be, let's say, some joint opportunities going forward. Operator: Now we're going to take our next question, and the question comes from the line of Magnus Andersson from ABG Sundal Collier. Magnus Andersson: Just first of all, on the transaction, if you could, in any way, quantify potential income and cost synergies and any potential structural charges related to this transaction in 2026? And secondly, just on your fundraising, there seems to be very strong demand for infrastructure according to market data. So I was just wondering whether we eventually should expect your flagship infra funds to become larger than your traditional key funds and if we could see that already in the generations that will be on the fundraising in 2026? Per Franzén: Yes. Good questions. I think we're incredibly -- I think as we've mentioned in the past, we're incredibly excited and optimistic about the growth potential across our infrastructure strategies, and we see very good momentum here in the ongoing fundraises that we have. I'm not sure we're going to comment on or give guidance in terms of the sizes for the next generation of these funds. But I leave that to Gustav to comment on further. And then on Coller and the income and cost synergies in '26, maybe, Kim, you want to take that question? Kim Henriksson: Yes. Well, first of all, on Coller, as you heard, we gave the guidance that we intend to more than double the business in the next 4 years. That's really the income guidance we can give you. And that is based on all of the strengths that we just talked about of the combined business. And this is not a transaction that is done because of cost synergies. Having said that, as I mentioned, there's a number of, let's say, costs that are of a nature where you can spread them out over a larger base, and that will become more efficient. Then there are some areas of overlap on the back end that we will work together to solve in the most efficient ways, but that's not the reason for the transaction. There's likely to be some transaction costs associated with it, of course, but they are not in the big scheme of things of a magnitude that will move any needle. Gustav Segerberg: And then maybe on the infra side, I think we fully agree with you on the infra opportunity in general terms, so to speak. And that's also why we, in the last couple of years, have been very focused on broadening the infra offering which you've seen both with the Active Core, especially now going open-ended. You've seen it with Transition Infra. We talked today about the EdgeConneX opportunity on the [ CV ] side. So I think you should think about it that -- and I'm not going to comment specifically on Infra VII, so to speak. But we probably think that the large opportunity here is continuing to broaden the infra scope and scaling those things in a way that we can really be a market leader across from, let's say, more infra growth opportunities all the way to core plus. Operator: Now we're going to take our next question and the question comes from the line of Jacob Hesslevik from SEB. Jacob Hesslevik: So my first question is on the culture fit. When you acquired both BPEA and Exeter, you talked a fair bit about the strong culture and how EQT and the related partner would fit together. But you have said very limited today with the acquisition of Coller. So what are the key culture and operational integration priorities over the next 12 to 18 months? And how will you maintain both EQT and Coller's entrepreneurial culture while achieving the synergies? That's the first question. The second one is you highlighted a particularly strong pipeline for Japan for 2026. What makes Japan distinctive from other Asian markets in the upcoming year? And do you need to change your approach to capture the market potential? Per Franzén: Yes. I'll start with the second one. On Japan, the reason why we are particularly excited about the pipeline that we see in Japan right now is because of some of those corporate governance reforms that have been implemented in Japan and that just enable us to pursue opportunities where we can really unlock value creation opportunities. And it allows us to create sources of alpha that are uncorrelated to the type of value creation opportunities that we see elsewhere in Asia. So for instance, in India, there's a lot of tailwind from demographics, capital markets-related tailwinds, whereas in Japan, the alpha-generating opportunities really around unlocking that value creation opportunity, thanks to some of those corporate governance reforms. And of course, we are very well positioned to capture that. Why? Because we have a best-in-class value creation toolbox that we've developed over 30 years. We have best-in-class sector-based strategies and value creation playbooks that we can apply. And then, of course, in Japan, our brand resonates very well. We've been present in the country for 20 years, thanks to the Wallenberg connection. We were also seen as a very credible long-term player, which is particularly important in a market such as Japan. So for all of those reasons, we're very excited about the opportunity ahead in that country. When it comes to Coller and the cultural values fit, right, it is as strong as we have seen in previous combinations. We've spent -- Jeremy and I have spent a lot of time together to get to know each other. I'm sure we're going to have an excellent partnership. And we've also spent significant of time together at the next generation of the leadership team between Coller and EQT, exactly like we did it in the combination with Barings and also in the transaction with Exeter, right? So that's a good way to get to know each other, and that's why we can with confidence say that this fit from a values perspective, culture perspective, the entrepreneurial, the innovation drive, the performance drive, all of that is exactly similar as it is in EQT. And the way, of course, we maintain and retain that culture, that's how we run our business, right? And that's why it was so important that we took those steps in 2025 to simplify our organizational setup. What I spoke about in my presentation and what I've also talked about in previous instances. So today, we have organized ourselves around a number of highly accountable high-performing business lines. And then we have simplified our governance, our structure in a way so that we have one combined capital markets client relations team on the institutional side that will be very well positioned to serve all of these business lines going forward, including Coller EQT. And then finally, of course, we have a clear governance around how we run our backbone, our business on the operations side. And those would also then be areas where we can achieve synergies together, right? And so by having those highly accountable business lines, that's also how you can ensure that you retain that entrepreneurial performance-driven culture. Kim and Gustav, anything else you want to say on the synergies? Gustav Segerberg: No, I think maybe one more point, and that's we just had a partner meeting earlier this week where, of course, the real estate and the Asia team was there. And I think it's so clear to see how well those integrations have gone, how much they feel like part of EQT in a real way. There is only one company. And I think it also shows that the model works, and also that we're ready to do the next one. So I think from all of those perspectives, this timing is also a good one, I would say. Operator: And now we'll go and take our last question for today. And it comes from the line of Nicholas Herman from Citi. Nicholas Herman: Congrats on the deal. Two questions from me, please. One on accretion and synergies and one on cash. On the accretion and synergies, you referred to a doubling of fee-paying AUM in Coller over 4 years. Is that the time frame for the mid-single-digit FRE accretion? Or is the accretion time frame shorter? And related to that, what synergies are in that guidance? And how should we think about the sequencing of adjacencies and synergies. And then a quick one on cash. I guess given this transaction is almost entirely equity, should investors now have greater confidence that you will announce share buybacks over time? And I guess for avoidance of doubt, I'm assuming you have no ambition for further deals or especially larger deals for now at least? Per Franzén: Thank you. Olof and Kim, do you want to take those questions? Olof Svensson: Yes. Do you want to go ahead? So I mean, if you think about the accretion, we're buying, first of all, 100% management fees, right, over the next several years. And as we talked about before, the earn-out mechanics is based on a fee-related growth of close to 30% or high 20s, right? And to Kim's earlier comments on the margins, that means that you're going to have a very rapid top line growth, and that means that our margins are going to scale quite meaningfully over the next several years in this business. So if you think about this from a fee-related EBITDA multiple, it's based on the guidance that we gave, it's about 16 to 18x multiple that we're paying in '26, but that's not then capturing this significant ramp-up that you have in '27 and '28, right? So to your question, if you think about this transaction in, say, a couple of years' perspective, I'd argue it's high single-digit accretive to our earnings. And that means that this mid-single-digit guidance, that's an average over the next few years. Kim Henriksson: And in terms of cash and buybacks, yes, you're absolutely right. This is an all-share transaction and will, if anything, strengthen our balance sheet further over time. There's -- last year already, we did about EUR 300 million of share buybacks in 2025. So it's not that we haven't been doing share buybacks already. And what we have said in terms of guidance is that we will use share buybacks or extraordinary dividends for that matter as a tool if we, at any point, become overcapitalized, for example, if cash carry comes in at scale, but I can't give you any specifics around that in terms of timing or how that's going to look. But right now, we have a solid balance sheet, but we're not overcapitalized given the opportunities we have, both organic and inorganic going forward. Nicholas Herman: That's really helpful, guys. If I could quickly follow up on the synergies. Just what synergies, as you said, are in that guidance? And how should we think about the sequencing there from, I guess, from a -- presuming is it wealth first, then insurance then Asia, I mean how should we think about the way you're going to be tackling those -- the numerous opportunities there? Gustav Segerberg: Yes. And I think we're not going to go into specifics of it. Of course, as always in this, it's going to be evolving development in it. And there are a number of opportunities. But I think we also feel that we're very well equipped, both from a Coller perspective and from an EQT perspective in order to capture many of this. I think you should think about the guidance on, let's say, doubling the business on -- in less than 4 years that, that does not include a very significant new initiatives in that. It's, of course, a development of the business. It's continuing to scale of the PE and credit side. On the institutional side, it's maybe 1 or 2 new initiatives on the institutional side. And then, of course, it's a development of the evergreen as well as the insurance side. But it's a base case that we feel and the Coller team feels comfortable, which I think is good. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to management for any closing remarks. Olof Svensson: Okay. Well, everybody, thank you very much for great questions and for the discussion. As you can hear, we're extremely excited about this combination with Coller, and we are very pleased with the results that we delivered for 2025. As always, you know where to find us, we're available for any follow-up questions. So thank you very much. Kim Henriksson: Thank you all. Gustav Segerberg: Thank you. Olof Svensson: Thank you.

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BKNIY 2025 Q4 财报电话会议

Laurie Shepard Goodroe: Good morning, and thank you for joining our 2025 full year earnings call. Financial statements were posted with market authorities early this morning. All materials can also be found on our corporate website. Please refer to disclaimer in the presentation and note that this call is being recorded. And we welcome today our Chief Executive Officer, Gloria Ortiz, and Chief Financial Officer, Jacobo Diaz. Gloria, over to you, please. Gloria Portero: Thank you, Laurie, and thank you all for joining us in this 2025 full year results presentation. Since we are reporting the full year, I believe it's appropriate to start with a brief overview of the environment in which our business has operated to provide context for the figures that we are about to review. 2025 was the year of Donald Trump's return to the White House and even that has set the political tempo of the international calendar. Continuing the trend of previous years, the events in 2025 confirmed that the international landscape is moving towards an increasingly turbulent and fragmented scenario. Long-standing conflicts, such as Ukraine, remain unresolved despite failed attempts to reach an end to the war. In Gaza, the ceasefire came only after months of escalating violence. Meanwhile, the Franco-German Axis, the traditional engine of the European Union, has been weakened by deep domestic political crisis. Without a doubt, tariff has been the most repeated word of the year. The imposition of tariffs on international trade has become the main diplomatic pressure tool of the Trump administration. The European Union, which for years has been a strategic partner of the United States, ultimately considered in trade negotiations and accepted a 15% tariff to maintain access to the U.S. markets. Thus, the balance of 2025 confirms an international landscape that is increasingly fragmented and less predictable, where open conflicts tend to become chronic, and long-lasting political solutions are replaced by fragile truces or unbalanced agreements. And indeed, what we have been observing in these first weeks of 2026, for example, in Venezuela or in the U.S. stance on Greenland, amongst others, confirms that this year will again be marked by geopolitical volatility just as 2025 was. At the same time, technology, led by artificial intelligence, continues to advance at a blistering pace, transforming operating and business models. And the banking sector is undoubtedly no exception. These are global trends shaping the broader environment. But if we focus on the countries in which we operate, it is worth noting that the 3 economies, Spain, Portugal and Ireland, are among the most dynamic in the Eurozone and have become the new growth locomotives of the union. In fact, the Eurozone in 2020 -- in fact, in the Eurozone in 2025 inflation, which had surged sharply after the pandemic and the Ukraine war, moderated. And as a result, the ECB accelerated interest rate cuts, especially during the first half of the year. With inflation under control at the European Central Bank's target level, benchmark rates stabilized at 2%, and no further cuts are expected in the short term. As a result, in 2025, the ECB reference rate averaged 2.2%, that is 1.4 percentage points lower than in 2024, while the 12-month Euribor fell by an average of 1.05%. Turning to financial markets. It's notable that despite escalating conflicts and increased political polarization, market performance remained robust. The IBEX 35 achieved a record increase of 50%. German equities rose by 23%, and the NASDAQ advanced by 19%. In this environment of geopolitical uncertainty and significantly lower interest rates compared to the previous year, we have delivered in 2025, very strong results, once again, record breaking. These results are built on solid foundations and driven by recurring client commercial activity. Moreover, in 2025, we executed major strategic projects that will underpin the bank's future growth such as the integration of EVO Banco and Avant Money, which is now Bankinter Ireland, a branch of Bankinter just like Portugal. Of course, before moving on, I want to express my thanks to all Bankinter Group employees for their dedication, effort and commitment because they are the true architects of the results that we present today. The results we present today are very satisfactory, driven by intense commercial activity that brings us to report a net profit of EUR 1,090 million in 2025, representing 14% growth over the previous year. 2025 was marked by diversified growth, both geographically and by business line. Overall, we grew 9% in total business volume, 5% in lending, 6% in customer funds and delivered a strong double-digit growth, 19%, in off-balance sheet products. Despite the sharp decline in interest rates, we managed to limit the falling interest income to 1.8% in 2025. And on a year-over-year basis, the inflection point was reached in the first quarter. From that point onward, net interest income grew quarter after quarter, thanks to credit growth and margin management. Customer spreads averaged 2.68% for the year with the overall NIM at 1.78%. Fee income from services had an exceptional year, growing 11%, which in nominal terms, almost doubled the reduction in interest income. This allowed us to grow gross margin by 5%, and I think it is important to note that the strong performance in fee income is due to the significant growth in our balance sheet funds and not to any increases in customer fees. All this growth has been achieved while keeping our risk appetite unchanged, improving the asset quality of our balance sheet, reflected in a nonperforming loan ratio below 2%, specifically 1.94%. Another key element of our business model is efficiency at 36%, indeed the best efficiency level across the industry. These 3 pilots, the diversified growth, asset quality and efficiency, are the foundation of our business profitability, which reached ROTE of 20%. As I have been commenting in previous quarters, commercial activity with clients has been very strong. Total customer business volume stands at EUR 241 billion, EUR 20 billion more than in 2024, representing 9% growth in the year or a compound annual growth rate of 8%, an increase of EUR 80 billion since 2020. This volume breaks down into EUR 84 billion in lending, representing 5% growth versus 2024 at year-end. Customer funds reached EUR 88 billion, EUR 5 billion more than a year ago, and we now manage EUR 69 billion in assets under management, 19% more than at the end of 2024. We have more than doubled the balance recorded at the end of 2020 with a compound annual growth rate of 17%. All this growth is organic and diversified with every geography contributing and outperforming the market. Our diversified customer business volume growth is what enables us to consistently strengthen revenue streams. Core revenue fees and interest income reached EUR 3,032 billion, a compound annual growth rate of 12% and a record for the series, exceeding 2024 by 1% despite the headwind of lower interest rates. We achieved this by limiting the decline in interest income to 1.8% through volume and margin management and through the excellent performance of fee income, which with an 11% growth rate more than offset the reduction in net interest income. The drivers of fee income are the strong growth in off-balance sheet funds, the increasing activity of Bankinter investment across all its business lines and the positive performance of the economies in which we operate. Regarding interest income, I would like to highlight its upward trend throughout the year. It bottomed out in the first quarter of 2025. And from that point on, revenues increased quarter after quarter. By the fourth quarter, we already grew on a year-on-year basis by 4%. So the outlook continues to be more positive, especially with the forward rate current scenario for 2024 -- 2026. In summary, sustained growth, asset quality and efficiency are what allows us, once again, to deliver results that surpass our own records, exceeding EUR 1 billion and representing 14% growth versus 2024, tripling our results over a 5-year period. Our ROTE now at 20% is also the highest in the entire series. Before I hand over to Jacobo to review in further detail the financial results, I wanted to quickly showcase one commercial strategy that was quite successful in 2025. In 2025, the 100% digital new client acquisition is what I'm referring to. Since the EVO integration, we have improved our digital customer experience with the use of AI in commercial and marketing processes. Our deposit gathering capabilities are now stronger, more granular and flexible. We increased customer funds in this channel by 64% in the year, now reaching EUR 12 billion, close to 14% of our total customer deposit base. New customer acquisition trends have doubled since 2022, and the digital channel now represents more than half of the new client acquisition in 2025. From an industry perspective, our digital offering is -- not only allows us to compete effectively with new entrants, but gives us a clear competitive advantage. Customers benefit from a full multichannel ecosystem, digital branches, contact center and also private banking network, which enhances loyalty and broadens upsell opportunities. In the second half of 2025, the strong growth of this channel generated some short-term pressure on deposit cost. However, looking ahead, our digital strategy and strengthened deposit gathering capabilities create meaningful upside supported by lower acquisition and servicing costs. Overall, our digital franchise has become a scalable and cost-efficient acquisition engine that strengthens loyalty, supports margin resilience and accelerates fee growth, a competitive moat that becomes more powerful each quarter. Jacobo, now over to you. Jacobo Díaz: Thank you very much, Gloria, and good morning, everybody. 2025 marks yet another year of increased revenues and profitability. In operating income, we have grown by 5% with increased volumes, continued strong fee growth and effective margin management. Operating costs were more balanced this year over the quarters with annual cost growth growing below revenue growth to end the year within guidance, confirming positive operating jaws another year. Cost of risk and related provisions declined by more than 15%, reflecting a continued positive trend in risk management. And net profit increased by 14.4% to well surpass our initial goal of EUR 1 billion in 2025. Onto NII and customer margins on the next page. NII contributed to EUR 2,237 million this year, slightly below our initial target. Asset yields for the year averaged 365 basis points and remained quite stable this quarter at 3.48%, down only 1 basis points from the third quarter given the good volume growth, especially in corporate and uptick in short-term interest rate. This helps soften the impact of a slight increase of 3 bps in quarterly deposit costs due to the same uptick in short-term rates as well as a successful commercial strategy that Gloria just mentioned regarding digital account deposit gathering. Customer margins for the year averaged 268 basis points, very near to our 270 longer-term target. We believe Q4 '25 mark a low point, as the downward repricing of digital account deposit is underway in Q1 '26. Therefore, we expect customer margins to recover moving forward. NIM averaged 178 basis points for the year as the noncustomer interest income improved in the quarter, leading to an increase of NIM of 4 basis points in Q4. Regarding the ALCO portfolio, this has been achieved through increased ALCO balances that you can see on Page 13 as well as reduced wholesale funding costs. Moving on to fees. Fees continued to deliver sequential increases each year, reaching EUR 795 million, up 11% versus 24%, reaching a double-digit compound annual growth rate of 10%. This sustained growth momentum is mainly attributable to the strong growth volume or strong volume growth in asset management, custody and brokerage services. Moving on to Page 15. Equity method and trading dividend income lines also up with an impressive 21% on a year-on-year basis. The diversification of sources of revenue is well represented here as a result of our business investment in the past. For example, Bankinter investment that we will look later in the presentation, insurance JVs as well with our JV in Portugal with Sonae called Universo. We also confirm the banking tax will have no impact in 2025 and expect this to be the case for '26 and '27. Moving into the contribution of gross operating income, there's been a very strong contribution from each geography in gross operating income, demonstrating increased diversification with Portugal and Ireland, growing from an 11% contribution to gross income in '22 up to 16% in '25. Moving to the expenses on page 17. We have contained total operating cost growth to 4%, notably with flat general expenses due to the tangible impact we are achieving through our IT and AI initiatives as well as with the EVO integration. Efficiency ratio improved to 36.1% this year, demonstrating our commitment to delivering positive operating jaws now and in the future. On Page 18, PPP more than doubled over a 5-year period to reach EUR 1,947 million in '25. Moving on, we see improvement in credit and other provisions. Significant decrease in cost of risk down to 33 basis points from 39 basis points in '24 with loan loss provision volumes now below those even of the ones in '23. Other provisions also performing well, down to 8 basis points for the year with no signs of deterioration in the market of -- in our portfolio, and our disciplined approach to risk management, we remain optimistic to maintain current levels for the coming quarters with potentially some upside risk. Next page, net profit reached once again historical levels at EUR 1,090 million, an exceptional increase of 14.4% in the year, maintaining similar growth rates seen in '24 even with the headwinds faced in interest rate during the year. Moving into the credit and asset quality indicators, as you can see, they continue to improve. Risk quality measure in terms of the nonperforming loan ratio has improved significantly this year breaking below 2% to reach 1.94%. The coverage ratio remains very solid at 68%, substantially higher than in the 2020. By geographies, Spain, down to 2.1%; Portugal at 1.4%; and Ireland, stable, 0.3%, all well below sector average consistently over time. Moving into capital. Our CET1 ratio ended the year at 12.72% and well above the minimum requirements of 8.36%, leaving an ample capital buffer of 4.4% as well as adequate MREL and leverage ratios. Main movements in the year related to retained earnings contributing to a total of 111 basis points, capital consumption of 51 basis points in RWAs and 35 basis points in operational and market risk. The implementation of the countercyclical buffer in Spain has resulted in a 41 basis point increase in minimum requirements. Moving into Page 24. Commercial activity, volumes and profit trends remain not only strong, but with a greater diversification each year across geographies. Customer volumes up 8% in Spain, 15% in Portugal and 23% in Ireland. Each region contributed at increasing levels to the profit of the bank as well we see on the following slide. Within Spain, loan growth this year, up 3% with a strong performance in the business lending segment growing 6%. I consider this satisfactory growth rate, especially when considering the intense competitive margin dynamics in Spain as well as our reduced appetite for open market consumer lending in Spain in 2025. Retail deposits continued to demonstrate solid and balanced growth, increasing by 5%, fueled by the successful digital campaigns we mentioned a little bit earlier. Stellar performance in Wealth Management, reflected by an 18% increase in assets under management balances as well as a 19% increase in assets under custody. Profit before tax, up 14%, reflecting solid contribution from our core Spanish business. Moving into Portugal, a continued momentum in lending activity across both business segments, up 9% in total with a strong deposit gathering growing 8% as well as a substantial increase in wealth management and custody balances, rising 28% on a year-on-year basis. Cost-to-income ratio at a very efficient low level of 33% even with increased investment in IT. Profit before tax, up 7% to EUR 210 million or 14% of total contribution to the group. Moving into Ireland. 2025 marked the year for our Irish business to convert into a branch of Bankinter, allowing for increased upside risk in terms of volume potential and efficiencies. We launched deposit in Q4, albeit with volumes still at marginal levels, definitively more to come in this space during 2026, as we begin to scale up deposit campaigns this quarter. Asset market dynamics and our Bankinter style commercial differentiation supported a 27% growth rate in the mortgage book in '25, with improved trends seen in the second half of the year. Consumer finance also growing at 11%. Profit before tax contribution reaching EUR 46 million, up 13% this year with important improvements in the cost-to-income ratio down to 44% from 48% last year. Now moving into the corporate and SME banking business. Business lending continues to deliver a strong performance, up 6% this year, consistently increasing market share year after year. One key growth catalyst continues to be our international business segment that has doubled loan volumes over a 5-year period, now reaching EUR 11 billion, representing 30% of the business lending book currently. This segment is also a strong recurring contributor to fee income from services. We also see increased activity and upside risk from other growth catalysts like our new ESG client solution across loan and servicing income products. For example, the loan advances we provide for energy certificates, where we were the first to launch in the market in 2025. Additionally, we are expanding substantially our Bankinter investment business that I will detail more in the next couple of slides. Bankinter investment has doubled income contribution to the group over the past 5 years with currently 31 alternative investment vehicles and associated vintages well distributed over the year since 2017. More than 15,000 Iberian Bankinter customers now invest in real assets. This franchise has been a key source for the increased fee income to the group, reaching a 12% compound annual growth rate with upside risk potential for the future. On the next page, you can see the strong diversification of the different investment strategy for the vehicles across many sectors and countries with more than 360 different underlying assets in the portfolio. Moving on now to review the Retail Banking business. Retail banking asset and deposit trends remained strong with increased core salary account balances up by 7%. New mortgage origination, up 10% year-on-year, with solid market shares of new production across Spain, Portugal and Ireland. Our mortgage back book is growing steadily at 5% annually despite rising competition in 2025. The Wealth Management business, on Page 32, shows our high-quality affluent client base that continues to drive exceptional incremental wealth volumes, up EUR 21 billion this year, a 16% increase on a year-on-year basis, of which half of it is new money to the bank. When excluding the market effect, the net new money has reached the EUR 10 billion level milestone, well above our historical range between EUR 5 billion to EUR 7 billion. Off-balance sheet, volumes under management and custody on Page 33 ended the year at EUR 156 billion, up EUR 25 billion, or 19%, increasing significantly with the markets and net new inflows in all categories. With the exception of fixed income security, we have provided additional details regarding commercial activity and trends for those key fee income growth catalysts in the annex, no doubt a key driver of continued fee growth for the future. Now, let me just spend a couple of minutes sharing our ambitions and targets for 2026 before I hand back to Gloria. We expect -- the first one, we expect solid macro outlook for all the regions where we are operating. Therefore, we expect growth across all segments and geographies, focus on our targeted type of customer and insurance and ensuring a disciplined risk-return approach for asset origination. Volumes are expected to grow at similar levels than in '25 and previous years. This means that lending volumes at mid-single-digit growth with deposit volumes targeting to keep our liquidity ratio stable, that is above 100% in terms of deposit to loan or below 100% in terms of loan to deposit. All geographies and business segments are expected to grow at similar levels with Portugal and Ireland keeping their successful track record, and Spain, keeping strong volumes in the corporate and retail businesses. Regarding NII, with the current Euribor 12 months rate outlook in '26 stable around current levels or slightly increasing towards the end of the year and next -- and following years, we expect customer average margin to recover 270 bps, our initial target. And therefore, we target in 2026 overall similar levels of client margins and NIM that the ones we saw in 2025. With residual negative repricing for mortgages and a downward repricing of our digital accounts in Q1, we expect minimal margin compression in the first half '26 with an upside bias to possibly reach a stable asset yields by the end of Q1 and beginning of Q2. Given these dynamics, we would expect NII for the entire 2026 to increase in correlation with volume growth. For fee growth, we target high single digit for the year, supported by increasing volumes from assets under management and assets under custody as well as from increased transactionality from each of the geographies, which are strongly correlated with the economic growth of each of them. With our strict cost allocation and management, while keeping strong IT investment around 10% of our gross income, efficiency remains one of our pillar or our main pillars, and we are committed to delivering positive operating jaws, again, in 2026, reducing cost-to-income levels below 35% for the year. In terms of credit quality, we have a stable outlook for cost of risk for the year around current levels of 33 basis points, albeit with a positive bias. And ROTE is expected to stay above 20%, ensuring attractive shareholder value creation. In summary, we expect 2026 to be another year of consistent growth in volumes and profitability reaching new records in volumes, gross income, efficiency, net income, and of course, profitability. Gloria, back to you, please. Gloria Portero: Thank you, Jacobo. Thank you for sharing our financial ambitions. In terms of our management priorities, all of these are well-integrated and will contribute to our financial goals with high-quality volume growth, a greater diversification of income from servicing fees and geographies. We will continue to invest in technology to achieve tangible benefits from our AI initiatives, driving both competitive differentiation and operational efficiencies. The outcome will undoubtedly result in a strong profitability and sustained improvement in shareholder returns. The key driver for this success centers around our clients and our employees. 2025 is a pivotal year for artificial intelligence, and we are committed to embedding AI tools and culture throughout the group. I will oversee project selection to ensure we achieve tangible results. Our program called AI First is designed to enhance our competitive advantage by integrating AI into all our customer-facing acquisition and service applications. We are committed to deploying personal productivity tools company-wide aiming to achieve 5% improvement in productivity over the medium term. Regarding process efficiency, ongoing initiatives across back, middle and front office focused on integrating AI gen applications into our banking operations. Coupled with leveraging AI tools for software development, we anticipate a 10% increase in capacity equivalent to approximately 1 million hours over the next few years. However, AI for Bankinter is not just a plan, it is a reality with substantial progress achieved in 2025. On Page 37, you can see the measurable improvements in productivity and efficiency thanks to the bank's digital transformation and the pragmatic and effective use of artificial intelligence in operational and commercial processes. We remain committed to investing 10% of our gross income in technology. On the lower left-hand side of the page, we have highlighted several examples of our use of AI in 2025, which have contributed to enhanced employee productivity. With EUR 36 million managed per employee, we compare very favorably to our peers with EUR 21 million per employee. And if we measure efficiency in terms of operating cost per billion managed, we also stand out. We allocate EUR 4.6 million of expenses per EUR 1 billion managed for our clients while our competitors require EUR 6.5 million for the same volume. Naturally, this is reflected in the efficiency ratio, which has improved year after year and now stands at 36%. Finally, I would like to highlight that all these gains in efficiency and productivity are not being achieved at the expense of service quality. In fact, service quality, measured in NPS, has improved by nearly 10 points since 2020 and now stands at 51%. Turning to the financial page -- the final page of our presentation. We report a ROTE of 20%, 100 bps above 2024, together with continued value creation for shareholders through both dividends and growth in book value. We are presenting another year of historical results driven by recurring customer activity and the disciplined execution of a long-term strategy that preserves our risk appetite while strengthening the balance sheet as reflected in the ongoing improvement of our NPL ratio. We continue to invest in initiatives that support business growth while at the same time improving efficiency. The drivers behind our performance, diversified growth, disciplined pricing, strong fee income engines and best-in-class efficiency are structural and provide strong visibility into continued profitable growth. In conclusion, 2025 demonstrated the resilience and strength of our business model even in a year of declining rates, geopolitical volatility and intense competition. Bankinter expanded volumes, protected margins and delivered record profitability. It was not just a record year, but a clear demonstration of the strength of our franchise, the quality of our growth and our ability to generate attractive returns and create long-term value for our shareholders. Back to you, Laurie. Laurie Shepard Goodroe: Thank you, Gloria, and thank you, Jacobo. We'll now open up for questions. [Operator Instructions] Our first caller is Maks Mishyn from JB Capital. Maksym Mishyn: Two questions from my side. The first one is on the competitive environment in lending in Spain. Your retail book is growing below the sector, and my question is whether it is intentional, why and when can this change? And the second question is just a clarification on the cost of risk guidance. You mentioned upside risks. What has to happen for them to materialize? And what kind of upside risk are we talking about? Could you please quantify them a bit more? Gloria Portero: I will answer you the first question, regarding competitive environment in Spain. Listen, I actually -- I think I pointed it out last quarter. We are seeing some irrational behaviors, particularly in the mortgage business, although also in other segments, but mainly, I would say, in the mortgage business. And you will understand it very, very quickly. I mean, there are offers, and I'm not talking to private banking clients. I'm talking to very standard clients, where they can get a 30-year mortgage at 2.20% for 30 years fixed, I'm talking. And as you know, the swap curve for the 30-year is over 3%. So basically, it's like selling a mortgage with Euribor minus 80 or even more. That is absolutely rational because even if that rate has a positive margin this year, obviously, you are building a portfolio that is not sustainable. And in 30 years, rates can do many things. So we are not into that world. We are not going to sell mortgages at 2.20% because we want to build a sustainable portfolio in any environment -- well, probably not in any environment, but in most of the environments, and we are not going to enter in that war. So we are producing with our clients, and we are competing in those clients where we think they deserve better rates. But we are not going to enter in that war. Jacobo Díaz: Maks, this is Jacobo. I'm going to answer your second question, and maybe there's a misunderstanding. The cost of risk that we're expecting for 2016 is quite similar to the current levels that we've seen here at the end of the year, which is around 30 bps -- 33 basis points. I think the word upside risk means -- it's meant in a positive way. That means that it could be even a little bit lower, not a little bit higher. So it's the way we can interpret that word. I think we think that we are under a good macro outlook for Spain, Portugal and Ireland. As you know, we are reducing our exposure to the consumer finance business with non-Bankinter client. We are reinforcing of being more prudent in all our activity. So the sense of the sentence that I mentioned of the upside risk doesn't mean this might go up in terms of cost of risk. I was trying to say that it can be even better than the current levels of cost of risk. I hope that I have clarified my point, and I expect that this was your question. Laurie Shepard Goodroe: Our next question comes from Francisco Riquel in Alantra. Francisco, go ahead. Francisco Riquel Correa: Yes. So my first question is I wanted to ask about your guidance of mid-single-digit growth in loans, if you can, please share indications by country. It seems to me that your guidance could be conservative if just the sector in Spain grows 4%, 5% in '26, which is nominal GDP growth. So you have grown a bit less than the sector in Spain. You were commenting that. So I wonder if you are willing to continue losing market share, particularly in retail mortgages in '26 or if you -- we could have upside risk to your volume guidance overall? And then my second question is regarding the guidance for cost inflation. So you have given cost-to-income reducing 1 percentage points, which means 2 percentage points cost inflation below revenue growth, meaning also cost inflation lower than in '25, but you need to invest in Ireland to become a full universal bank, also in Portugal. So that probably means very little cost inflation in Spain. So if you can, please elaborate on the cost guidance, the longer-term ambitions that you have presented for 2030, how do you plan to leverage technology to achieve that? I see other banks are still investing in technology. So if you can please elaborate. Gloria Portero: Thank you, Paco, for your question. I will try to answer the last question and maybe give some indications about the first one, but Jacobo will complete what I say. Okay. With respect to costs, obviously, technology is going to help, but this is not -- it's not a miracle. So we are not going to attain obviously, all that efficiency only with technology. I remind you that last year, we integrated EVO Banco. This year, 2025, we only had synergies for the half of the year. Next year, we will have the synergies of this operation for the full year. On the other hand, we just announced, I think, in December that we were absorbing consumer finance -- Bankinter consumer finance into Bankinter. And obviously, this means a simplification of the corporate structure that also brings some synergies. So it's a question of the traditional cost management technology and also all the simplification that we are undergoing in the corporate structure. And with respect to lending growth, listen, if the competitive dynamics continue to be in the mortgages -- in retail mortgages, the ones that we have seen during 2025, we are happy to be prudent and not to grow at the same pace as the market grows. But I hope because it doesn't make any sense that the market reacts and that we come back to a logic dynamic in pricing. Another thing where we are also reducing our growth rates is in everything that has to do with consumer credit in the open market. This means outside Bankinter clients in Spain because we are seeing already, as you can -- you know, there have been many announcements with regards to -- with regard to the new law, and well, there are a lot of problems in this -- I would say, a lot of compliance risks in this business. Do you want to complement? No? Jacobo Díaz: Yes, yes. Paco, good morning. No, no, I think in addition to -- I mean, basically, what Gloria is trying to say is that we are sticking to the same type of client or target of client that we've been sticking in the past, even with this exclusion of the consumer finance business in the open market activity. So this is one of the reason. We are targeting selective origination of lending. And even though we are able to keep the similar level of growth even if the market might grow a little bit more. But we prefer and we prioritize a good return and risk combination instead of volumes. Ireland is going to grow, again, quite strongly, double digit. Portugal is going to grow again strongly, double digit. And Spain behavior is going to be very positive. But always, we are prioritizing the combination of risk and return. Laurie Shepard Goodroe: Our next question comes from Marta Sánchez from JPMorgan. Marta Sánchez Romero: The first one is a follow-up on cost. So you're mentioning a commitment to positive jaws every year. You're going to be below 35% cost-to-income. What do you think is the right level to run the bank? And do you see a 1% positive progress every year for the next 3 to 5 years? And the second question is on the customer spread. You are committed to that 270 basis points. This quarter, we are a bit far from that level, 261. How are you going to be rebuilding that margin? And what is the outlook for net inflows into your digital account for next year? Jacobo Díaz: Marta, I'm going to start answering your second question about the customer spread. So Gloria has already mentioned that we are updating the cost of the digital accounts. This is going to be a good behavior in the first quarter of this year, and this is going to instantly recover part of the client margin, again, targeting the 270 in average that we've mentioned for the entire year. So for the year -- I mean, the cost of deposits are the ones that we will expect more contribution to this building up the 270. Loan spread that have ended the year at 3.48% last quarter also is intended to recover across the year. We expect or there is expectation of a steepened yield curve that will provide more upside in the second half of the year than in the first one, especially with mortgages. So we do expect that the contribution of the asset yield might be a little bit lower in the -- to recover that position. So maybe a couple of bps in average. But definitely, the cost of deposit is the one that will drive the most -- the majority of the building up of this 270s across the year. And in terms of cost, yes, I think one -- always it's very difficult to tell if it's 1 or 1-point-something point every year. But definitely, the message of Gloria is that we have a strong ambition to reach very low levels of efficiency. We think that we should aim to reach 30% not too far ago. This is where we want to be in terms of efficiency ratio. And this is something that we want to build in the next 3, 4 years, maybe. Laurie Shepard Goodroe: Our next question comes from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: I have 2 questions. The first one is on fees, looking to insurance fees and distribution fees related to insurance products. I mean, I just wanted to see if there could be any acceleration of that into 2026, if there is chances to rethink about the JVs that you had in the non-life business. What could be the strategy on the insurance business? And the second question is on the capital front in the quarter, that has been like 19 basis points positive effect from intangibles and other adjustments, if you could elaborate a bit what was the driver of that? Gloria Portero: Ignacio, I will try to answer your first question. As you know, we have to -- well, we have a JV with Mapfre that's in life insurance, but also in non-life in all segments but auto and home insurance. In home insurance, we are growing very nicely, actually, and also, in life insurance. But where we think that we could grow more is in all the other segments that are outside life and home insurance. And yes, we are working. We are working with Mapfre to see how we can give a greater push to this business. But we have no plans for the moment to make any changes in the JVs that we have. But as I mentioned, we are working with Mapfre to see how to improve this 7% growth rate. Jacobo Díaz: Ignacio, I'll answer your questions. Yes, I mean, at the end of the year, we reduced the deduction of intangibles just because all the IT assets that have been developed come into production in this fourth quarter. Therefore, we reduced the deduction as intangible, and then, we start the amortization of these IT assets. Laurie Shepard Goodroe: Our next question comes from Pablo de la Torre from RBC. Pablo de la Torre Cuevas: I had a first question on the potential uses of the excess capital that you're expected to generate going forward. So beyond organic growth in existing markets, how do you envision to use this excess capital? And I know Gloria has already commented on this last quarter, but you continue to be linked to a potential transaction in Ireland. What is kind of your latest thinking there? And given the outlook more generally for the bank, have you discussed plans to change the ordinary payout going forward? Then, it's more of a -- my second question is a follow-up on the corporate structure simplification point in consumer finance that you have already discussed. But I wanted to invite you to comment on the revenue opportunity from this change. Payments and collection services is already a large contributor to fee income for the bank, but it seems that the revenue growth there has been decelerating a little bit over recent years. And so can you just please provide a bit more color on how this change can -- how the change you have announced can contribute to revenue growth going forward? Gloria Portero: Thank you, Pablo. With respect to Bankinter consumer finance, and you are talking more about the payments, the new payments area, I suppose, that we announced at the end of the year. We have done this -- well, first, payment income is not growing so strong because the regulation with regard to payments for instant payments, well, is such that has an activity that was fee-generating, what has become an activity where you charge no fees at all. So that has had an impact this year. It won't have an impact next year because, obviously, we are already comparing equal things. But with respect to payments, we have started a strategic thinking about this because this is an area that is really being transformed by technology with everything that has to do with stablecoins, digital euro with request to pay in the transactions between businesses. And we need to have a strategy and a value proposition. We need to understand what will be value-creating in the future, what is just a bluff, as we say, because there is a lot of noise, and we have to take the noise out of the room. I think payments can be -- there is a side of this strategy that is going to be protecting our business and the other one is going to be how can I make my business grow more. For the moment, I cannot tell you anything because we are working on the strategy, as I mentioned, but I'm sure that we will have some news in the next quarter or maybe in June. With respect to capital, well, we are not changing. We are not going to change our dividend policy just because we have 30 basis points more capital than our objective level. And we are not building up capital for any purchase in Ireland. I mean, I've mentioned already we have -- our strategy there is organic growth. We are building a bank from scratch, and that is what we are going to do. We are not looking at PTSB. And -- I don't know, I cannot be any clearer here. So I think I've answered Pablo. Laurie Shepard Goodroe: Our next question comes from Borja Ramirez from Citi. Borja Ramirez Segura: I have 2 questions. Firstly is on Ireland. I would like to ask if -- given the ongoing sale of PTSB, if this is an opportunity for you to gain market share organically in the country? And then my second question would be if you could kindly provide the average cost of your digital accounts, which I think was 1.6% in Q3 and also the average duration of this, please? Gloria Portero: Okay, Borja. I will answer you with regard to Ireland. Well, as I've mentioned, we are not interested in acquiring any operations in Ireland. But obviously, as I have always said, when there is a corporate transaction, there is noise, and this is always an opportunity for the other established banks in the country. We have seen that in the past in Spain. And I'm sure that, that will be the same in Ireland. So yes, this could be obviously an opportunity to acquire clients there. And I pass the second question to Jacobo. Jacobo Díaz: Borja, yes, there is -- the current price is -- the current average cost is 20 bps lower then I think you mentioned the 1.6%. So now we are at 1.4% more or less. Laurie Shepard Goodroe: Our next question comes from Carlos from Caixa, BPI. Carlos Peixoto: So the first one was actually -- first one would actually be on fees. You have -- in this quarter, in the other fees caption, you have a substantial increase quarter-on-quarter and year-on-year. I'm guessing that this relates to the roughly EUR 10 million success fee on a transaction that you had mentioned in the previous quarter. Just wondering whether you see scope for similar fees of this nature in 2026 and whether the high single-digit guidance that you conveyed is with -- on the reported fee income or adjusted for that specific item. Then on -- well, you mentioned you expect ROTE to be above 20%. What type of net profit income growth are you expecting for 2026? Should we think about double digit or below that? Gloria Portero: Carlos, regarding the guidance on fees that we mentioned, it includes -- I mean, we are not -- we are considering the total fees of 2025, and then, we are -- our guidance is on the top of it. So we are not excluding these one-off fees because the volume is not huge, it's not relevant for the entire year. So we are not considering -- I mean, it's like it was usual BAU. And regarding the net income, I think we've provided enough guidance to provide you an idea of this increase. I mean, the level of efficiency is going to improve. Cost of risk is going to stay or even can perform a little bit even better. So yes, as you can imagine, the net income is going to grow. And again, it's going to be a new record year. Laurie Shepard Goodroe: Our following question comes from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: One is a follow-up from Marta's question on the digital account growth. So how much of your mid-single-digit deposit growth is explained this year by digital accounts? And the second one, I think, Jacobo, you mentioned that you're not expecting any impact from the banking tax in '26 and '27. So is that comment constraint to those 2 years? And that means that '28 onwards, you're going to start booking the levy actually in the P&L or you just wanted to constrain the comments actually to the next 2 years? Gloria Portero: Ignacio, I will answer you the second one. Actually, the banking tax is a temporary tax. So it is not expected to go beyond '28. Obviously, that is what I can say today. I don't know if they will again extend this stack. So it is not -- it is temporary. And with the figures we have in hand, we think that it will be 0 or absolutely immaterial because we have a cash tax rate that is very high and that absorbs very comfortably the figure that comes out from the theoretical banking tax. And I'll pass back to Jacobo for the first question. Jacobo Díaz: Yes. Ignacio, I think the digital accounts have played a relevant role in 2025. But again, it's a combination of many things because the level of term deposit has gone down, which is very important. Treasury accounts has also had a very good behavior because our business or the growth in our corporate banking business has also been very, very positive. And of course, digital accounts had a quite relevance, but it's not the only catalyst of the growth of deposits during 2025. We've been able to attract the deposits. Then afterwards, we've been able to convert into 2 assets under management that have brought a lot of fees. Digital accounts are very important in our commercial strategy. That's what can I tell you, but it's not the only thing that we have. We have salary accounts that also have a very good behavior. So it's important, but it's not the only driver of growth in our deposit base. Laurie Shepard Goodroe: Our next question comes from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Sofie from Goldman Sachs. So just going back to the digital accounts, we have seen almost a tenfold increase in digital accounts. Like could you give us the split of the digital client acquisition by country? So how much is coming from Spain, how much from Portugal and how much is coming from Ireland? And then my second question would be on the fee income side. When we look at the fee growth in Q4, which was very strong, we see a lot of the increase actually came from other fees, I believe around EUR 17 million quarter-on-quarter, which is almost a doubling quarter-on-quarter of this fee line. Could you just elaborate what that other fee income line includes? Gloria Portero: Sofie, I will answer the first one. Almost 100% of the client acquisition with digital accounts is Spanish. It comes from Spanish clients. We have actually acquired digitally in Spain around 130,000 new clients, and we have attracted around EUR 5 billion of new money from these clients. This has allowed us to do something, which is actually not be -- not have -- we have made -- changed these deposits with corporate deposits that were even more expensive. So actually, we prefer to pay an acquisition cost to acquire clients where we can cross-sell and make more money than to our corporate clients for the treasury excesses. We won the operative accounts from our corporate clients, which are much lower cost. But just to give you an idea, we have already cross-sell to these clients. It's very, very, very early to say, but we have already cross-sell payroll accounts. We have cross-sell lending, and we have cross-sell investment products. We are at around a 7% cross-sell. But another thing that I want to -- well, to say is that around 10% to 15% of these clients that we have acquired are in the maximum level of the digital account, which is EUR 100,000. And this means they are probably more in the affluent segment or the private banking segment, and we are going to concentrate on those clients where we see potential to develop them. Actually, we are doing some tests to see in which area of the bank, whether it is the branch network, whether it is the telephonic managers or whether it is digitally that we can actually develop these clients. And for the moment, we are having quite good results. I will pass you through to Jacobo to answer you the fee income question. Jacobo Díaz: Good morning, Sofie. Yes, I mean the fee -- we have recorded the EUR 10 million of success fee of alternative investment funds in that line. That's why you see in the other fees that amount. I must say that the alternative investment funds activity is performing very well. You've seen also that in the line of the equity method, we have recorded very good results. And I believe this is something that is going to be sustainable over time. We have 31 vehicles. We have a good average fees. We have quite strong expectations in the future. And as we mentioned during the call, we have brought to the bank around EUR 10 billion of net new money, and some of them flies to the alternative investment fund. So this is a business that is quite relevant for us. It's going to be another priority in coming years. And you should expect more fees to come from this business and more equity method income from this business in the future. Thank you, Sofie. Laurie Shepard Goodroe: Our last question comes from Britta Schmidt from Autonomous Research. Britta Schmidt: I have a question on the digital account. How should we think about the adjustment on the pricing of the stock and versus the flow? So maybe you can give us some sort of indication as to what basis point reduction in deposit cost you expect from this initiative? And on the acquisition cost of these customers, I think given that you just explained that these are mainly affluent, it's probably clear why the acquisition cost will be lower than for other channels, but maybe you can give us some sort of quantification of how much lower these acquisition costs are? Gloria Portero: Well, I will give you, for instance, the campaign where we acquired most was more successful this summer, summer in September, which was also after the acquisition of EVO. So it's really the digital organization. The acquisition cost was EUR 20 per client. So really, the acquisition cost is more the cost of the actual account. What we want to do is -- I mean, as you have seen, we have already reduced by 50 basis points every single account in the digital organization. And we will go on with this trying -- doing trials and reducing the cost. Obviously, the front -- so the front, the new production, the new acquisition, will have to be higher, and we will be always in the order of the reference, ECB reference rate or somewhere around there, obviously, depending on how the competition is behaving. And the second question... Laurie Shepard Goodroe: Thank you very much all for attending today. That has ended our Q&A. And on behalf of the entire Bankinter team, we definitely thank you for your interest and participation. As a reminder, the Investor Relations team will be available after the webcast to answer any questions that you may have. Thank you, and have a wonderful day and start to the new year. Jacobo Díaz: Thank you very much. Goodbye.

