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HGV 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Hilton Grand Vacations Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir. Mark Melnyk: Thank you, operator, and welcome to Hilton Grand Vacations Fourth Quarter 2025 Earnings Call. Our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements and the statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our SEC filings. Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we're required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses to the period when projects construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals. Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website on investors.hgv.com. On Slide 2 of these materials, you can see the deferral adjusted metrics that we'll be referring to. Reported results for the quarter do not reflect $61 million of contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to presales of our Ka Haku and Kyoto projects. Also as shown on Slide 2, we recorded deferred $29 million of direct expenses associated with these revenues. Adjusting for both of these items would increase the adjusted EBITDA to shareholders reported in our press release by a net $32 million to $324 million. With that, let me turn the call over to our CEO, Mark Wang. Mark? Mark Wang: Good morning, everyone, and welcome to our fourth quarter earnings call. Before we begin, I'd like to take a moment to thank our team members around the world for their hard work and dedication over the past year to create memorable vacation experiences for our members and guests. 2025 was a year of meaningful progress for HGV. We consistently delivered against our strategic initiatives during the year, driving material growth in package sales, significantly improving our execution and further enhancing our HGV Max offering. As a result, we grew contract sales 10%, representing the highest growth since 2022, with EBITDA above the midpoint of our guidance. We also made investments in our lead generation capabilities, opening 41 new marketing sites with our partners at Hilton, Bass Pro and Great Wolf to support our future tour flow. We grew HGV Max memberships by 35% through the recent introduction of Max to our Bluegreen members, along with the continued demand from new buyers and upgrades in our legacy member base; optimized our financing business to structurally improve our industry-leading cash flow generation, including opening a new low-cost financing market in Japan, the first of its kind for any U.S. timeshare operator. And it enabled us to return $600 million of capital to our shareholders, achieving the target we laid out. Over the past 2 years, we returned over $1 billion to investors through share repurchases, and we remain committed to capital returns as the primary use of our free cash flow. Our strong 2025 results not only demonstrate the progress we made in integrating our business but they also underscore the advantages of our business model, backed by the strength of the Hilton brand with nearly 60% recurring segment EBITDA, a highly engaged base of over 720,000 members, including 266,000 Max members with substantial embedded value and an established differentiated experience platform in our HGV Ultimate Access. As we look forward to the year ahead, we continue to see a stable consumer environment overall, one where travel remains a top priority within consumer discretionary spending. With that consistent backdrop and much of the integration work behind us, we're carrying significant momentum into '26, putting us further down the path to achieve our long-term algorithm of resilient, profitable growth and material recurring cash flow generation to enhance our shareholder value. Our guidance today represents another step toward that goal, reflecting low single-digit contract sales with mid-single-digit EBITDA growth, along with strong cash flow conversion, which Dan will get into shortly. Next, I'd like to provide an update on our strategic priorities and the progress we've made on our integration work. Our strong results were achieved through disciplined execution against our 4 strategic priorities, which continue to guide the organization as we've moved into the new year. First, attracting new customers in a cost-efficient manner; second, enhancing the lifetime value of our member base; third, product evolution and innovation; and finally, driving operational excellence. Starting with the first priority of cost-efficient new member growth. We drove strong tour growth in the fourth quarter while expanding margins and maintaining our sales and marketing cost ratios. Consolidated tours grew nearly 9%, supported by strong package sales over the last several quarters, along with strong local arrival. Importantly, we surpassed our pro forma consolidated 2019 tour flow levels, which is a nice milestone. We continue to focus on tour quality as we leverage the strength of the Hilton brand across our portfolio, added new lead gen partners like Bass Pro and executed against our acquisition, integration and efficiency initiatives. We also sharpened our data analytics and processes with a focus on optimizing cost per tour by customer segment and channel to maximize flow-through. And we continue to expect to drive new buyer growth in '26, which is embedded in our guidance. That new member focus ties directly into our second strategic priority, which is to grow the lifetime value of our member base. The