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CURN 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Q4 Year-end 2025 Financial Results. [Operator Instructions] Also note that this call is being recorded on Thursday, January 22, 2026. And I would like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead, sir. Bill Mitoulas: Thank you, Sylvie. Good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the fourth quarter and 2025 fiscal year. Thanks for joining us. With us today are President and CEO, Randolph Pinna; and Group CFO, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results, his latest perspective on the company's operations and Randolph will then provide his commentary on CXI's strategic initiatives, sales efforts and business activities, after which we'll open it up for your questions. Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. For those of you who may happen to leave the call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI's Investor Relations website page, along with financial statements and the MD&A. Please note that this conference call will include forward-looking information, which is based on a number of assumptions, and actual results could differ materially. Please refer to our financial statements and MD&A reports for more information about the factors that could cause these different results and the assumptions that we have made. With that, I'll turn the call over to Gerhard. Gerhard, please go ahead. Gerhard Barnard: Good morning, Bill, and thank you, everyone, for joining today's call. My overview of the company's performance, CXI will also include the results of the discontinued operations of Exchange Bank of Canada, or EBC. These results are presented in U.S. dollars. As a reminder, on February 18, 2025, the group announced its decision to discontinue the operations of it's wholly owned subsidiary, Exchange Bank of Canada. Now EBC ceased operations as of October 31, 2025. And on December 19, EBC issued its year-end audited financial statements to its regulators. EBC has formally applied to OSFI to recommend approval from the Minister of Finance for the discontinuance from the Bank Act. Following final regulatory approval, management and the directors will liquidate the remaining assets and liabilities and distribute EBC's net assets to CXI, its sole shareholder. Management anticipates that all required regulatory approvals for discontinuance will be granted during the second quarter -- second fiscal quarter of 2026. Now starting the second quarter of 2025 and following the Board's decision to discontinue the bank's operations, the group updated its financial statements presentation to present continuing and discontinuing operations separately in accordance with IFRS accounting standards. Therefore, included in the group's financial statements are the results of the U.S. or United States operations, that's CXI, which is under continuing operations and the results of Exchange Bank of Canada, EBC under discontinued operations. Before we go into the detail of the various results, I'd like to note that the group measures and evaluates its performance using several financial metrics and measures, some of which do not have standardized meanings under general accepted accounting principles or GAAP and may not be comparable to other companies. We call these measures non-GAAP financial measures and/or adjusted results. Management believes that these measures are more reflective of its operating results and provide a better understanding of management's perspective on the performance of the company. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2024. Management included a full reconciliation of the key performance and non-GAAP financial measures in the MD&A. I think it's Page 24, 25. When we refer to reported results, we refer to results as reported in the financial statement based on IFRS, the audited results. Whether we refer to adjusted results such as adjusted net income, we refer to performance non-GAAP measures. Now the group reported net income of $10.3 million for the year ended October 31, 2025, an increase of $7.8 million or 317% over the prior year with yearly revenue growth of 5%. This 2025 reported net income reflected $14 million of net income from continuing operations at CXI and a net loss of roughly $3.7 million from discontinued operations, Exchange Bank of Canada. Reported unadjusted results for the continuing operations included nonrecurring items restructuring charges, roughly $300,000, $400,000 related to the closure of CXI's Miami vault and about $200,000 related to the discontinued operations in Canada. Now it is important to note that the reported results of the prior year 2024 included nonrecurring items related to the discontinued operations and represented impairment losses, regulatory compliance charges, other tax items, and that totaled $7.7 million. Now excluding restructuring and nonrecurring charges, adjusted net income from continuing operations increased to $14.5 million, a 10% increase, and the group's adjusted net income increased to $10.8 million, an increase of 6% -- the group's adjusted diluted earnings per share increased to $1.77 or $1.77, which is a 14% increase over the prior year. Now certain operating expenses and personnel costs previously shared with EDC were fully assumed by CXI during the year. The annualized estimate of these costs, we call the stranded costs, was initially approximately $3 million after tax. However, it is now expected that the actual figure will be closer to 90% of this original estimate once the full 12-month period has been completed. With that, here is a summary of our current fourth quarter's results compared to the same quarter in 2024. Revenue grew to $19.8 million, up by $1.4 million or 8%. Operating expenses increased to roughly $13 million, up by $743,000 or 6%. So revenue up 8%, expenses up 6%. Reported EBITDA grew to $6.4 million, roughly 4% and adjusted EBITDA grew to $6.8 million by close to $0.75 million or 10% over last year. Adjusted group net income grew to $3.3 million or by close to $0.5 million or 19% as a result of restructuring charges related to the closure of the Miami vault and charges related to EBC discontinued, which were partially offset by a recovery related to the judgment by the Federal Court of Canada, which reduced EBC's administrative monetary penalty by $1 million or CAD 1.4 million as agreed by both parties. Revenue growth was driven by 31% growth in the payments product line, 17% of CXI's total revenue is now from payments and a 4% growth -- in the banknotes revenue, 83% of CSI's total revenue is in the banknotes product line, primarily through direct-to-consumer channels. Now payments grew $800,000 or 31% of -- and it's roughly 17% of the total revenue. This growth was supported by a 40% increase in business trading volume and almost $2.1 billion due to the increased activity from existing financial institution customers and the onboarding of new customers. So that trading volume literally up 40% in this quarter. Wholesale banknotes revenue remained fairly flat year-over-year, presented roughly 40% of our revenue. Trading volumes declined slightly due to the impact of the U.S. federal government shutdown in October 2025, impacting several airports across the nation as well as a slowdown in inbound international travelers, especially from Canada. This slowdown of inbound international travelers has been substantially offset by an increase in outbound travel by U.S. citizens to Europe and Asia. Now let's look at direct-to-consumer banknotes revenue growth of roughly $600,000 or 8% and DTC represents 43% of our total revenue, with growth mainly in the online FX platform due to the increased demand for exotic foreign currencies. During the current quarter, CXI added South Carolina to the states in which CXI's online FX platform operates. Added more than 51 new non-airport agents in several locations and opened a new company-owned branch in New York. Now the following is a highlight of the operating expenses from continuing operations for the fourth quarter of 2025 compared to the prior year's fourth quarter. As I mentioned, CXI's operating expenses increased by roughly $0.75 million or 6%. Variable cost, postage shipping, bank charges, sales commission and incentive compensation totaled $3.4 million, an 8% increase, mostly attributable to shipping costs and bank service charges, partially offset by a decrease in variable compensation costs. Salaries and benefits remained fairly flat compared to the previous quarter, primarily due to general inflationary adjustments. This increase was partially offset by a reduction in headcount resulting from the closure of the Miami vault. Now bank service charges are related to processing payments and banknote transactions with the majority arising from the payments product line, where we realized 40% increase in volume. During the current quarter, CXI fully transitioned its check clearing and payment processing activities away from EBC, eliminating the use of EBC's correspondent bank for such transactions. As a result, 100% of CXI's bank fees for the current quarter were reported in continuing operations. Now in the same period last year, bank charges incurred through EBC's correspondent banking relations were reported under discontinued operations. So you can see a bit of a change there and where we reported it. This transition accounted for roughly $150,000 of the variance reported above, and you'll see the variance in the financial statements and the growth in that cost. The remaining difference was primarily attributed to the 40% significant increase in payment transaction volume and the associated processing costs compared to the prior year. Marketing and publicity efforts grew mainly, and there, we spend a lot of money on growing this marketing and publicity mainly because of CXI's strategic emphasis on target marketing initiatives, comprehensive campaigns, retail investments and the development of our customer referral programs. To align with our corporate objectives, partially supporting the growth of the direct-to-consumer business line. Online FX, DTC marketing campaigns were on Instagram, and social media, really making sure we get the word out. Restructuring impairment charges represented the closure of CXI's Miami vault, and that was roughly $400,000 and impairment charges of assets related to some of our company-owned branches of close to $270,000. Now interest revenue generated from excess cash holdings is noteworthy at the end of October 31, 2025. CXI maintained nearly $25 million in AAA-rated money market funds compared to 0 in the prior year. This was supplemented by interest earned on other investment-bearing bank accounts in the ordinary course of business. The increase in interest income reflects a substantial rise in available excess cash attributable to the decreased working capital requirements as a result of EBC's discontinuance and a well-executed exit plan. Income tax expense in the current quarter reflected an effective tax rate of roughly 18%, where the majority of the decrease below the statutory rate was reflected -- related to the tax benefit from a large amount of stock options exercised during the current quarter and accounted for roughly 9% of this effective tax rate. Now let's look at the year. Summarizing the results of the group for the year 12 months ended October 31, 2025, compared to 2024. Revenue grew to $72.5 million, up by about $3.5 million or 5% and expenses only grew by 3% or $1.2 million to a total of $48.5 million. That gave us net income from continuing operations that grew to $14 million or close to $1 million, $800,000 or 6%. Now reported EBITDA grew to $23.3 million, up $1.6million or 7% and adjusted EBITDA grew 10% to $24 million compared to the previous year, up by $2.2 million. Now it's important to note that adjusted reported group net income, as I said, grew to $10.8 million. That's an increase of $600,000 or 6% as CXI's restructuring charges related to the closure of Miami as well as some legal and advisory fees were adjusted as nonrecurring items. This is for the year now. Now looking at the group's results, EDC's adjusted adjustments almost netted out with recovery from the Canadian Federal Court's judgment reducing EDC's administrative monetary penalty, resulting in a benefit of USD 1 million, together with a net gain related to the lease terminations of roughly $360,000. These benefits were partially offset by severance costs, nonrecurring legal and advisory charges of $650,000 as reported in net discontinued operation results. Now let's look at continued operations consolidated performance for the year compared to the prior year. For the year, the revenue growth was driven by 19% growth in payments product line and a 3% growth in banknotes revenue, primarily through, as mentioned, for the quarter as well, the DTC channels that we have. Now payments revenue grew an impressive 19% or $2 million. As I mentioned, it's now 17% of our total revenue. The growth was supported on a yearly basis by a 31% increase in trading volumes. For the quarter, that was 40%. For the year, we're at 31% increase in trading volumes, primarily from new customers and a slight increase in volume from existing customers to almost $6.7 billion, up from $5.1 billion a year ago. Very proud of the team there. Wholesale banknotes revenue maintained relatively flat year-over-year, representing 42% of the total yearly revenue. Revenue growth came from both existing and new domestic financial institution customers with declining volume from monetary services businesses and international financial institutions. Our international travel levels were generally lower than last year, offset by an increase, as mentioned in the outbound U.S. travel to popular destinations in Europe, Asia and Mexico. Consumer demand for euros and Mexican pesos drove growth, while the Canadian dollar volumes remained lower. DTC direct-to-consumer banknotes revenue grew by $1.1 million or 4%, and that represents 41% of our yearly revenue with growth mainly from our online FX platform due to the increased demand for exotic currencies and the addition of 3 new states during the year. At October 31, 2025, CXI had 39 company-owned branch locations and operated in 50 airport agents, 3 more locations compared to last year, and we had 468 non-airport agent locations, almost 245 more locations than the prior year. The following is a highlight of our operating expenses for the continuing operations for the year. CXI operating expenses increased by $1.2 million or 3% year-over-year. Now that's an important number because variable costs posted shipping, bank charges, sales commission and incentive compensation totaled $11.8 million, only a 1% decrease due to a slight decline in variable compensation cost. The ratio comparing total operating expenses to revenue for the current year improved to 67% compared to 69% last year. Now stock-based compensation declined due to a 5% decline in share price throughout the year in comparison to last year where the share price grew roughly 25%, which in turn reflected the increase in debt expense last year. Foreign exchange gains for the current year were primarily driven by the U.S. dollars depreciation against major currencies during the second quarter and the first half of the third quarter. The euro and British pound strengthened notably against the dollar, while the Mexican peso recovered from early year weakness, contributing to the favorable revaluation of banknotes holdings. Gains on euro and a basket of unhedged currencies exceeded losses on Mexican peso inventory for the year. Foreign exchange losses in the same period in the prior year were largely driven by the weakening of the Mexican peso against the U.S. dollar compounded by higher overall hedging costs. Now let's look at discontinued operations related to Exchange Bank of Canada, where the bank had a net loss of $1.1 million in the fourth quarter of 2025 compared to a loss of roughly $6.1 million in the same period last year. For the year, the bank added a net loss -- the bank had a net loss of $3.7 million compared to a net loss of $10.7 million for the same period in the prior year. That's where all those adjustments and write-offs happens. Diluted loss per share from discontinued operations was a loss of $0.18 for the fourth quarter and a loss of $0.61 for the year compared to $0.97 and $1.70 for the same 3- and 12-month periods in the prior year. Once final regulatory approval has been obtained, the Board of Directors, as I said, plan to liquidate the remaining assets and liabilities of EBC and distribute those net assets to CXI, its sole shareholder. As of October 31, the net assets directly associated with the disposal group, EBC, were approximately USD 5 million. Now let's review the balance sheet at year-end. Due to the company's business being subjected to seasonality, CXI uses a 12-month trailing net income amount to calculate ROE, which has been relatively consistent at 13% over the last 12 months and includes the discontinued operations results. CXI had net working capital of $73 million and a total equity of $85 million and 100% available unused line of credit amounting to $40 million. As indicated on Page 22 of the year-end financial statements, CXI reported a cash balance of $95.5 million. Additionally, approximately $5 million, as I mentioned, is held in EBC, resulting in a total cash position slightly exceeding $100 million. Now it is important to note that cash serves as CXI's primary product. It is our widgets, primarily used for transactional activities within the banknote segment. CXI had $53.2 million cash held in the form of banknote inventory in transit in vaults, tolls and on consignment locations at year-end. CXI maintains cyclical banknote inventories with optimal levels ranging from $50 million to $70 million, depending on the travel season. Now cash deposited in bank accounts totaled $42.2 million. This total $42.2 million includes the $25 million of excess cash designated for investment purposes. So that's the $25 million that we had at the end of the year in AAA-rated money market funds. The remaining balance of this $42 million is comprised of minimum cash reserves maintained by CXI in bank accounts with select banking partners to support our banknote settlement operations as well as operating cash balances corresponding with customer holding accounts. Maximizing shareholder returns through share buybacks under the normal course issuer bid, NCIB or share buyback continues to be a primary objective. Over the past year, CXI acquired or acquired and canceled 312,300 common shares at prevailing market prices on the TSX totaling $4.75 million. On November 26, 2025, the TSX accepted CXI's notice of intention to make another NCIB and an automatic share purchase plan to purchase for cancellation, a maximum of 360,000 common shares, representing 10% of the company's public float as of November 18, 2025. As of yesterday, CXI purchased for cancellation approximately 170,000 common shares. Now at this time, I will turn the call over to Randolph Pinna, our CEO, to provide his perspective. Thank you, Randolph. Randolph Pinna: Thank you, Gerhard, for the detailed review. And thank you, everybody, for joining, especially those out West since I know it's quite early there. To give you guys time to ask questions, I'm going to try to keep this as short as possible, but I do want to highlight the main things from my perspective, please. So to begin with, as usual and top of mind is Exchange Bank of Canada's discontinuance. As you know, we executed on a discontinuance plan to the point where we are now, which is we have closed all operations last fiscal year. We took care of all the employees. So there -- most of them have all found new homes. All of our customers have been referred to the 2 referral relationships we have and the feedback has been good that the customers have switched and they are trading with those new providers. So therefore, in layman's term, I would say we're pretty much done. and we're just now waiting on the paperwork final process. But all dealings with regulators, employees, customers has all been satisfied, and it is just now in the final approval process for full discontinuance and our complete exit from Canada, which is expected in this second quarter that we're now just starting. Turning and my focus has been now 100% on CXI. And by the way, on Exchange Bank, I do want to just do a hats off to Katie Davis, our CFO of the bank and our Group Treasurer, who led the execution of that detailed discontinuance plan to a key. And I want to thank all of the parties, both regulators, employees, legal advisers, everyone involved for their contribution to sticking to the plan so that we can discontinue as expected. So back to CXI. The main business, as we all know, is banknotes. And I will address that at a high level after I just covered the consumer unit and the wholesale unit and what we're doing. The consumer unit is what has shown continued growth primarily because of our e-commerce channel. We now have the ability to deliver currency to homes or businesses in 46 states, representing over 93% of the entire U.S. population. We see tremendous growth in this. In fact, we've done a survey -- a qualified survey confirming that there is a huge upside potential to continue to be able to sell currencies across America, and this will remain a focus. We are also continuing to have brick-and-mortar stores. Some of our stores are very good, and we've identified new stores like in New York, Carolina and others to be announced. We will continue to invest in our direct-to-consumer business by adding agent locations. As you saw and Gerhard pointed out, we've grown our agents -- non-airport agents from 225 to 468, and we see a tremendous amount of opportunity going to existing retailers across the country and adding a significant value service like currency exchange to complement their current offerings. So we do see upside potential in all of the consumer area. While the wholesale banknote business was flat, this was primarily due to a reduction of a few customers and overall inbound travel being affected. We see upside potential in wholesale because our pipeline is full. We do have other financial institutions in the pipeline, both credit unions as well as banks, and we do have a renewed focus on banknote sales as a company. Before I go to payments, I do just want to talk about what some have called the melting iceberg. Reality is, if you look around the whole world, 5 of the major countries, America, Canada, Australia, Germany and England have all shown for the last 3 years that cash usage is slightly going up. Looking at cash providers such as the ATMs, Euronet, the largest operator of ATMs in the world continues to show growth in ATM output, cash output. So cash will be still king. Just as I'm looking at my notes on paper, people thought we would be paperless by now. Cash is here to stay. Central banks wanted to have digital currency. The U.S. abandoned its digital dollar project that was being led by the Federal Reserve and realized that cash is king. On a marketing front, I had verbal commitment from many of our customers as well as even competitors, banks, currency exchanges in Europe, Canada and America, including CXI, have already all verbally committed to putting marketing dollars towards educating younger consumers about cash as well as pushing for legal legislation to ban the stores that are going cashless. Not only are the currency exchanges and select banks willing to participate, there's been good support from the armored car companies who move this cash around the world as well as the manufacturers of note acceptance machines and cash processing machines. So there will be a unification soon of all of these -- a coalition, if you will, of all of these people that have a pro cash interest. And we feel that you will see an improvement in cash usage, and we will be a part of that trying to drive the cash is king movement because cash is freedom. So moving over to payments. We will continue to diversify our revenue sources in payments. You can see that our focus in the last few years in growing our payments business is compounding. We are continuing to see incredible demand for our payment offerings. While our investment with Jack Henry and Fiserv and the other core bank software providers is working well. We will continue to grow those relationships doing our service of international payments as well as U.S. dollar payments internationally and even potentially domestically. We will continue to invest into this business. We are now, as you know, EDC closed, so we gave up our Swift membership there. CXI is now fully a Swift member using the full services of Swift and that capabilities integrated with our technology has enhanced banks and credit unions' ability to offer international payments to their clients. We are also current with the new stablecoin movement. We have -- are in the final stages of onboarding with a major stablecoin operator to test a USDC capability for moving domestic dollars in America. So our focus is going to continue to invest into payments. And we are -- as I said, our pipeline is full, and we will continue to quickly grow this business as we focus our overall growth efforts for financial institutions credit unions and nonbank customers. Well, that turns us to the M&A area. We have a lot of cash. We are looking to do a strategic accretive type of transaction in the payment spaces, the prices are too high. We will not overpay for an asset, but that looking for strategic opportunities is a main focus of myself, the management team as well as the Board of Directors. Lastly, I just want to remind everyone in March is our Annual Shareholder Meeting since we're no longer really in Canada, even though we're on the TSX for now, we will be having our Annual Shareholder Meeting at our head office, our headquarters in Orlando. And so we really hope you can come in person. We are working on the technology capability so that you can video in should you not be able to physically attend, but I look forward to seeing you in person ideally in March. So I'll end it there and open it up for questions. Thank you. Operator: [Operator Instructions] And your first question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: It's nice to see these results are perking up very well. My first question is with Gerhard. Gerhard, the $3 million expenses that we're talking about, are they now kind of fully reflected in the expenses? Gerhard Barnard: Robert, a lot of them are in there. Obviously, as we exited EBC, it moved from discontinued operations into continued operations. Bank charges are fully there in the fourth quarter, salaries and wages for the people that transferred are fully incorporated in the fourth quarter, not on the yearly numbers. As you know, we exited EBC during the 2025 financial year. But in our Q1 '26, it will be fully incorporated. Robin Cornwell: Okay. And Randolph, when you were looking for your future -- discussing your future growth, what about the software for as a service? I think I've asked this before, but where do you see that now because you've sort of got a new lease on life here going forward. And that's a very important part of your structure, your software. What are your thoughts on that? Randolph Pinna: We -- before we roll out nationally, we have done a pilot with 4 financial institutions in the U.S. utilizing our relationship with the Federal Reserve, part of what's called the Fed Direct program. And so we do have a direct connection to the Federal Reserve, and we are receiving monthly fee income for the usage of our software. Again, the domestic processing in America is not CXI actually touching the U.S. dollar moving from, let's say, a Florida bank to a California bank. We are actually using the connection, which is our software that is often in these 4 cases, we're already in the bank because they use us for either international wires and cash services. And they will -- it connects that bank to their own account at the Federal Reserve by using this one platform and us as the one provider. And so we do see that revenue from Software as a Service for this service will grow. At this point, it is not a material item to have a separate line item on it, but that is another way of growing our payments business. So we do, as I said, see that these growth rates in payments is sustainable this year and hopefully even larger based on the success of our previous investments and integrations that we've done. Does that answer your question, Robin? Robin Cornwell: Yes. Thank you. And the payments to grow that payments business, are you continually adding more people to drive that? Randolph Pinna: Well, we have been conservative on our hiring. We -- controlling our costs is critical, especially in this last year where there's been a lot of layoffs. We are, again, just using the existing integrations we have. So if you're familiar with how that works is the software providers that provide core banking systems have a whole variety of banks and credit unions using their software, and we have continued to grow that. So it's just a matter of working these lists, and we have a sales team of about 10, and we feel that's sufficient. We are adding one more person dedicated for banknote sales. But as far as payment sales, we are -- our pipeline is good, and we are executing on adding new clients every week doing new payments. And so therefore, I'm comfortable with the current team and our marketing to the existing customers we have that haven't switched to the wires to us yet or the new clients that are on these lists because of the integrations with these core software providers. Operator: [Operator Instructions] The next question will be from Jim Byrne at Acumen Capital. Jim Byrne: Randolph, maybe just on the online FX and direct-to-consumer, just thinking you're pretty much in all 50 states now. You mentioned some agency adds and some new stores as well. But I mean, when you go into a new state, can you talk about kind of the ramp-up of revenue and profitability on a new state versus something that's been operating for a couple of years? I mean is it -- you kind of see an immediate impact and then profitability grows after a certain level of revenue? Maybe just talk about that ramp up. Randolph Pinna: Yes. I'm not -- at least in my connection, your question was a bit faint. So hopefully, I got it. Basically, I think it is what do we expect when we go into a new state that we didn't have a license in. And so I've required that we have a business case to support why we're going to get a license in a certain state. For example, to take an extreme one, we don't have yet the business case to support having a license in Alaska. There are several states that we are still applying to because we do have a business case, and that is driven not just by the online home delivery service. So a business case that supports a new state license is usually a combination of the online home delivery, so the population of that state, but also the opportunity for agents. As you know, we are probably the primary provider to the largest automobile club in America, AAA. And they have what they call their AAA clubs in each of these states. And so that between the home delivery and the agent possibilities support us going in through the state. As far as the dollars and cents, each state is different, and Gerhard is probably closer to the numbers to answer it fuller if you need that. But basically, we do enter a state based on the projected expectation we see in a state, which will cover your administrative costs, the fees and all of that to do it. So did that answer your question, Jim? Jim Byrne: Yes. Sorry about that. I was kind of just thinking, as I said, you're kind of maxing out the number of states you're going to penetrate here. You still expect growth on the online platform as newer states kind of ramp up? Like have you got mature states that have kind of plateaued in terms of growth rates? Randolph Pinna: No. So that's -- okay. And one, I hear you much better now. Thank you. The online is where we see the most growth in the consumer unit. New stores will add growth as well. But the online, we spent a pretty penny doing a qualified survey of well over -- I think, over 1,000 proven international travelers -- and it shows that there's still about a 50% increase in capability of our home delivery, and we are refining our group marketing plan. The Cash and King campaign is a piece of that. But yes, we do see that there is still upside in every state we're in, and there's still 1 or 2 states that we are applying to now to have that. Eventually, we will probably be licensed in all 50 states. But again, I won't approve a new state approach until we have enough reason, financial incentive to do so. But I think overall, the consumer unit as well as the wholesale unit will show increased growth this year. And that's contrary to this perception of a melting iceberg. Gerhard Barnard: Nevada right now has allowed us an exemption. So we are operating in Nevada. Tennessee requires GAAP financial statements, which means we're reporting under IFRS. So that one will have to sit out until we get the approval to send them IFRS statements. And as Randolph said, Alaska and North Dakota, we are currently deferring just due to that, we call it that management case of determining what the return would be. And as Randolph mentioned, online FX is the scalability of that product is significant. If you think of we've doubled our marketing spend in the last year on driving that revenue growth. And in our planning, that is a very important product line, online FX payments. Jim Byrne: Okay. That's great. And then maybe just lastly, you mentioned the NCIB and the capital allocation priorities through M&A. You are sitting on quite a bit of cash and potentially more cash coming in the door here with the EBC closure. Any thoughts on maybe an SIB or a special distribution or anything like that? Randolph Pinna: Yes, that is a topic that has to be considered every quarter by the Board. Again, we have some -- our eyes set on 1 or 2 opportunities strategic, but because the owners of that business are incredibly large, that process is a very long and slow process. We've even got a focused team to help us try to carve out an asset. However, I can't say it's imminent. Nothing has been signed. As soon as it is, we would tell you, but we are continuing to look for the best use. And right now, the best use is to acquire our stock and retire it. There are restrictions. So an SIB is a next step of that. But as of this quarter, we have not chosen to do that. We do feel that cash -- capital allocation is critical and dividend or an SIB is definitely a good use of cash as well. However, the best use will be to continue to grow our payment and banknote business. But I do not have anything that I can announce today. Operator: The next question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: I just have one quick follow-up. And have you considered changing your year-end back to December 31? Randolph Pinna: That's a good one, Robin. We have discussed that among the accounting team, we would really like to just finish this year-end at October. And then we'll revisit that because we've also, as you'll understand, just want to get through the discontinued operations, make sure we get our focus on the operating entity, CXI. And yes, that's a good point. I'm laughing because it came up in the last week in one of our discussions and say it would allow us to have a better Christmas than dealing with auditors. Operator: Next question will be from Peter Rabover of Artko Capital. Peter Rabover: Congratulations on a nice quarter. Randolph, I wouldn't be doing my job if I didn't ask you on the little thing that I caught when you were describing your listing on the Toronto Stock Exchange as for now. Any comment that you would like to share on your future listing plans? Randolph Pinna: We have been happy with the Toronto Stock Exchange and the Ontario Securities Commission. However, our exit from Canada does invite us to consider NASDAQ. Ironically, one of our employees that worked for me for several years is working there. So we have been in talks with them in sizing up that move. But as Gerhard just said, our focus right now is to really fully exit Canada, get -- which we are 100% focused on America and get some nice clean quarters going forward. But in like a '27, you could see a potential move of our listing from the TSX to NASDAQ. But as of right now, we are not -- just like the SIB, these are all topics that the Board do discuss each quarter, but we have not chosen to hurry up to do that. We don't think anything is on fire. And therefore, running our business as efficiently as we can, generating the highest return for our shareholders and having that cash in our business and growing the value of our business is our #1 priority. Peter Rabover: Great. I appreciate the color. And maybe my second follow-up is on the color for the payments business. I know you guys had a great quarter, 31% and I know it's now 17% of the business because you've exited Canada. Any I guess, how should we think about that 31% in terms of run rate? Is there -- I know you added a state and et cetera. But what do you think the natural growth rate of the market is and what your share is in that market? Maybe that's the way to ask that without asking for future growth guidance. Randolph Pinna: Thank you, Peter. And I do want to highlight which another shareholder told me that the foreign exchange market is probably one of the largest markets in the world because automotive, Toyota, there's a lot of foreign exchange, et cetera. So the payment business as well as cash the foreign exchange market is the largest market. And as I told you, our pipeline for the payments business is tremendous. And there was a good question from Jim saying, or Robin, whoever asked about, am I hiring more people? Right now, we have a sufficient team. We have improved our internal automation and onboarding. Our -- what we call our implementation team is geared up and ready to continue to add customers each week. And so while the new state helps us, it's really a matter of just getting through contract approval with the financial institution, training them, doing the testing and then going rollout, and that is underway. So that 31%, I'm confident to say is sustainable, if not even increasing because now that we're getting bigger, we have more reputation in the payment industry, and we can get even larger financial institutions than what we currently have. And so I feel that our payment business will continue to grow nicely each quarter. And our banknote business will continue -- will get back to growing like it used to do as we did just recently sign a very large financial institution for wholesale banknotes, which is going to be onboarded hopefully in this current quarter and start trading soon thereafter. So we are really doubling down on our sales and implementation of new clients across the United States. Peter Rabover: That's great. So maybe I'll sneak in one more. I know you mentioned Jack Henry and the Fiserv relationship. Any color out of that 31% or I guess maybe as part of your business. How big is that part of the distribution channel, I guess, or part of the growth and as part of the business? Randolph Pinna: So to broaden it than those 2, I named, we have about 5 or 6 integrations and the integrated relationship is well over the 50% mark for sure. So that is the significant component to our payments because, again, we do one provider, one product where we provide all the foreign exchange. And therefore, that allows a bank to use its platform that the tellers are already on and get all the benefits of our enhancements using the common denominator, their core banking system as we've integrated into it. So all the bells and whistles, the Swift lookup, the IBAN validation tool, all the functions that our -- the SWIFT gpi, all of the bells and whistles, if you want to use that term, are available to banks that are already using a core from a Jack Henry or Fiserv as an example. And therefore, that's where that pipeline is and the list of banks that say, yes, I'm already using them. And luckily, a lot of our -- some of these banks are using us for currency. So they're already familiar with us. So yes, that will continue to drive our payment growth. And then as Robin brought up that we soon will be having new opportunities with domestic payments as well, enabling the bank to use our software to do their own wires with the Fed. So we don't have the compliance cost of moving and touching the actual dollars. They will just use it and pay for the service by each login that they have, and that will generate new fee income to the business that's not dependent on international. And so that is an exciting expansion of our payment business this year. Peter Rabover: That's great. And then maybe -- sorry, I'll keep on. So what percent of the business -- or sorry, of your, I guess, distributor business, what you call the Jack Henry and the Fiserv relationships, what percent of that is penetrated relative to what's available? Randolph Pinna: What's available, every bank uses a core. So the entire market upside is there. We are still a very small provider. As you know, there's several large fintechs that have been acquiring other payment businesses and so forth. And so they're there. But the natural competitor are the 3 or 4 mega money banks up in New York example type that are correspondents for the smaller banks, and we are trying to pick those off because those banks are using a software like Jack Henry, and we are needing to convince them to switch to us as a boutique provider as opposed to being just using 1 of the 3 or 4 top largest banks in the country. So there's tremendous upside. And yes, to reiterate, it is because of that integration into these core software providers. Peter Rabover: Okay. Great. And I just want to say thanks for providing the really good color on the excess cash and the return on capital really good to see that as a shareholder. And have a great day. Gerhard Barnard: Thank you for always asking us to do a better job of that. As you see, we listen to our shareholders. Peter Rabover: Not unnoticed. Operator: Thank you. And at this time, gentlemen, it appears we have no other questions registered. Please proceed. Randolph Pinna: Okay. Thank you again for your support, for all the questions. We feel this year we just closed is a successful year. We're continuing to be strongly profitable as a business, all while executing on our strategic vision to focus on America and grow our core of banknotes as well as our payments business. So thank you for your support, and I look forward to hopefully seeing you at our Annual Shareholder Meeting in March. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.

69天前Insight Analytics约5分钟阅读

EQT.ST 2025 Q4 财报电话会议

Olof Svensson: Good morning, everyone, and welcome to the presentation of EQT's full year results. We have a lot to cover today. Per will start off by reflecting on our strategic positioning and today's announcement that we're entering the fast-growing secondaries market by joining forces with Coller Capital. Teaming up with Coller strengthens our ability to serve clients globally and it unlock growth opportunities for both firms. The transaction is accretive to our fee-related earnings. It accelerates our growth outlook and it will further diversify our platform. Before handing over to Per to share more details, let me share a few highlights on 2025. First, it was our most active exit year ever with fund exits and realizations for co-investors of EUR 34 billion. We invested EUR 16 billion across our strategies globally while providing a co-invest ratio for our clients of close to 1:1. It was a pivotal year for EQT's expansion into evergreens and open-ended strategies across the globe with new product launches and accelerating inflows. We continued to deliver on our fundraising agenda, more than doubling gross inflows to EUR 26 billion. All our key funds continue to develop on or above plan, and our more recent vintages in particular performed strongly. EQT delivered total revenue growth of 16%, while keeping head count largely flat year-over-year. So with those remarks, let me hand over to Per to go through things in more detail. Next slide, please. Per Franzén: Thank you, Olof. Good morning, everyone, from Davos. We have very exciting news to share this morning, and we'll come back to Coller shortly. I'll start by saying a few words about the private markets industry and our strategic positioning. EQT remains well positioned to navigate a fast-changing world and to capture the growth opportunity ahead. There are a number of forces shaping our industry. The geopolitical backdrop remains volatile. We continue to see private market investors wanting to rebalance their portfolios as they are looking to achieve a better global diversification. At EQT, we are well positioned to navigate this environment and to help our clients achieve their strategic portfolio objectives. We want to be the most attractive global provider of international alpha. Through our global sector teams, we engage with our clients to align on their pipeline priorities. And with the help of our local teams in more than 25 countries, we can move quickly in times of market dislocation to unlock attractive thematic opportunities. The combination of our global sector teams with our strong local presence helps us deliver structural uncorrelated alpha as often the sources of alpha across those various countries and regions are uncorrelated. A good example of the investments that we've made into our global platform and how it's paying off is Japan. We built our local presence in Tokyo over many years. And in 2025, we were able to reap the benefits of those investments. In our private capital strategies, we created 2 attractive public to private opportunities, and we continue to have a very attractive pipeline in Japan going forward. The second force, AI that I'd like to touch upon, that will have an impact on most sectors and businesses that we invest into, including, of course, also our own industry and how we run our business at EQT. At EQT, we keep on investing in our AI capabilities. On the investment side, we continue to back AI-driven tailwinds in our early-stage strategies. We make investments into native AI companies. Harvey and Lovable are 2 good recent examples. In our infrastructure platform, we keep on investing into globally leading data center platforms. One of our companies, EdgeConnex is a good example of that, but also into fiber assets and into energy platforms. We're also driving AI adoption across our organization, deploying advanced solutions that enable better decision-making and help us realize synergies across our platform. Over time, we believe that this will help us run our business in a better way, but also in a more efficient way. Private wealth and insurance remain 2 attractive growth opportunities where we see new capital pools emerging. We're making the necessary investments to build our capabilities in those areas, and we expect to see significant capital inflows in this part of our business. Coller will be a catalyst for the insurance segment as we will get access to their capabilities within structured solutions. The rise of secondaries continues, and this part of the market will also going forward, outgrow the rest of the industry. There's a number of structural forces driving that growth. Private markets have grown in size and in relevance. And in some regards, they've become more complex, and we also see public and private markets converging. Clients want to be able to ride the winners, and they want to stay invested in compounding open-ended structures. On the other hand, there's also been a lack of distributions in our industry post pandemic, we saw a slowdown in dealmaking. And as a result, many firms are not able to raise new funds, and that has created more and more zombie funds in our industry. And all of this drives a need for clients to be able to restructure their private market portfolios and to find good liquidity solutions. And in this context, Coller will be an important enabler and really further strengthen our ability to be that strategic partner for our clients. Finally, we see the consolidation of the industry accelerating. Not everyone in the private markets will be able to navigate this environment. We'll be able to make the necessary investments to capture that growth opportunity ahead. So size and reach matter more than ever when it comes to creating real alpha and when it comes to serving clients in the best possible way. And our global platform, our size, being the largest private markets firm in the world outside of the U.S., will continue to be a true differentiator for us. Next slide, please. At EQT, we remain committed to our long-term strategic ambition to keep on building the most attractive scaled private markets firm, delivering industry-leading performance and solutions for clients. By continuing to be that client-centric firm focused on delivering attractive risk-adjusted returns for investors, real alpha, we will also be able to attract the best talent in our industry to our organization and to our portfolio companies. And really that way, creating that virtuous circle that will give us the license to keep on scaling our firm and as a result, over time, also delivering attractive sustainable value creation for shareholders. Next slide, please. In 2025, we made good progress on our strategic ambitions, and we executed well in a volatile environment. We took the opportunity to simplify our organization to ensure that we can remain that entrepreneurial, fast-paced, high-performing organization. We successfully completed a number of leadership transitions. We streamlined our organizational structures and reinforced our focus on accountability, performance and efficiency across the platform. We also integrated our client relations, capital raising and capital markets teams, creating one unified platform well set up to deliver a seamless experience for institutional clients and private wealth distribution partners. And all of this makes us also well prepared to add Coller now as a new business line to the EQT platform. In 2025, we stayed disciplined in our investment pacing, producing a record year for co-investments. We facilitated EUR 14 billion of co-investment opportunities for our clients. That is up from EUR 12 billion in 2024. And we want to -- this is an important tool for us to also going forward, create those deep strategic relationships with the institutional investors. And we want to -- we remain committed to continue to produce that most attractive co-invest to fund commitment ratio in our industry. We did a superb job really in driving realizations in a tricky exit environment. 2025 was actually our most active exit year ever with EUR 34 billion in total of realizations, and that includes EUR 14 billion of realizations out of co-investments that were done together with our clients. And that is just massive outperformance compared to the wider private markets industry in terms of those realizations. A good example is our equity strategy, which is our oldest strategy at EQT. In that part of our business, we sent back close to 30% of NAV, which is approximately 3x the industry average. And notably, we set a new record for distributions and capital gains from a single investment. So in Galderma, in 2025 alone, we realized more than EUR 9 billion of proceeds for fund investors and for our co-investors. And this actually excludes the stake sale that we have announced to L'Oreal that is yet to close. And this investment has generated more than $20 billion so far in capital gains for investors. As a result of that strong performance, we saw a good fundraising momentum. We more than doubled gross inflows to EUR 26 billion. Our evergreen offerings targeting the private wealth segment saw inflows of approximately EUR 2 billion. And we also introduced our first open-ended institutional product, which is exciting. This is the second generation of our active core infrastructure strategy. And the portfolio in Fund I is performing very nicely, and we really see a strong client interest for this fund. Next slide, please. As you've heard me say, I think, many times before, we have actively been looking to establish a presence in the secondaries market for some time now, actually. And this is one of the fastest-growing parts of our industry and building our capabilities in this area is really critical so that we can become an even more stronger and attractive strategic partner for our clients. And so today, I'm just very, very pleased to announce that we have reached an agreement to join forces with Coller Capital. This is really a highly strategic and complementary combination. By joining forces with Jeremy and his team, we want to build a market-leading secondaries platform together. We really have a very high bar for any M&A that we do at EQT and the fit must be just very, very strong. And in this case, from a strategic, performance, culture perspective, Coller checks all the boxes. The strategic fit between our 2 firms is simply excellent. It's highly complementary. And most importantly, the cultural fit, the values fit is very strong. Similar to EQT, Coller is a performance-driven and entrepreneurial organization focused on delivering consistent long-term solutions and returns for investors. And just like EQT, Coller also has that constant improvement mindset and that relentless drive to continue to drive innovation and stay ahead of the curve. At EQT, we like to say everything can always be improved everywhere at all times. Coller's version of this is better never stops. I'm very excited to welcome Jeremy and the entire Coller team to our firm. And I really look forward to working closely with Jeremy as part of the executive leadership team. And together, we will be just incredibly well placed to deliver the most attractive solutions and the most attractive performance for private market investors and to really fully capture that growth opportunity ahead that we see in secondaries. I'll now hand it over to Gustav, who will cover the highlights from our 2025 results together with Olof and Kim, and I believe starting with fundraising. So next slide, please. Gustav Segerberg: Thank you, Per, and good morning, everyone. In 2025, we executed strongly on fundraising across the platform and more than doubled inflows versus last year. Starting with the key funds. Fundraising for BPEA IX continued with strong momentum, having raised $14 billion as of today. We expect to close at the $14.5 billion hard cap in the first quarter. Fundraising for EQT XI continues to be off to a strong start, further helped by the strong exit pace during 2025. Note that in our reporting fee-paying AUM, it does not include EQT XI until activation. And later this year, we expect to launch fundraising for Infrastructure VII. So moving over to our other closed-ended strategies. We are advancing our Healthcare Growth and transition infrastructure fundraisings, having raised approximately EUR 3 billion combined, and we expect to conclude fundraising for Healthcare Growth momentarily. In the fourth quarter, we activated our latest European real estate logistics fund. The fund is expected to close in Q1, and our reporting fee-paying AUM includes almost EUR 3 billion of commitments versus the size of the last fund at EUR 2.1 billion. And then finally, on evergreens and open-ended institutional strategies. In 2025, EQT launched 3 new evergreens, Nexus Infrastructure and Nexus ELTIF Private Equity distributed in Europe and APAC, and a U.S. domiciled private equity vehicle. Hence, our evergreen offering consisted of 5 vehicles at the end of 2025, and we raised close to EUR 2 billion in 2025, while reaching an NAV of around EUR 3.5 billion by year-end. And just last week, we launched a U.S.-domiciled evergreen structure for infrastructure. During the year, we've also introduced our first open-ended structure for institutional clients, as Per mentioned, with our active core infrastructure strategy. This fund is yet to be activated and is not in our fee-generating AUM number as of year-end. However, we continue to be very excited about the prospects of scaling this strategy in the coming years. We've also decided to pursue our first continuation vehicle based on EdgeConneX. This will be an open-ended structure that will allow us to continuously support EdgeConneX's long-term growth opportunity. And with that, I will hand over to Olof to cover investments and realizations. Next slide, please. Olof Svensson: Great. Thank you, Gustav. So looking at the investment activity in 2025, I'd say it reflects our global sourcing machine and our thematic focus. 45% of the EUR 16 billion of fund investments were invested in Europe, about 1/3 in North America and the remaining 20-ish percent across APAC. We invested in a number of high-quality businesses throughout the year, be it the cloud-based software companies such as Fortnox or NEOGOV; industrial tech businesses like Fujitec in Japan or as Per mentioned, AI native investments such as Lovable and Harvey. In real estate, we continue to see attractive risk/reward dynamics. And in our flagship and transition strategy, we invested in areas such as energy, grids, AI infrastructure and transportation companies. And on that note, please do make sure to take the Arlanda Express when you next come and visit us in Stockholm. In total, we provided a further EUR 14 billion of co-invest for our clients, a co-invest ratio of close to 1:1. EQT X and Infrastructure VI are now about 60% to 65% invested, while BPEA IX is 5% to 10% invested. We expect to activate EQT XI around midyear 2026 and Infra VII around year-end. Next slide, please. Turning to exits. It was a breakthrough year in 2025 for exits. Volumes in the EQT funds amounted to more than EUR 19 billion or 70% higher than last year's volumes. Around 2/3 of the fund exits were from funds in carry mode. In addition, we realized EUR 14 billion for our co-investors. The strong activity means that we reached the ambition communicated at the start of the year to execute more than 30 exit events across our key funds. Key fund exits were made at an average gross MOIC of 2.6x above our target return levels. Roughly 40% of the fund exits were minority sales and secondary buyouts. Early in the year, we announced a minority sale in IFS at a gross MOIC of 7x. This is an example of how we actively work with portfolio construction, sending back EUR 3 billion to fund investors while continuing to own an asset that is expected to have an outsized impact on the fund returns for EQT IX. 1/3 of the exits were equity capital markets transactions. And as a result, EQT retained its position as the most active private markets firm across global equity capital markets for the second year in a row. Looking ahead, we believe that fund exits in 2025 is a relevant proxy for '26 if markets continue to be favorable. Our gross pipeline for 2026 is, in other words, similar to 2025 when we had gross realizations of close to EUR 20 billion. And with that, I'll hand over to Kim. Kim Henriksson: Thank you. Thank you, Olof, and good morning, everyone. All of our key funds continue to perform on or above plan. And during the year, key fund valuations increased by 8% on an FX-neutral basis, but let's look at performance by vintage. 4 out of 5 funds raised in 2019 or before are performing above plan, and most of these funds are in exit mode and already derisked. Funds raised 2020 to 2021, which are still in value creation mode, performed predominantly well with value creation of 10% plus on an FX-neutral basis. We did face some headwinds related to idiosyncratic events in a few individual portfolio companies. But with 350 portfolio companies globally, we will always have certain underperforming assets. Risk-taking is part of our model. As a reminder, historically, about 10% to 15% of our investments have returned less than 1x gross MOIC, while the total portfolios have still delivered on or above target returns. In 2025, we also realized some assets with subpar performance, enabling us to refocus on the part of the portfolio where we can create more value. Overall, underlying operational performance was solid across the portfolio and particularly so in our latest generation of key funds, which increased by 15%, excluding FX. 1/3 of our investments in these funds are already performing ahead of plan. Next slide, please. In 2025, carried interest and investment income increased to EUR 448 million on the back of the strong exit activity in funds in carry mode. Looking into 2026, we expect that carried interest will continue to be paced by the key funds already in carry mode. And please note that the figures on this page are based on a simplified and illustrative on-plan scenario. To date, the 4 funds in carry mode have recognized EUR 1.3 billion of carried interest and roughly EUR 600 million remains, and we continue to expect the remaining carry from these funds to be recognized over a multiyear period. The next 2 funds expected to enter carry mode, Infra IV and EQT IX are currently executing on their value creation and realization plans. And we do not expect these funds to enter carry mode in 2026, in line with our previous communication. The final bucket includes the most recent key fund vintages, which are still in value creation mode. In total, the remaining illustrative carry potential in the key funds activated as of today is approximately EUR 9 billion. This is a simplified round number based on a number of assumptions, which are outlined in the appendix. Next slide, please. Let's now look at the financials in a bit more detail. In 2025, we grew fee-related revenues by 9% and delivered a fee-related EBITDA margin of 52%, reflecting also the continued investments we make in our business, for example, the build-out of the evergreen offering. As you know, we initiated and completed a number of efficiency measures during the second half of 2025. And as a result, the number of FTEs was broadly flat year-over-year. We expect to see the full year cost effects of this in 2026 and therefore, expect mid-single-digit total OpEx growth this year. Run rate savings from the efficiencies will, to a degree, be reinvested to support future growth in our priority growth areas, including focused geographies such as Asia and the U.S., focus areas such as AI capabilities, private wealth and of course, the build-out of our new secondaries business. We're ramping up marketing and brand spend, which will remain at meaningfully higher levels going forward. We remain committed to reaching a 55% plus fee-related EBITDA margin at completion of the current fundraising cycle. And we're highly focused on efficiency, scaling and automating parts of our work, including through increased AI adoption. We will continue to keep you posted on this progress and how we see the OpEx outlook beyond 2026. Let me also come back later in the presentation on how the combination with Coller impacts our financials. The Board has proposed a dividend of SEK 5 per share for 2025, representing a growth rate of 16%. And during 2025, we distributed approximately EUR 460 million in dividends to shareholders. And in addition, we repurchased shares for around EUR 300 million. Let me also spend a brief moment on our new revenue disclosures. We have, in our income statement, introduced the concept of fee-related revenues, which consists of the underlying management fees, fee-related performance revenues and transaction, advisory and other fees. Fee-related performance revenues are revenues from our evergreen products that are measured and received on a recurring basis and do not require the realization of underlying assets to materialize. Transaction, advisory and other fees include fees from, for example, debt and equity underwriting and other capital markets activities. With that, I will hand over to Per to cover the Coller combination. Next 2 slides, please. Per Franzén: Thank you, Kim. As I mentioned earlier, secondaries and solutions is becoming an increasingly important part of the private markets ecosystem. GPs are looking for ways to hold on to their best assets for longer, driving the growth of continuation vehicles or GP-led secondaries and LPs are seeking strategic liquidity tools and the ability to actively rebalance their portfolios where LP-led secondaries are a key enabler. And secondaries have now become one of the fastest-growing parts of our industry, and that the market actually grew by more than 40% in 2025 and is expected to more than double from now until 2030. And continuation vehicles are today driving close to 20% of global exit volumes. Next slide, please. With Coller, we're really happy that we found the right partner to enter this segment at scale. Coller shares our values-driven culture, a strong performance mindset and that drive to constantly innovate for clients with an entrepreneurial approach. As a pure-play dedicated secondaries firm, Coller is 100% complementary and a perfect match for us. I'll now hand it over to Gustav to tell you more about Coller's track record, Coller's offering and its client base. Next slide, please. Gustav Segerberg: Thank you, Per. As a pioneer in secondaries, Coller has led many of the first in the industry, such as leading the first ever GP-led transaction almost 30 years ago and continuing to innovate across product categories and client channels. Coller has 35 years of proprietary data from more than 25,000 companies has incorporated AI-enabled underwriting into its investment process. This enables faster and more precise investment decisions, aligning very well with EQT's data-driven investment approach and leading AI capabilities. Their strong investment track record and ability to innovate has allowed them to expand from a single flagship fund in 2021 to today having a multiproduct and multichannel offering investing across both private equity and private credit secondaries. The private equity secondary strategy recently held a successful final close of Fund IX at USD 10.2 billion of fee-generating commitments, up more than 35% compared to the last generation. Since launching the private credit secondary strategy in 2021, Coller has already been able to raise 3 funds with a total of close to USD 5 billion in fee-generating commitments. Next slide, please. The team also shares our strategic commitment to the private wealth opportunity, and their journey closely resembles ours. They -- like us, they have a very deliberate and disciplined focused on product development to launch and ramp up products across asset classes and geographies. Since 2024, Coller has launched 4 evergreen products in total with the current combined NAV of more than USD 4 billion. And expansion continues to show great momentum and inflows are around USD 200 million per month. Coller also recently announced a strategic partnership with State Street along with State Street's investment in Coller. Their partnership gives a unique opportunity to go after the 401(k) market in the U.S. We look forward to exploring what we can do together to strengthen the global distribution of the combined evergreen platform. Next slide, please. Insurance is 1 of the most interesting capital pools in private markets. However, insurance companies operate in a highly regulated environment with strict requirements around capital charges, duration matching, liquidity, ratings and asset-liability management. To participate at scale credit exposure, secondaries and strong structure capabilities are required. This is an area where EQT on a stand-alone basis has been limited on a structural basis, and where Coller today is the clear market leader. Coller is the preferred partner to insurance clients with deep relationships and in-house structuring expertise. They have reached over USD 5 billion in structured products in the last 2 years, including the largest CFO backed by secondaries at USD 3.4 billion. This is a significant growth opportunity for the combined platform and where EQT's scale will be a key enabler. Next slide, please. We believe that this combination and more diversified secondaries platform by bringing together complementary strengths, we can accelerate innovation, deepen client relationships across both institutional and private wealth clients. Together, EQT and Coller are very well positioned to accelerate insurance-related product -- and to Per. Next 2 slides, please. Per Franzén: Thank you, Gustav. In 2025, we took the opportunity to simplify our organization and to clarify our governance to put us in the best possible position to be able to accelerate our strategic M&A agenda. So today, we are very well prepared to add Coller to EQT and to support Jeremy and the team to accelerate their growth independent investment committee. Next slide, please. The Coller team has demonstrated strong fundraising momentum, most recently with the successful close of Fund IX and has earned the strong client trust to expand into new strategies such as credit secondaries over recent years. Today, Coller has around 600 clients and more than half of those will represent new client relationships for EQT. At the same time, EQT brings a base of around 1,400 institutional clients, of which more than 900 clients are not currently invested with Coller, representing a significant opportunity to accelerate growth across the combined platform. The client bases are also complementary. EQT has a strong footprint with sovereign wealth funds, while Coller is more heavily weighted towards private wealth and insurance. So together, we will be able to offer clients a broader and more flexible range of solutions from primary investments to tailored liquidity solutions within one global platform with a real focus on generating alpha and performance. I'll now hand it over to Olof to comment on the transaction structure. Next slide, please. Olof Svensson: Thank you very much, Per. So let me talk about how we have structured this to ensure alignment of interest and this growth orientation. The transaction entails 100% of Coller and EQT will be entitled to 35% of carried interest in all the future funds in line with the EQT setup. We are also acquiring 10% of the carried interest in Private Equity Fund IX that Per just referred to. The deal construct includes a base consideration of $3.2 billion with a growth-oriented contingent consideration in 2029 of up to $500 million. The contingent consideration is structured to incentivize strong growth in the business with full consideration dependent on delivering high 20s, almost 30% fee-related revenue growth until 2029. The base consideration of $3.2 billion will be funded in newly issued EQT AB shares, creating a strong alignment to drive value. At closing, the shareholders of Coller will own approximately 6.5% of EQT, where Jeremy is the main shareholder of Coller's business today. Closing of the transaction is expected in the third quarter of '26. And with that, I'll hand over to Gustav to give us the combined fundraising outlook. Next slide, please. Gustav Segerberg: Thanks, Olof. I'll start on the evergreen side, where the joint offering will compromise more than 10 vehicles distributed across U.S., Europe and Asia. In terms of inflows, Coller increases the H2 2025 annual run rate to around EUR 4 billion. As only 7 out of the 10 plus evergreens where operational during that time frame, we hence expect 2026 to be significantly higher than the H2 2025 annual run rate. We believe that there are significant revenue synergies for the evergreens through the strengthened combined private wealth organization. By leveraging EQT's banking relationships to further accelerate Coller's distribution reach and by jointly tapping into EQT's brand and marketing capabilities. For reference 100% of Coller's evergreen inflows are incremental to fee-generating AUM. Next slide, please. So we are now a bit more than 1 year into our current of that EUR 100 billion based on the funds activated. 2026 is set up to be a very active fundraising year for EQT with 3 flagship funds, a number of other closed-ended strategies and of course EUR 25 billion to EUR 30 billion to the total amount effectively increasing it to roughly EUR 125 billion to EUR 130 billion. And with that, I will hand over to Kim. Next slide, please. Kim Henriksson: Thanks, Gustav. First, a few words on the latest flagship fund, the introduction of credit secondaries and the expansion into private wealth evergreens and structured products. Fee-related revenues were approximately $330 million, nearly all of which were management fees. This number includes catch-up fees as Fund IX was activated in July 2023 and closed on 31st of December 2025. However, it does not reflect the run rate management fees from evergreens due to fee holidays for some products in 2025. From 2026 onwards, all private wealth evergreens will be charging full fees. Across funds, the average fee rate is about 1% and in general, charged on committed capital. It's worth noting, though, that the private wealth evergreens in general charge somewhat higher fee rates with NAV as the fee base and that we see this channel growing faster than the closed-ended funds. Expect Coller to generate fee-related revenue of between $350 million to $375 million. Adjusting for catch-up fees, fee-related revenue is expected to grow in the range mentioned, the 2029 contingent consideration is based on growth in the high 20s. On costs, Coller has a similar profile to EQT, where the majority of operating expenses are salaries and other personnel-related costs. Then fee-related EBITDA margin at around 50%. Next slide, please. So what does the above then mean for the combined platform? We expect Coller to accelerate our fee-related revenue growth from day 1. In terms of carry, the acquisition will not impact our outlook for a number of years since the first fund where EQT has right to carry is a 2024 vintage. As I mentioned, today, Coller has a somewhat lower fee-related EBITDA margin than EQT. But in the near to midterm, however, we expect Coller to be in line with EQT's margin and to grow fee-related expenses. As a result, we maintain our ambition to reach a 55% fee-related EBITDA margin at completion of the current fundraising cycle. I'll now hand over to Per for some concluding remarks. Per Franzén: Adding Coller to EQT is a significant milestone in the development of our firm. Secondaries represents one of the fastest-growing parts of the private markets industry. We're confident that Coller is the best possible platform to build a market-leading secondaries franchise being a pioneer in the space with more than 3 decades of track record and experience. Next slide, please. The combination really means a step change for EQT in terms of scale, growth and revenue profile. Coller will add approximately EUR 28 billion of fee-paying assets under management and EUR 42 billion of total AUM. We will have a combined AUM of approximately EUR 312 billion. And to our business, we also significantly diversify our fee-related assets under management. Secondaries will represent about 15% initially of that fee-related fee-based assets under management, but it is expected to represent a significantly larger share over time. The acquisition will enhance our growth profile, and we aim to double Coller's fee-generating assets under management in less than 4 years. This means that 5 years from now, the mix of EQT's business will be much more well balanced across our business lines, private capital, infrastructure, real estate and secondaries. And we also see a very attractive opportunity to accelerate growth and scale of our real estate platform in the years ahead. Finally, we now manage strategies that, to some extent, are somewhat also countercyclical, if you will, creating an even more resilient and well-diversified revenue profile. As we look ahead with this transaction, we have created a platform that is even better positioned to attract and retain the best people in our industry and to continue to serve our clients, a more attractive, resilient and higher growing platform. With that, I open up for questions. Operator, please. Operator: [Operator Instructions] Olof Svensson: Operator, can I say a few words before we have the first question? Operator: Yes, please proceed. Olof Svensson: Thank you. So as you can imagine, Per is on a tight schedule in Davos today. So our suggestion is that we keep the Q&A open for about 45 minutes. And to make sure that everybody has time to ask questions, I would very humbly and politely suggest that you keep it to 2 questions each. And as always, we're, of course, available for any follow-ups after the call today. So let us aim for that and really looking forward to the Q&A session. Operator: And now we're going to take our first question, and it comes from the line of Oliver Carruthers from Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Two questions on Coller, please. So I guess you're acquiring a revenue fee stream in a growing asset class that's accretive to EQT, but you've also acquired this knowledge base in wealth. So can you talk to how you think this might help as you build out your existing wealth and evergreen business? And do you think this will accelerate the uptake of your existing Nexus products? So that's the first question. And the second question on this transaction. I may be wrong, but I don't think Coller has a dedicated infra secondary strategy. And so my guess would be that EQT is one of the largest global value-add infra managers, could add value here? And is this a kind of white space that you could go after? Because it feels like the use case for GP-led secondaries in infra could be even higher than it is in private equity over time because you have these platform build-outs like EdgeConneX that are very long-term assets that need capital and maybe don't fully belong in drawdown funds. So any thoughts there would be helpful as well. Per Franzén: Good questions, Oliver. I think the answer is that in both of those areas, on the private wealth side, evergreen side as well as on the infrastructure side, we see attractive growth opportunities ahead and are both good examples of why we're stronger together. But Gustav maybe you want to elaborate? Gustav Segerberg: Yes, happy to do that. And just echoing what you said, Per, so to speak. I think on the evergreen side, of course, this -- what this enables us, we get 2 strong evergreen organizations, both from a sales perspective, from a product development perspective, where we get to a completely different scale on a combined basis. So I think there's a lot of opportunity there, including joint products going forward in at least a midterm perspective. I think same on the infra side. This is, of course, one of the key areas where we see that there are complementary capabilities in terms of that Coller is very, very strong on the secondary side. We are very, very strong on the infra side and as well on the real estate side. So going forward, we see that this is, of course, a very interesting growth opportunity for us to attack on a joint basis and where we combined will have a very good right to win in that aspect. Operator: Now we're going to take our next question. And the question comes from the line of Arnaud Giblat from BNP Paribas. Arnaud Giblat: I've got 2 questions, one on Coller and one on your infra business. On Coller, could you -- when I step back and just look at who are the largest GP-led secondary fund, typically, there are quite a few, including Coller before the acquisition, being independent and not having a very large direct business. So I'm just wondering how you're thinking about that? Do you see a need to operate a bit at arm's length? How is that going to be pitched to investors? I'm just wondering if there's any risks around that and how you intend to put that to investors. My second question is -- thanks for the update on -- in terms of what you intend to do with EdgeConneX and wrapping that into a longer-term structure. I'm just wondering if you could give us a bit more detail in terms of the mechanics, how much of enterprise value would EdgeConneX come into this continuation or long-term fund? And how you're thinking about fundraising around that? Per Franzén: Good questions. I'll let Gustav talk about EdgeConneX and provide more details on that transaction. In terms of the combination with Coller. As I mentioned in my presentation, right, I mean, we've really organized ourselves in a way so that it's very easy to add on a platform such as Coller and also to have that platform continue to be run in a very independent way so that the Coller team can serve clients and its stakeholders in the right way and in the best possible way going forward. And that's the intention also with the combination. That's how we'll organize ourselves. As I said, Coller will have an independent investment committee going forward and will be a separate business segment of EQT, where we will, of course, collaborate as was mentioned earlier, is in the areas around branding, marketing, also on the client relations side, where we can leverage the strong combined sales force that we have, both on the institutional side and on the private wealth side, right? And that's also how previous transactions have been structured and done in this space in the past, and that's what we intend to do also here when it comes to the combination between EQT and Coller. And Gustav, why don't you address the question on EdgeConneX? Gustav Segerberg: Absolutely. So due to where we are in the process, I can't go into, let's say, details about the size or the terms at this point in time. So we'll come back to you on that at the right time. I think what we can say in general is, so to speak, that we're super excited about this opportunity because, of course, it allows us to really continue to support the company for the long term as there is a very, very significant growth opportunity here in the data center area, so to speak. And therefore, it was also important for us to create this into an open-ended structure. Operator: Now we're going to take our next question and it comes from the line of Hubert Lam from Bank of America. Hubert Lam: I've got 2 of them. Firstly, I just wanted to check your expectations for exits in 2026. I think you said you expect it to be similar to 2025. Just wondering why not better? And also, does this mean that we should expect a similar carried interest as in 2025? The second question is on Coller. Can you talk about the opportunity you see with State Street and the partnership there? And do you see this as a way to enter the U.S. target date funds and maybe the outlook for this partnership going forward? Per Franzén: Thank you for those questions. I'll start by addressing the first one, then I'll hand over to Kim to provide more details, and Gustav can talk about the partnership opportunity with State Street going forward. So when it comes to exit volumes, right, I mean, it's important to keep in mind that 2025 was a record year in the history of EQT for us, right? I mean we sent back EUR 34 billion of proceeds to clients, 3x industry average in our equity strategy. So the beauty, of course, the benefits of having a truly global diversified platform the way we have it at EQT is that in certain years, there will be higher amounts of distributions in relation to NAV in certain strategies. And then in other years, there will be a step-up in other parts of the business. And so that's what you should expect in 2026, right? In 2026, we do expect a pickup in distributions coming out of our infrastructure platform, for instance. And yes, I just wanted to provide a little bit of that background and color as to the outlook for 2026. And Kim, maybe you want to elaborate a little bit on the details and carried interest. Kim Henriksson: Yes. And what Per just said, how that sort of translates into carried interest really then goes into the framework I talked about earlier, where the carry will predominantly come from the funds that are in 2019 vintages or before. And you saw yourself that there's about EUR 600 million of carry left in those funds to be recognized, whereas the 2 flagship funds not -- next to come into carry mode are not expected to -- with the current exit plans it being carry mode still in 2026. So that's the guidance we can give you at this point in time. Gustav Segerberg: And maybe I'll touch upon the State Street partnership. I think, first of all, we're super excited about having State Street as a shareholder in EQT and the partnership that they already have in place with Coller. Of course, there is a lot happening in the private market side connected to private individuals and in the U.S., especially the target date funds and the 401(k) opportunity. We think that there is tremendous opportunities here, both in the form of over time broadening the partnership with State Street, and that's something that we look forward to having a positive dialogue with them around. But also when you think about how the target date funds operate and what's required to be able to win in that channel, it's very clear that secondaries is going to be a very attractive and key component of that solution, also given the need to trade on a daily basis which when you think about it from a primary versus secondary perspective, would just make it easier. So I think all in all, we're very excited about it. As we've talked about, we think that the 401(k) opportunity is very significant, but then it will also take time. And this, of course, is an important step for us in that journey to really create products that fit into that type of client base. Operator: Now we're going to take our next question. And it comes from the line of Ermin Keric from DNB Carnegie. Ermin Keric: Do you hear me now? Per Franzén: Yes, we can hear you. Ermin Keric: Maybe just you mentioned that you expect an increase in evergreen flows in 2026. Could you quantify that? And sorry, then the second question would be on branding. You're saying that you're increasing your spending on that. Could you give us any more kind of details on how much you expect to spend on branding and put it in context to what you spent before and also how the success of those efforts are measured? Per Franzén: Good questions. I'll leave both of them to Gustav and Kim. Gustav Segerberg: Yes. Maybe I'll start with the first one. I'm not going to quantify it into a number. I think that if you think about -- if I were you, I would think about it in 2 aspects. First of all, as I talked about, during that time frame, 7 out of the 10 or 10-plus were operational. So that kind of gives you, I think, a first piece of the puzzle of seeing how that could then be in the 2026 flow. I think the second piece of it is -- it's really that out of the 7 and of course, the remaining 3, 4 products, we still see an acceleration of the flows as we're ramping it up, so to speak. So I think what we're saying is that we expect that number to be significantly above the EUR 4 billion in 2026. Kim Henriksson: On the brand and marketing topic, in order to have a successful spend of brand and marketing, you first need to build a sort of organization and have the processes, et cetera, in place. And that is what we have been doing over the last few years, and we now have that foundation, which allows us to spend money efficiently externally on marketing campaigns and on brand events and branding more generally. The -- we're not going to go into the specific numbers here on a line-by-line basis, but it's -- the amount we will spend is a multiple of what we have done historically, but from a fairly low base to start with, I would say. Then it is a science of its own in terms of how this money will be measured, and it's quite different from a directed marketing campaign where you can sort of measure the exact clicks, et cetera, where from a more branding campaign where it's more about brand awareness, et cetera, in the market. But we have a great team focused on that with very specific sort of follow-up processes that are going to be in place. Operator: And the question comes from the line of Isobel Hettrick from Autonomous Research. Isobel Hettrick: Isobel Hettrick from Autonomous Research. So in your presentation, you touched on the significant number of new LP relationships the transaction opens up for both you and Coller. Can you provide some color on how you're thinking about the cross-selling opportunity from both ways, so existing EQT clients investing in new secondary funds and vice versa over time. So perhaps with reference to BPEA, how have you seen cross-selling develop since you acquired that manager? And what can we read across to Coller? Per Franzén: Good question. I'd say it's not only that we have a track record in terms of achieving cross-selling synergies on the institutional side from the merger with Barings. And we, of course, also acquired Exeter before making the Baring's transaction. And I think we have good data points and evidence from both of those transactions in terms of the synergies that we can generate. Gustav can provide more details. And then, of course, what's different also this time around is that the private wealth opportunity has developed further. And here, we really see an opportunity for us to leverage all of the investments that we've been making into our capabilities, into our brand, into our marketing in those areas, right? So -- but Gustav, why don't you elaborate? Gustav Segerberg: Yes. No. But I think as you say, Per, there, we have experienced from it both from Exeter and BPEA. Of course, BPEA is not fully closed yet, but what you will see in the appendix is that around 25% of the capital in BPEA IX is from, let's say, original EQT clients. I think the equivalent number for Exeter on the latest U.S. fundraise there is about 15%. So we -- I think we have good track record of showing that there is significant cross-selling opportunities in these transactions, of course, going both ways in it. And in this specific transaction, as Per points out, the private wealth opportunity, there is significant cross-selling opportunities there. And then, of course, we also have the insurance side where over time, there can also be, let's say, some joint opportunities going forward. Operator: Now we're going to take our next question, and the question comes from the line of Magnus Andersson from ABG Sundal Collier. Magnus Andersson: Just first of all, on the transaction, if you could, in any way, quantify potential income and cost synergies and any potential structural charges related to this transaction in 2026? And secondly, just on your fundraising, there seems to be very strong demand for infrastructure according to market data. So I was just wondering whether we eventually should expect your flagship infra funds to become larger than your traditional key funds and if we could see that already in the generations that will be on the fundraising in 2026? Per Franzén: Yes. Good questions. I think we're incredibly -- I think as we've mentioned in the past, we're incredibly excited and optimistic about the growth potential across our infrastructure strategies, and we see very good momentum here in the ongoing fundraises that we have. I'm not sure we're going to comment on or give guidance in terms of the sizes for the next generation of these funds. But I leave that to Gustav to comment on further. And then on Coller and the income and cost synergies in '26, maybe, Kim, you want to take that question? Kim Henriksson: Yes. Well, first of all, on Coller, as you heard, we gave the guidance that we intend to more than double the business in the next 4 years. That's really the income guidance we can give you. And that is based on all of the strengths that we just talked about of the combined business. And this is not a transaction that is done because of cost synergies. Having said that, as I mentioned, there's a number of, let's say, costs that are of a nature where you can spread them out over a larger base, and that will become more efficient. Then there are some areas of overlap on the back end that we will work together to solve in the most efficient ways, but that's not the reason for the transaction. There's likely to be some transaction costs associated with it, of course, but they are not in the big scheme of things of a magnitude that will move any needle. Gustav Segerberg: And then maybe on the infra side, I think we fully agree with you on the infra opportunity in general terms, so to speak. And that's also why we, in the last couple of years, have been very focused on broadening the infra offering which you've seen both with the Active Core, especially now going open-ended. You've seen it with Transition Infra. We talked today about the EdgeConneX opportunity on the [ CV ] side. So I think you should think about it that -- and I'm not going to comment specifically on Infra VII, so to speak. But we probably think that the large opportunity here is continuing to broaden the infra scope and scaling those things in a way that we can really be a market leader across from, let's say, more infra growth opportunities all the way to core plus. Operator: Now we're going to take our next question and the question comes from the line of Jacob Hesslevik from SEB. Jacob Hesslevik: So my first question is on the culture fit. When you acquired both BPEA and Exeter, you talked a fair bit about the strong culture and how EQT and the related partner would fit together. But you have said very limited today with the acquisition of Coller. So what are the key culture and operational integration priorities over the next 12 to 18 months? And how will you maintain both EQT and Coller's entrepreneurial culture while achieving the synergies? That's the first question. The second one is you highlighted a particularly strong pipeline for Japan for 2026. What makes Japan distinctive from other Asian markets in the upcoming year? And do you need to change your approach to capture the market potential? Per Franzén: Yes. I'll start with the second one. On Japan, the reason why we are particularly excited about the pipeline that we see in Japan right now is because of some of those corporate governance reforms that have been implemented in Japan and that just enable us to pursue opportunities where we can really unlock value creation opportunities. And it allows us to create sources of alpha that are uncorrelated to the type of value creation opportunities that we see elsewhere in Asia. So for instance, in India, there's a lot of tailwind from demographics, capital markets-related tailwinds, whereas in Japan, the alpha-generating opportunities really around unlocking that value creation opportunity, thanks to some of those corporate governance reforms. And of course, we are very well positioned to capture that. Why? Because we have a best-in-class value creation toolbox that we've developed over 30 years. We have best-in-class sector-based strategies and value creation playbooks that we can apply. And then, of course, in Japan, our brand resonates very well. We've been present in the country for 20 years, thanks to the Wallenberg connection. We were also seen as a very credible long-term player, which is particularly important in a market such as Japan. So for all of those reasons, we're very excited about the opportunity ahead in that country. When it comes to Coller and the cultural values fit, right, it is as strong as we have seen in previous combinations. We've spent -- Jeremy and I have spent a lot of time together to get to know each other. I'm sure we're going to have an excellent partnership. And we've also spent significant of time together at the next generation of the leadership team between Coller and EQT, exactly like we did it in the combination with Barings and also in the transaction with Exeter, right? So that's a good way to get to know each other, and that's why we can with confidence say that this fit from a values perspective, culture perspective, the entrepreneurial, the innovation drive, the performance drive, all of that is exactly similar as it is in EQT. And the way, of course, we maintain and retain that culture, that's how we run our business, right? And that's why it was so important that we took those steps in 2025 to simplify our organizational setup. What I spoke about in my presentation and what I've also talked about in previous instances. So today, we have organized ourselves around a number of highly accountable high-performing business lines. And then we have simplified our governance, our structure in a way so that we have one combined capital markets client relations team on the institutional side that will be very well positioned to serve all of these business lines going forward, including Coller EQT. And then finally, of course, we have a clear governance around how we run our backbone, our business on the operations side. And those would also then be areas where we can achieve synergies together, right? And so by having those highly accountable business lines, that's also how you can ensure that you retain that entrepreneurial performance-driven culture. Kim and Gustav, anything else you want to say on the synergies? Gustav Segerberg: No, I think maybe one more point, and that's we just had a partner meeting earlier this week where, of course, the real estate and the Asia team was there. And I think it's so clear to see how well those integrations have gone, how much they feel like part of EQT in a real way. There is only one company. And I think it also shows that the model works, and also that we're ready to do the next one. So I think from all of those perspectives, this timing is also a good one, I would say. Operator: And now we'll go and take our last question for today. And it comes from the line of Nicholas Herman from Citi. Nicholas Herman: Congrats on the deal. Two questions from me, please. One on accretion and synergies and one on cash. On the accretion and synergies, you referred to a doubling of fee-paying AUM in Coller over 4 years. Is that the time frame for the mid-single-digit FRE accretion? Or is the accretion time frame shorter? And related to that, what synergies are in that guidance? And how should we think about the sequencing of adjacencies and synergies. And then a quick one on cash. I guess given this transaction is almost entirely equity, should investors now have greater confidence that you will announce share buybacks over time? And I guess for avoidance of doubt, I'm assuming you have no ambition for further deals or especially larger deals for now at least? Per Franzén: Thank you. Olof and Kim, do you want to take those questions? Olof Svensson: Yes. Do you want to go ahead? So I mean, if you think about the accretion, we're buying, first of all, 100% management fees, right, over the next several years. And as we talked about before, the earn-out mechanics is based on a fee-related growth of close to 30% or high 20s, right? And to Kim's earlier comments on the margins, that means that you're going to have a very rapid top line growth, and that means that our margins are going to scale quite meaningfully over the next several years in this business. So if you think about this from a fee-related EBITDA multiple, it's based on the guidance that we gave, it's about 16 to 18x multiple that we're paying in '26, but that's not then capturing this significant ramp-up that you have in '27 and '28, right? So to your question, if you think about this transaction in, say, a couple of years' perspective, I'd argue it's high single-digit accretive to our earnings. And that means that this mid-single-digit guidance, that's an average over the next few years. Kim Henriksson: And in terms of cash and buybacks, yes, you're absolutely right. This is an all-share transaction and will, if anything, strengthen our balance sheet further over time. There's -- last year already, we did about EUR 300 million of share buybacks in 2025. So it's not that we haven't been doing share buybacks already. And what we have said in terms of guidance is that we will use share buybacks or extraordinary dividends for that matter as a tool if we, at any point, become overcapitalized, for example, if cash carry comes in at scale, but I can't give you any specifics around that in terms of timing or how that's going to look. But right now, we have a solid balance sheet, but we're not overcapitalized given the opportunities we have, both organic and inorganic going forward. Nicholas Herman: That's really helpful, guys. If I could quickly follow up on the synergies. Just what synergies, as you said, are in that guidance? And how should we think about the sequencing there from, I guess, from a -- presuming is it wealth first, then insurance then Asia, I mean how should we think about the way you're going to be tackling those -- the numerous opportunities there? Gustav Segerberg: Yes. And I think we're not going to go into specifics of it. Of course, as always in this, it's going to be evolving development in it. And there are a number of opportunities. But I think we also feel that we're very well equipped, both from a Coller perspective and from an EQT perspective in order to capture many of this. I think you should think about the guidance on, let's say, doubling the business on -- in less than 4 years that, that does not include a very significant new initiatives in that. It's, of course, a development of the business. It's continuing to scale of the PE and credit side. On the institutional side, it's maybe 1 or 2 new initiatives on the institutional side. And then, of course, it's a development of the evergreen as well as the insurance side. But it's a base case that we feel and the Coller team feels comfortable, which I think is good. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to management for any closing remarks. Olof Svensson: Okay. Well, everybody, thank you very much for great questions and for the discussion. As you can hear, we're extremely excited about this combination with Coller, and we are very pleased with the results that we delivered for 2025. As always, you know where to find us, we're available for any follow-up questions. So thank you very much. Kim Henriksson: Thank you all. Gustav Segerberg: Thank you. Olof Svensson: Thank you.