introduction of HGV Max has exceeded our expectations with sustained adoption that has driven a greater than 20% increase in lifetime value of a Max member versus a non-Max member. In the fourth quarter, we saw material growth from Bluegreen new buyers and owner upgrades. And importantly, 4 years after our initial launch, we've also continued to see our legacy club members upgrade into Max as well. We expect that demand to continue as we introduce new guests to our offerings and further enhance the value proposition of Max membership. In addition, we strengthened our customer service and rolled out new AI-based tools to drive engagement and help members make the most of their ownership and vacation experiences. Our third strategic priority is product evolution and innovation to position our brand for sustainable growth. One area where we're continuing to evolve is our scaled differentiated experience platform, HGV Ultimate Access. 2025 was our biggest and most successful year of Ultimate Access. We hosted over 137,000 attendees, a more than 15% increase in participation from the prior year. In 2026, you'll see us introduce several innovations across new categories of events, enhanced booking options and new pricing tiers to broaden accessibility to the Ultimate Access platform. In addition, we'll continue to enhance our HGV offerings with new features and benefits throughout the year. The final strategic priority is driving operational excellence, which is at the core of everything we do at HGV. This focus was a driver of our performance in the fourth quarter and building upon that success to drive incremental operational and asset efficiencies will be a key focal point in '26 and beyond. Operational excellence also extends to our integration efforts. I'm happy to say we reached our $100 million in cost synergy target during the fourth quarter, several months ahead of schedule. It's a great achievement for our teams, and I'm proud of their hard work to hit that goal. And we remain committed to managing costs and further improving our efficiencies from here. Branding front, we've now rebranded our targeted Bass Pro locations, including more than 125 this past year. In addition, we're well underway with the rebranding process for our Bluegreen Resorts with 8 properties completed in '25. We're on track to have roughly 10 additional rebrands completed this year and the remaining 10 in '27. So in summary, I'm happy with our performance this past year. We continue to demonstrate the strength of our differentiated model, and we made a lot of progress on the path towards our long-term algorithm. Our teams are all executing well in the field. We continue to innovate and evolve our offerings, which is showing in our results. As I look forward to the year ahead, our focus is on growth, innovation and efficiency to drive additional progress this year. So with that, I'll turn it to Dan for more details on the numbers. Dan? Daniel Mathewes: Thank you, Mark, and good morning, everyone. 2025 was a year of strong progress for Hilton Grand Vacations. Contract sales grew by 10% for the full year with both our owner and new buyer channels contributing to a positive sales growth. Additionally, the growth was driven by a mix of both strong VPGs and tour flow growth, driving 140 basis points of margin expansion in our real estate business. We achieved our goal of realizing $100 million of run rate cost synergies associated with the Bluegreen acquisition, slightly ahead of our 24-month post-close target. These factors, coupled with a strong fourth quarter performance, put us well into the upper half of our guidance range with adjusted EBITDA of $1.15 billion, growing 4% over the prior year. In addition to our operating performance, we augmented the long-term cash flow generation of the business by executing on our finance business optimization. We ended the year with 73% of our current receivables securitized within our target range of 70% to 80% and compared to a 55% run rate prior to the program's inception. As part of our optimization, we introduced timeshare ABS to the Japanese market, unlocking a new funding source at an attractive cost of capital. For the year, we generated adjusted free cash flow of $756 million or more than $8.25 per share, and we returned $600 million or 79% of that cash flow to our shareholders, repurchasing nearly 15 million shares to reduce our float by over 20%. Turning to our results for the quarter. Total revenue before cost reimbursements in the quarter grew 1% to $1.3 billion. Adjusted EBITDA to shareholders grew 12% to $324 million with margins, excluding reimbursements of 26%, up 250 basis points over the prior year. Within our real estate business, contract sales grew 2% to $852 million. We did a great job during the quarter of converting the package pipeline that we have built over the course of the year. Tours were up 9% year-over-year to 225,000, driven by growth in our new buyer as well as our owner channels. Our strong fourth quarter tour performance also enabled us to surpass our pro forma 2019 tour flow levels for the first time. So I'm really pleased with the result of our efforts. New buyers represented 24% of contract sales mix in the quarter. As we anticipated, VPG of nearly $3,800 declined against the prior year, owing to a difficult comparison from the launch of HGV Max to Bluegreen owners as well as the strong performance of our Ka Haku project during the initial introduction. Cost of product