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ETTYF 2025 Q4 财报电话会议

Sandra Åberg: Good morning, and welcome to Essity's presentation of the Q4 and full year 2025 results. Here to take us through the highlights, we have our CEO, Ulrika Kolsrud; and our CFO, Fredrik Rystedt. After the presentation, we will open up for your questions. [Operator Instructions]. With that, let's get started. I'll leave over to our CEO, Ulrika. The floor is yours. Ulrika Kolsrud: Thank you, Sandra. And also from my side, welcome to this webcast. The final quarter of 2025 confirms that we are standing strong in a continued challenging market environment. We continue to grow in our strategic segments, such as Incontinence Care, Wound Care and premium products in Professional Hygiene, and we strengthened market shares across our different branded categories. We're also strengthening our profit margins. Actually, we are strengthening our profit margins in all 3 business areas in the quarter, and we delivered a stronger result than last year's same quarter. When it comes to volumes, sequentially, we have a stronger volume, so stronger volume in Q4 versus Q3. Looking at quarter over last year's quarter, however, there was a flat volume growth. And that, together with the fact that we are then lowering prices in order to compensate for lower input costs is resulting in that we are reporting a negative organic sales growth. And that underpins the importance of the initiatives that we took last quarter to accelerate profitable growth. We are now operating in the new organizational setup with decentralized decision-making with end-to-end accountability and with even sharper focus on our most attractive categories and segments. And we are starting to implement our cost-saving program. In the quarter, we also strengthened our position for profitable growth by acquiring the Edgewell Feminine Care business in North America. And now with the brands Carefree, Stayfree and Playtex in our bag, we are more than doubling our Personal Care sales in the U.S., in line with our focus on high-yielding categories in attractive geographies. Another key highlight of the quarter is that we again got recognized for our strong sustainability performance. So we were awarded for the EcoVadis Platinum Medal, recognizing our sustainability performance, placing us among the top 1% companies worldwide that they are assessing when it comes to sustainability performance. And also, we have been placed on the CDP prestigious A list. I would say sustainability performance is important in all of our business areas, but not the least in the health care sector. Many of our customers in the health care sectors have high ambitions when it comes to sustainability. One good example of that is one of our biggest customers, NHS, in the U.K. They continue to pursue ambitious sustainability agenda even if there is financial pressure, with increasing demand for health care and funding under pressure. And speaking about funding under pressure, we talked already last quarter about that we see in some selected markets that there are some cuts in funding, and we continue to see that, for example, in Indonesia. That does not, however, prevent us from growing. Quite the contrary, we have a positive organic sales growth in Health & Medical, and we grow volumes both in incontinence Care as well as in Medical Solutions. If we double-click on the Medical business, this is the 19th consecutive quarter that we grow the Medical business, and we grow in all 3 therapy areas. A critical success factor behind this good performance in Health & Medical is, of course, our strong and unique offers that we have. And we continue to strengthen those offers. In the quarter, we upgraded one of our flagship products in the TENA assortment, the belted TENA Flex product. This product is specifically easy and ergonomic for caregivers to use on bedridden patients. And in this quarter, then we upgraded it with an even better comfy stretch belt. The elasticity is better, so it adapts easier to different body types and thereby, you can use this product for more patients. Also in the quarter, we relaunched one of our unique offers in the Advanced Wound Care assortment, the Cutimed Siltec Sorbact product. And in connection with that, we kicked off a new brand campaign for Cutimed on the theme of imagine a world where wounds would heal faster. And in this campaign, we showcase how our unique offers are helping health care to improve patient outcomes and reduce health care costs, thereby improving health economic -- or bringing health economic benefits. And it's, of course, leveraging these unique advanced solutions that is helping us and contributing to our performance in Wound Care and allowing us to gradually strengthen our positions in this category. Strengthened positions is also the theme if we go to consumer goods. In the quarter, we strengthened our branded market shares in 65% -- more than 65% of our business. And this is not only attributed to one of the categories, but it's actually contributing from all different -- all 4 categories. Looking at Incontinence Care, there, we strengthened our market shares, and also it's a fast-growing category. So as a result of that, we saw very good growth in Incontinence Care. In Feminine Care, we were impacted by a one-off, but underlying, we continue to perform very nicely also in this category, and that is demonstrated through the market share development that we see. In fact, in feminine, we grew our market shares in 80% of our business. And we had also some good records that we saw in the quarter. One very exciting of those is that we now in Mexico have 62% market share in Feminine Care. And as you know, Mexico is one of our most important markets for Feminine. Another exciting development in the quarter in Feminine was that we now are back to growth in Knix washable absorbent underwear. And that is thanks to new retail listings, higher prices, as well as product launches. Then if we move to Baby Care and Consumer Tissue, here, we saw an organic net sales decline. And this is for the same reasons that we have talked about previous quarters. So in Baby, we are impacted by the lower birth rates and also the fierce competition that we see, and consumers being more price sensitive than what we have seen before. And in Consumer Tissue, it's the weak consumer sentiment that makes the growth happening mostly in the mid- and low-tier segments, and we also lost some private label contracts due to pricing. Then it's very encouraging to see that we are growing our branded business, both in Baby as well as in Consumer Tissue. And that's a testament to the effect of our launches and our marketing activities. They are really paying off. And we continue to have a very high activity level in Consumer Goods. As you can see here on the slide, there are many different launches to talk about in the quarter. But in the interest of time, I have to choose one of them. And I choose to talk about the upgrade of our thin assortment, our thin towels in feminine care in Latin America. So having thin feminine pads is, of course, more discrete and comfortable than using thick pads when you have menstruation. But even so, many women actually choose thick pads because they don't fully trust the leakage security of the thinner ones. Now with this upgrade, we are introducing a new core technology that we call SmartPROTECT that manage even sudden gushes and thereby increased leakage security. And for that benefit, we have 2 -- actually 2 benefits of that. One is, of course, that we strengthen our superiority even further in this ultra-thin segment in the market, but also that we move consumers from the thicker pads to the thinner pads, which is a benefit because we normally have higher profitability in this segment. Now the activity level was also very high in Professional Hygiene in the quarter. Here, market growth continues to be depressed following the weak consumer sentiment, and we see that as impacting our sales. But we are responding to that by continuing to have selective price adjustments, continuing to work with joint sales plans together with our distributors, and also adapting our assortment. In this situation, it's super important to be competitive in all different price tiers. And in the quarter, we launched some what we call volume fighter specifications to make sure that we are at the right price point for the customer. We expect this to pay off in the coming quarters, but what has already paid off is really our push in the premium segments. So we continue to see strong growth in our premium segments in Professional Hygiene like Tork skincare and Tork PeakServe. We also continue to develop these products even further. So in the quarter, we launched an automated sensor-based dispenser for PeakServe in addition to the manual one that we have already. And that will broaden the relevance of this premium solution in the market. We are also broadening the relevance of our center feed dispenser solutions. The center feed dispenser solution allows you to take one sheet at a time, which is more hygienic and it also controls consumption. So it's cost efficient for our customers. Now in some segments, it's more important with design than in others. A good example of that is in restaurants that have an open kitchen. Then, of course, you are very dependent on a good-looking dispenser. And if you see on this picture, the black stylish dispenser here is what we launched in the quarter, and that is really a very strong fit into these type of environments. I would even call it decoration. It's really nice. Also, we launched a new refill paper with natural color that also has a lower price point. And that is then an excellent choice for those customers who are either very price sensitive and/or want to work with their sustainability image. Now all of these innovations that I'm talking about, they have 2 purposes. I mean, one is to expand the relevance of the product, but also, of course, to drive product superiority. And with product superiority, we mean that it's the preferred choice by customers and consumers. And looking across categories in 2025, we reached a record level when it comes to product superiority. And that, of course, makes us very well equipped to continue on that positive market share growth that we have seen in the fourth quarter of 2025. And now after all of these talk about products and innovations, I'm sure you guys want to hear a bit about the figures behind this. So over to you, Fredrik. Fredrik Rystedt: Thank you, Ulrika, and I will put a few numbers to what you have been talking about here. And as you can see, and you've already mentioned it, we actually had, in terms of organic sales, a negative development during Q4. And this is basically driven by price decline and a slight volume decline. It's maybe worth noting or perhaps repeating what you said, Ulrika, we are taking market share. So this is very much a market issue. And if we actually look at the sequential development of volume, it's always a little bit of seasonality. But nevertheless, you can see that we actually grew our volume sequentially between Q3 and Q4 with just under 2%. So it's a good momentum despite the fact that we have a decline versus Q4 of 2024. I mean, some of you will actually remember that Q4 of '24 was very strong. So we also have a bit of difficult comparable. Now as before, the volume decline is very much driven by Baby, or same as in Q3, our Baby business, our Consumer Tissue business and also Professional Hygiene, and these all are leading to the group decline of volumes of minus 0.2%. So just really brief, Health & Medical, you've said it, Ulrika, we had a good volume development in Inco Health Care and Medical. And if you look at the Medical area, actually all therapy areas and especially Wound Care, so that story you will remember. And if you talk about price and mix, largely flat in Health & Medical. Consumer Goods, Inco really, really doing very well in terms of volume, Inco Retail. Feminine is as well. It's a little bit -- it's positive volumes, just under 1% of positive volumes. And that is actually despite a fairly weak market in Europe. So overall, you can say we are growing, but the European market is a bit challenging. Ulrika talked about a onetime issue in Feminine, and that is related to an adjustment that we have made of customer rebates in Latin America. So we've increased those, and that has actually impacted sales and the pricing components, and this is why you see a negative organic sales growth for Feminine. And this is temporary for the quarter. It will go back to normal in the next quarter. And if you actually adjust for that, we have stated that the underlying growth is good. And so what we mean by that is that growth would have been -- organic sales growth would have been low single digits, to give you a little bit of perspective. When it comes to Baby, again, we are gaining in our branded business in the Nordics, but we are continuing to lose in the rest of the retail branded business in Europe. And overall, volumes are down with approximately about 4%. That's also for the market as a whole. So it's not just us, but it is a very competitive market in Europe. And this is also why we are losing volumes. And finally, Consumer Tissue, we're struggling a bit with volume there, minus 2%. And this is all actually related to private label. We have talked about this before. So there is no news here. We have lost a few contracts on the back of pricing. And of course, we have always prioritized margin over volume. But of course, we don't want to lose volume. So we have selectively actually reduced prices in Consumer Tissue. And hopefully, that will pay off as we go forward. HoReCa, we've talked about Professional Hygiene, and this is, of course, still leading to a slight volume loss of about 0.5%. And there are signs here of at least stabilization of the HoReCa markets. So here, we're hoping for better conditions going forward, but there time will tell. And to summarize maybe for the group, minus 0.2% in terms of volume, minus 0.9% in terms of price and mix is actually flat. So that sums it up a bit. Then if I go to the margin, you can see that we've actually -- we've improved our margins, both if you compare between Q4 of '24 and Q4 of '25 and sequentially. And it's not only for the group, it's actually for all the business areas. Gross profit, as you can see, increasing by 180 basis points, and this is on the back of lower COGS as we flagged when we talked to you last or after Q3. So that actually happened. And we've maintained a very good price management in the quarter, all of that leading to that very good improvement of the gross profit margin. The COGS reduction is all about, I should say, raw material energy, but we actually -- and this is a little bit of -- we're proud of that. We managed under tough conditions to reach also our COGS savings of just above SEK 500 million. So you will know our target for the year was SEK 500 million to SEK 1 billion, and we said we were struggling to reach that range, but in the end, we actually managed to do that, and that contributed to that margin enhancement. As you can see, and we've said that, we want to fuel our growth. We want to fuel our innovations that we put on the market. So we are spending more in terms of A&P, and that's both percentage of sales-wise and as an absolute number. When it comes to SG&A here, you see that it's actually favorable. So we have reduced in terms of absolute. Also in constant currency, we have reduced our spending in terms of SG&A. And this is due to, of course, a tight cost control. That's not surprising to you. We've reduced our travel, as an example, with more than 30%. We have a bit of lower bonus accruals. And there is also a bit of onetime here that is positive. So it's not as good as you see here. There is a bit of onetime. But if you look at the overall group, there is also positive and negative onetime impacts in the result. So overall, all the onetime impacts are balancing off for the group as a whole. But all in all, we're quite proud of our SG&A performance. So let me then just talk a little bit about the SG&A program, the cost saving program that we have launched previously. And as you know, we're aiming for a run rate saving of SEK 1 billion towards the end of '26. Now we are actually aspiring to reach quite part of this saving already throughout this year, but that will be more towards the latter part. So you can expect more of the savings. So far, we have realized very, very little, and we've also put fairly little in terms of restructuring charges. We expect the cost of this program to be a bit over SEK 1 billion, so approximately SEK 1.1 billion in restructuring charges. Let me end this part with a little bit of guidance for Q1, as we normally do. We expect actually COGS to be slightly lower, partly from savings, but also a little bit from currency or positive currency impact in raw materials. So slightly lower COGS, that is what we expect. And we are expecting a slightly higher SG&A. And please remember, I'm now giving you guidance Q1 of '26 versus Q1 of '25. So we are expecting slightly higher SG&A, and this is primarily driven by higher A&P in line with our ambition to fuel growth. And customary, and you know that, we also give you a little bit of guidance for the full year, and we expect CapEx, to start with that, between SEK 8 billion to SEK 8.5 billion, a bit higher than we had in '25. And this is actually partly phasing and just ambitions to grow as we go forward. We expect other cost or the corporate cost, if you will, to be approximately SEK 1.3 billion, so very similar to this year -- or to 2025. The structural tax rate to be between 25% to 26%. And then finally, on the COGS savings, we remain with our estimated range of SEK 500 million to SEK 1 billion. So let me move on then to the cash flow side. We're quite pleased with the cash flow here in Q4. This is driven by obviously a good cash surplus. The margin was good. So this was a good operating cash surplus, but we also had good working capital management. So inventory days came down a little bit, continue to do that. And we had unchanged credit days, both in receivables and payables. So all fine in terms of working capital. And net cash flow was also quite strong. And this cash flow has driven a continued strengthening, of course, of our balance sheet. So net debt-to-EBITDA is approximately 1.0 here, as you can see at the end of the year. We've continued to repurchase shares in line with our program that we launched with SEK 3 billion. And so far, we have purchased 9.2 million shares or totally SEK 2.4 billion. So we are roughly about 80% through this year's program. So let me then finalize with a little bit of overview of 2025. In many aspects, this was a good year. We had an organic sales growth of 0.9%, and this is despite challenging market conditions. We actually had growth in all our business areas. We maintained our volumes and price management remained strong for the entire year. In terms of margin, we've already talked about that, but it was a very good year in terms of margin. In fact, if you look at that operating margin of 14.1%, it's the second highest we've ever had. It's second only to the artificially high margin during the pandemic that was caused by all the panic buying, for those of you who remember. So this is, from a historic perspective, a very attractive margin. And then turning a little bit to what does that imply? And some of you may have seen from the report that our EPS growth was, if you look at it, between 2024 and 2025 in nominal terms, roughly about 1% growth. Now of course, the Swedish krona has strengthened a lot. So if you actually look at the EPS growth in comparable currencies, you will see a growth of roughly about 8%. And this is quite consistent with the long-term growth of about 6% if we start with the birth of Essity as the first year. So continued good performance. And this is, of course, on the back of good margins, the growth we've had and of course, also a shrinking finance net as our net debt has reduced. Finally, then the Board has -- or will propose to the AGM a dividend increase of SEK 0.50 to SEK 8.75. This represents an increase of about 6%. And if you look at, once again, from the birth of Essity, you can say this is consistent with the growth that we've had, roughly about 6% or a total growth of 52%. So with those words, leaving over to you, Ulrika. Ulrika Kolsrud: Yes. Thank you, Fredrik. And with that, we are leaving a solid 2025 behind us. We finished the year with stronger market shares with continued growth in our strategic segments and not the least with strengthened profit margins. It's been, from an external perspective, a quite turbulent year with a lot of geopolitical uncertainty and the weak economy. And that has, of course, impacted also our industry. And we see that the resilience that we have shown during this is really a sign of strength. As Fredrik has shared, we have grown organically during the year. We have strengthened our profit margins, and we have now the strongest profit margin in 5 years, and we have delivered a solid result. So we are proud over this, but we're also determined to accelerate our profitable volume growth and to speed up our progress towards our financial targets. And therefore, the initiatives that we've launched earlier than in 2025, with the reorganization with the cost saving program and with the acquisition of the Edgewell Feminine Care business in North America. And we bring those initiatives with us together with then the very strong financial position we have into 2026, where we remain fully committed to our strategy to drive profitable volume growth. And we will do that by, first and foremost, making sure that we have the customer and consumer at the center in everything we do. We will also do that by continuing on the path to strengthen our market shares and our product superiority. We will, of course, integrate the Edgewell acquisition to strengthen our Personal Care position in North America. And we will implement our cost save programs, both the COGS cost save program that Fredrik was talking about as well as then the SG&A cost save program, where we have the ambition to reinvest the majority of that into fueling profitable growth. And also, we will fully leverage our new organizational setup with end-to-end accountability with more decentralized decision-making and also with even sharper focus on our most attractive parts of our business, so that we can unleash the full power of our fantastic Essity teams, and also to make the boat go faster. Speaking about our fantastic Essity teams, you have the opportunity to meet some of them if you join us in our Capital Market Day on the 7th of May. We will host that in our Mölndal office in Sweden, which is our largest office. And you don't want to miss the opportunity of hearing more about our strategy to drive profitable growth and to be able to see some of our R&D laboratories in this facility as well as production facility in the neighborhood. So I really hope to see all of you there. Sandra Åberg: Thank you, Ulrika, and thank you, Fredrik, for that walk through. Now we are ready to take your questions. [Operator Instructions]. Ulrika and Fredrik, are you ready to open up for questions? Ulrika Kolsrud: Yes. Sandra Åberg: Perfect. We have the first question from Niklas Ekman, DNB Carnegie. Niklas Ekman: Can I start asking about kind of your priorities for '26 here? Obviously, volumes have been weak now for some time. And now you have a couple of quarters with a pretty strong margin expansion. How do you view that now in '26? Are you willing to sacrifice some of that margin in order to restore volume growth? Or are you more optimistic maybe about the market now having had some kind of cyclical headwinds, that they might turn to some tailwinds in '26? Or you're thinking there on the mix between organic volume growth and margins and what your priorities are? Ulrika Kolsrud: Well, as we have talked about previous quarters as well as in this quarter, we are doing selective price adjustments in order to fuel volume growth. And also, we have the intention to increase our A&P investments. We have seen that the investments that we do in A&P is paying off very nicely, as you saw in the market share development. So that we will do. And then the volume growth will give us operating leverage and thereby also securing the profit margins. And since we talk about this and how to drive volume growth, I want to mention one thing that we're also very proud of in 2025 that will support volume growth in '26, and that is our innovation delivery in the year. We increased our share of sales that is generated through innovations and also the superiority record that I talked about earlier. That shows that we are strengthening our offers to consumers and customers, and that is the base for driving volume growth. And then, of course, we need to make sure we have the right price positioning and that we support those fantastic offers with A&P investments. Niklas Ekman: Very good. But do you see any risk of margins? Or are you looking at maybe sacrificing some of these strong margins now to accelerate growth? Or do you think that you can do both? Ulrika Kolsrud: Our ambition is to do both. I mean, in some areas, of course, when we have selected price adjustments, that will have an impact on margin short term. But in other areas, we have opportunities to go in the other direction. So that is a continuous work that we do to optimize this. Fredrik Rystedt: Maybe to add, if I may, Niklas, as you are aware of, and we communicated last quarter that the cost saving program will generate fairly significant savings. And of course, we are aiming to use those funds to actually do what Ulrika was talking about here in terms of fueling growth, both in terms of selective price decline, but also A&P spend. So this is a way to make sure that we can do both, just to emphasize. Sandra Åberg: Next up is Charles Eden from UBS. Charles Eden: You mentioned the lower volumes and prices in Consumer Tissue private label. Are you able to quantify the organic sales decline for that business in Q4? And can I ask whether the continued challenges of this unit makes you reconsider whether this asset is indeed core to Essity going forward as you concluded at the most recent strategic review of this asset? And then if I can sneak a clarification question, it's the usual one for me, Fredrik, on the group EBITA bridge. Of the SEK 749 million cost of goods sold tailwind in the quarter, can you help break that down between raw mats and energy distribution? I've got the SEK 190 million benefit from COGS savings in Q4 from the press release. Ulrika Kolsrud: If we start with the second question, maybe there with the reconsidering, I mean, we are continuously looking at our portfolio in evaluating and optimizing our portfolio. Then Fredrik, maybe you can help on the details of private label... Fredrik Rystedt: COGS... Ulrika Kolsrud: Yes, and the private label part. Fredrik Rystedt: Yes. Charles, we are not giving the details specifically as to the individual components. So I'm not going to say that. But of course, we already alluded to that the majority of the decline in volumes of the 2% or just under 2% is coming from there. But it's worth noting that the performance or actually EBITA is really, really good with Consumer Tissue private label. And we always have a bit of volume volatility in Consumer Tissue private label. So I don't think you can draw the conclusion that it's a bad business. In fact, it actually is generating quite a healthy margin and good profit. It's just that for the time being, volume is actually low. Should I answer also -- you were asking for the breakdown of COGS, right? Was that your question there? Charles Eden: Yes. Fredrik Rystedt: So the majority was related to raw materials. So that was about 2/3, give and take. And then we had energy, how should I say, more or less the rest. And then if you look at the other COGS, which was basically volume decline or less absorption plus new lines, et cetera, that was about the same as the cost saving program, so to give you a little bit of indication. Does that answer your question, Charles? Charles Eden: Yes, it does. Thanks, Fredrik. Sandra Åberg: Then let's move to the next question. Warren Ackerman from Barclays. Warren Ackerman: Warren Ackerman here at Barclays. Could you maybe sort of dive a little bit deeper on the A&P spend? You're talking about the increase to help drive the volume. I get it's going to be funded from the savings. But are you able to say -- I think it's around 5% of sales at the moment. But how much do you want to increase that by? And what is your current A&P mix in terms of online digital, and how do you measure the returns on that investment? What kind of tools do you have to sort of figure out where and how you allocate that spend? It sounds like it's going to be a big part of the story for this year. So just keen to understand a bit more on the details. Ulrika Kolsrud: And I can answer to some extent today, but I would also then invite you to the Capital Markets Day and talk more about this in detail. But of course, we are eager to measure the return of our marketing investments. So we do that on a regular basis. And it's by doing research on what we produce as well as following up that the activation is having the effect that we expect, both when it comes to purchase intent, when it comes to awareness and, at the end of the day, that it's generating the sales and the repurchase that we are expecting. So that we do on a continuous basis to make sure that we allocate the investments to where they do the best job for our brands. That was one question. The other question was more about how much we intend to increase A&P. Fredrik Rystedt: Yes, we haven't specified that. And of course, it's connected also to the innovation that we put on the market, because that always has an impact on the A&P spend. But generally speaking, we are, of course, convinced and, Ulrika, you gave a couple of examples here that A&P in general is fueling growth and is also profitable. You were asking there, Warren, about how we actually track profitability, return on market investments that we do. We believe we are reasonably good at it. Of course, as you always know, it's really very difficult to exactly have a scientific way of measuring. But we think we are pretty okay with measuring return of market investment. So to allocate where to put it, I think we are doing it reasonably okay. So we can't give you exact answers to your question as to how much or exactly how much the return is. It varies a lot. But generally speaking, we will increase, and we think we know where to increase. Warren Ackerman: And maybe just to clarify quickly, Fredrik. I guess I'm going to press you a little bit from a modeling point of view, I mean another way to ask it is, of that SEK 1 billion savings, how much of that will be sort of allocated to reinvestment? Or maybe another way to ask it is that 5%, how does that benchmark against peers? I mean, from a modeling point of view, do we stick in 6%? Or I mean, because it's sort of like it's quite a big swing factor. So any kind of help would be useful. Fredrik Rystedt: Yes. It's a great question. And of course, we got this question last quarter that is this going to impact in the end the EBIT margin or EBIT line. And we said, yes, it will, indirectly. So it's not so that we are putting the savings to our income statement or to the EBIT line immediately. We are investing it. And through that return on market investment, we believe that over time, we will both get operating leverage for growth and then, of course, margin enhancement. And it's not all about A&P, it is also about a combination of selective price increases that we partly have already done, but will do and A&P increases. So it's actually both. It's very difficult to give you specific details on exactly where, it's many different combinations. But over time, we think it will be profitable. Your final question as to how do we compare. Quite difficult to answer that. We are making a lot of benchmarking and trying to kind of adjust for the differences in structures and categories. But I think overall, there is an upside for us to do this. Sandra Åberg: Let's continue then with a question from Johannes Grunselius from SB1 Markets. Johannes Grunselius: I have a question on COGS again, if you can dive in a bit more there. Because Fredrik, you mentioned here, you will have slightly lower COGS year-over-year in Q1. In Q4, you obviously had a tailwind year-over-year of SEK 749 million. It's such a huge COGS base. So maybe you can provide a range or something on the year-over-year tailwind in Q1, that would be very appreciated, if you can give any indications, please. Fredrik Rystedt: Yes, we can. So thanks, Johannes, for the question. And we have chosen to guide only on COGS as a totality, because understanding all the ins and outs doesn't make things easier to actually grasp. So we are typically reasonably accurate when it comes to the estimate of the entire COGS number, and this is why we are giving it to you. But as I said, raw material is largely -- they're a bit in and out there, or positive and negative, but it's largely going to be a bit positive as energy as well, perhaps, if we compare then Q1 versus Q1. We're going to continue to have a little bit of unfavorable volume comparisons. We're going to have a bit of new -- or cost for new lines that we will have -- we're putting in place in Q1, and then we'll have a bit of cost savings. So all in all, this will give a slightly lower cost. The main driver actually still being raw material. And if you think about the main driver of raw material, it's actually mainly favorable FX actually. Johannes Grunselius: Okay. Okay. Can I put it the question in this way, if we look at COGS sequentially, are you thinking about more stable COGS? Or are COGS perhaps up a bit Q1 over Q4? Fredrik Rystedt: It's mainly stable. Mainly stable, you can say. Sandra Åberg: So let's move to the next question. Aron Adamski from Goldman Sachs. Aron Adamski: First, I had a follow-up on growth expectations for 2026. I mean, against the backdrop of lower input cost environment that you highlighted, would you expect price to be negative for the entirety of '26? And given that context, would you expect to achieve a better organic sales growth in '26 than you have done in '25? And then second, a quick follow-up on the A&P discussion. Can you please give us a sense of how the advertising step-up is going to be phased through 2026? Is it going to be more front-loaded? And therefore, could we expect the margin delivery to be relatively weaker in the first half of the year, given everything you said on volume, price adjustments and the cost savings delivery? Ulrika Kolsrud: I almost forgot the first question after the third question. What was the first question again? Sorry. Aron Adamski: Sorry, just on pricing expectations for '26. Ulrika Kolsrud: Yes, it was pricing and volume expectation, that's true. So I mean, we need to be agile and want to be agile when it comes to pricing because it's, of course, dependent on what happens in the market environment. So we are adapting to both, of course, what happens with input costs, but also what happens when it comes to demand and need to adapt to that situation as well as being fully equipped to capture the market growth when the wind is turning. So therefore, of course, there are scenario planning and so on, but to be agile is most important. When it comes to organic growth, yes, our ambition is clearly to move towards our financial target with 3% organic growth. So our ambition is to accelerate our growth. But again, we are in a volatile environment. So it's so important for us, and that's why it's so great to see that we are strengthening market shares in this quarter, because when the market is as volatile as it is, what we can focus on a lot is to win the relative game. And what we see in the quarter is that we're doing exactly that. And what's also important for us is that we win where it matters the most, and that is to drive our strategic segments. So that was an answer to say that we need to stay agile and see what happens in the market and then adapt to that. Sandra Åberg: Perfect. Aron, does that answer your question? Aron Adamski: Yes. Just on the second question on the phasing of margins, I suppose, for 2026, maybe if you could give us a bit more color on how the step-up in A&P is going to be phased and how is that going to impact the margin phasing through the year? Fredrik Rystedt: Maybe I can -- we don't give those kind of detailed guidance, as you've seen, Aron, but just maybe as a little bit of still a hint or 2, maybe even. First of all, you can see that Q4, as we have just reported, was higher than Q4 of '24. So that step-up has already actually happened. And if you remember, I mentioned -- maybe you weren't participating, but I actually mentioned that we do expect higher SG&A cost in Q1 on the back of higher A&P. So this gives you a little bit of hint. So we believe that the higher A&P cost will be there immediately -- actually already is there, higher, if you see the numbers. Sandra Åberg: Now let's move to Tom Sykes, Deutsche Bank. Tom Sykes: Would you be able to say how the A&P to sales for you differs by category? And just what are the categories which would have the greatest elasticity to increased A&P spend, please? And maybe just in addition is, what's happening to your trade retail spend? And how big is that in the COGS costs presumably? Ulrika Kolsrud: Well, if we look at A&P to sales, it's the categories that you find in Personal Care that has the consumer brands that has the biggest A&P spend in relation to sales, or I should say A&P investment rather in share of sales. Then if you look at a category like Wound Care, for example, you have a much lower A&P in relation to sales. There, it's much more about the sales force and equipping the sales force with the right products and support. And you find that fueling growth is through the sales force. And then we have everything in between there. Tom Sykes: Okay. And in terms of sort of the elasticity, where do you think the best place to allocate incremental A&P is? Was it just across the board? Ulrika Kolsrud: Yes. This is more about where we have our most attractive segments and categories. We want to invest the most where we have the highest potential for profitable growth and the strongest reason to win. So I think what you've seen here also now is that we have had good effect of investing, for example, in Feminine Care as well as in Incontinence Care. But we do want to fuel growth across our categories, but that should give you an indication. Fredrik Rystedt: And I guess, Tom, your question on trade spend, are you referring then to promotional activity there, I guess, right? Tom Sykes: Yes. I guess it's yes. That's spend with retailers. Fredrik Rystedt: Yes. And that is by far Consumer Tissue traditionally. So the promotional -- the percentage of all products sold under promotion is by far highest in Consumer Tissue. Tom Sykes: Okay. So that's just sitting in reduction of your revenues? Is it... Fredrik Rystedt: It's a pricing issue. It's a way -- you can say the pricing activity, they're strategic, so kind of headline pricing, and then you've got tactical pricing. And so promotion is a tactical -- it's what you do on a more temporary basis. So it's not list price adjustment. Tom Sykes: I get some of it. Sorry. Is there not spends that you would do on the websites of major retailers to get up the ladder of people searching for particular categories? I mean, that wouldn't -- or do you just include that in pricing? Ulrika Kolsrud: No, there is also brand communication and marketing that we do through the retailers or in connection with the retailers. So that is one element. But to Fredrik's point, when it comes to price campaigns, that you see in the sales. Tom Sykes: Okay. But just to clarify, does all your, if you like, A&P type spend, setting aside any promotion and price reductions, does all of that sit in the A&P line? Or does some of it sit also in the COGS line, because it's trade spend that goes on? Fredrik Rystedt: Not in COGS. It's not in COGS. It's either sales or A&P. So in this case, what you're referring to is A&P. So it's not COGS. I'm not sure how that could be possible. But we can talk about that offline, but it's not in COGS. Promotion is in sales and marketing in A&P. Sandra Åberg: Perfect. Next question comes from Karel Zoete from Kepler. Karel Zoete: I have 2 questions, if I may. The first one is in relation to M&A. You've done last year, one acquisition, but the market is difficult certainly in places such as Latin America. What's hindering you from doing more M&A? Or why haven't we seen more acquisitions over the last 18 months given the difficult markets? And then the second question is more in relation to Asia. I think there's still an agreement within that they can use some of your brands. What's the status of this? Is this going to be renegotiated in the coming year? Or do you have plans to build operations yourself selectively to capture some of the growth in the Asian market? Ulrika Kolsrud: If I start with the M&A question, maybe you can answer to Asia later. We continue to work actively with M&A, identifying potential targets and assessing potential targets. As you know, it's part of our strategy to grow both organically, but also inorganically. So we clearly have the ambition to do value-creating M&As. But we are, to that point, very disciplined to make sure that they are value creating. So that is, of course, always what we're doing in the screening to make sure that, that is the case, and always judging what is the most value creating, is it organic growth or inorganic growth. And you could argue, of course, when it comes to valuation, that in order to bridge the potential valuation gap, we need to find quite a lot of synergies then to secure that value creation. So the short answer is that we have the ambition to drive more M&As and are working on that actively. Fredrik Rystedt: So Karel, when it comes to Asia, the story isn't really different there. When we divested Vinda in 2024, there was a license agreement for these brands, and that expires in 2027. Now as we sold the company, we also granted an option for the buyer to continue licensing these brands also in the future against, of course, a license fee. And that option has not yet been translated into an agreement. And of course, we remain unsure of whether that will actually happen. So there are 2 possibilities here. One is that we continue with the license agreement subject to the buyer actually exercising on that option, or if they don't, then, of course, we get those brands back in Asia. So we cannot give you an answer at this point of time as we actually don't know. Sandra Åberg: Let's move then to Misha Omanadze, BNP Paribas. Mikheil Omanadze: I just wanted to zoom in a bit more on your end market dynamics where you already provided some helpful color. And overall, it seems that the markets remain challenging. If you were to look at your biggest category geography exposures, where would you say you saw the biggest sequential change from the previous quarter in both positive and negative direction in terms of end market trends and consumer environment? Ulrika Kolsrud: I wouldn't say that we've seen any big movements between quarter 4 and quarter 3. It's been quite stable when it comes to market environment. Sandra Åberg: Next question comes from Henrik Bartnes from ABG. Henrik Bartnes: One question for me, please. You have historically talked about seasonally lower volumes in Q1 compared to Q4. And if we look at Q1 sequentially, how should we think about volumes this year? Are there any indications that this year won't show any seasonally lower volumes? Fredrik Rystedt: I can maybe answer. First of all, we don't give volume estimates. We can only report what has historically been the case in terms of seasonality. So as you rightly say, seasonality would suggest that volumes in Q1 are lower than Q4. It's not actually one and the same for all our business areas or categories. Some don't have that. But in general, if you look at the group as a whole, clearly, volumes are typically, I should say, lower in Q1 versus Q4, but we are not giving an estimate for '26 specifically. Sandra Åberg: Let's now move on to Celine Pannuti from JPMorgan. Celine Pannuti: So my question is coming back on the Consumer Goods performance with price/mix negative. I think you mentioned that you had to roll back some pricing in order to keep some of your customers. I think it was in private label. Does that mean that going forward, we still have to annualize that, and so we'll have continuous negative pricing. I also said you mentioned there was a one-off impact from Latin America. So if you could give us a bit of an idea on that go forward. [indiscernible]. Sandra Åberg: Sorry, your sound is not working really. So we can't really hear your question. Maybe we can just start with the 2 questions you had now, because then we have to move on. Is that okay? Celine Pannuti: Perfect. Sandra Åberg: Good. Fredrik Rystedt: Yes. I think I got the question whether the price/mix -- the negative price/mix in consumer goods would flow into Q1 or Q2? Was that the question, Celine? Celine Pannuti: Yes. I mean, I would presume it annualizes if you have made some pricing concessions. And then the question, is there any other price negotiation that you are going through now in retail? Fredrik Rystedt: Yes, right. No, again, we can't comment on, obviously, price negotiations. That's more commercially related, I can't do that. But of course, as we have lower prices now in Q3 and Q4 and especially here in Q4. So there has been a price decline in Consumer Tissue. That will, of course, obviously continue into Q2. So in short, we'll see those price impacts coming or continuing in Q1 and Q2 potentially. Celine Pannuti: And just how material is the Latin America impact that you mentioned? Fredrik Rystedt: Yes, we are not actually giving you the exact number there, Celine, and this is for commercial reasons basically. But if you actually look at -- I gave you a little bit of guidance. It's always interesting when you say you're not going to give a number and then you almost do it anyway. But I'll do it because if you look at the minus 0.6% in terms of organic sales growth for Feminine in the quarter. And then we also stated that without that sales, organic sales growth would have been low single digit. That gives you a little bit of indication as to the size. So this is a bit -- of course, for the group, not a lot, but for Feminine, it is a bit, and it comes out as pricing. So that's temporary. That will not be there in the next quarter. Sandra Åberg: Perfect. Thanks for your question, Celine. Now we will move to our final question, and that question is from Oskar Lindstrom, Danske Bank. Oskar Lindström: Just a slightly different question from me. Following the Edgewell acquisition and an acquisition by another company, you're not going to be sharing, I understand, the brands Stayfree and Carefree between you. Who owns those brands? And who is paying royalties or fees to whom? Ulrika Kolsrud: Well, we own the brands in the geographies that we are operating the brands with. So in those geographies, it's our -- we can actually then do what we think is commercially right to do with those brands. Fredrik Rystedt: So in short, no royalties paid to anyone. Oskar Lindström: Wonderful. That's all the questions I had. Ulrika Kolsrud: That's what you wanted to know. Thank you for that interpretation. Sandra Åberg: Thank you, Oskar, for that question. And now it's time to wrap up. But before we end, I would like to hand over to you, Ulrika, again, for final remarks. Ulrika Kolsrud: Yes. Well, thank you, Sandra. Thank you for joining us today. We are leaving, as I said, a solid 2025 behind us, where I think our resilience has really been a critical success factor. And it's especially great to go into 2026 with this good market share momentum that we have talked about today. And finally, I look forward to see you all on the 7th of May in Mölndal, Sweden. Sandra Åberg: Yes. Thank you for that, Ulrika, and thanks to you for joining. If you have any further questions, just reach out. We will be road showing in Stockholm today virtually next week, and we will also be in London next week. So see you there. And take care, and have a good rest of the day. Bye for now.

69天前Insight Analytics约5分钟阅读

CSX 2025 Q4 财报电话会议

Matthew Korn: Hello? And welcome to the CSX Corporation Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Matthew Korn, Head of Investor Relations. Please go ahead. Thank you, Sarah. Good afternoon, everyone. We are very pleased to have you join our fourth quarter earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer, Mike Cory, EVP and Chief Operating Officer, Kevin Boone, EVP and Chief Financial Officer, and Mary Claire Kenny, SVP and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and non-GAAP disclosures. We encourage you to review them. And with that, I am very happy to turn the call over to Mr. Steve Angel. Steve Angel: Good afternoon. And thank you for joining our fourth quarter call. This has been a challenging year for CSX Corporation and for our industry overall, with subdued demand and limited growth opportunities persisting across many of our key markets. Against this backdrop, our service levels remain positive in the fourth quarter, and we delivered modest total volume growth. However, reported operating income, operating margin, and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we have taken to adjust our cost structure, deliver better financial results, and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments. We have renewed the leadership team, putting the best people into the best positions to drive value. And we are aligned in driving greater fiscal responsibility and disciplined execution across the company. We have stabilized service on our network at high levels, delivering consistency and reliability for our customers while realizing clear productivity gains. We have capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases. As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow and build momentum into the year ahead. And now I will turn it over to Mike. Mike Cory: Thank you, Steve. So let's take a quick look at our safety and operational metrics on Slide five. Our operations team is improving safety performance through focused execution of our safety plan. The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics. We know that an outstanding safety record is a clear indicator of effective management at every level. And we are taking solid steps towards our goal of reaching best-in-class performance for the industry. The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, CarsOnline, Dwell, and Tripland compliance all showed substantial improvement from Q1 to Q4. These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success. We are maintaining this balance and preserving our operational momentum while ensuring CSX Corporation has the capacity available when the industrial cycle turns. Kevin will now review our quarterly results in more detail. Kevin Boone: Thank you, Mike, and good afternoon. I am excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple of months, we have taken steps to align our cost structure to the current business environment. The team is fully engaged, and I am encouraged by the momentum we are building with opportunities to drive efficiencies in nearly every part of our business as we enter 2026. Now let's move to the fourth quarter results. Volume increased 1% with revenue down 1% driven by business mix headwinds in coal pricing. Fourth quarter operating income and earnings per share fell by 97%, respectively, against adjusted prior year figures. These results included approximately $50 million or $0.02 of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio. Now let's turn to the next slide for a closer look at the expense line. Fourth quarter expenses increased by $73 million or 3% excluding the 2024 goodwill impairment. As mentioned, the quarter included approximately $50 million of charges comprised of $31 million of separation costs in the labor line and $21 million of technology impairments in PS and O. We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending real headcount finished the quarter down over 3% as we continue to align to the current business environment. Additionally, overtime remains a focus for Mike's team as we look for ways to provide better visibility and tools to manage these costs. We have identified meaningful opportunities to reduce non-labor spending with well over 100 diverse savings initiatives across the company, including cutting outside and professional service spend, improving asset utilization, and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. Twenty twenty-six expenses will see year-over-year benefit from cycling network disruption costs, third and fourth quarter separation costs, and fourth quarter technology impairments. Depreciation expense will be relatively stable year over year as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets. We are encouraged by the cost improvements identified as we move through the quarter. Similar to our focus on cost, capital spend and driving free cash flow remains a significant area of opportunity. Working with Mike and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth. With that, I will turn it over to Mary Claire to review our revenue results. Mary Claire Kenny: Thank you, Kevin. I am happy to be here and excited to have the opportunity to lead the commercial organization. The railroad is running well, and we have many opportunities ahead. That said, as you have heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment. The strength of our relationships is critical when uncertainty is elevated, and our voice of the customer surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change. Turning to slide 10. Let's cover fourth quarter volume and revenue performance. Overall, total volume was up 1% in the quarter, but revenue was down 1%. As negative mix and weaker export coal prices led to a 2% decline in total revenue per unit. Our merchandise franchise, where volume and revenue were both down 2%, continues to face market-driven headwinds. Revenue per unit was modestly higher and was also affected by mix, as growth was strongest in low RPU areas such as minerals and fertilizers. We continue to see softness in chemicals and forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures. In forest products, we continue to see the effects of plant closures, particularly with pulp and container board, that occurred up until the start of the fourth quarter. Despite these headwinds, our team has had success at winning incremental business and we anticipate benefits from new facilities ramping up in 2026. Automotive volume was down 5% year over year. While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals limited output at other facilities. That said, we have been encouraged by the continued strength in fertilizers and mineral shipments. Fertilizer volume was up 7%, on improved phosphate rock production, and business wins in the nitrogen market. Minerals volume remains supported by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter, with revenue up 7% year over year, on a 5% increase in volume. We have been winning new domestic and international business as we brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year over year. Domestic tonnage increased by 6% driven by a substantial increase in domestic utility volume supported by growing power demand and higher natural gas prices. Export tonnage declined 3% in the quarter, with the derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in met coal benchmark pricing. Notably, the discount for East Coast met coal indices widened versus Australian pricing this quarter, which impacted our yield. Now let's turn to Slide 11 and talk about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX Corporation that's driving demand for materials such as cement, aggregate, plate, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets. Consensus forecasts call for modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production. Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas, that occurred through 2025. We have been encouraged by the success we have had in intermodal, where the team won new business in 2025 as we expanded our network reach through new operational agreements and our strong service has allowed us to provide a faster service product. At Howard Street, the first of two bridges being raised to support double stack capability is now complete, and our customers are excited about the opportunities coming later this spring. They are bidding on business now for volume to start moving double stack through the tunnel in Q2. Still, the markets reflect the reality of a still soft trucking market, where we are watching the supply-driven increase in truck rates carefully. We also need to be aware of the risk of a slowdown in imports after the pull forward of activity that occurred through 2025. For coal, we are pleased to have two important mines on our network back open after extended outages. These mines provide good quality met coal for the export market, so global steel markets and benchmark prices remain subdued. Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed. Overall, we see good potential in 2026, but we expect the best results will come from our own specific initiatives. Our visibility is limited, but from what we can see and hear from our customers today, there is no short-term catalyst on the horizon to lift the major industrial market. Our team will work hard to make the most of every profitable opportunity and we will be ready to respond when macro conditions improve. Now I will hand it back to Steve to talk through our outlook. Steve Angel: Thank you, Mary Claire. Now we will review our guidance for 2026 on Slide 13. We have a well-running railroad and a good pipeline of growth initiatives. However, as Mary Claire discussed, the near-term outlook across many key markets remains soft. As we plan for 2026, we do not anticipate any meaningful improvement in macroeconomic conditions. So we are assuming low single-digit revenue growth for the year, based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization, tighter management of discretionary expenses, our drive for efficiency, and the benefits of a more stable fluid railroad. With our Blue Ridge project complete and focused efforts on capital discipline in place, we plan for 2026 CapEx below $2.4 billion, a substantial reduction from last year. Our CapEx priorities are unchanged: invest in our infrastructure for safety and reliability, and invest in growth and productivity projects that pass our financial criteria. For free cash flow, higher earnings, a more normalized cash tax rate, and lower capital outlays should drive growth of at least 50% compared to 2025. Finally, let me address the multiyear targets that were offered at the company's 2024 Investor Day. The opportunities ahead for CSX Corporation are strong. When we execute on the core fundamentals of service, cost discipline, operating efficiency, and prudent capital deployment, we will create shareholder value over the long term. That said, the macroeconomic environment and the industry dynamics were meaningfully different than compared to today. I am replacing our 2025-2027 targets with the guidance we have given for 2026 only. I will continue to evaluate our outlook as we make progress toward our goal to be the best performing railroad in North America. With that, Matthew, we will open it up for questions. Matthew Korn: Thank you, Steve. We will now proceed with the question and answer session. Now to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to only one question. Sarah, with that, we are ready to begin. Operator: Thank you. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadewitz with UBS. Your line is open. Tom Wadewitz: Great. Good afternoon. Just I guess, one fine point on the OR improvement, if you could tell us what the base OR is in 2025, kind of just like what's included. But I guess the real question, if you will, how do you think about pricing and price cost spread? I think, Steve, focus on price and productivity kind of two hallmarks of your approach. How do you think about the opportunity to Steve Angel: Yeah. On Tom, the on the base the starting point for 2025 is obviously excluding the charge that we took on goodwill. So that's the starting point that we have in the adjusted number, that we disclosed. And on your questions on price and productivity, so, you know, as we think about price, I mean, certainly, you would like to be able to cover you know, the cost of inflation in any given year and actually do better than that. In terms of kinda where we are in the pricing initiatives, Mary Claire is taking the ball on that and has already put some new structures in place that I think are definitely gonna help in terms of our price yield. As we look at you know, what we have in the plan for 2026 versus 2025, price yield will be in 2026 over 2025 than it was in 2025 over 2024. So we are making progress I think, on the pricing front. It will be a bit slow going, but I think we will continue to make progress as we work harder on the whole price management equation. And in terms of know, these contracts have they roll off in certain time frames. It would probably take until about this time next year before we had a chance to touch every contract and stress test, if you will, in terms of what the right price is versus the value we are bringing to that customer. Operator: The next question comes from Brian Ossenbeck with JPMorgan. Your line is open. Brian Ossenbeck: Hey. Good afternoon. Thanks for taking the question. So maybe one for Kevin. In the 200 to 300 basis point guidance for improvement, can you give us some qualification how much of that you think is already baked in based on some of the the onetime items or the things you know are rolling off? And sort of what do you expect for inflation within that guide? Because if you look at the ALIF index, for example, and that's starting to pick up a bit here. So it didn't give us a little bit more color in terms of the building block there and sort of what's already spoken for and what are the assumptions underlying the rest of it? Thanks. Kevin Boone: Yeah. No. When you look at some of the unique charges, that occurred in 2025, between the severance, the technology write-off that we disclosed as well as you know, some of the costs related to the Blue Ridge and the Howard Street Tunnel, you know, you can roughly assume those are about $150 million. What we are doing, what our guidance implies, is a much greater initiative around productivity and a big focus across the organization to drive that. And so you will see our productivity numbers if you do the back if you do the math, have a fairly significant increase in step up. When we think about what's happening on the inflation side, on our labor side, that's pretty self-explanatory on the union side. You know, the industry has obviously embedded labor inflation. Next year, you will see another wage increase in the 3.75% range. We are also experiencing a little bit of more health care inflation going into '26 versus '25. So I would say on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year. And then on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower. So expect a little bit lower inflation on the non-labor side. So, overall, you know, I would look at inflation probably being in that three to three and a half percent range. Operator: The next question comes from Scott Group with Wolfe Research. Your line is open. Scott Group: Hey. Thanks. Afternoon. The low single-digit revenue growth for the year any just sort of rough thoughts on volume versus yield in that? And then maybe, Steve, just bigger picture, like the guide this year I guess, implies, like, a 64 to 65 OR. Now that you have been here a few months, do you have a feel for, like, what you think the longer-term operating ratio should be? Do you should this be a sub 60 OR railroad in the next few years? Or not is that a I don't know. How do you how should we think about that? Thank you. Mary Claire Kenny: Hi, Scott. This is Mary Claire. I'll take the first part. So I think as we think about next year, we are looking at modest volume growth going into the year. I covered some of the macro environment that we are seeing out there, and you know, while we are optimistic about certain areas and we see growth opportunities in places intermodal, places where you see infrastructure investment, like our minerals markets, and I think, you know, there's some potential on the domestic utility side when you think about the need for power generation as well as natural gas prices are. Those are kind of more positives for us. But then as I talked about when you look at more of the industrial economy, we still see a lot of headwinds out there. So at this point, we would say really modest volume growth next year. Steve Angel: Yeah. And on the I'll just talk in terms of operating margin percent. You know, look. We want to expand it every year. And if we are doing the right things on price management and productivity, we will be able to do that. And you know, I have confidence in this team. I have confidence in our ability to build solid productivity programs to be able to grow operating margin in certain percent every year. And I could give you a number now, but I think I'll wait and talk about that later. But, you know, the objective is best-in-class performance. And you know, you know what that is with respect to operating margin. I know what that is. I have confidence we can get there. The question is, you know, over what time frame. We will make progress every year. What I would like to do I mean, we have a very solid plan as Kevin described, and we put a ton of time into building this plan for the environment, that we are facing and to make sure we could deliver an outcome that we would be proud of. So that's where we are. But what I would like to see over the course of time is how well we can execute to those plans. You know, I have confidence we can. But I'd like to you know, experience that a few quarters, if you will. Just so I can get grounded and confident in our ability to build I'll call it, sustainable productivity over time. And I think we can do that, but, you know, give me a little time to get more confident in our ability to do that. Operator: The next question comes from Ari Rosa with Citigroup. Your line is open. Ariel Luis Rosa: Hi. Thanks for taking the question, and good afternoon. So we are looking at I apologize because this is a little bit short term. But, we are looking at potentially a pretty nasty storm coming up. You know, not too long ago, we saw CSX Corporation's network face a pretty big setback given some storms. I'm curious, maybe Mike is the best one to answer this question. Just how are you preparing for the storm? And how do we get confidence? Maybe it's an opportunity to talk about kind of how you are running the network differently now versus, say, twelve to eighteen months ago. But what are the risks that these types of events could present setbacks, and how do we get comfortable that this isn't going to be a big obstacle in Q1? Mike Cory: Sure. Thanks for the question, Ari. As we've said, like, the network is going into this in much better condition than we than last year when we started facing storms. So just to give you, you know, just a view of what we see, we are gonna see ice on our southern portion of our network basically going, you know, from Nashville right across, through Alabama, through Georgia. And then in the middle section of our network, we are gonna experience or we see right now from the weather report we are gonna experience heavy snow right from Indiana through Kentucky, right across PA, Western Maryland, Virginia, all the way up the I-95. In terms of precautions, you know, here's some real detail. I mean, we are gonna have senior coverage right around the clock in all of our key areas, including our network center. We've gone over from snow clearing to tree clearing, generators, everything that we need in each location, each facility that we see the storm coming through. We've modified our operating plan, working with our customers, notifying them because they are gonna have the same conditions that really assets for us right now are gonna be most crucial thing that we protect. We at the same time, you know, we expect to see power outages, highway closures. We are gonna see cold right after that. So I do not see us coming out of this probably for a few days. If we get it Sunday, you know, we are looking at midweek to recover, but I'm very confident, especially with the condition that we are going in. That we will come through this with no issues. This is not gonna lead us into four months of trouble like it did the year before. Even if there is some consecutiveness to it, we have everything in place. And what we learned last year, we are putting into effect, throughout the beginning and right through this storm. Operator: The next question comes from Brandon Oglenski with Barclays. Brandon Oglenski: Hey, everyone. Thanks for taking the question. And I guess, Mike, it's not shocking that it snows in January. So I'd ask maybe more importantly, like, how are you approaching the operations differently this year especially, you know, with, like, new leadership concepts at the company. How do you get back to those best-in-class metrics that the railroad had, you know, three or four years ago? Mike Cory: Yeah. No. Thanks for the question. I think you can see by the metrics we have now, we are running as good as we have three or four years ago. But, really, I mean, it's a focus on asset utilization, it's a focus on oversight and, you know, to the key measures that we look at every day. Really, that's what we've done. What we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid. And that's, you know, from making sure that we don't bring equipment in when we shouldn't. It's making sure we have our excess equipment in places to be able to respond to issues we have. That's generally what we did to come out of the second quarter issue first and second quarter issues we've had. But I don't see I don't see us really, you know, failing on this storm coming up. I appreciate your concern, but we are ready for it. And I again, I see us coming through it very well. Operator: The next question comes from Ken Hoexter with Bank of America. Your line is open. Kenneth Scott Hoexter: Hey, great. Good afternoon. So Kevin, sounds like a lot of programs. I think you mentioned 100 different ones. Just so we don't get lost in kind of minutiae, can you maybe talk dollar amounts for buckets so we can, I don't know, track something? Is there workforce optimization or a headcount target? Anything from Mike Cory on the op savings? And Kevin, you mentioned non-labor spending. Maybe you could just maybe parse that out a little bit. So because if we've got very low volume growth, very low pricing growth, you know, how do we get that 200 to 300 margin basis points? I guess, you take out maybe one basis points or so from the $100 million that you spent this year. If you can bucketize some of that stuff to help us walk through and what to expect. Kevin Boone: Yeah. You know, when you look at the majority of you know, the productivity, that you obviously can solve for after the $150 million that I pointed out that that naturally just comes out. That won't repeat in 2026. It's very, very highly focused on the labor line and the PS and O line. And so a lot of activity in those two areas. I would say, largely equally divided. You'll probably see on an absolute basis absolute dollar basis, more come out of the PS and O line because you are gonna have less inflation core inflation in that line versus the labor, which I talked about a little bit earlier given, obviously, our union labor contracts and what we are seeing on the medical side, on that area. But those are the areas, we are certainly focused on driving cost improvement across the line items. Depreciation, more or less, will be in the flat range. As we pointed out. And then know, certainly some areas of improvement. I you know, Mike will always tell you the fuel side, we are looking for every opportunity to continue to get more fuel efficient. And then on the rent side, there's some opportunity as we run better. Certainly, from a car hire and other areas that we expect to drive. Improvement there, too. So the good news is that diversified portfolio of opportunities. I guess the bad news on that side is we've got, you know, we've gotta stay very, very focused across all these areas to make sure that we are capitalizing on those. And my full expectation as we move into, later into this month in February, we are gonna come up with an additional list, that'll obviously hopefully, drive further improvement in the back half of the year and then, create some opportunities as we move into 2027. Operator: The next question comes from Stephanie Moore with Jefferies. Your line is open. Stephanie Moore: Great. Good afternoon. Thank you. You know, I think I would be a bit remiss not to ask at least about the major merger that is underway for this industry. If you could you know, maybe talk about how you are positioning the company in the wake of what could be a, you know, a pretty transformational deal. So, you know, in the near term, while it's under review, what are the opportunities that all can take advantage of? And then, of course, I'm sure you are also having to somewhat scenario analyze what would be like if the deal is approved. And in that way, you know, what is strategy for CSX Corporation as kind of the full East Coast merger? East Coast Rail. Steve Angel: And and made a call it took three years before the final restriction was lifted. So for three years, we were kinda in deal purgatory. And what you have to do is make sure that, you know, you are running the business to best your every day, and that that's kind of the key in this process. You know, I don't know what conditions are gonna be required for approval. That remains to be seen. I think this is a long process, and we'll find out you know, what that is. And then when you get to the end of that, you know, the if the merger is approved, you know, you still have to execute. So I think it's a long process, as I said. You know, there are gonna be, you know, opportunities we can take advantage of. We see some today that we are taking advantage of. Whatever risks are out there, we'll certainly manage those. We'll mitigate those. We'll have plans for those. As the time comes forward for us to you know, make our case to the appropriate authorities, we'll certainly be prepared to do that. And then the focus is just making sure that we can be as competitive as we can be. You know? But at the end of the day, you know, we can create value by running CSX Corporation better every day. So you can set the merger aside, we are gonna manage that. We are gonna work through that. We are gonna have many, many quarters to talk about that probably. But what we know we can do now is run this company better every day, and we feel really good about our ability to do that. Operator: The next question comes from Jonathan Chappell with Evercore ISI. Your line is open. Jonathan Chappell: Thank you. Good afternoon. Kevin, maybe Mary Claire, can you just help us a little bit with coal RPU? Feels like the way that we are calculating it now is a little bit different than the last several years. And, you know, what are you thinking about as baked into that revenue growth? Do we see and then this is from both a 1Q and a full year perspective. Is it kind of stabilized from this 4Q exit rate? Or is there some improvement baked into what's very important yield line item? Mary Claire Kenny: Yeah. So it's very clear. I'd say as we think about RPU going forward, there's always a mix element that comes into our business. And so I think about going into 2026, talked about some of the markets that we feel a little bit better about as well as ones that, you know, we see more risk. And so intermodal, we feel good about. When you think about some of our merchandise side of the business, we see some impacts there of probably stronger growth in some of our lower RPU business, like minerals and fertilizers. And more softness in some of our higher RPU business when you think about our forest products business or our chemicals business. Talk a little bit more about next year. We've got overlap. That we saw closures in over the course of 2025. Quite a few of that in our forest products line of business. We see auto down next year from a North American like vehicle production perspective. And we also have a large plant on our network that will be down over the course of next year. So that will certainly impact where we see volume growth versus decline, and comes into play. I would tell you, Steve, you spoke earlier about how we are thinking about pricing. We've had a lot of conversations there. We've looked at our processes and controls, and you know, Mike's delivering a really good service product right now, and customers value that. And so we are gonna take that into account as we think about going forward. And you also know there's, you know, there's a portion of our business that we can touch every year. So that'll impact from a timing perspective. Kevin Boone: Yeah. I'll just add on on the coal on the coal RPU just as a headline. We went through a year where we are lapping some pretty difficult comps, and that'll be largely we'll be through that by the first quarter. On that side. So, you know, we'll see a lot more stable, maybe slightly down, but, again, that to Mary Claire's point, it's a lot about mix. And, obviously, with a stronger southern utility demand, that's that is helpful as well. Given the length of haul. Operator: The next question comes from Chris Wetherbee with Wells Fargo. Your line is open. Christian F. Wetherbee: Yeah. Hey. Thanks. Good afternoon, guys. Maybe wanted to come back to a question I was asked earlier in the call and maybe think about a little bit differently. I guess, Steve, you talked about best in class. And when you think about it from a margin perspective, we kinda know where the benchmarks are. CSX Corporation was there probably five or six years ago for a few years, and I know things are different, makes it different. You know, there are some other dynamics in the market relative to them. But I guess as you've been there for three plus months now and had a chance to kind of think about the business, is there anything meaningful that you see that would sort of prevent the ability to get back to those levels whether you think about sort of the different customer mix, how things are changing, if there's any kind of a perspective we should be thinking about? I get the productivity, and you have to kind of get some reps in before you feel comfortable with how that can be sustainable. But anything sort of, you know, maybe insurmountable that you see right off the get off the bat? Steve Angel: I mean, in an answer, no. I don't see anything insurmountable in and it's not like I'm sitting here, you know, thinking, that we are gonna go back to the heydays of coal, and that's how we are gonna accomplish it. That's not what I'm thinking. I'm thinking about, you know, basically take the mix we got, and you know, through some of the strong initiatives that Mary Claire talked about earlier, you know, finding some growth through our own actions, obviously, anytime you get a little help from the economy, that would certainly help a great deal towards, you know, moving those operating margins up faster. But I really don't sit here and think, you know, I need to have a lot of help from the economy. I think our own growth initiatives do a better job on price management. And working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken. But, you know, I can lay out something that says, you know, we should be able to get there? But, again, I want to see the kind of proof in the pudding and I think that'll happen. But, you know, that's kinda how I think about it. Operator: The next question comes from Jason Seidl with TD Cowen. Your line is open. Jason H. Seidl: Thank you, Arthur, Steve and team. Hello. Mary Claire, I guess this is gonna be one for you. It we are gonna go back to the coal side, but I want a clarification first. I think you said it was you know, you were calling for muted growth, and then you said next year. I'm assuming you were talking '26 and not '27. Mary Claire Kenny: Yes. '26. Sorry. Jason H. Seidl: Oh, okay. No. Not a problem. I've done that a bunch of times already this year. Wanted to just ask a question, you know, given this storm and some of the impacts that we've seen at least over the last two days with natural gas futures. Just how long do natural gas prices have to stay elevated until we see a flow through on the volume side? And what's sort of the best way to monitor that? Mary Claire Kenny: Yeah. Thanks, Jason. I would say, as I think about the coal side, you know, both with greater power demand that we are seeing here and the increase in the natural gas prices, certainly, supported recently about this upcoming storm. We feel good about the volume demand on the domestic utility side. I would say, you know, one of the things that we are watching here, though, is there were some plan closures that were supposed to start happening this year. We expect those will get delayed, but how long, that's a little bit uncertain. I think there's gonna be more demand. And more opportunity for us think the piece we'll have to watch is, you know, how much can actually be supported by the producers going forward. Operator: The next question comes from Ravi Shanker with Morgan Stanley. Your line is open. Ravi Shanker: Steve, it's understandable that you pulled the long-term guidance given our macros done the last couple of years. But is that still the right template to think about earnings growth in the long term when macro is normal? Do you think something has changed with the business where it could be better or worse than that initial guidance? Steve Angel: No. I don't think anything's changed in the business where you know, we can't come back and lay out a longer-term, you know, guidance, or a longer-term algorithm. You know, I don't see anything that's fundamentally changed the business that would prevent us from doing that. It's just, you know, caution on my part that I want to make sure that we can you know, that we can execute the plans in front of us before we start talking about a longer-term picture. But I'm not sitting here thinking that you know, we need to get away from that any kind of longer-term guidance because there's something fundamentally wrong in the business. I don't see that. Operator: The next question comes from Jordan Alliger with Goldman Sachs. Your line is open. Jordan Alliger: Yeah. Hi. Just sort of curious, can you maybe talk a little bit more about the double stack opportunity, perhaps sort of update if anything on the sizing? And I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business in order of magnitude? Thanks. Mary Claire Kenny: Yeah. Thank you. So I tell you, we are really excited about Howard Street Tunnel. I've been here fourteen years and excited to see it come to fruition. And, you know, there's a couple opportunities there. One, we are adding new Conic from the Southeast up into the Northeast, and so we've announced new lanes of service. But it's also gonna improve our service product from Chicago to and from Baltimore. It's also enabled us to allow efficient double stack service from the West Coast all the way through to Baltimore, versus having to do a rubber tire crosstown in Chicago. So we are excited about the opportunities that are there. We are talking to our customers today, both channel partners and shippers. But what I would tell you is based on past experience, it typically takes a couple of bid cycles to really customers to kind of see the opportunity and convert more business. So we expect to see growth this year and going into the future. I would say, both on our domestic and in the future on the international side of the business as well. Operator: The next question comes from Walter Spracklin with RBC Capital. Your line is open. Walter Noel Spracklin: Yeah. Thanks very much, operator. Good afternoon, everyone. I wanted to come back to the revenue growth profile of low single digit. I know whenever I know, I think about pricing in the rail industry, I kinda consider it in the three and a half percent area, and then you do assume some volume growth it would seem. So just curious, is there a mix effect at play here where we should we should build in some negative mix? Or are we seeing that core pricing number that's typically north of three, below three, I know, Mary Claire, you you you flagged truck pricing. Don't know if that's I mean, truck pricing is catching a bit here. So I'm just curious as to how the how the decompose the revenue growth versus what you would have seen typically in the past? Mary Claire Kenny: Yeah. What I would say is, you know, mix is always gonna play a role. Right? And so as I talked about this year and what we are seeing, we expect some of the stronger growth to be in our lower RPU segments. And so that is gonna absolutely have an impact on us. You know, on the intermodal side, that's lower RPU. Minerals and fertilizer is a little bit lower RPU for us. We are when you think about chemicals, when you think about forest products, when you think about automotive, there's headwinds out there. I mean, we are gonna go after opportunities that we see and make sure they are accretive to the business, but mix is certainly gonna impact where we see the growth come in 2026, and that will have an overall impact on the business. You know, Kevin touched a little bit on the coal side earlier. I just you know, mentioned on that. I do think that not only is there, you know, domestic utility opportunity, this year, provided these closures that are scheduled get pushed back, but I would also say on the export side, last year, we saw the numbers, the benchmarks come down pretty significantly over the course of the year. Think what we've seen is some pretty recent stabilization there. I guess I would call out that, you know, PLV has jumped up a bit. But I think it's important to note that when you think about our business, we are more heavily indexed to high vol. And I would say that's been more stable as opposed to seeing any significant increase at this point. Operator: The next question comes from Bascome Majors with Susquehanna. Your line is open. Bascome Majors: Steve, last quarter, you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model. You know, now that you've gotten through a few more months, you're in planning. Can you talk a little bit more tactically about how you and the board have talked about changing the incentives for senior management, both on an annual basis and a go-forward long-term basis? You know, how are they different today than they were, you know, the last few years? Thank you. Steve Angel: Well, you know, we are basically in the process of rolling out the new metric you know, kinda as we speak. But if you to your point about what I discussed last time about most important, and it's really inherent in our guidance. Right? I talked about operating margins as being very important in terms of you know, demonstrating that we can continue to improve the quality of the business. And so that's an obvious metric. You know, operating income dollars that's what translates into you know, net income and earnings per share. So that's obvious that will always be an important metric. Safety will always be part of the mix. And if I had to pick three metrics that are most important to us sitting here at this time, it'd be those three, including safety. That's really on a year-to-year basis. And as you look into you know, the longer term, you know, which we call, you know, kinda three years. So you've heard me say, and those of you who've heard me say, this for many years, some of you, you know, return on capital, I think, is the truth serum you know, for any capital-intensive business. So return on capital is very important. And, you know, it's total shareholder return. You know? How well are we doing compared to the S&P 500 industrials? I think that's you know, important to all of us. So you know, kind of in a nutshell, those are the metrics that are most important. You know? And I you know, I've always liked to focus the organization on a handful of really important metrics as opposed to having you know, eight, 10, 12 as I've seen other companies do over time. And I think that's know, if you want to motivate the organization, if you want to incent the you need to have metrics that are that are very meaningful and reinforce that every day. Operator: The next question comes from David Vernon with Bernstein. Your line is open. David Scott Vernon: So Steve, if you could maybe kind of the cadence of OR improvement we are expected as we get through this year. Should we expect in kind of year over year across the board? Or is it going to be a little bit more back or front-end weighted? And then if you could put a hard number around what the benefit, the run rate benefit you are expecting from the cost actions you've taken to date I think that would help us kind of better understand the bridge for kind of what's organic or volume dependent and what's already kind of in the bag. Thank you. Kevin Boone: Yeah. When you know, certainly, are comparisons, when you think about what occurred in, 2025. And, you know, I would obviously, highlight first quarter given some of the storm activity and other things that occurred to us as a quarter where we should have good year-over-year performance probably above the average for the year. This is the continual process. As we move through the year, we continue to expect to get better and drive more cost out of the business. And we'll see if the what the revenue story is. We are obviously not assuming a whole lot, but there's a lot of activity around that as well. You know, the framework that I would use, from a margin perspective is the $150 million that I certainly highlighted as, not gonna reoccur, next year. I highlighted, three to three and a half percent inflation, in our business, and you will see that more pronounced, on the labor side versus the non-labor side. And I think you can effectively back into know, what we are assuming from a productivity standpoint from there. Operator: The next question comes from Diane McKinney with Deutsche Bank. Your line is open. Diane McKinney: There. This is Megan. Thanks for taking my question. Kind of sticking with the OR progression, I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified, but it also sounds like there's potential for more. But as it relates to the full-year outlook, of the 200 to 300 basis points of the OR improvement, can you help us bridge from 2025? Like, are these cost savings considered? How much is dependent on the market versus what's within CSX Corporation's control? Any color there would be really helpful. Kevin Boone: We are not depending on the market. This is a plan that based on the things that we can control, which is encouraging for us in the at this team, we are gonna focus on those items. And you know, we haven't talked about, you know, the potential for some of these markets to improve, but what we are really focused on is you know, creating the operating leverage when the markets improve. To, quite frankly, deliver higher incremental margins than what we've done in the past. And I'm fully confident given all of the things that we are doing that every incremental dollar of revenue that Mary Claire and her team are able to deliver that will come in at a very, very high, incremental margin. Given all the cost things that we are focused on. You know, going back to the 100, you know, different opportunities, that's really across everything, from vehicle spend to overtime, you know, focused on rental equipment, travel. Mike and his team Doug, Casey, Terry, all of them, have brought ideas to the table. And now it's building the process, the on a monthly basis to hold our teams accountable to delivering it. I'm very confident that we can do that and providing better tools, quite frankly, to the operating team and every team across this organization so they have visibility to where the costs are. And I'm feeling better and better about that every day. I know Mike and I collaborate on that every day. I'm sure there's things that we don't know about today that we'll continue to identify. And so our goal is to you know, build the momentum through the year. And, when that volume comes back, we are gonna have a network that can handle the volume most importantly and really deliver the incremental margins. Operator: This concludes the question and answer session. And will conclude today's conference call. We thank you for joining. You may now disconnect.