was 12% of net VOI sales in the quarter, down 290 basis points from the prior year, but consistent with levels we've seen throughout 2025. Real estate sales and marketing expense was 46% of contract sales, which improved slightly against the prior year. This reflects the monetization of some of the tour flow pipeline investments we made earlier this year as a portion of that expense was recognized when packages were actually sold in prior periods, but it also reflects the efficiency efforts the team has made during the quarter. Given the increased contribution from tours this quarter, which carries higher marginal expense, I'm really proud that the teams were able to manage costs so effectively to maintain our cost ratio against the prior year. Real estate profit was $177 million in the quarter with margins of 28%, up 150 basis points over the prior year to the highest level we achieved since 2023. In our financing business, fourth quarter revenues were $134 million and profit was $81 million with margins of 60%. Excluding the amortization items associated with our acquired receivables portfolio, financing margins were 63%. Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.6%. Combined gross receivables for the quarter were $4.3 billion. Our total allowance for bad debt was $1.2 billion on that $4.3 billion receivables balance or 28.6% of the portfolio. The portfolio remains in great shape overall. Our annualized default rate for our consolidated portfolios was 9.86% for the quarter, reflecting another 24 basis points of improvement from the third quarter and marking our third straight quarter of sequential improvement in our default rate. And as of year-end, our legacy HGV and DRI 31- to 60-day delinquencies are level with prior year, and our Bluegreen delinquencies are actually 28 basis points lower than the prior year, continuing the trend of credit outperformance on our originated platform. In late summer, we made meaningful changes to strengthen and streamline our underwriting processes, focusing more on equity at the point of sale, which we see as the primary driver of defaults. The result has significantly increased the equity and cash from both new buyer and upgrades, which should further improve our loan portfolio performance as we look into 2026. Fourth quarter provision of 18.1% of contract sales was slightly above our long-term target for a mid-teens rate and sequentially higher than Q3's level of just under 17%. This was largely a function of fourth quarter seasonally strong owner upgrade trends, particularly on the Bluegreen portfolio, where upgrades accounted for 76% of sales during the quarter. As owners upgrade out of the acquired portfolio, the provision release for the old loan shows up in the financing segment, which was the primary driver of margins in the finance segment being up over 700 basis points year-over-year despite an interest headwind from our previously disclosed financing business optimization program. Assuming similar mix and economic backdrop, we expect the provision to be down sequentially in the first quarter of this year and feel good about the provision in mid-teens as a percent of contract sales for the full year of 2026. As a reminder, our expectations for the financing optimization program was that it would drive an increase in our consumer interest expense during both 2025 and 2026 as we achieve our run rate securitization target of 70% to 80%. We have several ABS deals slated for the first half of this year, including another offering in the Japanese market, which will help us achieve our full targeted run rate of term securitization receivables on an annualized basis. In our resort and club business, our consolidated member count was over 720,000. Revenue grew 6% to $219 million for the quarter, and segment profit was $160 million with margins of 73%, growing 170 basis points versus the prior year, reflecting the consistency of our recurring resort and club business. Rental and ancillary revenues were up 2% versus the prior year to $178 million with a loss of $8 million driven by developer maintenance fees. Revenue growth in the period was driven by higher available room nights and an increase in our overall portfolio RevPAR. While we continue to see solid demand from our stand-alone rental business, developer maintenance fees remain the largest driver of our rental ancillary business segment profitability trends. Inventory management is a priority for our teams this year. We're focused on reducing the burden of those developer maintenance fees by working down our inventory balance through a combination of organic as well as inorganic means. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $3 million, license fees were $57 million and EBITDA attributable to noncontrolling interest was $5 million. Corporate G&A was $42 million or 3% of pre-reimbursement revenue, down slightly from the prior year. Our adjusted free cash flow in the quarter was $414 million, which included inventory spending of $103 million, representing an adjusted EBITDA conversion rate of 128%. For the full year 2025, we converted 66% of our adjusted EBITDA into adjusted free cash flow or over $8.25 per share. As we discussed at this time last year, with the launch of our financing optimization, 2025's conversion rate would be above our target long-term rate of 55% to 65% before returning to that long-term range in 2026. During the quarter, the company repurchased 3.5 million shares of common stock for $150 million to achieve our targeted $600 million of repurchases in 2025. January 1 through February 9, 2026, we repurchased an additional 1.9 million shares for $89 million. As of February 19, we had $339 million of remaining availability under our current share repurchase plan. We remain committed to capital returns as the primary use of our free cash flow in 2026 and believe our shares continue to represent a compelling value. As we look at 2026, we expect to maintain a robust pace of repurchases of approximately $150 million per quarter with the aim of not increasing our leverage through those repurchases. This will enable us to continue to return capital to shareholders without adding additional corporate leverage to the business. Turning to our outlook. We are establishing 2026 guidance of adjusted EBITDA before deferrals to be between $1.185 billion and $1.225 billion. Two important expense headwinds are taken into consideration in our 2026 guidance. The first item is regarding our license fees. During 2026, we will experience the annualization of the final rate step-up on our Diamond business as well as our second rate step-up on our Bluegreen business. We estimate that these items combined will be approximately $15 million to $20 million for the full year. With the Diamond step-up being fully realized by August, the majority of the headwind will be realized in the first 3 quarters of the year. The second is the annualization of our finance business optimization. Consistent with our original expectations when we initiated the program, we expect that this will negatively impact the year by approximately $10 million to $15 million, with the majority of the impact being felt during the first half of the year. Our full year guidance also embeds low single-digit contract sales growth. As Mark mentioned, we expect this growth to be driven by tour flow this year. Specifically, our current expectation is that VPG for the full year will be down slightly as we lap the elevated growth rates from 2025. However, despite that increased mix of tours, which generally deliver lower flow-through than pure VPG changes, we still expect to maintain adjusted EBITDA margins consistent with where we ended 2025 due to continued execution against our efficiency initiatives. In regards to the cadence of the year, our current expectation is that contract sales and EBITDA in the first quarter will be flat to slightly down as we lap the near-record VPGs in Q1 of the prior year that were driven by the strong initial launch periods for HGV Max and Ka Haku, along with the anticipated expense headwinds associated with the expected step-up in rates for our license fees as well as consumer finance interest expense as we analyze the ramp of our finance optimization program. We expect EBITDA to improve sequentially in each successive quarters, consistent with sales growth, execution against our efficiency initiatives and as the expense headwinds subside. As I mentioned, our adjusted free cash flow conversion this year will fall within the long-term range of 55% to 65%. We expect that our 2026 conversion rate will be in the lower half of that range as we wrap up the spending on our Ka Haku project ahead of its anticipated opening later this year. But as our level of annual inventory spend trends towards a maintenance level in the upcoming years, we expect to move higher within that target range. Moving to our liquidity. As of December 31, our liquidity position was over $1 billion, consisting of $239 million of unrestricted cash and $809 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.5 billion and nonrecourse debt balance of $2.7 billion. At quarter end, we had $235 million of remaining capacity in our warehouse facilities. We also had $943 million of notes that were current on payments but unsecuritized. Of that figure, approximately $374 million could be monetized through a combination of warehouse borrowing and securitization. While we anticipate another $388 million will become available following certain customary milestones such as first payment, deeding and recording. Turning to our credit metrics. At the end of the quarter and inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.78x. We will now turn the call over to the operator and look forward to your questions. Operator? Operator: [Operator Instructions] The first question is from Patrick Scholes from Truist Securities. Charles Scholes: Question, then I'll have a follow-up question here. You did briefly talk about quarterly cadence for 1Q, but I'm wondering if you could touch on, if possible, quarterly cadence expectations for the other quarters and also specifically within that expectations by quarter for tour growth and VPG. Mark Wang: Sure. Thanks, Patrick. Yes, let me kind of frame it up a little bit, and then I'll have Dan kind of jump into some of the details here. But I think, first, I'd say we made really good progress in '25 on both operational and from a financial perspective. When you think about the investments we made in our lead flow, that gives us a lot of confidence about our tour flow coming in this year, controlled our costs, especially you saw that in the second half of the third quarter and fourth quarter, grew both contract sales and EBITDA and grew both our tours and MVPGs and our real estate margins, which really led to this leading industry cash flow generation over $756 million. So -- and then as we've been talking about, we continue to buy back shares, and we