69天前Insight Analytics约5分钟阅读

RSG.AX 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the Resolute Mining Fourth Quarter 2025 Activities and 2026 guidance. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to the Chief Executive Officer, Chris Eger, to open the presentation. Please go ahead. Christopher Eger: Good afternoon, and good morning to all. Welcome to Resolute Mining's Q4 2025 Activity Report in addition to providing some color on our 2025 annual results as well as our guidance for 2026. Today, I'm joined on our call by Gavin Harris, our Chief Operating Officer, who's actually sitting at our Syama operations in Mali as well as our CFO, Dave Jackson, in addition to our Head of Corporate Development and Investor Relations, Matty O'Toole-Howes. So let's dive into it. When looking at our Q4 performance across the business, I'm very proud to say that we achieved all of our targets and have very much stabilized the operations, setting up a very strong foundation for 2026. But when looking at the details, our gold produced was 66,000 ounces, an increase of 6,000 ounces over our Q3 results. A lot of this additional work came from our activities in both Senegal and Mali. Specifically in Mali, we have stabilized the supply chain issues that we talked about at the beginning of last year and throughout 2025, whereby now we've now stabilized our explosive situations and are hitting our targets through the end of the year and into 2026. Mako continues to perform extremely well, and we had a very strong quarter in the last quarter of the year. As a result of the good production across the business, our all-in sustaining costs came in at $1,877, again, a decrease versus our Q3 AISC of just about $2,200. So the difference between the 2 AISCs really results in the fact that we are really managing our costs across the business as extremely and efficiently as possible, but most importantly, with the increase in the production levels. Very also positively, we reduced our TRIFR to 1.87x versus 1.95x in the previous quarter. CapEx came in line at $18 million. But ultimately, what we're most proud of is the fact that we generated close to $86 million of operating cash flows in Q4 relative to $70 million in Q3. So what does this mean from a net cash position for the year is that we ended the year at $209 million of net cash, which is roughly $140 million increase in cash from the beginning of the year. But Q4 was also very exciting for us and the fact that we had some significant developments in Côte d'Ivoire. Specifically, on December 15, we provided an update of the Doropo DFS to the market, which shows the incredible robustness of this project, whereby the NP of the project at $4,000 is just about $2.5 billion. We'll go into more details on the specific activities for Doropo in the upcoming slides, but I'm very pleased to say that this project remains on track, on budget for construction in the first half of this year. In addition, we continue to progress across the portfolio in our exploration assets. And most notably, we introduced a Le Debo MRE at 643,000 ounces at 1.14 grams per tonne. In addition, we started really drilling at the ABC deposit in Western Côte d'Ivoire, achieving very strong exploration results, which I'll go into detail in the coming slides. Across the business, we also are continuing to execute our other strategic projects, most notably in Mali, we're very much on track and on budget with our SSCP project, again, which we'll talk about in the upcoming slides, and we continue to progress in Senegal on the life extension projects. 2025 was an incredibly pivotal year for Resolute as well as a very transformational year for the business. I'm very proud to say that we were able to achieve gold production in line with our guidance of 275,000 ounces to 285,000 ounces with final gold forward of 277,000 ounces. So very much on track to guidance, on production, also on all-in sustaining costs, whereby we ended the year at an all-in sustaining cost of $1,843, which is in line with our revised guidance. Additionally, CapEx came in on guidance at $118 million, and we achieved very strong operational and financial results with EBITDA coming in at $383 million. It is worth noting though that at the end of the year, we finished with quite a lot of gold bullion that we did not sell. So we roughly had 31,000 ounces of gold in inventory that we sold in January, which impacted the EBITDA profile for 2025. With regards to cash flow generation and as it relates to the previous slide, we ended the year with $209 million of net cash, but our overall available liquidity was just over $320 million between our gross cash and access to working capital facilities. So when looking at the business from a qualitative perspective, we're very pleased with all the activities that occurred in 2025 to position the business for continued success in 2026. Most notably, in 2025, we substantially augmented the skill sets of the executive team. We brought new people into the business, specifically a project team in Côte d'Ivoire for the construction of the Doropo project. We also restructured a lot of the principal activities in Mali as a result to some of the challenges that we encountered in 2024. We spent quite a bit of time with different government bodies across the business, and we've been augmenting the relationships that we have with the people in all the different jurisdictions that we operate. We also completed the acquisition of the Doropo and ABC projects in Côte d'Ivoire in May of 2025. This acquisition has set the business up for continued success by becoming a multi-producer West African gold company. We also made significant achievements in continuing the projects that we have in both Mali and Senegal as it relates to the SSCP and [indiscernible] programs, which we'll go into more detail. The other key activity for the business in 2025 was continued focus on exploration as I see this as a pivotal leg to creating shareholder value in the long term. But I'll spend a bit more time in the exploration section as it relates to some of the key activities that we see in 2026. Here's a recap of the organic growth profile for the next coming years. As you can see, in 2025, we achieved 277,000 ounces but as you look to the future, we'll be achieving between 250,000 to 275,000 ounces for the next couple of years as we continue our stockpile processing at Mako, where we start the construction of the Doropo project. So I'm very confident by 2028, we will be on a run rate to achieve 500,000 ounces for the foreseeable future across the business. And beyond that, with the work that we're doing on exploration, I'm very confident that we'll be able to grow the production profile organically through some of the success that we're seeing in the exploration side of the business. So as you can see on the page, we're guiding gold production from 250,000 to 275,000 ounces across the group. That's split between Syama and Mako of 195,000 to 210,000 ounces of gold production out of Syama and 55,000 to 65,000 ounces of gold production out of Mako. Mako is quite straightforward as we're continuing to process stockpiles all through '26 and into '27. However, at Syama, Syama is going to have an interesting year as we will be commissioning the SSCP program, whereby we are going to start processing the majority of the ores to be sulfides as opposed to in the past, a split between sulfides and oxides. But Gavin will go into very specific details about how this transition will occur in 2026. As a result of the high gold price environment, we are seeing our all-in sustaining costs increasing. And so we are guiding our all-in sustaining costs across the group between $2,000 to $2,200, but a significant reason for the increase from 2025 is due to the fact that the royalty expense at today's gold price environment at $4,000-plus is adding quite a bit of expense to our all-in sustaining costs. Capital expenditure for 2026 is substantially higher versus 2025. And as you can see on the page, is between $310 million to $360. Going through the different line items, we will provide some context to the increase in CapEx. So let's start with Syama. Syama is being guided between $110 million to $125 million. But of this number, approximately $40 million relates to the finalization of the SSCP program relative to 2025. In addition, waste stripping is also about $40 million, which is an increase versus 2025 of about $20 million. And that additional waste stripping capital is required in order to further develop the Syama North deposit in order to access higher-grade zones for the future. At Mako, we anticipate that the CapEx will be between $15 million to $20 million with the vast majority of that capital being spent on capital projects at the Tombo and Bantaco projects. Doropo is projected to be between $170 million to $190 million, subject to permitting an FID approval. And most of that CapEx is scheduled to be spent in the second half of the year. But again, we'll go into more detail how we see Doropo being built and expensed in the upcoming slides. And finally, we continue to spend quite a bit of money on exploration as this is a key value driver for the business. And so we expect to spend at least $15 million to $25 million on exploration, predominantly in Côte d'Ivoire, but we are looking to expand our activities in both Guinea and also in Senegal. So with that, let me turn it over to Gavin Harris to walk you through the specifics of each of our assets and our activities in 2026. Gavin Harris: Okay. Thanks, Chris, and good morning and good afternoon to everybody on the call. Starting in Ivory Coast. We've made major progress on Doropo and ABC projects, which we acquired in May last year from AngloGold Ashanti. Doropo is a transformational project for Resolute, one that I was already familiar with as it was originally developed during my time with Centamin. Throughout the second half of 2025, we built out the project team, appointing key positions; the Project Director, the Project Manager and the Project Services Manager. The Project Director, Rob Cicchini, leads this team, which has nearly 100 years of experience building projects in West Africa, Asia and Australia, predominantly with Lycopodium in the past. The long list of projects this team have worked on in West Africa include Ity, Agbaou and Sissingué in Côte d'Ivoire; Houndé, Bissa and Bouly in Burkina Faso; Fekola in Mali, Obotan and Nzema in Ghana and of course, our very Mako mine in Senegal. Moving on to key achievements for Doropo last year. These include the updated mineral resource estimate, which increased by 28%. The release of the updated definitive feasibility study, or DFS, that outlined a larger and longer life operation than the previous DFS by Centamin in 2024. The appointment of Lycopodium Engineering to complete the front-end engineering design or FEED and the issuance of the tender for engineering, procurement, construction management or EPCM, with site visits taking place next week. Progression of permitting saw increased governmental interactions, including multiple visits from the Resolute executive team and a meeting with the Prime Minister. We are waiting for approval for the mining permit. At the end of last year, the permitting process slowed due to elections. With these now over and ministers being appointed this week, we expect the last 2 stages of permitting to progress over the coming months. These stages are, firstly, approval in the Interministerial Commission followed by signature of the presidential decree. The updated DFS released on the 15th of December outlines a significantly larger project compared to the previous version of the DFS with a 55% increase in gold reserves and an extension of the mine life. An updated gold price of $1,950 per ounce has increased total life of mine gold production to 2.2 million ounces over 13 years. Current spot gold price is significantly higher than this, but to manage the time line and permitting, which was submitted using $2,000 pit shells, the updated DFS remains within these confines. Further gold production is anticipated at higher gold prices, which underpins the confidence that the Doropo life of mine could be extended beyond 13 years. We believe additional exploration targets between the main Souwa hub and Kilosegui could add even further mine life. [indiscernible] front capital costs have increased to an estimated $516 million, which reflects updated pricing with a significant inflationary aspect compared to the previous version completed during the first half of 2024. A 25% increase in processing capacity, future-proofing the project, which allows for further modular expansion, an 80% increase to the water storage capacity, a 55% increase in the capacity of the tailings storage facility to meet the additional process tonnages, increased land and livelihood restoration and resettlement costs and the inclusion of some previously admitted items. Financial highlights from the updated DFS at a base case gold price of $3,000 an ounce include all-in sustaining cash cost of $1,406 an ounce, a post-tax net present value of $1.46 billion at a 5% discount rate and internal rate of return of 49%. A payback period of 1.7 years, the payback drops to under a year of $4,000 gold price, and obviously, the gold price is much higher than that right now. Very strong free cash flows averaging over $260 million per year over the first 5 years of production. As I mentioned a moment ago, we see a lot of upside potential at Doropo, and I believe it's going to be one of those mines that simply keeps producing well beyond initial expectations. So the key work streams for Doropo in 2026, which are already underway are focused on maintaining project time lines whilst permitting and the final investment decision or FID takes place. FEED work undertaken by Lycopodium will mean equipment and construction tender packages can be prepared and issued in the first half of 2026. This work will enable procurement of key long lead items to start as soon as FID is approved. EPCM tenders have been issued with a site visit taking place next week. We initiated a competitive bid process with strong interest from world-class engineering firms with proven track records building gold mines in West Africa. The EPCM submission and adjudication will continue throughout the early part of the year, and we plan to award this towards the end of Q2. Site earthworks will start before the wet season to establish access roads and advance the early stages of the water storage and water harvesting tasks, which are key to retaining and providing water during the project construction phase. To facilitate the early work schedule, work will start on the construction of the camp and permanent village to provide messing and accommodation for the construction teams. If we assume that FID is completed by the end of Q1, the project time line has construction starting from midway through Q2 of 2026 with commissioning starting early 2028. The first gold pool is expected to be towards the end of the first half of 2028. Again, assuming the FID is reached by the end of Q1, capital expenditure on the project in 2026 is expected to be between $170 million to $190 million with approximately 75% or $135 million of expenditure during the second half of the year. Expenditure in the first half of the year will include land acquisition and crop compensation for the villages affected by the project. So now we'll move across over to Mali and the Syama operation. Syama delivered 47.2 kilo ounces during Q4, the momentum shift after 2 successive lower quarters, largely due to supply chain issues encountered from the end of Q1. The strong quarter resulted in Syama achieving the lower end of guidance with 176.3 kilo ounces of gold produced at $2,008 all-in sustaining cost, again, within the guidance range. Of note during Q4 was a new ore production record from the underground mine, achieving over 250,000 tonnes of ore in a single month. This underpinned the strong quarter as we use alternative explosive products and supplies to address issues encountered over the previous 9 months. On joining Resolute, I traveled to Mali on the evening of my first day with the company. During this visit, which lasted 3 weeks, it was clear the team on site needed strategic leadership to help with decision-making of the complex operation. We made great progress in this area, and we see further areas of improvement in 2026. Additionally, I spent considerable time reviewing contractor and supplier arrangements to make sure we're receiving the most competitive rates. To address some of the challenges, I carried out a restructuring of the management team in the second half of 2025. This started with the General Manager of the operation. While this restructure took place, I spent 3 months on site at Syama overseeing the operation and implementing a reset to remove historical inefficiencies, also whilst taking advantage of many opportunities that were immediately visible. The team at Syama were bolstered with experienced and seasoned professionals bringing first-hand experience of turning around distressed assets. We conducted an operational review starting during Q3, focused on optimization of the underground assets and cost reduction programs across the whole site. It resulted in a significant drop quarter-on-quarter as these benefits began to hit the bottom line in Q4. You can see this reflected in the all-in sustaining cost of $1,779 an ounce. This review continues today with the new leadership team and with even more opportunities under evaluation that are expected to deliver shareholder value throughout 2026 and into the future. These ongoing measures as a minimum are expected to assist in offsetting inflationary pressures. Full year capital expenditure was just below the guidance range, largely due to the Syama Sulphide Conversion Project or SSCP as we call it, deferring some $5 million of costs with the revised schedule for sulphide processing. This was while we were completing Tabakoroni oxide reserves in Q4. The key supply chain issues revolved around transport of products internally through Mali. The largest effects were on explosive products and fuel that needed government escorts. Currently, fuel levels are stable and to combat the explosive transportation issues we faced, we followed our in-country peers and will construct an explosive manufacturing plant at Syama in 2026. This is expected to increase operational stability and explosive availability across the operation. Whilst I've been on site as Syama stabilized in the operations. Chris, the CEO has been busy working to improve dialogue and build a relationship with the government leasing with the value in Prime Minister [indiscernible] during Q4. During Q4, we completed oxide mining at the Tabakoroni deposit, which lies about 40 kilometers southeast of the Syama processing plant. With nearly all economic high-grade oxide deposits local to Syama exhausted, open pit ore production will focus on the Syama North 821 district for fresh sulphide ore over the coming years. Syama today has a processing capacity of 4 million tonnes per annum. This is split between 2 processing plants. First of which is the 2.4 million tonne per annum sulphide plant which treats the underground sulphide ore. The second, the 1.6 million tonne per annum oxide plant processes open pit oxide ore. The Syama sulphide conversion project started in 2023 as key infrastructure to allow sulphide ore to be processed through the existing oxide plant. The project includes the installation of a secondary crusher after the primary crusher to reduce the harder sulphide which material and transitional or prior to feeding the existing SAG mill, a pebble crusher to deal with scats, which is the oversight of discharges from the existing SAG, a close circuit secondary ball mill to treat cyclone rejects and deliver the correct grind size of flotation. The column flotation cells to recover the sulphide material prior to roasting, 2 additional CIL tanks and a roaster upgrade with a new electrostatic precipitator or ESP, which will increase concentrate throughput by over 15%. All of this will allow for the plant to process sulphide feed whilst maintaining flexibility to still be able to process oxide ore. The SSCP is currently on time and on budget. Stage 1, the oversized pebble crusher and sulphide flotation plant scheduled to be commissioned in Q2 2026. The SSCP will then be able to run at 50% capacity, approximately 110 tonnes per hour during Stage 1. As we move to Stage 2, this focuses on the secondary crusher, ball mill construction and the roaster upgrade. This is scheduled to be commissioned and fully operational in Q3. Once fully commissioned, the throughput capacity is expected to increase to 215 tonnes per hour. Syama production will increase in 2026 compared to 2025, and will deliver between 195,000 to 210,000 ounces of gold at an all-in sustaining cost of between $1,950 to $2,150 per ounce. The gold production is weighted heavily towards the second half of the year, with H1 and H2 representing 42% and 58% of gold produced, respectively. This split is due to the ongoing review and optimization of open pit mining, which will conclude during Q1. As such, mining will be limited to the Syama North A21 waste stripping with the existing appointed contractor. During this time, existing oxide stockpiles will be processed and sulphide ore will be stockpiled ready for SSCP commissioning in Q2. The Syama North A21 open pit is expected to mine 1 million tonnes of sulphide ore averaging 2.3 grams per tonne. H1 will be focused on waste and low-grade oxide stripping before ramping into full-scale sulphide ore production in H2. The underground operation is expected to build on the optimization work completed in the second half of 2025 and deliver over 2.6 million tonnes of ore to the surface. The underground production includes 300,000 tonnes of development ore with total development increasing by 74% compared to 2025 and 8.2 kilometers of underground development plan. The highest grades from the underground will be processed, resulting in an average head grade of 2.4 grams per tonne. The lower grade material will be stockpiled, rebuilding the stockpiles that we've depleted during 2025. On completion of the open pit optimization review, oxide mining will take place during Q2 at the [indiscernible] open pit, completing the oxide high-grade reserves of this ore body ahead of the rainy season. This oxide will be stockpiled whilst SSCP Stage 1 commissioning takes place and will be processed later in the year. The second and third quarters focused solely on sulphide processing and the ramp-up of SSCP during Stage 2. By the middle of Q4, sulphide concentrate stocks will be sufficient to meet the process throughput. And as such, any further sulphide processing in the SSCP will defer ounces to be poured in 2027. As a result, there's an excess capacity on the SSCP to revert back to oxide and add additional ounces while stockpiled concentrate feeds the roaster. Hence, the heavy weighting of ounces in H2 with 12,000 ounces of oxide gold production expected during Q4. The current sulphide plant, which receives ore from the underground mine will process over 2.2 million tonnes in 2026, slightly down from 2025 as a 3-week essential maintenance work program takes place in the second quarter on the primary ball mills and the roaster. Once fully commissioned, the SSCP is expected to lift overall gold production by 5% to 10% from 2026 levels. As oxide resources deplete, oxide production is expected to decrease over the next 2 years with operations transitioning to 100% sulphide processing from 2028. CapEx at Syama this year is expected to be in the region of $120 million. And this is split into 3 main areas: approximately $40 million to complete the SSCP and roaster upgrades, another $40 million of waste stripping in Syama North A21 pit and the underground development and around $40 million comprising of equipment replacements and maintenance within the processing plant and the underground mine and additional tailings storage facility studies and construction. A full life of mine review commissioned in H2 2025 is progressing to increase production in subsequent years. We'll report on this in H2 of this year. So we move across to Senegal now on our Mako operations. The Mako operation in Senegal delivered an outstanding 2025, achieving an upward revised guidance target of 123 kilo ounces at a lower all-in sustaining cost of $1,270 per ounce. The fourth quarter gold production of 18,755 ounces was enhanced by higher than forecast stockpile grades. This strong performance was achieved despite open pit mining activities ending in H1 and transitioning to stockpile material in H2. Naturally, the cessation of mining and processing of stockpiles has seen the overall feed grade decrease over the second half of the year. Processing throughput of 604 kilo tonnes has improved year-on-year, but also quarter-on-quarter with continuous improvement. This means that recovery above 91% is maintained despite a reduction of feed grade to 1.04 grams per tonne and higher throughput rates. This has been achieved primarily by metallurgical testing on course grind sizes and optimization of the gravity gold circuit. All-in sustaining costs have increased in the second half of the year with Q4 all-in sustaining cost of $1,666 per ounce as overall gold production reduces with no higher grade run of mine ore to process, increased royalty payments and noncash stockpile movements of approximately $143 per ounce. Capital expenditure was limited to $0.3 million in the fourth quarter and a total of $2.9 million for the full year. As part of our ongoing commitment to build strong relationships with the governments of the countries in which we operate, Chris also met with the President of Senegal in Q4. The Mako Life Extension Project or MLEP, has the potential to extend the current Mako mine life up to 10 years. The MLEP encompasses 2 main areas, the Tomboronkoto and Bantaco deposits. The exciting discovery of the Tomboronkoto deposit, approximately 20,000 from the Mako mine has a current resource of 377 kilo ounces with average grade of 1.7 grams per tonne. The Tomboronkoto ESIA has been pre-validated by the Senegalese technical agencies and is pending ministerial approval. Importantly, this has been supported and approved by the Tomboronkoto village and surrounding communities. The resettlement action plan or RAP and the DFS is nearing completion and the cutoff date, the point at which no further compensation can be claimed, has passed. A full survey of the affected houses and livelihoods has been completed and is now crystallized for the purposes of this project. The overall process has been completed with detailed approach to stakeholder engagement, underscoring our commitment to regulatory compliance, transparent community consultation and responsible project execution. The application for the Tomboronkoto mining permit will follow the issuance of the environmental permit with all permitting anticipated to be received by the end of 2026, assuming no major revisions are required. When we receive the mining permit, we will have the authority we need to implement the RAP and initiate the village relocation work. We expect detailed engineering to start during Q2 with long lead items procured before the end of 2026. That means mining at Tomboronkoto is scheduled to start in the second quarter of 2028. Two additional deposits are currently being explored at Bantaco. The Bantaco South and Bantaco West deposits have recently published resources totaling 266,000 ounces at 1.1 gram per tonne. During 2025, infill drilling, technical studies and metallurgical analysis work streams were progressed with $4.1 million of capital expenditure on this part of the project. This included progressing the ESIA submission and community engagement activities, which are far less onerous than at Tomboronkoto. 2026 work streams for Bantaco are related to technical studies, additional infill drilling is required and progressing the permitting process. Subject to full economic analysis, Bantaco ore delivery is scheduled to commence in Q4 2027 to bridge the gap between the completion of Mako stockpile processing and the start of ore delivery from Tomboronkoto. Total capital expenditure on the MLEP is expected to be between $10 million to $15 million during 2026. Mako production will decrease compared to 2025 as stockpile material is processed in 2026 and deliver a guidance of between 55,000 and 65,000 ounces of gold at an all-in sustaining cost of between $1,600 to $1,800 per ounce. The all-in sustaining cost increase is a reflection of the lower stockpile grades processed within an inflationary environment, including higher royalties due to the higher average gold prices expected in 2026 and compared to H2 2025. Gold production is slightly weighted to the first half of the year with H1 and H2 representing 52% and 48% of gold production, respectively, although it's important to note that the potential variability when processing stockpiles. 2.2 million tonnes of ore to be processed at an average grade of 0.9 grams per tonne with gold recoveries above 90%. Mako currently has sufficient stockpile low-grade ore to continue processing to the end of 2027, albeit grades will decrease as processing moves through low grade to mineralized waste stockpile. And with that, I'll hand you back to Chris to talk through the exploration activities. Christopher Eger: Thank you, Gavin. And now let's move to talking about exploration. Exploration continues to be very important to the business strategic priorities moving forward. As you can see on Slide 21, in 2025, we spent just shy of $25 million on exploration activities with considerable success. Of that $25 million, roughly $15 million was spent in Senegal, $5 million in Côte d'Ivoire and $5 million in Mali. Some of the key achievements in 2025 was an initial MRE at Bantaco as well as continued exploration activities at La Debo and Doropo. But however, when we look at 2026, we will plan to continue to spend around the same amount of money but to focus more on Côte d'Ivoire versus Senegal as the bulk of the drilling in Senegal has been completed. We will continue, though, in Senegal to spend some money at Bantaco and Tombo with regards to infill exploration drilling, like I said, the bulk of the cash expenditures for this year is going to be focused at Côte d'Ivoire because we see real value at the ABC and La Debo projects. But I'll go to that in more detail in the upcoming slides. The other key area of focus for the business, which has been forgotten about is in Guinea. We do have a number of permits in Guinea, but we have been looking to apply for new permits, and I will be very proud to say that we did receive first reconnaissance authorizations for a number of permits in the Siguiri Basin, which we'll start spending time and effort in 2026. So when I look at the triangle on the right side of the page, this shows that we are developing a proper pipeline to developing the fourth asset within the Resolute business. So again, exploration is core to our success, and we are spending quite a bit of time and effort in developing additional projects within the portfolio. Moving to Page 22. I want to spend a bit more time on our ABC exploration project in the West side of Côte d'Ivoire. When you look at the map, ABC actually is comprised of 4 key deposits. There is a Farako-Nafana permit, which you can see in the very north part of the deposit; the Kona permit, the Windou permit and most recently, the Gbemanzo permit. The bulk of this initial resource is all situated on Kona. That's where you see the $2.2 million of inferred ounces at 0.9 grams per tonne. In Q4 of 2025, we started an excessive drill program across all 4 of those deposits, where we're seeing very exciting results. So the Farako-Nafana permit, which is in the north part, we've got some very exciting drill results support by we saw 1 hole at 31 meters at 2.4 grams per tonne from 13 meters from surface. We also started drilling in Kona to expand that deposits with very strong drill results and this year, the focus will be to drill at least 20,000 meters across the 4 different areas in order to expand this footprint. We are, though, looking to put economics on this project, and we've commissioned a scoping study which we hope will be released towards the end of H1 2026, but possibly to H2 of 2026. So once those numbers are completed, we'll release those to the market. Similar to the ABC project in Côte d'Ivoire, we're also very excited about the La Debo project in Côte d'Ivoire. This is a project that's about 400 kilometers into the northwest of Abidjan, which we acquired in 2024. So we spent quite a bit of time and effort in 2025 drilling out this deposit, and we had a very successful MRE of about 643,000 ounces at 1.14 grams per tonne that was issued in Q4, and that was after 16,000 meters of drilling completed in 2025. When you look at the map on the right side, the resource is focused on the Northeast area of the deposit in the G3S and in G3N zones. Those zones show gold that continue at depth and at strike. And so in 2026, we will start doing a bit more drilling to prove out the size of that deposit and continue to expand. We also see some interesting anomalies at the G1 area, which is kind of in the middle. And so we're going to be spending time drilling that deposit out as well. So the goal is to try and make us to at least 1 million ounces but also is very similar to ABC, we will be looking to implement a scoping study report towards the end of H1 2026, possibly into H2, which will demonstrate the economics of this asset. So look, in summary, I do believe that between Le Debo and ABC, we have been making for a fourth asset -- fourth producing asset, I should say, within the Resolute portfolio. So with that, I'll turn it over to Dave Jackson to go through the financial summary. Dave Jackson: Thanks, Chris. Today, I will walk you through the Q4 and full year headline financial results highlighted in the key performance metrics. Overall, we ended the year strong, and our Q4 metrics were in line with expectations. We continue to strengthen our balance sheet and build cash in the business. Looking at the financial highlights. Our year-to-date EBITDA was an impressive $383 million, which was a substantial increase from the $319 million reported in 2024. This performance was underpinned by revenue of $863 million generated from the sale of 259,000 ounces of gold at an average realized price of $3,338 per ounce. As previously noted, Resolute remains fully unhedged and continues to sell all of its gold at spot prices. At quarter end, net cash stood at $209 million, marking a $72 million increase from Q3. Included in the net cash figure is $135 million of unsold bullion, representing nearly 31,000 ounces of gold that were sold shortly after the quarter closed. We had $57 million drawn on overdraft facilities at quarter end. These facilities continue to be used locally to optimize working capital. Currently, the group has in-country overdraft facilities of approximately $113 million available as we continue to maintain financial flexibility for the group. The group all-in sustaining cost for Q4 was $1,877 per ounce, which represents a $328 per ounce decrease from Q3. This decrease was primarily driven by the expected increase in gold production at Syama. At Syama, specifically, the all-in sustaining cost was lower than Q3 due to higher production and lower sustaining capital expenditure. As already mentioned, we have successfully navigated the supply chain disruptions in Mali, which resulted in Q4 being Syama's second strongest production quarter in 2025. Let me now walk you through the key components of our cash flow summary that led to the net cash position of $209 million at the end of Q4 on our next slide. We generated a solid $86 million operating cash flow during the quarter and $314 million for the full year. This was a substantial increase from the comparable periods in 2024 and is mainly attributed to the increase in gold price throughout the year. CapEx totaled $118 million for year-to-date. This includes $24 million spent on exploration, $70 million in project capital across Syama and Mako and $24 million spent on the SSCP. Overall, CapEx and exploration spend were within guidance. As previously noted, we made the initial $25 million payment for the acquisition of the Doropo and ABC projects during Q2. These projects represent exciting growth opportunities for the company and are expected to deliver meaningful long-term value for our stakeholders. VAT outflows in 2025 totaled $66 million across Mali and Senegal. We are pleased to say we obtained $34 million of VAT mandates in Senegal in 2025, which were used to offset government payables However, VAT remains a source of cash leakage in Mali, and we continue to engage actively with the local government to recover these amounts. Our recent discussions have been positive, and we remain encouraged by the progress being made. Moving to working capital. We recorded a $29 million inflow for the year-to-date. This was driven by a $6 million reduction in consumable inventory across the group, a $10 million reduction in stockpile balances at both Syama and Mako and a $13 million change in supplier payments, which are settled in the normal course of business. Our ending cash in bullion was $266 million and marks a $165 million increase from the beginning of the year. This leaves us with ample available liquidity of over $322 million at the end of December. As noted on our last call, we have a stake in Loncor gold worth approximately $31 million, which is currently being sold. We expect to receive these funds in Q1 this year, and we expect no tax impact on the proceeds once received. Supported by a strong cash position and ample liquidity, the company is well placed to fully fund its 2026 capital expenditure requirements, including Doropo, through existing cash balances and the anticipated strong cash flows in 2026. We are currently in discussion with debt providers to secure additional capital for the Doropo project, which we are expecting to be finalized in 2026. The timing to secure any financing will not impact the Doropo time line as we expect to begin construction as soon as the permits and FID are obtained. In summary, we're in a very solid financial position and are excited about the growth potential of the business. With that, I'll hand it back to Chris. Christopher Eger: Thanks, Dave. And look, just a couple of more slides to wrap up the story. First, let's start on Page 28, which has qualitatively highlights some of the key milestones we're expecting in the next few years. Let me just focus on 2026. So going first and starting in Cote d'Ivoire, the most important is we expect to get the mining permits and FID for the Doropo projects in the coming months. And that will then obviously formalize and kick off the construction period for Doropo. But I think as provided by Gavin, we're not slowing this down, and we believe we have the financial resources to execute the construction of the project without missing a beat and initiating full construction and initial commissioning in the beginning of 2028. In addition, we're going to provide economic studies on both Doropo and at ABC. Moving to Mali, we will be commissioning the SSCP and transitioning to almost 100% sulfide production and completing an optimization study. And then when looking at Senegal, the key activities revolve around permitting of both Bantaco and Tombo projects. So we anticipate that we'll kick off those permitting applications in 2026, and we'll keep the market updated. So we have a lot on our place. We're very excited about what we're doing. We also see tremendous opportunities to continue to drive cost reductions across the business and continue to develop and build our relationships with the governments where we operate. So in summary, again, very proud of what the business achieved in 2025. We achieved our production guidance. We managed our costs across the business. We generate a substantial amount of cash flow in the business although with the support of the rising gold price environment. But most importantly, we executed our strategy of becoming a geographically diversified producer through the acquisition of the Doropo project in Cote d'Ivoire. We also made substantial improvements in exploration by focusing this as a key strategic priority for the business. I made a number of executive changes and augmented the skill set of people within the business, which is incredibly important to any mining operation. So with all the pieces that we put in place, I'm very confident that we'll have a very successful 2026. But most importantly, we're well on track to becoming a 0.5 million ounce producer from 2028. So with that, I will turn over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Justin Chan with SCP. Justin Chan: My first one is just maybe just clarifying the explosive situation in Mali. I read that you're planning to put it in an emulsion plant and that the explosives are no longer an issue. And I was just wondering, I mean, a bit more detail. Do you have a stockpile now? And then what's the timing on the plants? And can you just give us a bit more color on that situation and I guess, how it evolves through the year? Christopher Eger: Thanks for the question. Maybe just easier, I'll just turn over to Gavin, and he can probably give a bit more color than I would. Gavin Harris: Yes. Thanks for the question. So basically, our strategy at the moment is the explosives that are coming into site has to be escorted in by the Mali and government forces, obviously, given the security situation in Mali. What's been happening is the government have been in talks with our team in country to effectively set up a grade to support the mining operations. So we're seeing a lot -- we're getting a lot more exports into the site now. So currently, the stocks on site are good enough for us to continue production and obviously be a little bit more relaxed in terms of the issues that we have had previously. But further to that, we have been in discussion with different suppliers to effectively build their own plants on site to be able to produce the products we need going forward. So we have had a successful discussion with two suppliers on that, and we're waiting for final proposals to come in ahead of building these, but we expect these to be constructed within 2026. And obviously, bringing in raw materials that are precursors to explosives will not be subject to the scores from the government, which makes things a lot easier. So that really should solve that issue that we've had with explosives throughout 2025. Justin Chan: Got you. So perhaps to paraphrase, so the near-term issue is resolved because you have these convoys that are more frequent and the supply frequencies increased and then the emotion plant is more of a longer-term solution, but timing on that in 2026 is to be determined. Gavin Harris: Yes, exactly. That's a good summary. Justin Chan: Okay. Perfect. And then maybe just on Mali more broadly, I mean, there's been a couple of major developments, the Barrick coming to an agreement with the government on Loulo-Gounkoto. And then I mean, there was a lot of press on the fuel blockades, et cetera, around November last year. It seems like that situation has improved quite a lot. It sounds like. And I'm curious on the situation with Barrick coming to an agreement with the government. I think four companies are having a hard time implementing their already agreed terms just because the government was preoccupied. Maybe could you give us an update on what you're seeing in the country on both those fronts? Christopher Eger: Yes. So Justin, I think, look, what we see is similar to the others that the mood has changed dramatically versus 2024 and a lot more positive and constructive. We do believe the situation with Bayer coming to resolution is good for the industry and good for Mali. I think the government understands what has happened and why and are trying to work with the remaining operators to try and keep it more stabilized. There was obviously a bit more noise on security at the beginning of Q4 that we've seen kind of reverse. So it's -- unfortunately, it's a bit more of the same. We are continuing open dialogue and constructive dialogue with the government and trying to educate them on how we can work together for future investments. That's why we're doing the Phase II studies that we work with the government. Demonstrate that I know if we can work together, we think that there's growth in our business. But unfortunately, a bit similar to 2025, I'm still cautiously optimistic. We're still very cautious that we need to see a bit more signs of reversals. One of the key activities that we have not been receiving or VAT refunds back. And I think that's a key milestone that needs to be achieved for future investments. But generally, the mood is much more positive and continues to head in that direction, but it's still delicate. So look, I would say, just a summary, security is probably in good shape. And as fuel hasn't been an issue because we're working very closely again with the government to get the convoys and for our mines to be fed, which has been not impacted, but it's still delicate. Justin Chan: Got you. I appreciate that. That's really helpful color. And just one last one, I'll free up the line. Just clarifying with regards to the CapEx and exploration at Mako this year. So the $10 million to $15 million quoted in CapEx, that's for studies and that's independent of the exploration budget for Mako this year? Christopher Eger: That's correct. The bulk of that is study work. We will do, like I said, a bit more drilling on Bantaco, less on Tombo because we've pretty much completed that. And look, we'll spend more -- if we find more areas to explore and to expand on. But the key is to get the studies completed so that we can file for mining applications. And then depending on how we see our cash needs in '27 and '28, we may open up a bit. We're going to also look -- we have two other deposits in Senegal, Sangola and Laminia, and we're going to do some work there. But with the resources we have, we're going to focus more in Cote d'Ivoire. Justin Chan: Okay. Got you. And that will be primarily studies, it's not for, say, early site works or relocation. Christopher Eger: There is some capital towards the back end of this year, depending on the timing of -- if we receive the mining applications towards the end of the year, we'll start doing some, we'll call it, early site works and mostly it's around the wrap the relocation process at Tombo. So there's probably about $3 million to $4 million anticipated in Q4 assuming we get exploitation permits coming in as expected, but that may change and get pushed into '27. Operator: Our next question comes from the line of Casper [indiscernible] from Berenberg. Unknown Analyst: I just had two quick questions. At on the CapEx at Syama this year. I just wanted to ask how we should think about that CapEx going forward after this year's $170 million to $190 million spend? Christopher Eger: Yes. So it's a good question because I know it's higher this year because we have decided to put a bit more capital into effectively into the plant because look, the plan is 30-plus years, and obviously, we need to do a new TSF. So that's why there's additional, call it, $40 million of what we call capital projects that is probably more of a one-off. I would say next year, 2027 will be probably closer to $30 million. And then look, we have, like I said, more than $40 million this year on waste stripping with a lot of that, half of it being new stripping at the 21 Syama North Zone. So I'd say, look, moving forward, the run rate CapEx is closer to $30 million to $50 million. So probably a bit on the higher end for '27 and then it will start to stabilize in that $30 million to $40 million thereafter. Unknown Analyst: Okay. Great. And just as a follow-up, why -- I just wanted to ask why sales at Syama lagged production volumes in Q4? And did they get sold in early Q1? Christopher Eger: Again. So look, in summary, we had just about 30,000 ounces of gold volume, 31,000 to be specific at the end of the year. It has to do with the fact that the 31st of December was on Wednesday, and we tend to ship our gold on Fridays. And so we have built up stock around 2 weeks' worth of stock. So all of that gold was then shipped effectively in the first 10 days of January. So look, we'll have -- that was a key impact to the lower EBITDA versus overall guidance. It's just that some of those gold sales were pushed into January, which will impact the '26 numbers. Operator: Our next question comes from the line of William Jones with Canaccord Genuity. William Jones: And congratulations on a pretty good quarter. Most of my questions have been answered. But maybe just one on trying to understand the grades going through the plant at Syama post '26. So I know you quote sort of a 5% to 10% step-up. I gather that is grades are going to be impacted just by oxide feed. So just if you could provide some color on those -- the grade of those oxide stocks going into the plant over the 2 years and if that will step up towards the reserve grades once those stockpiles are used, probably firstly. And then secondly, just a bit of the strategy around utilizing those stockpiles. Christopher Eger: Thanks. Maybe, Gavin, over to you on that one. just obviously as we're reviewing the mine plans... Gavin Harris: Yes. Thanks for the questions. Look, on the Syama grades, obviously, the sulfides that we're seeing are reasonably good grades coming out of that Syama North A21 district, and we expect those to improve as we go forward. They're sitting around sort of 2.3 at the moment for this year. There will be ups and downs in that as we go through the mine life, but we think reasonably around 2 grams per tonne is acceptable for what we'd be looking at, at the moment. And then the underground, realistically, the grades will drop off towards the end of the mine life. But certainly, over the next few years, they're sitting around that sort of 2.4 gram per tonne as we go forward. William Jones: Okay. And then just interested on -- look, I appreciate how much you can say on this, but how you're thinking about the funding or capital stack for Doropo? And is there any target leverage perhaps that you're thinking of? Christopher Eger: No, it's a good question, and it's an evolving question, to be honest, because of the cash flow generation that we're generating in the business. So as you saw from Dave, we have today over $300 million of liquidity. At today's gold price environment, we're generating anywhere from $30 million to $50 million of fresh cash every quarter. So that puts us in a very strong position to actually fund the bulk of the CapEx with our own resources. But we think it's prudent to put in some debt and because we will need some cash in the future for the MLEP program. I would say we're looking at kind of a 50-50 target split between equity and debt, but it may be a bit more equity depending when I say equity or cash versus debt. It all comes down to the cost of capital net debt. But what's really important to us because of the cash flow generation of the business, and we're not a developer is that we put in a debt facility that's very flexible that allows us to pay that back quite quickly without too many penalties and costs. And look, we've been innovated with term sheets for funding of Doropo because of the attractiveness of the project and where it's located in the world. But again, similar to what Dave said, we're working through these. So we're not in a rush because we have quite a -- look, everything is going on track as we expected, and we'll probably look to put something in place towards the end of H1, maybe into early H2 because in any case, we'll be using our cash to fund the front end of the project. Operator: [Operator Instructions] Our next question comes from the line of Richard Knights with Barrenjoey. Richard Knights: Just one on ABC. It feels like it's a bit of a sleeper in the portfolio. You mentioned there's a scoping study that you're targeting to get out in H2. How quickly do you think you could turn that around into a DFS and ultimately an FID decision? Christopher Eger: Look, I think realistically, that would be towards the back end of '27. And look, and I agree with you, it is a bit of a sleeper in the group. It's a fantastic asset, and it's a very large footprint that we have. So look, depending on the economics of the scoping study, we can try and fast track it, but there is infill drilling that needs to be done. And because there's various deposits on the permit, we would need to think about where we would start and how we would kind of build that line because it's a good problem to have, but they are different -- the ore bodies are quite different in each of the different zones that we have. So we just need to understand that a bit better. But we see significant strategic value in ABC and how it's continuous with other deposits in the area. So there's definitely a mine at ABC that will be built at some point in time. Richard Knights: Yes. Okay. And maybe -- sorry, just one more on Doropo. The $170 million to $190 million of CapEx you're targeting for this year. I'm assuming all of that comes out of the $516 million total CapEx bill for the project? Christopher Eger: That's correct. Operator: At this time, we have no further questions. This concludes today's call. We would like to thank everyone for their participation. You may now disconnect your lines. Have a nice day.