had a record $600 million last year. So as I take just a step back here, as you look at how we're tracking against our targeted algorithm of consistent top line growth with EBITDA growing a bit faster and strong free cash flow, I think we're on a really good path. I'd say in '25, we were a bit below that algorithm with strong contract sales growth, but EBITDA growing more slowly due to the investments we put in the business. But as we look into '26, our guidance today really reflects us tracking better and closer to that algorithm with EBITDA that we expect to grow slightly ahead of sales for the year. So -- and that really is about the tour flow generation. And with that, we expect strong cash flow generation. So anyways, so I think we're tracking really well towards unlocking our earnings and cash flow power of the business and getting us set up on the right path toward that long-term algorithm we've been working on. I don't know, Dan, if you want to hit on some specifics on the VPG and EBITDA for the year. Daniel Mathewes: Yes. No, absolutely, Patrick. I know we talked about it a little bit in our prepared remarks. But when you think about Q1 specifically, we're looking at high single-digit growth on the tour flow side, mitigated by high single-digit decline on the VPG side, which is as expected and very consistent with what we saw in Q4 given the tough comps. As we look on the cost side, there are some pressures. I mentioned the license fee pressure as well as the financing business optimization. The one thing I'd also point out is from a provision perspective, we look to return to that mid-teens level for the full year of 2026. And if you look at year-over-year, Q1 was favorable to that last year. So there's a little pressure on that side. Those components really yield to that slightly down EBITDA in Q1. But when you think about it sequentially throughout the year, we're really going to capitalize on all the package pipeline work that we did last year. You'll recall, we saw some outsized package performance, in particular, in Q2 and Q3 last year. Those will be playing out this year. And we see strong tour flow growth, coupled with easier comps as we progress out the year. Clearly, Q1 being the toughest comp with the first full quarter launch of HGV Max to the Bluegreen owner base. And as we progress throughout the year, those headwinds, in particular, the license fee with the Diamond being fully ramped starts to fall away in Q3. And then the optimization of the financing business should be fully annualized by the time we hit midyear. So it helps sequential growth for EBITDA from quarter-to-quarter to quarter-to-quarter throughout the year. So that's how we see it playing out. So a lot of details in there. So if you have any follow-up, happy to address those. Charles Scholes: Okay. And then actually, my follow-up question is to you, Dan. Just with that uptick in the 4Q loan loss provision, you called out it having to do with upgrades to legacy existing Bluegreen owners. Can you -- there, I say, talk a little bit more about the sausage making into that. There's definitely a little bit of confusion out there of why such a step up. And if you could just help clear the air a little more color and detail around that. Daniel Mathewes: Yes. No, absolutely. Very important question. And it's one of those scenarios where purchase accounting still is coming into play since that acquisition is relatively recent. First, though, what I would like to say is the portfolio in general is performing extremely well. I talked about in my prepared remarks, about us making meaningful changes from the underwriting process. A little bit of an oversimplification, but a key aspect of that was eliminating a program that Bluegreen had in place. We've accomplished this about midyear in 2025, where we're now requiring additional capital down -- additional deposits down from the consumer as they upgrade in particular. Previously, Bluegreen allowed for a no cash upgrade option. And what we've seen is material upticks in the deposits, especially in the Bluegreen side that have yielded strong performance on those originated loans. So those are -- that performance is improving. We talked about the 31- to 60-day delinquency rates. On the HGV and the Diamond side, they're holding steady year-over-year, even sequentially, and the Bluegreen has actually improved by 20 basis points, which is good to see. And we expect that improvement to continue, especially with the change in the underwriting. Now from just a geography purchase accounting item and how you saw an uptick in Q4, the -- how it works from an accounting perspective is when someone in the acquired portfolio upgrades into an originated portfolio, the release of the reserve associated with that original loan actually goes through financing to the extent there's not already a reserve in place. And then you fully reserve the new loan into the real estate business, and that goes into the percentage count. So you're effectively reserving a full balance on the new loan even though you're only recognizing incremental contract sales, which yielded an optic -- uptick to that provision rate. But just to avoid any confusion, we're very happy where our portfolio sits and fully expect to be in that mid-teens range in 2026. So we'll see that tick down in Q1 and remain lower throughout the year in 2026, obviously, assuming no material deterioration in the macro environment. Operator: The next question is from Ben Chaiken from Mizuho. Benjamin Chaiken: I think maybe stepping back a little bit, excess inventory has been a headwind on the rental side for you guys, but also the entire industry broadly driven by the developer maintenances. If I caught you correctly, I think you mentioned there were -- and maybe I'm conflating 2 comments you made, but I think you were referencing some organic and inorganic ways to bring down that inventory again, if I caught you. One of your peers recently took some strategic action. Would it make sense to streamline some of your assets and locations? Why or why not? And then again, did I hear you correctly? Mark Wang: Yes. No, I think you heard us correctly. we've got through a very thorough financial brand and market analysis on the properties that we have in our portfolio. And we picked up a lot of really good inventory in the acquisitions and a lot of great markets. But ultimately, we're looking to try to optimize the portfolio for both our members and our shareholders. And as we've discussed in the past, some of the inventory that we acquired just doesn't align with our long-term vision for the portfolio. So I think as we get closer to making a final decision on our plans, we'll provide a lot more detail. But I think you've heard it from our competitors and you're hearing it from us. This is really nothing related to legacy HGV. That product is in great shape, and we feel like we've put the best new product in the market within our sector over the last decade. So that's in great shape. It's just really when you acquire 2 companies like that, there are properties that just meet the portfolio requirements. So we're looking at it, and we'll give you an update as soon as we have a final plan. Benjamin Chaiken: Got it. And recognizing you may not want to bite on this one, but any way you could maybe ballpark a range of number of assets? Mark Wang: No, I think we're still in the middle of the analysis. Look, we've been working on this for a while, but I prefer to wait and give you the bigger picture and a more concise program that we're looking to move on. Benjamin Chaiken: Okay. And then just as a quick follow-up, just any thought process on -- or maybe more color on your philosophy around buybacks. Is $150 million a quarter kind of the right number? Why not more, just given kind of the amount of free cash flow generated and your valuation? Daniel Mathewes: That's definitely a fair question. It clearly is our primary directive when it comes to -- well, primary choice of use of capital these days as the stock is a compelling value at these levels. And we anticipate continuing at $150 million per quarter. What I would say from our mindset is we're not of the mindset that we want to increase our leverage ratio to repurchase shares. We're very comfortable with the leverage that we're operating at today, which is actually a downtick from where we were prior quarter and year-over-year. But at the same time, levering up the company to buy back shares, given the robust level of the share repurchase program that we currently have in place is not what we're looking to do. That's why we are very comfortable at the $150 million level per quarter. Operator: The next question is from Stephen Grambling from Morgan Stanley. Stephen Grambling: I may have missed this in some of the opening remarks, so apologies. But I think this is the first year where NOG turned slightly negative. And that was kind of like a hallmark, I think, of the story relative to some of the peers. Maybe if you could just shed some light on some of the underlying dynamics there. Obviously, on the last comment about maybe club management, does that have any impact on owner growth that we should be anticipating? And do you expect it to maybe stabilize at some point going forward? Mark Wang: Yes. No, Steve, this is Mark. First, I'd say that I think when you look at our business right now, and it got a lot mature with these acquisitions, right? With the Diamond acquisition, that was -- the strategy was a roll-up strategy, and they acquired 11 companies over time and some of those companies go way back and -- as far as 40, 45 years back. And so you have a situation where some of these owners, some of these members have been in the system for a long time. And we continue to work with them to exit them out appropriately based on a one-by-one analysis of that. So we have some pressure on that side. I'd say the good news is we have generated -- when you look at Max since we rolled out, we've got 266,000 new Max members in less than 4 years. And of that, 175,000 are new buyers, meaning they bought within the last 4 years. So we continue to bring new members in the system. And we've talked about it, I think, on the last call, a new member, the lifetime value is 6x what a member that's been in the system for 15 years. So -- and when you look at our Max membership base, 50% of that base is -- the tenure of ownership or membership with us is 5 years or less and nearly 70% are 10 years or less. So we continue to build lifetime value into the business and more recurring revenue. And so it's just part of the equation. It's part of the business. And for HGV, when we were stand-alone before the acquisitions, we were a younger company, I'd say, only in the business for around 30 years versus we acquired some of these companies that have owners that have been in the system longer. So look, our focus continues to be on driving new buyers on an absolute basis. We believe