69天前Insight Analytics约5分钟阅读

EGBN 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Eagle Bancorp, Inc., fourth quarter and year-end 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eric Newell, Chief Financial Officer of Eagle Bancorp, Inc. Please go ahead. Eric Newell: Good morning. This is Eric Newell, Chief Financial Officer of Eagle Bancorp. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call are forward-looking statements. We cannot make any promises about future performance and we caution you not to place undue reliance on these forward-looking statements. Our Form 10-K for the fiscal year 2024, Form 10-Q and current reports on Form 8-K including our earnings presentation slides identify important factors that could cause the company's actual results to differ materially from any forward-looking statements made this morning, which speak only as of today. Eagle Bancorp does not undertake to update any forward-looking statements as a result of new information, future events or developments unless required by law. This morning's commentary will include non-GAAP financial information. The earnings release, which is posted in the Investor Relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company, online at our website or on the SEC's website. With me today is our President and CEO, Susan Riel; and our Chief Lending Officer for Commercial Real Estate, Ryan Riel. I'll now turn it over to Susan. Susan Riel: Thank you, Eric. Good morning, and thank you for joining us. The fourth quarter marked an important inflection point for Eagle Bank. Over the course of the year, we took actions to diversify our balance sheet, reduce risk and strengthen the overall quality of the franchise. These efforts became clearly visible in the fourth quarter as asset quality metrics improved meaningfully and our balance sheet mix moved closer to the profile we believe is necessary to sustainably support durable earnings. Importantly, these improvements were the results of intentional decisions, disciplined balance sheet management and a continued focus on reducing concentration risk. While these steps created near-term expense pressure, they significantly improve the underlying risk profile of the company and enhance our flexibility going forward. As we enter the new year, our focus shifts from remediation to execution, we are operating with a stronger foundation, improved asset quality and a more disciplined funding approach. This will position us to drive more consistent earnings and improve returns. I'll now turn the call over to Eric to walk through the quarter's results in more detail. Eric Newell: We reported net income of $7.6 million or $0.25 per diluted share compared with a $67.5 million loss or $2.22 per share last quarter. Let's start with asset quality. The fourth quarter results reflected the trade-offs we discussed on our prior call. Credit stability supported book value, while planned held for sale loan dispositions created some pressure on fourth quarter earnings. In the quarter, $14.7 million was recognized relating to higher expenses associated with the disposition of held for sale loans as well as mark-to-market expenses. At December 31, we had $90.7 million of loans held for sale, a decline of $45.9 million from the prior period, which includes $8.4 million of mark-to-market adjustments due to updated valuations informed by proposed or under contract disposition activities. We recognized $1.1 million of loss on the $77.9 million of loans sold during the quarter. At December 31, 2025, nonperforming loans declined to $106.8 million, down $12 million from the prior quarter and represented 1.47% of total loans. Slide 23 of our earnings deck shows the walk between linked quarters for inflows and outflows of nonaccrual loans. Total nonperforming assets declined $24 million to $108.9 million, representing 1.04% of total assets as compared to 1.23% in the prior quarter. The land loan transferred to OREO in the third quarter was sold during the fourth quarter with a gain of $900,000. Special mention and substandard loans totaled $783.4 million at year-end declining $175.1 million from the prior quarter. This represents 10.6% of total loans at year-end, declining from 13.1% at September 30. Provision for credit losses declined $97.7 million in the fourth quarter and totaled $15.5 million. Our allowance for credit losses ended the quarter at $159.6 million or 2.19% of total loans. Of that total, we have $73 million of reserves associated with income-producing office loans representing 13% of the $577.1 million outstanding at year-end. Net charge-offs declined $128.6 million from the third quarter and totaled $12.3 million in the most recent quarter. Loans 30 to 89 days past due totaled $50 million at December 31, up $20.8 million from last quarter primarily due to a participation loan, which was in the process of being renewed and was booked yesterday for closure. Office loans totaled $577.1 million, and of that total, $469.2 million are pass rated. Loans that exceed $5 million in our pass rated are undergoing quarterly reviews. Smaller office loans have stronger credit enhancements than the larger office loans that we've worked through cycle to date. The fourth quarter saw dramatic reductions in our CRE and ADC concentrations as expected payoffs, resolutions and the completion of construction projects drove down our CRE concentration ratio, which is a measure of CRE loans to total risk-based capital and reserves. That ratio declined to 322% and the ADC concentration ratio, which measures acquisitions, development and construction loans over the same denominator declined to 88% for the company as of year-end. From an earnings standpoint, pre-provision net revenue was $20.7 million. Included in that is $8.4 million in held for sale, mark-to-market expenses and the $6.3 million in disposition costs related to loan sales. Net interest income grew $144,000 to $68.3 million as the decline in deposit and borrowing costs outpaced a modest reduction in income on earning assets. NIM declined 5 basis points to 2.38% primarily driven by a mix shift between loans and cash partially offset by improved time deposit costs from reduced brokered time deposit usage. Noninterest income totaled $12.2 million compared to $2.5 million last quarter. The increase was primarily due to losses that did not reoccur in the fourth quarter and other income as a result of FDIC investments and the gain on the sale of OREO. Noninterest expense increased $17.9 million to $59.8 million due to the $6.3 million in costs associated with the disposition of certain held-for-sale loans, and $8.4 million in valuation adjustments on proposed transactions for the remaining held-for-sale loan portfolio. Our capital remains strong. Tangible common equity to tangible assets is 10.87% Tier 1 leverage ratio is 10.17% and CET1 is 13.83%. Tangible book value per share increased $0.59 to $37.59 as earnings added to capital. Continued deposit growth and a rising proportion of insured balances underscore the resilience of our funding base. With $4.7 billion in available liquidity, we maintained 2x coverage of uninsured deposits. During 2025, our teams have reduced brokered deposits by $602 million while increasing core deposits, $692 million, and we expect continued progress in 2026. The improvement reflects coordinated efforts among our C&I teams, branch network and digital platform. Finally, turning to 2026. We are optimistic about our ability to expand pre-provision net revenue, as outlined in our updated 2026 forecast on Slide 11 of our earnings deck. While we expect average deposits, loans and earning assets to decline on a year-over-year basis, this reflects deliberate balance sheet repositioning rather than operating pressure and reflects prioritization of shareholder returns and profitability. Loan balances entering 2026 begin from a lower level due to paydowns and resolutions that occurred throughout 2025, and the investment portfolio runoff in 2025 further reduces average earning assets. On the funding side, lower average deposits in 2026 primarily reflect the continued runoff of brokered funding as we prioritize building core deposit relationships. This shift in funding mix is expected to improve profitability. As a result, we're forecasting a meaningful expansion in net interest margin with NIM expected to range between 2.6% and 2.8% for the year. This improvement is driven largely by a reduction in higher-cost brokered deposits. Noninterest income is expected to increase by approximately 15% to 25% while noninterest expense is expected to decline between flat and 4%. Importantly, this reflects normalization following elevated expense levels in the fourth quarter of 2025, which was previously discussed and we do not expect to reoccur. Taken together, these trends support our confidence in expanding pre-provision net revenue in 2026 despite a smaller average balance sheet. I'll turn it back over to Susan for final comments ahead of the Q&A. Susan Riel: The fourth quarter tangibly demonstrates the progress we've made at Eagle Bank executing on our strategic plan. The actions we took throughout 2025 to address credit risk, reduce loan concentrations and improved balance sheet quality are now clearly reflected in our results. We exited the year with an improved risk profile, higher core deposits allowing for reduced use of wholesale funding and improved visibility into the sustainability and trend of our earnings. As we look ahead, our focus will transition from foundational initiatives to consistent performance. While we are not yet where we want to be in terms of bottom line performance, we're optimistic about the franchises direction. Before we conclude, I want to thank our employees for their continued dedication and professionalism. Their commitment has been instrumental in navigating a challenging period and positioning the company for the future. With that, we'll be happy to take any questions. Operator: [Operator Instructions] And our first question comes from Justin Crowley of Piper Sandler. Justin Crowley: Good morning, everyone. I wanted to start off on the asset dispositions, of course. Really encouraging progress, and it's obviously great to see not whole lot in additional loss through the sales that got done. I was wondering if you could talk just a little more on what's left in held for sale in terms of the expected timing. I know you mentioned some agreements in place, and you took the additional mark through the expense line. So maybe just the confidence level in the current carrying value, what's left there? Eric Newell: Justin, this is Eric. At year-end, we had $90.7 million of loans held for sale and they are carried at the lower of cost or fair value. We did have that mark that ran through noninterest expense at year-end to take into consideration fair value, which is informed by under contract or negotiating to a contract on disposition of approximately 2/3 of that portfolio. Right now, 2/3 of that portfolio is scheduled for resolution and disposition in the first quarter, but it's not done until it's done. So it could bleed into the second quarter. Justin Crowley: Okay. Got it. And then, of course, you have the wide-ranging third-party review, but what's the thinking or expectation on the potential, if there is any for any further moves into held for sale. Could this be it? Or is there a possibility that as we get through the year and credits with maturities a bit further out, perhaps get a closer look that you could see additional inflow into that bucket. What's kind of the thought there? Eric Newell: And looking at the total criticized and classified portfolio, which is $783 million at year-end, down from $960 million. There certainly could be situations, Justin, where we might decide that selling the loan is the best strategy to maximize value to the shareholders. So I don't want to say that we're done there. There certainly could be situations that arise, I don't suspect you're going to see that at the pace of what you saw in 2025. And it's a case-by-case assessment. Justin Crowley: Got it. And then I guess outside of office and maybe one for you, Ryan, but it's certainly good to see some what I thought was stabilization and actually some signs of improvement in multifamily. It looks like a handful of some of these larger watch-list loans, got some updated appraisals that show some breathing room. I was just wondering if you could talk a little bit about the trends you're seeing there. And at this point, we can maybe expect to see things continue to look better in that area? Ryan Riel: I think that we'll continue to be proactive in the problem on identification on -- and looking at the portfolio on a regular basis as we have been. So what's in there you've seen, to your point, Justin, there's been some migration positively and negatively in that criticized and classified population. Valuation, again, continues to be strong relative to the office market, where we saw significant losses, obviously, right? The multifamily market, the valuations have held up. Cap rates in our region are still sub-6% when compared to the national average of just over 6%. So where we feel good about that and where our exposure is we're monitoring the income performance. Some of these are in lease-up, recently delivered properties. So my prognostication is that you will continue to see stabilization and improvement within that multifamily portfolio. Justin Crowley: Okay. And then just for the total loan portfolio, just as far as where the reserves shook out this quarter with the movement a bit higher, including the increase in the office ACL. Just like bigger picture, how are you thinking about eventually seeing that number move lower and maybe using it to absorb just any further charge-offs without the provisioning to match it. Eric Newell: The office overlay or the portion of the ACL that's attributed to a performing office did increase, even though that's a qualitative aspect to the calculation, it's driven quantitatively by experience that we've incurred throughout the prior 12 months in office. And so when you quantitatively put that together, it's driving approximately 45% of reserves in our substandard loans about 50% of that in our special mention loans and 50% of that for launch. So when you put that all together, that's what comprises of the $73 million of reserves associated with the $577 million of performing office. So as we move forward and we have less loss content in our look back period, you'll see that ease off. Justin Crowley: Okay. So the idea would be lower from here if all goes according to plan as you see it today? Eric Newell: That is the way the calculation works. Justin Crowley: Okay. And then maybe just 1 last one. I know it's 1 quarter here and there's still some work to do. But obviously, a lot of positive signs. And so when you think about capital planning over maybe the more medium term, how do you think about the levels you're at with maybe a clearer picture on loss content? And I don't know if it's a bit premature, but when do you think you could start entertaining a more offensive stance on capital management when you think about things like buybacks or the dividends. Again, I know it's kind of early days here, but just thinking a little bit more medium or long term. Eric Newell: We are going to continue to be prudent and use caution in terms of capital management. I would point to the criticized and classified loan level and where we're at. We need to continue to see continued migration down. So a favorable trend. The 1 quarter is not a trend. So we need to see 2 or 3 more quarters. And we also need to see a more absolute level that's acceptable before management would consider talking further to our Board about additional changes in our capital management approach. By the way, Justin, you asked how we would characterize the level of capital, and I would say it's strong. Operator: And our next question comes from David Chiaverini of Jefferies. David Chiaverini: So I just wanted to follow up on credit quality. Clearly, a good update here. Can you talk about your confidence level that credit issues are behind you. Are you seeing any signs of lingering potential deterioration? Eric Newell: David, I mean again, I'd point back to the criticized, classified portfolio of $783 million. There's a lot of prudent credit management process that we're putting around that. Finance, credit, special assets teams are looking at that portfolio. We also spend time looking at the watch portfolio to understand any trends that could cause negative migration into the criticized classified so given the level of review on this portfolio every quarter as well as pass rated multifamily and office loans that are greater than $5 million. They're undergoing a quarterly review as well. We're not seeing any developing new trends based on what we see today. And what we know today. Susan Riel: I would just simply add to that. We have given problem loans and just loans in general, high attention that we're constantly looking at them. That will not change. We will not slow down on that. So we'll continue to focus on reviewing and monitoring our loans. Eric Newell: Our expectation, David, will be that the criticized classified loan portfolio continues to decline throughout the year. David Chiaverini: Great. And in terms of the dispositions, you mentioned 2/3 scheduled for the first quarter. It sounds like the level of buyer interest is high. Can you talk about what you're seeing in the secondary market? Are these private credit funds, are they other banks? And is that a fair characterization that the buyer interest is high for these loans? Ryan Riel: So David, this is Ryan Riel. The buyers are a range of types of folks. The 2/3 that you're referencing that Eric referenced in his comments, there's a range in that population, too. There's investors that are supporting local developers to convert to an alternate use, some of the historic office properties. There's existing ownership that is looking at their situation and evaluating the go-forward plan and in some cases, being willing to come in and purchase their own debt. In each and every case, we've said this for a number of quarters now. We are looking at every possible outcome in every possible path in determining on a case-by-case basis what the best path forward is to optimize the results for the bank and its shareholders. That continues to be the game plan in each and every case. David Chiaverini: Great. And then on the loan loss provision on a go-forward basis, Eric, you mentioned back in October that you're hopeful to get to a normalized level in early 2026, how should we think about it from here? Are we kind of at that point of getting to a normalized level? And how would you kind of define that normalized level? Are we talking kind of where we were in the second, third and fourth quarter of 2024 kind of in that $10 million range. Any comments there? Eric Newell: Yes, David, looking at the criticized classified portfolio level where it's at, I think that, that would inform a provision expense level that's a little bit greater than what you were indicating from 2024, just given that portfolio was smaller at that point. But we're not -- I'm going to speak to obvious here, but we're not going to see provision like levels that we saw in 2025. But I think that there could be some provisioning expenses that are more heightened than 2024, given the level of where criticized and classified, but it's also important to say what I said last quarter, that capital will continue to -- or credit is not going to cause further degradation of book value. Operator: And our next question comes from Catherine Mealor of Keefe, Bruyette, & Woods. Catherine Mealor: One follow-up on credit. Just 1 follow-up on the credit on the special mention. It was great to see that decline. I know it looked like you had maybe an upgrade from substandard and then a new credit, but then you had some come off. And so I was just curious if you could give us a bit more discussion on the credits that were upgraded or came out of special mention, just some stories or color around what those credits were, what caused them to move out and just so we can kind of understand some of the puts and takes within that category. Ryan Riel: Sure. So Catherine, this is Ryan. Big categories that help the positive migration there are improved performance at the property level. And then in certain cases, there are structural enhancements to that loan that may have been under considered, if you will, in the past with updated information and proof of the willingness and capability of those sponsors to stand behind their credits, we made some of those upgrade decisions as well. Catherine Mealor: Got it. Great. And then I guess I'm going to maybe drag in on the provisioning piece. I think that's -- that's the biggest question we all have is where do we put our provision expense for '26. And I guess that's the magic number. But as I look at the reserve, I mean, it should be fair that we should see the -- I guess the question is how much of current expectations of losses you think are in the reserve? And is it fair as you continue to work through this level of classified, which to your point, Eric, is still very high, right, still 10%. We still have a lot to work through, but your reserve is also very high over 2%. So as you kind of keep working through that, at what point should we see the reserves start to decline? And where do you -- where is the fair number or maybe a range of where that kind of trends to towards the end of the year? Eric Newell: Given our 1 quarter of improvement. I think it's prudent for management to be cautious about where we think the provision expense and telling you all what we think provision expenses, we certainly have our views on it given what we've worked on. And I can tell you that we do expect the ACL coverage to decline this year. We do expect that there is potentially lost content in that $783 million, some of which we've identified and have reserved for through specific reserves, so it is sitting in ACL. But we also have some unidentified migration, portfolio migration that are things that we don't know about yet. So I guess, Catherine, I probably I'm going to punt a little bit and try not to answer your questions with specificity until I think next quarter, if we have another continued trend, then I think we could be a little more focused in answering that question for you. Catherine Mealor: Yes, that makes sense. That makes sense. Fair enough. And then maybe my last question is just it was nice to see the inflows of new credits flow dramatically this quarter, which we would have expected just given the portfolio review we saw last quarter. But just there were a couple of -- like you had a couple of inflows, new credits that kind of came into special mention, for example, that $43 million multifamily credit. So for the new credits that came in this quarter, what happened this quarter that your loan review did not catch? And is there anything within that, that we should kind of be thinking about that would be a risk of new migration in the next couple of quarters? Eric Newell: Yes. So with specificity on that $43 million loan, Catherine, that's a newly built multifamily property in a particular submarket of Washington, D.C. that's an inflow or influx of supply. So while this property was nearing stabilization, there is a sort of hiccup in that stabilization process because of that inflow of supply, reintroducing concessions in that submarket. Reacting to that, we worked with the sponsor to put in place a go-forward plan that has cash flow sweeps and other mechanisms in it to protect the bank. The reality is that the supply -- the new supply under construction in our region is very, very small. It's less than half of what it's been historically. So with the passage of time, those units will be absorbed, those concessions will burn off and the stabilization will occur and we'll have enhanced credit structure on that particular loan through that stabilization period. So that's what happened in that quarter was just that, right? The information came through on the pickup in supply and the plateauing frankly, of that stabilization process. Operator: Our next question comes from James Abbott of Diligence Capital Management. James Abbott: I wanted to see if we could get some additional color on the C&I loan growth, it was about $120 million. That's about a 40% annualized rate. Could you provide a little context as to whether the loans are coming through SNCs? Are they bilaterals, maybe some yields, that kind of thing, just so that we can understand the color around those -- that type of production? And secondly, is it sustainable? Eric Newell: So the growth of our C&I platform is a sustainable expectation that we should all have. The growth levels seen in the fourth quarter at that enhanced growth level is probably not a sustainable figure. Speaking to the diversity question, James, the portfolio -- the C&I portfolio does not have great concentration really in any industry. There are some syndications and participations in that number. That is not an ongoing strategy that we're going to employ. Evelyn and her team have done an excellent job of bringing in relationships with debt and deposit balances on the other side of the balance sheet. So that's where you see it, and the numbers are reflective of that. You see actually greater in the fourth quarter deposit growth in the C&I book than you do loan growth. James Abbott: Sorry, Ryan, could you just give us some sort of sense for maybe the typical size of those deals that were coming in during the quarter? Are they typically $5 million and $10 million or more $20 million and $30 million sort of relationships? Ryan Riel: There's a range of it. I'd say the more on the higher end of the range that you just cited, probably 15 to 30. That's an off-the-cuff number. I'm not looking at the portfolio to justify it. But I'd say probably on average, it's in that $15 million to $30 million range. James Abbott: Okay. And then also I had a question probably for Eric. Could you maybe give us some context for the cash level that you're holding and then the broker deposit level? And I suspect it's probably a negative spread at this point and you're probably working to address that. But could you give us a sense for what the broker deposit level is today? And then how much you anticipate bringing that down? Can you use cash to pay that down, et cetera? Eric Newell: Yes. A couple of things. There was -- when you look at average cash in the fourth quarter, it was definitely higher than normal, and it was in anticipation of paying down a material level of broker deposits that were coming up for stated maturity. So we are holding that cash in anticipation of paying down those broker deposits. We have, on an average basis, we do have a third-party payment processor that does hold some deposits with us in the middle of the month that can cause the averages to increase at a high level, but it generally isn't a period and it doesn't impact period-end cash that much. In terms of brokered deposits at year-end, we have, excluding 2-way deposits, we have $1.56 billion with a weighted rate of 4%. And we're going to continue to work that down through 2026. James Abbott: And Eric, are there maturity dates on those that you could give us some sense for? Is it pretty spread out throughout the year? Is it -- and how much do you think you can attack? Do you think you can get rid of half of that in 2026? Or just any sort of context on that? Eric Newell: Yes. Of the $1.56 billion in brokered, $715 million of that is a brokered CD. So there's -- I would say it's probably spread throughout the year. And our goal is to reduce a lot of those CDs down to close to 0. Operator: And our next question comes from Christopher Marinac of Janney Research. Christopher Marinac: I think that Ryan addressed a little bit of this question in the last few callers, but I was curious about sort of the surprises on the -- for past loans going bad in the future. It would seem that you have smaller loans, if that indeed is the case. And I just want to sort of talk through sort of where would there be larger loans that could surprise us that are passed now, but that could surprise if they were downgraded in the future? Ryan Riel: The top 25 list shows where they are, shows the type of exposure there is. Again, these -- to Eric's earlier point, multifamily loans that are pass rated in size greater than $5 million, we're looking at on a quarterly basis. Office properties are there. There's not an asset -- there's some slight headwinds in the multifamily space, which is what we've talked about, again, with the back end valuation issue not there relative to what we've seen in office. The surprises coming into the substandard category, there was 1 particular land loan that we found out, had some characteristics in it that came to light during the last quarter, and they were material and impactful. That's still -- we're working through that situation and coming up with the determination of where it is. The other transaction that came in the mixed-use residential into the substandard category. That is a multifamily construction loan that we're a participant and a 50% participant in that had some challenges relative to the agency takeout that is committed to on that. The workout plan has already been addressed. And in fact, we anticipate a full payoff of that by the end of this month. So that's a material thing. It's also notable that 2 of the top 11 loans that are listed in the top 25 loan list in multifamily have been refinanced, and the aggregate balance there is about $130 million. So it's -- there's good and positive migration from a balance perspective, and we don't anticipate any fundamental issues like we've seen in office and therefore, the surprises should be limited with all the risk mitigation structures and processes we've put in place. Eric Newell: And just to build off what Ryan is saying. The theme here is that the proactive credit risk management characteristic or the behaviors that the management team with credit and align have deployed this year to reduce the amount of surprises that we may have seen in earlier years and periods and be very thoughtful about and having a high level of attention in identifying the primary source of repayment and if there's weaknesses or issues there, we will appropriately internal or risk rate that loan so we can monitor it and it allows us to intervene much earlier in the process which will maximize our options to maximize shareholder value in the event that there is some disposition that needs to occur. Christopher Marinac: Great. I appreciate the additional color. And then, Eric, I know that the guide for '26 is to have shrinkage of the balance sheet. And I'm just curious if there's a point where you may get to where it's stable and grow slightly before year-end? Or do you think you'll be shrinking for the entire calendar year? Eric Newell: I actually don't believe we're going to shrink for the entire calendar year. I suspect we'll see CRE that continue to decline in the first half of the year, and then there will be some stabilization in the back half of the year, which will then support growth, period end growth in the second half of 2026. Christopher Marinac: Great. And the last question on -- sorry, go ahead. Eric Newell: I was just going to add. The period end is a little different given that we're making money on the averages, and we're comparing the average -- the period end of 2026 compared to the average of last year. So that's why you're seeing that forecast in terms of declines on average earning assets. Christopher Marinac: Got it. Great. And then just a last question. I know the C&I balances grew quarter-on-quarter. Are you still hiring producers in that part of the operation? Susan Riel: We absolutely are still looking for strong producers in that area. Evelyn has her hand out there constantly reviewing and there are some candidates that we are exploring. Operator: I'm showing no further questions at this time. I'd like to turn it back to Susan Riel, President and CEO, for closing remarks. Susan Riel: Thank you very much for your participation and questions during the call, and we look forward to seeing you again next quarter. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