we've been driving more new buyers on an absolute basis into our system than anybody in our sector, and we'll continue to stay focused on that. Operator: The next question is from David Katz from Jefferies. David Katz: I wanted to just talk about the sales force a bit. Such an important driver in this business. Where are you, would you say, in terms of having the force where you want it? Are there any sort of strategic changes or personnel changes or anything like that, compensation structures, et cetera? Give us a kind of lay of the land there, please. Mark Wang: Yes. So first of all, a big shoutout to our sales force because they do an amazing job. If you think about 2024, we broke through a barrier, $3 billion barrier in contract sales, and that wasn't good enough. They grew at 10% last year, right? So I don't know of any other company that's ever hit $3 billion nor grew at 10% at that level. So we got a great sales force. Dusty Tonkin leads our team there. We've got great leadership with Mike Reilly under him, a great team out there. So we feel really good about our teams. It's -- are we exactly where we want to be? Absolutely not. You always want to be improving. One of the things that you have to think about for us, and we're still continuing to evolve is -- we went from a business back in 2019, where 85% of our business was generated out of 7 markets. Now we're in 40 markets. So we historically were very focused on large markets, and I think we continue to dominate in those large markets. But we also are now -- have developed a lot of mid and small markets. And so those are markets where we continue to build our teams and our capabilities, but I'm very, very pleased with the progress we're making. We've got a great team, and they continue to drive results. Operator: [Operator Instructions] There are no further questions at this time. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mr. Wang? Mark Wang: All right. Well, thank you for joining the call today and another thank you to our team members for the strong year of execution and, most importantly, for taking care of our members and guests. I'm extremely proud of what you've accomplished, and we look forward to updating you on our Q1 call. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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ACSAY 2025 Q4 财报电话会议

Juan Cases: Good morning, everyone, and thank you for attending the 2025 Results Call of ACS Group. I'm joined by our Corporate General Manager, Angel Garcia Altozano; and our Chief Financial Officer, Emilio Grande. As usual, after the presentation, we'll host a Q&A session to provide you with any clarification that you may need. Those who are connected via our website can ask their questions through the established channel. So let's start with the first slide of our presentation. In 2025, the group delivered very strong operational and financial results with solid growth in sales, backlog and net profit, backed by robust cash flow generation. We're making solid progress in executing our strategy, increasingly leveraging our global footprint and engineering expertise to drive sustainable growth. We continue to actively pursue highly attractive equity investments opportunities across both traditional and next-generation markets, generating long-term value for all our stakeholders. Let me give another view of the key highlights for the period. Ordinary net profit reached EUR 857 million, up 25.3% or 32.4% FX adjusted, exceeding our top end of our revised guidance. On a reported basis, net profit stood at EUR 950 million. Sales and EBITDA were up by 20% and 20%, respectively, driven by the robust momentum across all our segments. Operating margins improved as well across the group. Net operating cash flow reached EUR 2.2 billion in the last 12 months. This is up EUR 320 million adjusted for factoring variations, highlighting the quality of our profit growth. As a result of this strong cash flow generation, the group achieved a net cash position of EUR 17 million at the end of 2025. This is after allocating EUR 2.1 billion to strategic investments and shareholder remuneration. Strategic investments include EUR 564 million in data center projects, EUR 436 million of the Dornan acquisition and EUR 200 million of the capital contribution to Abertis. In addition, EUR 448 million were allocated to shareholder remuneration. New orders during the year of EUR 62.5 billion, showing an accelerating growth trend up approximately 27% FX adjusted, resulting in a higher book-to-bill ratio of 1.3x. Within the outstanding new orders figure, digital infrastructure represented approximately 28% or EUR 17.6 billion with growth of around 130% year-on-year FX adjusted. The order backlog grew by 14.6% FX adjusted, reaching EUR 92.9 billion, supported by sustained demand in biopharma, defense, critical minerals and data centers. Looking ahead, we remain very confident in the group's outlook and set our ordinary net profit growth target of 20% to 25% for 2026 up to EUR 1.070 billion underpinned by strong fundamentals. Let's take a closer look at the group's consolidated performance for the period. Sales rose by 19.7% to EUR 49.8 billion, driven by the exceptional performance of Turner, which achieved approximately 34% organic growth or 40.3% FX adjusted, particularly supported by digital infrastructure, health care and education projects. This momentum was further enhanced by the integration of Dornan and the full consolidation