69天前Insight Analytics约5分钟阅读

INVE-B.ST 2025 Q4 财报电话会议

Jacob Lund: Good morning, and welcome to Investor's Q4 and year-end results for 2025. I'm joined here in the studio in Stockholm by our CFO, Jenny Ashman Haquinius; and our CEO, Christian Cederholm and both will soon be giving their presentations. After that, as usual, we'll be opening up for questions, both on the call via our operator and online. And with that, over to you, Christian. Christian Cederholm: Thank you, Jacob, and hello, everyone. As we look back on the past year, it's clear that 2025 was anything but straightforward. The world remains impacted by significant geopolitical uncertainty. Now despite these headwinds, the global economy delivered decent growth. And in this environment, our companies are doing a good job balancing profitable growth here and now, including focus on efficiency and cost out whilst continuously investing to future-proof their businesses. Let's take a closer look at how we performed over the last year. So 2025 turned out a strong year for Investor. Adjusted net asset value grew by 14%, and our TSR, total shareholder return, was 15%. Listed companies total return amounted to 22%, and we strengthened our ownership in Ericsson and Atlas Copco for a total investment of about SEK 2.3 billion. Patricia Industries total return was minus 9% with considerable headwind from the weaker U.S. dollar. Operationally, it was a good year in total for the major subsidiaries. And in addition to organic growth of 4%, the companies made add-on acquisitions for a total of SEK 24 billion, of which Patricia funded about SEK 16 billion with the rest funded by the portfolio companies themselves. The biggest one by far, of course, being the acquisition of Nova Biomedical. Investments in EQT generated a total return of 15%. And here, we also made our first co-investment, Fortnox, alongside EQT X, exploring another way to create value together with EQT. Lastly, supported by a strong balance sheet and cash flow generation, Investor's Board of Directors proposes a dividend of SEK 5.60 per share for fiscal year 2025. This represents an increase of SEK 0.40 or 8% over last year. At the end of the year, adjusted net asset value stood at SEK 1,087 billion. Now let me briefly go through the 3 business areas. Starting with Listed that represents about 70% of our assets. Listed Companies generated a total return of 6% in the fourth quarter. Investor received proceeds of close to SEK 900 million or SEB shares divested in Q3, so the last quarter to maintain our ownership level as the bank continued to buy back shares. Portfolio companies continued activities focused on future-proofing their businesses. So as an example, Sobi announced its acquisition of Arthrosi, expanding its portfolio within gout with a promising Phase III drug. Wärtsilä announced the divestment of its gas solution business, further focusing the Wärtsilä portfolio. Now over to Patricia Industries, which represents about 20% of our portfolio. Total return in the fourth quarter was 1%, driven by earnings growth and multiple expansion, offset by significant negative currency impact. While reported sales declined by 5%, our major subsidiaries grew sales 5% organically. Adjusted EBITDA declined by 6%, heavily impacted by the same negative currency effects I mentioned and with some costs relating to restructuring initiatives in a couple of the companies. We saw continued high activity in Patricia. For example, Laborie announced the acquisition of the JADA system, expanding its offering within obstetrics for a potential maximum value of USD 465 million. Sarnova completed 2 add-on acquisitions for a total of $165 million, strengthening Sarnova's software offering for revenue cycle management. Also, we contributed SEK 200 million to Atlas Antibodies to strengthen the balance sheet after a period of weak demand and performance. Mölnlycke and BraunAbility distributed a total of SEK 4.1 billion to Patricia Industries in the fourth quarter. All the major subsidiaries and our 40% in 3 Scandinavia in aggregate, including the combined Nova Biomedical from Q3 and onwards, reported last 12-month sales stood at SEK 68.4 billion, and EBITDA was SEK 17.2 billion. We should note here that this is in Swedish krona, so of course, rather sensitive to FX. And finally then, investments in EQT, our third business area, which represents about 10% of the portfolio. In Q4, total return for investments in EQT was 8%, driven by strong share price development in EQT AB. Net cash flow to Investor was SEK 1.2 billion with approximately SEK 0.9 billion net inflow from EQT funds, driven by continued healthy exit activity in the funds. During the quarter, we also completed the very last part of our SEK 4.5 billion investment in Fortnox. So it was a strong quarter and a strong year. But as always, our focus is on the future. I'm confident in our strong platform. Investor has a clear purpose and a focused strategy, a portfolio of high-quality companies, an ownership and governance model that is well proven and great people, both at Investor and in our network and in the companies. And we have financial flexibility with low leverage and strong underlying cash flow. Our strategy towards 2030 is clearly defined and well aligned with our purpose with the ultimate target, of course, of generating an attractive shareholder return. Our objectives are to grow net asset value, to pay a steadily rising dividend and to operate efficiently and sustainably. We will remain focused on our 3 strategic pillars: Performance, portfolio and people. And let me say a few words about each of these. Performance first. While it varies between industry segments and geographies, overall demand remains lukewarm. In addition, the U.S. dollar is down significantly and tariffs need to be managed and the geopolitical situation remain profoundly unpredictable. Against this backdrop, companies need to focus on efficiency here and now to drive profitable growth. At the same time, focus on future-proofing initiatives is critical to ensure long-term competitiveness. This includes, for example, R&D, other investments for innovation, expansion of sales, including to new geographies and investments to leverage the potential of AI and other new technologies. So moving to portfolio then. Based on our financial strength and strong cash flow generation, we continue to seek attractive investment opportunities across all 3 business areas. This includes additional investments in our listed companies, add-on investments and potential new platform companies within Patricia Industries and continued investments, of course, in and together with EQT. Ultimately, the allocation will depend on where we find the best opportunities. And finally, people. Given the rapid transition pace in all industries, we have to ensure that the right people are driving our companies. With 24 portfolio companies and around 200 board seats across the portfolio, talent sourcing and succession planning is a top priority for us. So near-term priorities are clear, and we have a lot of work cut out for ourselves. With that, I'd like to leave the word to Jenny to talk more about our financials. Please, Jenny. Jenny Haquinius: Thank you, Christian. Yes, so let me take you through the financials for the quarter. So in Q4 2025, adjusted net asset value was SEK 1,087 billion, and this implies an increase of 6% compared to Q3. For the quarter, all business areas contributed positively. Investments in EQT increased with 8%, Listed Companies with 6% and Patricia Industries with 1%. So this implies a total return of 6% for the quarter and 14% for the full year. And now double-clicking on each of the business areas, and I will start with Listed Companies. So within Listed Companies, share price performance was mixed, but with positive share price development in almost all companies, particularly strong quarter for the Electrolux share, followed by AstraZeneca, Wärtsilä, Ericsson and Sobi. Saab and Husqvarna, however, had a tougher quarter looking at total return. Total return for the Listed Companies portfolio was 6% and largely in line with SIXRX. And as for absolute contribution, it paints a similar picture, but with AstraZeneca and Atlas Copco in the top due to the weight in our portfolio. All in all, a solid quarter for the Listed Companies portfolio. And then moving on to Patricia Industries. For the quarter, the Patricia Industries portfolio, so the major subsidiaries, grew 5% organically, while the adjusted EBITA declined by 6%. For the full year, organic growth was 4% and the adjusted EBITA declined by 1%. And as a reminder, we are restrictive when it comes to EBITA adjustments. So in the 6% drop in EBITA for the quarter, we have only adjusted for transaction costs related to M&A and one-off costs related to CEO transitions. Other than that, and of course, then not adjusted for and hence, still weighing on the adjusted EBITA margin, we have negative impact from FX, so the stronger SEK and also tariffs as well as restructuring costs to unlock efficiencies in several of the companies, and we deem this as part of ongoing operations. And now double-clicking on performance across the companies in Patricia Industries. And first to highlight a few positives. We saw a second strong quarter for BraunAbility, in part explained by a relatively weak comparison quarter, but also due to strong demand. Profitability improved, but coming from a depressed level in Q4 2024. Nova Biomedical had a solid quarter in terms of growth and profitability. Growth was partly helped by recovery following the cyber incident in Q3. Integration is progressing according to plan, and this includes initiatives such as merging the organizations and implementing a common ERP system. And this, as we mentioned last quarter, may have an impact on sales and earnings near term. We also do know that Q1 last year was a particularly strong quarter for the acquired part of the business. Laborie continued to see solid growth, driven by a large extent the Optilume urethral strictures product. Reported profitability for Laborie was down as it includes USD 11 million in cost for the JADA acquisition and the CEO transition. If we were to adjust for this, profitability was still down, but only slightly on the back of commercial investments. Permobil and Piab had a more challenging quarter. Permobil is experiencing muted growth, and that's primarily explained by negative impact from the voluntary product recall of the Power Assist device announced in Q3. But positive to see good cost containment and a slight increase in EBITA margin, and this is despite SEK 32 million in restructuring costs. Piab had a quarter with negative organic growth, and that's on the back of weaker customer demand, particularly in the semiconductor market. Generally, Piab's end markets have been more choppy following the introduction of tariffs and increased geopolitical disruption. Lower sales impacts margins together with negative FX and tariffs as well as SEK 37 million in restructuring costs to drive efficiencies. And finally, on to Atlas Antibodies, we contributed SEK 200 million to strengthen the balance sheet. And this is to give room to the relatively new management to execute on the plan. And we do see that roughly 70% of the business is recovering, but we still see challenges in terms of soft market and competition for the evitria part of the business. And over to Mölnlycke. So Mölnlycke had a solid quarter with 3% organic growth, and this was primarily driven by Wound Care. So Wound Care grew 5% organically and Gloves 3% organically, and this was somewhat offset by a contracting ORS. On a general basis, we see continued good momentum in U.S. and China, while softer markets in Europe and the Middle East. In Europe, as mentioned before, there are pressures on health care budgets and that's specifically in Germany and France. And in the Middle East, we see customers with relatively high inventory levels. Profitability for Mölnlycke improved, and this is despite negative impact from FX and tariffs, and this is driven by positive product mix, but also lower cost on the back of continuous work with efficiency improvements. And Mölnlycke distributed EUR 200 million to Patricia Industries in Q4. We saw a 1% increase in estimated market values compared to Q3, so from SEK 223 billion to SEK 225 million. And this increase was explained by earnings growth in the portfolio companies as well as cash flow generation and, to a lesser extent, also expansion in valuation multiples. However, the increase was essentially offset by a negative impact from currency. And looking at value development across the companies, we can say that the main contributors for Q4 were Nova Biomedical and Laborie, while Sarnova and Piab was a drag on total value. For Sarnova, mainly due to multiples and for Piab, mainly lower earnings. Also worth highlighting is the distribution, so roughly SEK 2 billion from Mölnlycke and BraunAbility, respectively as well as the already mentioned equity contribution to Atlas Antibodies of SEK 200 million to strengthen the balance sheet. And now moving on to investments in EQT. So total value change was 8% in the quarter, and that's primarily driven by EQT AB, which was up 14%. Fund investments were essentially flat. And as a reminder, we report EQT fund investments with 1 quarter lag. So the 0% is based on EQT's Q3 report. On the right-hand side, we illustrate the net cash flow from EQT to Investor, which was roughly SEK 1 billion in the quarter, and this is driven by exit proceeds as well as dividend from EQT AB. And here, we have an illustration of the net cash flow from investments in EQT over time. While it's quite lumpy on a quarterly basis, over the past 10 years, we've received a net cash inflow of SEK 1.6 billion on average per year. And the LTM net cash flow is a negative SEK 2.4 billion. However, this includes SEK 800 million in acquisition for EQT AB shares and also SEK 4.5 billion in investment in Fortnox. If we were to adjust for this, net cash flow on an LTM basis is a positive SEK 3 billion. Our balance sheet remains strong. Our leverage as of Q4 is 2.1%. So it remains in the lower end of our policy range despite significant investments. And we closed the year with SEK 27 billion in cash at hand. All of our 3 business areas generate cash flow to support investments and a steadily rising dividend to shareholders. And as you know, from Listed Companies, we receive ordinary dividends as well as extraordinary dividend. In Patricia Industries, the portfolio companies generate cash flow, which can be reinvested in the companies or paid in distribution. And for investments in EQT, we have an ownership in EQT AB, which yields an annual dividend as well as fund investments where cash flow is, by definition, lumpy because it's dependent on drawdowns and exits, but it remains a strong contributor to cash flow over time. Since 2015, we have received total funds from all of these 3 business areas of SEK 216 billion, and note here that EQT is net cash flow in the pie chart to the left. The use of proceeds is illustrated on the right of more than 50% has been distributed to shareholders, roughly 30% has been reinvested in Patricia Industries and north of 10% in Listed Companies. So this platform with 3 strong business areas provides a broad-based cash flow that supports continued growth and distributions. The incoming funds provide strong investment capacity and have been deployed across all of our 3 business areas. 2025 was a record year in terms of investments, and this has been executed on while maintaining a strong balance sheet going into 2026. While sustaining this high level of investment activity, as mentioned, more than 50% of incoming funds have been distributed to our shareholders. We have continuously delivered on our commitment to pay a steadily rising dividend, and we continue to do so also in 2025. So the dividend proposal for 2025, as Christian has already mentioned, is SEK 5.6 per share, which is an increase of SEK 0.4 per share compared to 2024. And this applies an average annual growth of 8% over the last 10 years. And then on to my final slide. So looking at the longer-term perspective, the performance of the Investor ABB share truly illustrates the strength and the resilience of our portfolio and strategy. So with that, I will leave the word back to Jacob. Jacob Lund: Thank you, Jenny. Thank you, Christian as well. We are now ready to take your questions, and we will start with the questions through our operator, Sharon. Sharon, please. Operator: [Operator Instructions] And your first phone question comes from the line of Linus Sigurdson from DNB Carnegie. Linus Sigurdson: Starting off with a question on Mölnlycke and Mölnlycke growth. Is there any visibility on these France and Germany headwinds subsiding? Or should we expect this effect to persist in the foreseeable future? Jenny Haquinius: I can start. Thank you for the question, Linus. It's quite hard to say. We are seeing muted growth across many sectors at the moment, given what we're seeing globally. And specifically for Mölnlycke in Europe, there's weakness in France and Germany, and that is because there's a lot of pressure on health care budgets. But it's really hard to say if that would look any different in the next quarter, but really good to see continued momentum in the U.S. and China. Christian Cederholm: And maybe just to add, I think it's fair to say that this started somewhere during the first half of last year. But to Jenny's point, we don't really have visibility on the future development. Linus Sigurdson: That's fair. And then on the margin in Mölnlycke, is it fair to assume that the sort of tariff and currency impacts on profitability there are in line with previous quarters? And I mean, with 30-plus EBITDA margin, have we sort of already reached the potential for the efficiency program? Jenny Haquinius: Well, I can start. I would say that for the companies impacted by the tariffs, on a general basis, they're doing a really good job to mitigate, but it's roughly 1 percentage point or so still impacting margins. In terms of FX for Mölnlycke for this quarter, it's roughly 3 to 4 percentage points in negative FX. And Mölnlycke is doing a really good job working with efficiencies and really demonstrated that in this quarter. Then, of course, that's ongoing work because it's a mix of travel restrictions, using less consultants and also finding more sustainable efficiencies. So I think that work will continue also through 2026. Linus Sigurdson: Okay. And then my final question is a more general one. When you talk about solid cash flow in the coming years and this ambition to accelerate investments, could we view this as a comment on, say, EQT exit markets and the potential for, for example, Nova Biomedical start generating dividends to investors after the integration? Christian Cederholm: Sorry, can you repeat the question? You were asking about our comment on accelerated investments and the cash flow, and then I didn't quite follow. Linus Sigurdson: Yes. I mean, implicit in that statement is accelerating cash flows to fund those investments. So just -- is there anything you can comment on in terms of where those cash flows will come from? Christian Cederholm: Okay. I can take a first crack. So thanks, and it's a good question. And really, the way we think about it is we look at the cash generation from the 3 business areas. And when it comes to Patricia and you were asking about Nova, the way we think about it there is that really the cash flow generated and the debt capacity generated in the subsidiaries is all a potential funding source for acquisition and/or distribution. And really, cash is sort of a corporate asset. So whether it's distributed or not is maybe not the key point, but rather that the underlying cash generation in these businesses is solid. Does that answer your question? Linus Sigurdson: Yes. Operator: And your next question comes from the line of Derek Laliberte from ABG Sundal Collier. Derek Laliberte: I wanted to ask on Mölnlycke. You say the prevention and post-op were strong product segments in the U.S. I was wondering if you could give some more insight on why these areas are performing so strongly now and which product areas perhaps aren't doing as well. Also, I'm wondering if the product mix is similar in Europe in terms of performance right now. Christian Cederholm: I can start on that. I think the main difference we see is relating to the different geographies, as Jenny mentioned. And when it comes to product mix and channel mix, maybe the one thing to say there is that in the U.S., we're more heavily leaning on acute and hospital, while in Europe, including in France, for example, we have more towards post-acute and even some home care. Jenny Haquinius: And I could also add to that maybe that the Prevention segment is larger in the U.S. because of the reimbursement structure. So there's a clear market for that in the U.S., which is very different compared to Europe as well. Derek Laliberte: Okay. Great. That's very helpful. And on Laborie, what's the status on this BPH product, is it reasonable to expect any meaningful contributions from that during '26? Jenny Haquinius: Well, we don't really provide guidance, but what we can do say is that for this quarter, as we mentioned, the growth is a lot driven by the urethral strictures product. But as of now, we do have an active reimbursement in the U.S. for the BPH product. So we continue investing behind that launch. And of course, it will also depend on the reception in the market, et cetera. But the launch is very much ongoing, and we are very optimistic about the long-term runway with both of these products. Derek Laliberte: All right. And regarding Nova Biomedical, looking at the combined company now, I was wondering how the geographical split looks like, how high is the share of U.S. sales, for example? Christian Cederholm: We provided that in the last quarter. Let us come back to that. Derek Laliberte: Yes, absolutely. That's fair. And on Three Scandinavia, I was wondering generally here, the background, I think the growth looked pretty strong here in Q4 and actually over the year. What's driving this growth? Is it mainly continued market share gains or also some price increases involved here as a contributing factor? Christian Cederholm: Well, yes, we agree. Three has been continuing to gain market share, as you can also tell from the subscriber growth numbers. And then with regards to price, I mean, it remains a fiercely competitive market, of course, but at least they have been good at holding prices. That's what I would say on that. Derek Laliberte: Okay. Great. And finally, if I recall correctly, on Sarnova, you have this high inventory situation with distributors affecting market demand and so on. Is it fair to say that this has subsided now? Christian Cederholm: Thank you. Yes, this is primarily relating to the AED or cardiac response business. And really, what we see there is it is continuing to be a tough market. However, on a sequential basis, it has been more stable recently. And then, of course, inventory could be one part in that. Operator: We will now take the next question. And the question comes from the line of Jakob Hesslevik from SEB. Jacob Hesslevik: First, on demand navigation. So several businesses face weak demand and cautious demand in their segment. How do you differentiate between cyclical weakness that require patience versus structural challenges requiring strategic pivots? Christian Cederholm: I can start there. Well, so really, what we try to track, if I start there is, one, of course, total market development, but also we're benchmarking with a certain cadence so as to make sure that we understand whether we're gaining, holding or potentially losing market share. And there, I think it's fair to say that for the majority of the portfolio, we're confident that we're holding or increasing market share. And then the other part of your question was whether -- to what extent we see structural weaknesses in markets. And that's, of course, something we continuously evaluate. And generally, when it comes to investments, we're quite keen and that's one of our top criteria to make sure that we are in industries where we see, call it, GDP plus rather than GDP or GDP minus growth. And of course, sometimes that changes over time. And then we make sure we keep track of that. Jacob Hesslevik: Great. And then double-clicking on the currency exposure management. So FX headwinds significantly impacted Patricia Industries performance during this year. It should have affected your Listed portfolio as well given its large exposure towards exports. But beyond the operational efficiency improvements mentioned, what strategic actions are you considering in order to manage your FX exposure across the portfolio more efficiently, especially to hedge the Patricia portfolio that seems to be more sensitive to USD weakening while not having a professional treasury department helping out, which you can maybe found in most of your listed portfolio. Is this something you're looking into how you can help out Patricia more in managing their exposure? Christian Cederholm: Thank you for the question. Well, as you allude to, our main way of, let's say, balancing FX exposure is by way of operational hedging, i.e., to try to have the costs where we have the revenues and the income. Now despite that, we do have a significant earnings stream in U.S. dollar, thanks to our presence and strong market positions in the U.S. When it comes to sort of further hedging within the companies, we typically don't engage much in that. But rather, we want the FX effect to be seen immediately and then addressed and dealt with. So with a long-term perspective, the changes and the FX environment will be a reality and will hit. So we'd rather just see it upfront and then try to deal with it. The only additional hedging we do is we try to match our debt currency with what our underlying cash flow is per currency. So for example, if you have a company with a lot of earnings in U.S. dollars, it's appropriate to have some level of U.S. debt there as well. Jacob Hesslevik: Okay. And then just finally on Atlas Antibodies. Following the goodwill impairment and now equity contribution, what strategic options are you evaluating for Atlas Antibodies? I mean it's a holding from back in the days when it was called investor growth capital. It is still a very small investment and contribute limited to NAV. Why are you not looking into divesting this holding? Jenny Haquinius: Yes. Well, thank you for the question. First and foremost, so we are contributing the SEK 200 million, and that is to give management some room to execute on the plan. And we have a clear plan. I think we also mentioned in the presentation that roughly 70% of the business is doing well, while we have the 30% evitria business, which is struggling, and that's on the base of weaker market demand. But we have belief in management and also the plan to continue to build on Atlas Antibodies. So that's what we are focusing on here and now. I don't know if you want to add something. Christian Cederholm: No. As alluded to previously, I mean, you have 2 out of 3 business areas that are performing well. And the struggle we see is within evitria. Jacob Hesslevik: Yes. Fair enough. I'm just thinking about the time it takes versus the size of the company relative to the rest of your portfolio, maybe we can come back to Atlas in the future? Christian Cederholm: No, but I think the one thing to say there is maybe that, of course, with Atlas Antibodies as with the other companies, our ambition is to grow it bigger over time, for sure. Jacob Hesslevik: No, I agree. It should -- it's just it hasn't really grown over the past 15 years. It's not that much larger than it was when it came out of Investor Growth Capital. But it's clear. Thank you for the elaboration at least on the business performance in the name. That makes a lot of sense. Christian Cederholm: May I just, before we take the next question, come back to the question on the geographic split on the combined Nova Biomedical business. And then the numbers are roughly 60% North America and then the other 40% is roughly equally divided between Europe and rest of the world. Operator: [Operator Instructions] And your next question comes from the line of Johan Sjöberg from Kepler Cheuvreux. Johan Sjöberg: I hope you can hear me. My question is, if you start off with the Wound Care business and looking at the growth rates over the last year, it seems like you continue to be in the high single-digit growth area. And my question here, going forward here, I heard your comments on especially what's going on in Europe here. But do you see any change to that or any -- I mean, over the next, say, like 3 years, whatever, is that the sort of -- do you see any change to the market that would sort of change that picture, if you take some sort of a helicopter view on that one, please? Jenny Haquinius: Yes, I can start. And I think the short answer is, not really. So no clear change. I think looking at the full year, Wound Care specifically grew 7% organically and was 5% in the last quarter. And that is, as we've talked about before, in a market that's growing low to mid-single digit. So Mölnlycke has continued to take market share within Wound Care on the back of a strong product offering, very much focused on the customer. And we, of course, have the absolute aim to continue to do so by continuing to investing in innovation and also go-to-market. And then in addition to that, we also have new geographies. So we are investing in China, where we now have local production. And there we, of course, are seeing potential for higher growth. And then also the investments and the building presence in the post-acute channel, which is also an addition because Mölnlycke has historically had the strong position in acute, and that will also add potential avenues for higher growth. So we're not seeing anything differently now. But of course, in the more short-term perspective, we will always have markets that can be under pressure like we're seeing now in Europe. Johan Sjöberg: That's great. And also, Jenny, can I ask you on EQT funds, EQT reported today also and sort of you -- given a quarter lag on your -- the reported value of EQT funds. Should we expect any shift -- or put it like this, is there any material change if you were to use the Q4 numbers compared with the Q3 numbers? Jenny Haquinius: No, the short answer is that there will not be a material change, at least not for this quarter. Johan Sjöberg: No, good. Then also FX is all over the place right now or rather going in the wrong way, you can say, to some extent. How -- what -- could you sort of give some sort of indication? We know about the domicile of all the companies, but just to get a feeling for what is sort of the -- what is the most important currency to look at? Is it Euro-Dollar, is it the Euro-SEK or the U.S. dollar-SEK, just to see sort of the flows within the company, so to speak here, because it is a little bit big movements, to put it mildly. Christian Cederholm: I assume you're referring to the Patricia portfolio? Johan Sjöberg: Yes. Christian Cederholm: So this is what I would say. First of all, the #1 exposure is, of course, to the U.S. dollar, just given our big presence there with some U.S. domiciled companies, but also for a company like Mölnlycke and Permobil, I mean, the U.S., clearly the single biggest market for many companies. And then in Swedish krona, for most of the Swedish domiciled companies or the global, I should say, Swedish domicile companies, you would typically look at SEK exposure that is or krona exposure, where we sort of short the krona because we have headquarters here, R&D, et cetera. But of course, sales in Swedish krona is typically quite limited. And then thirdly, just to comment on the euro, I think from Mölnlycke, in particular, it's worth to highlight that we do have manufacturing for Wound Care, for example, in the U.S., in Maine. That said, we are still net exporting from Mikkeli in Finland and so from euro into U.S. dollar. So that's another one to keep track of. Johan Sjöberg: Okay. Cool. My last question, it's really about -- I mean, some of your portfolio companies are talking about also the hesitance among customers to place orders due to tariff uncertainty, geopolitical stuff and everything like that. I would like to hear your thoughts upon, especially when you're looking at -- or you are looking for a platform acquisition or if your companies are doing an add-on acquisition, do you see that being impacting, well, sellers and buyers also here in terms of hesitance. I know one thing is the sort of valuation, but that's always a thing you can say. But this geopolitical stuff here, is that something which is also sort of hindering your M&A ambitions in both platform and add-on? Christian Cederholm: Thanks for the question. I would not say that it's sort of the major obstacle. But of course, all the factors that you point to just add to the general sort of uncertainty in terms of deciding what's the underlying earnings, et cetera. That said, on a lot of things that we're looking at, for example, in the health care and life science market, tariffs, for example, is sort of not the biggest factor driving that. So it certainly adds to the unpredictability and uncertainty, but it's not a -- I would not call it out as a major obstacle for doing transactions as proven also in the recent year where we've done lots of add-on acquisitions, for example. Operator: Thank you. There are currently no further phone questions. I will now hand the call back to Jacob for webcast questions. Jacob Lund: Thank you very much, Sharon, and let's take the questions from the web. We can start with one from [ Tommy Falk ] around the dividend for 2025. Maybe add some flavor to that, Jenny. Jenny Haquinius: Yes. Well, thank you for the question. Well, I think, first of all, the dividend proposal is the Board's proposal to the AGM and for the AGM to decide. But maybe some flavor commenting on the SEK 0.40 increase. It seems balanced looking at our robust balance sheet and also view on cash flow generation and investments. And I think the SEK 0.40 is also really a testament to the fact that we have 3 business areas generating cash flow that really supports continued growth, also investments and delivering on our dividend policy to pay a steadily rising dividend. Jacob Lund: Next question, [indiscernible]. Please, how Investor AB is engaged in rearm Europe programs or other defense investments globally? Would you like to pick that up, Christian? Christian Cederholm: Yes, I'll take a crack at it. So Investor AB as such is not particularly involved in this. But of course, the build-out of the defense of Europe means business opportunities for Saab quite obviously, but also for other companies. And as an example, Ericsson do see a potential from the rebuilding of the European defense. Jacob Lund: Next question comes from Oskar Lindstrom, Danske. On Mölnlycke, are there opportunities to growth, more through acquisitions in the Wound Care or adjacent segments given weak main markets? That's the first one. And then on Patricia acquisitions, for some time now, you've been talking on and off about adding a new major leg in Patricia, mentioning industrial automation as a segment of interest. Is that still the case? What does the pipeline look like? And what is your thinking on valuations? Jenny Haquinius: Yes, I can start with Mölnlycke. Yes, well, add-ons is a priority for all of our subsidiaries and Mölnlycke included. So there is a lot of time spent to, of course, understand the different segments within Wound Care, but also adjacencies. And I think so far, there has not been any major available targets that have made sense because Mölnlycke has been able to grow so strongly organically. What Mölnlycke has done and is, of course, also continuing doing is add-ons that are smaller and more focused on innovation. So early-stage research, for example. And I think a recent example of that is a product for potential debridement of wounds, which would be a good addition to the Mölnlycke portfolio. But as for the other subsidiaries, it's also an important focus for Mölnlycke, of course. Christian Cederholm: And then the question on new platforms. And just to recap, our capital allocation priorities are quite clear in that we always put development and growth of our existing companies first. So that's our top priority. And as we've said, we are also open for and actively looking to add new platform companies, not the least in Patricia. And yes, industrial automation or industrial technology has been pointed to as one area that we're looking in, but we are also looking more broadly than that. And as for the pipeline, I think all I can say there is the work with identifying, scouting and potentially executing on acquisitions is a continuous process. And then when it comes to sort of closings and actual execution, that is inherently volatile and will remain so. Jacob Lund: Then the next one is from [indiscernible]. Will you organize another Capital Markets Day in 2026 for us, long-term shareholders? This is helpful to gauge the development of nonlisted companies. I think I can answer that briefly. It's been a while since we had the last Capital Markets update, and we'll be getting back with more information on that in due course. Next question and the final question I can see is from Jens [indiscernible]. From a strategic perspective on China, how do you assess the competitive risks and opportunities, the latter in terms of growth, investment and cooperation? Christian Cederholm: So as we comment on in the CEO statement in this report, we do see China as a very important region and for several reasons. I mean, one is that for many of our companies, both on the listed side and in Patricia, China is a large and growing market. So that's one thing, the market potential. But also, it's increasingly clear that competition in China or from China is evolving and evolving quite fast. So as we comment on, it's important for many of our companies to be in China, not just for the market opportunity, but also to be where and to compete where some of our toughest competitors are. And it's quite clear to me that comparing China today to a number of years ago, they're not just leading on low cost, but also on implementation of new technology, on fast innovation cycles, et cetera. So even more reasons to be there. Jacob Lund: Thank you very much. There are no further questions on the web. That means it's time to wrap up. Thanks to both of you. Our next scheduled call is the Q1 results for 2026 scheduled for April 21. And until then, thank you, and goodbye.

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OSBC 2025 Q4 财报电话会议

Operator: Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc.'s Fourth Quarter 2025 Earnings Call. On the call today are Jim Eccher, the company's Chairman, President and CEO; Brad Adams, the company's COO and CFO, Darin Campbell, the company's Head of National Specialty Lending; and Gary Collins, the Vice Chairman of our Board. I will start with a reminder that Old Second's comments today will contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. Management would ask you to refer to the company's SEC filings for a full discussion of the company's risk factors. The company does not undertake any duty to update such forward-looking statements. On today's call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in our earnings release, which is available on our website at oldsecond.com on the home page under the Investor Relations tab. Now I will turn it over to Jim Eccher. James Eccher: Good morning, and thank you for joining us, and thanks for your patience as we worked through some technical difficulties there. I have several prepared opening remarks. Give you my overview of the quarter and then turn it over to Brad for additional details. We will then conclude with summary comments and thoughts about the future before we open it up to Q&A. From a GAAP perspective, net income was $28.8 million or $0.54 per diluted share in the fourth quarter, and ROA was 1.64%. Fourth quarter 2025 return on average tangible common equity was 16.15% and the tax equivalent efficiency ratio was 53.98%. Fourth quarter earnings were impacted by a couple of material adjusting items, the first being a $428,000 pretax loss on mortgage servicing rights and a $2.5 million in pretax acquisition-related expenses driven by $1.5 million of computer and data processing related to the core systems conversion, as well as systems related to acquired operations. Excluding those two items, net income for the fourth quarter was $30.8 million or $0.58 per diluted share. Tangible book value per share increased 61 basis points to $14.12. The tangible equity ratio increased 61 basis points from last quarter from 10.41% to 11.02% and is 98 basis points higher than the like period 1 year ago. Common equity Tier 1 was 12.99% in the fourth quarter, increasing from 12.44% last quarter and increasing 17 basis points from 1 year ago. Our financials continue to reflect an exceptionally strong net interest margin at 5.09% for the fourth quarter, which is a 4 basis point improvement from last quarter and 41 basis point increase over the prior year like quarter on a tax-equivalent basis. Pre-provision net revenues decreased from both interest-earning deposits and securities, balance declines, coupled with a decline in rates. The total cost of deposits was 115 basis points for the fourth quarter compared to 133 basis points for the prior linked quarter and 89 basis points from the fourth quarter of 2024. For the fourth quarter 2025 compared to last quarter, tax equivalent income on average earning assets decreased $1.8 million, while interest expense on average interest-bearing liabilities decreased $2 million. Loan-to-deposit ratio now sits at 93.9% as of year-end compared to 91.4% last quarter and 83.5% as of 12/31, 2024. The fourth quarter 2025 experienced a slight increase in total loans -- excuse me, a slight decrease in total loans of $12.4 million from last quarter. Tax equivalent loan yields declined 11 basis points during the fourth quarter of 2025 compared to the linked quarter, but reflected a 48 basis point increase for the quarter year-over-year. The decrease in yield comparison to the prior quarter is primarily a function of Fed rate cuts working through the portfolio. Asset quality trends were relatively unchanged. Nonperforming loans increased $4.8 million and classified assets increased by $10 million. In general, our collateral position is very good on Q4 downgrade credits. We recorded a $6 million of net loan charge-offs in the fourth quarter of 2025 with the majority, where 75% of those stemming from the Powersport portfolio and commercial real estate owner occupied. With regards to Powersports, I would say that losses given default are running a bit higher than we expected. However, yields in that portfolio are much higher than expected, and the contribution margin is both above expectations and improving. Due to the nature of Powersport business, gross charge-offs are anticipated to run at a higher rate than Old Second has historically experienced, especially in a higher interest rate environment. This is the nature of what is a very good business. Investors should know that the contribution margin is now at a multiyear high in this business, and we're very bullish on our 2026 performance. The allowance for credit losses on loans was $72.3 million, as of December 31, 2025, or 1.38% of total loans from $75 million at September 30, 2025, which was 1.43% of total loans. Unemployment and GDP forecasts used in future loss rate assumptions remained fairly static from last quarter with no material changes in the unemployment assumptions on the upper end of the range based on recent Fed projections. The impact of the global tariff volatility continues to be considered within our modeling. Provision levels quarter-over-linked quarter, exclusive of day 2 purchase accounting impacts decreased $3 million and were largely driven by the Powersport portfolio, net charge-off levels with other losses associated with the previously allocated provisions. Noninterest income reflected a slight decrease in the fourth quarter compared to the prior quarter, but continue to perform well compared to the prior year like quarter. Noninterest income in the third quarter of 2025 reflected a $430 death benefits on a BOLI policy which was not experienced in the fourth quarter of 2025. Mortgage banking income was flat compared to the linked quarter and declined $668,000 compared to the like prior year period, primarily due to the volatility of mortgage servicing rights mark-to-market valuations. Excluding the impact of mortgage servicing right mark-to-market adjustments, mortgage banking income increased nominally quarter over linked quarter and from the prior year like period. Other income decreased nominally in the fourth quarter of 2025 compared to the prior linked quarter, but increased $550,000 compared to the prior year like quarter driven largely by Powersports service fees. Noninterest income increased $544,000 compared to the prior year like quarter as wealth management fees increased $238,000 or 7.2% and service charges on deposits increased $198,000 or 7.5%. Total noninterest expenses for the fourth quarter of 2025 declined $10.2 million from the prior linked quarter. Fourth quarter experienced a decrease of $9.3 million in acquisition-related costs. Our efficiency ratio continues to be excellent and the tax equivalent efficiency ratio adjusted to exclude core deposit intangibles, amortization, OREO costs and the adjustments to net income, as noted earlier, was 51.28% for the fourth quarter compared to 52.1% for the third quarter 2025. So our focus continues to be on the optimization of the balance sheet to perform and withstand the variability of the current and future interest rates. We continue to reduce reliance on wholesale funding as we allow the legacy Evergreen Bank broker CDs to run off and reprice higher cost deposits in the falling interest rate environment. With that, I'll turn it over to Brad for additional color. Bradley Adams: Thanks, Jim. I don't have a ton to talk about today. I would say that we're pretty darn excited to close the year like this. Running at a north of a 5% margin and ROA handsomely above 1.5% and ROTCE above 17.5% on an operating basis is pretty exceptional performance that we're proud of. EPS, some 30% over last year. Integration fully done. Integration at the end of last year as well. That's a lot of work. And to close the year like that, this is especially gratifying. This quarter is not a lot of complexity to it. Most of the stuff that we talked about last quarter is still true. So I'll be relatively brief. Net interest income increased nominally this quarter relative to last quarter both around the $83 million level. Loan yields decreased about 11 basis points and securities yields decreased a bit more at 14 basis points. Total yield on interest-earning assets decreased 8 basis points over the linked quarter. Cost of interest-bearing deposits decreased more at 24 basis points, and total interest-bearing liabilities decreased 15 basis points. The end result was a 4 basis point improvement in the tax equivalent NIM, which is obviously pretty awesome. Tax equivalent NIM for the fourth quarter of 2025 increased 41 basis points from 4.68% for the period last year. Average loans increased $60 million or $1.2 million over linked quarter with average deposits declining $200 million, a level we expected. Deposit runoff is largely concentrated in high beta effectively wholesale deposit captions as planned. Loan origination activity in the fourth quarter, you may not know, was actually very good and activity remains robust. Certainly, the market environment, marginal spreads is far more favorable than it was in the first half of the year and certainly at this time last year. Payoffs, especially in the participation book have resulted in relatively flat balance sheet growth in the fourth quarter. This is interesting. Balances in the CRE loan participations acquired with West Suburban declined by $53 million in the fourth quarter of this year, the largest quarter runoff that we have seen to date in that portfolio. This was a significant headwind to growing the balance sheet this quarter. Organic activity remains exceptionally strong. Other than that, everything I said last quarter remains true to the best of my knowledge. Balance sheet is exceptionally well positioned and margin trends feel stable. We may tick down modestly in the first quarter, but I expect to still be above 5%. Loan growth being targeted in the mid-single-digit level for next year. Expense growth will be modest. Pre-inflationary trends in employee benefits and salaries are going to be moderated by the realization of the cost saves associated with Evergreen. Buyback is on the table that we haven't done anything this quarter. It's becoming inevitable. I don't have anything to add about the tax rate other than it was really high this quarter. Please don't ask me about that. There isn't a lot of complicated stuff to go over beyond that. So I'll turn the call back over to Jim. James Eccher: Okay. Thanks, Brad. In closing, we're very proud of the year we just concluded, and we believe the level of performance is reflective of the strength of the bank we are building. We're optimistic about next year or this year and all the opportunities that are in front of Old Second. I would like to thank our team for their hard work and execution in 2025, including integrations and systems conversions and upgrades that have made us a much better Old Second. I could not be more excited about the things we can accomplish next year. That concludes our prepared comments this morning. So I'll turn it over to the moderator, and we can open it up to questions. Operator: [Operator Instructions] Our first question for today is from Jeff Rulis with D.A. Davidson. Jeff Rulis: On the expense side, I just wanted to see if those cost savings, Brad, I could tell you, are those fully captured? Or was that -- is there a tailwind to '26 that leads to that muted expense growth from your perspective? Bradley Adams: There's a tailwind to '26. Employee benefits are up -- are expected to be up solidly in the double digits next year just with inflationary trends that we're seeing in health insurance. We've done a lot of things to restructure to keep those costs contained. But we've got a couple of branch closings that are scheduled and some other expense initiatives. All in all, it's going to look like we're just kind of doing a good job, not as good as flat, but not as bad as it would be just on a pure apples-to-apples basis. So it kind of feels like a 3% type level as we get those final cost saves run through. Jeff Rulis: Got you. And then on the credit front, Jim, I guess the charge-off from the Powersports, and you really outlined that clearly very profitable on the margin front. Just wanted to see on the net charge-off pace. I think we talked about kind of 30 basis point level, a little higher. Is anything that front-end loaded? Or could we expect kind of 30-40 going forward? And then secondly, on the credit side, is that 30- to 89-day bucket, a little bit of an increase? Anything to note on that balance? James Eccher: Yes, good question. I think we need to be accustomed to a little bit higher net charge-off rate due to Powersports. That's just the nature of that business. I think if you look at the $6 million in charge-offs, $4.5 million was Powersport related, so only $1.5 million in the legacy book, which is more in line with our historical trends. But given that, we're in a higher interest rate environment, we expect Powersports to have maybe elevated charge-offs in the next couple of quarters. And I think we have to look at that hand-in-hand with the contribution margin, which I mentioned was at a multiyear high. So obviously, that's flowing through the margin and profitability. As it relates to 3089, we had a couple of larger loans that were just past maturity. We had a couple of loans that obviously migrated into nonaccrual that we're working through. One has a very low loan to value. The other is a mixed-use property in Chicago that has been very slow to lease up and it's going to take another couple of quarters to work through that one. Operator: Your next question for today is from Nathan Race with Piper Sandler. Adam Kroll: This is Adam Kroll on for Nathan Race. So maybe just a question for Brad on the margin. I was curious if you could kind of frame out expectations for the first quarter with the full quarter impact of the December rate cut and just your overall positioning if we were to get another cut or two in the middle part of the year and just where you think the NIM can settle out over the longer term? Bradley Adams: I'd be very surprised if we're not around the 5% level for the full year 2027. I was my machine there. 2027, I have no comment on at this point. Adam Kroll: And I was just curious if you have the purchase accounting accretion number for the quarter? Bradley Adams: It's a few hundred thousand. I've talked about that before. It's down substantially from last quarter. The thing that I would really like people to focus on is that the amount of purchase accounting that we have in our numbers this year in aggregate is less than the amount of purchase accounting that we're getting off the solar loan book. It's nothing. I think there was $150,000. It's not something that I really think is material to anyone's understanding of Volt Second at this point. It was down substantially linked quarter. But the thing to keep in mind here is that the purchase accounting impact on the Powersports portfolio is negative for the next 2 years. So the go-forward business is better than what you're trying to isolate as the unrepeatable portion in the current periods. It's actually a tailwind going forward relative to a headwind. Adam Kroll: Got it. No, that's super helpful. And then maybe just moving to deposits. You've called out letting exception price deposits run off from the acquisition. So I guess I'm curious how much is remaining of those deposits and if you're seeing opportunities to reduce deposit costs on your legacy nonmaturity deposits? Bradley Adams: We talked about this last quarter. The thing to remember is that fixing and returning to an old second like funding profile is a multistage process. Some of it we did prior to bringing on the Evergreen balance sheet and some of it we'll do after. We probably need to replace $300 million to $400 million in deposits with our type of funding in order to complete the process. In terms of the amount of wholesale funding, effective wholesale funding that's on the balance sheet right now, that's part of the reason why the margin is so darn resilient at this point because we do have substantially more funding that benefits from falling rates than we typically otherwise would have. So it's not necessarily a bad thing to focus on, at least at this stage. It's not what I want over the long term. But right now, it's actually a benefit. I would say just the number to keep in mind is that I would like to look $300 million to $400 million different on the liability side. Adam Kroll: Got it. And then maybe just last one for me. Digging into the mid-single-digit loan growth, [ Gary ], I was curious what your expectations are for growth in the Powersports vertical specifically? Unknown Executive: Slightly less than that would be my expectation. Operator: [Operator Instructions] Your next question for today is from Terry McEvoy with Stephens. Terence McEvoy: Maybe could you just remind us of the profile of a typical Powersport borrower? And I ask, I'm just curious, where do they line up in this K-shaped economy? And is there typically -- has there typically been some seasonality in terms of the charge-offs within that portfolio? James Eccher: Sure. Terry. Darin, if you're there and on, do you want to take that one? Darin Campbell: Yes, I can do that. Yes, Terry, the average FICO score for our portfolio in the Powersports and 730 with the biggest percentage of that in your Tier 1 bucket, which has an average FICO score of 776. But from a seasonality perspective, Terry, our busy season starts March 1 through -- it's really the second and the third quarter from an origination perspective where you have most of your business. And you -- from a risk perspective from either delinquency and losses, you have more of that in the other 2 quarters, especially at year-end, like I say, when we compete with Santa Claus at year-end, the numbers elevate a little bit and then stabilize out again as you get into the second quarter. But it's been -- I've been, Terry, I've been doing it for 30 years, and it's been pretty consistent trends for 30 straight years in this portfolio. Terence McEvoy: Great. And then as a follow-up, Brad, just capital management. I think you said share repurchase inevitable. I look back the stock is up 20% from 3 months ago. So the stock is higher. Is that just a comment on where your capital levels are? Or should I read into maybe the M&A market and what you see happening in '26? Bradley Adams: No. M&A market feels good. There's no shortage of discussions happening. The question is what's the right deal for Old Second at the right time and how much capital do we need to do that. Clearly, I got it wrong in that we were basically running a big Christmas plus savings account in order to acquire the capital for an acquisition, and we needed a fraction of what we had saved up. So it's just a function of what we need versus what we have. Obviously, we generated a ton of capital. And I'm not uncomfortable where we are. I just don't really see a need to grow it much from here is the thing. Operator: Your next question is from Brian Martin with Janney. Brian Martin: Can you talk a little bit, Brad, about -- or Jim, you talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the West Suburban that was running off. Just maybe how much ran off in that West suburban and then how much is left there that may be a headwind going forward. But then just trying to get your take on this kind of mid-single-digit loan growth, but kind of the production being better kind of it's been in a long time. James Eccher: Yes, Brian. The fourth quarter actually, surprisingly, was our best production quarter of the year. And normally, that's a softer quarter along with the first quarter, but it was exceptionally strong along multiple verticals. The challenge, as Brad pointed out, we had some pretty big paydowns. Some of it was welcomed in the syndication portfolio, but we also had early payoffs in multifamily and commercial real estate, a lot of it is stemming from property sales. What I think we get encouraged is the pipeline today or as of the end of the year is the highest it's been in probably 6 to 7 quarters. So that gives us a lot of optimism that we're going to have a pretty good first half of the year in '26. And I think mid-single-digit growth is certainly achievable this year. Brian Martin: Got you. And how big is that -- where is that the syndication book today? How far is that down? And maybe how much more to go there? Is that a headwind going forward? James Eccher: It's -- well, when we -- at the start of -- at the end of 2021, which is when we closed on West Suburban. We had about $772 million in commitments. We've had that as of the end of 2025. From a balance perspective, we got about $285 million left. I would anticipate 1/3 of that will continue to run off, and we'll probably keep the remainder. Bradley Adams: I would tell you that those numbers that Jim is referencing are inclusive of some additions related to Evergreen. So what you're really talking about over a 5-year period is almost an 80% reduction in that loan book. Brian Martin: Yes. Got you. Okay. And Brad, I think you mentioned the stability in the margin, just maybe being down potentially a bit in 1Q. I guess is that -- I guess what's the -- I guess, the modest headwind here in 1Q? And just in terms of that -- the balance sheet, the runoff that you expect, it sounds like there's still a couple of hundred million of exception-based brokered CDs that, like you said, is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what... Bradley Adams: I'm just being really pessimistic, man, because the reality is that the biggest headwind to the margin is probably going to be deciding to buy treasuries, especially if people keep making noise about invading countries that are largely ICE. So the more we see moves like that, I would be comfortable adding assets that largely don't offer, obviously, a 5% spread. So it's just a function of that. I also just don't want to go on here and say that, hey, the margin is going to go up from 5.09. I'm not going to say that. So I'm the biggest headwind, Brian, me personally. Brian Martin: Got you. Okay. And Jim, just going to the criticized or classified for a minute. I guess classifieds are up a little bit. I guess the -- how do you see those trends going forward? And then do you have -- how are the special mention trends? I don't know that you mentioned that, but -- or if you quantify those, were those up or down in the quarter? James Eccher: Yes. We classified, certainly, we had a lot of migration in and migration out. I think where we're seeing a little bit of degradation of that portfolio is in the C&I book and companies just showing weaker performance. By and large, collateral positions are pretty good. We're not seeing a whole lot of loss given default at this point. But it's going to take some time to work through this. I think the positive news from our perspective is the net change in special mention or watch loans was down materially. We had, I think, only a couple of loans migrate in, and we had over $15 million in reduction in that bucket. So those are early-stage indicators for us. So that should help us moving forward. Brian Martin: So the special mention were down on a linked quarter basis? Or did I hear that wrong? James Eccher: Yes, down $15 million in the quarter. Brian Martin: Down $15 million. Okay. Perfect. And the last 1 or 2 for me, and I'll jump off was the -- Brad, you mentioned on the expenses, just to clarify that, your comment, the 3% -- you were talking about 3% growth year-over-year in expenses. So 25% expenses to 263 -- or were you talking about something else there in terms of your comments? Bradley Adams: No, that's what I'm talking about. Brian Martin: Yes. Okay. And then just on the buyback, your general comments are we expected -- can you give any sense on how you're thinking about the buyback, Brad? Or is it just you expect to begin that this quarter and based on pricing, that will be opportunistic? Bradley Adams: I expect it will begin in relatively short order, yes. I'm not price sensitive at this point. Brian Martin: Got you. Okay. And the M&A environment, you said it's good with lots of discussions. What is kind of the optimal target today look like for Old Second if you are looking at M&A? I mean the last one was obviously asset driven Bradley Adams: I'm not sure how much that I can be helpful on an answer there because I can tell you that I wouldn't have described Evergreen, if you'd asked me that 18 months ago. So I think the only thing that investors can be certain of is that, we're not going to do anything unless it makes us a better bank, and that's what we're focused on. James Eccher: Yes. Brian, I would say our priority this year is really fully integrating Evergreen, which we're about there, but really focusing on organically growing the balance sheet and optimizing it. That would be priority one. Brian Martin: Yes. That's what I was getting at. I felt like it was more if there was M&A, it was likely more on the deposit side rather than the... James Eccher: We'll be opportunistic, but it's certainly not in the near term for us. Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to Jim Eccher for closing remarks. James Eccher: Okay. Thanks, everyone, for joining us this morning. Again, I apologize for the technical difficulties. We look forward to speaking with you again next quarter. Goodbye. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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