of this since second quarter of 2024. EBITDA increased by 25% to EUR 3.1 billion, with margin expansions across all segments and at overall group level. Profit before tax amounted to EUR 1.7 billion, up 67.3%. On a comparable basis, PBT grew by 24.8%, particularly fueled by Turner's outperformance and the solid evolution of Flatiron Dragados. We delivered a strong ordinary net profit growth of 25.3% year-on-year on a comparable basis, reaching EUR 857 million, above the top end of our full year guidance. Turning now to the ordinary net profit split. I would like to highlight the following: Turner delivered an outstanding performance with its contribution rising 66.6% to EUR 549 million, driven by the strong growth in high-tech markets and improved margins. CIMIC contributed EUR 199 million, supported by the strong growth in data centers, biopharma, health care and education, but also the natural resources. Engineering & Construction recorded a very strong result, growing 35.7% year-on-year, reflecting a higher contribution from Flatiron Dragados and solid results in HOCHTIEF Europe. Abertis delivered a resilient operational performance during that period despite nonoperational impacts. During the year, the group implemented efficiency measures involving EUR 32 million in restructuring costs, aimed at streamlining operations and unlocking synergies that will enhance performance in the coming years. Slide 5 highlights the group's strong and consistent cash flow generation. Net operating cash flow amounted to EUR 2.2 billion, supported by a robust EBITDA, uplift of 25% and outstanding level of cash conversion. Adjusted for factoring variations, the net operating cash flow increased by EUR 320 million. Building on this, the acceleration of cash flow generation in the fourth quarter further improved the previous quarter last 12 months figure of EUR 2 billion. We reached a net cash position as of December 2025 of EUR 17 million, showing an improvement of EUR 719 million since December 2024. This performance is primarily the result of the group's strong net operating cash flow, facilitating significant strategic capital allocation initiatives. In the period, we have executed EUR 1.7 billion in financial investments, including EUR 564 million in data center projects, EUR 436 million for the Dornan acquisition, EUR 316 million of M&A, EUR 207 million in other net infrastructure equity investments and EUR 200 million for the Abertis capital contribution. Financial divestments of EUR 1 billion, including the 50% sales of UGL Transport, the data center platform 50% divestment and the final settlement of ACS Industrial. Additionally, EUR 448 million of cash were allocated to shareholders' remuneration. Our disciplined approach to capital deployment supports our long-term growth strategy while maintaining a solid financial position. Moving on to Slide 7. Our order backlog stands at an all-time high of EUR 92.9 billion as of December 2025. This growth was underpinned by a very strong order intake of EUR 62.5 billion, up 26.6% FX adjusted, resulting in an improved book-to-bill ratio of 1.3x. This very positive performance reflects the group's continued success in securing high-quality projects across strategic growth markets, particularly in data centers, defense, biopharma, critical minerals and nuclear. Notably, digital infrastructure now accounts for approximately 28% of new orders, up circa 130% year-on-year FX adjusted, driven by the strong sustainable demand in data centers. We're also seeing strong traction in Germany, where positioning allow us to benefit from the country's increased focus on infrastructure investment. New awards in Germany grew by approximately 41% year-on-year, reinforcing our ability to capture opportunities in these key markets. In the following slide, we can see a selection of recent awards. It is worth placing these projects in the broader context of the ACS Group strategy, where we have continued advancing to become a leader in rapidly expanding strategic growth verticals, including artificial intelligence, digital and tech sector, energy, including nuclear, critical minerals and defense. This momentum builds on a long established locally embedded presence in core infrastructure markets in North America, Australia and Europe, which remains the foundation of our competitive strength and our ability to scale into these next-generation markets as a life cycle partner. Let's start with the digital infrastructure and advanced tech sector, where we command a leading position. Growth in the global data center market remains extremely strong. Soaring demand for cloud services and AI is expected to quadruple DC and compute CapEx by 2035, boosted by the growth of generative AI and further cloud migration. The group has the resources and capabilities as a firmly established global end-to-end solutions provider to meet this rising demand. During the period, we have been awarded several new large-scale data center projects. Among these new awards we can find. The announcement of the construction of the 902-megawatt data center complex in Wisconsin, which is part of the $500 billion Stargate program. Most recently, Turner was awarded a role in the delivery of the $10 billion 1-gigawatt data center companies for Meta in India. In Europe, Turner was awarded the construction of a 160-megawatt data center in the Netherlands. This is the result of Turner's expansion strategy into Europe with Dornan executing a project for recurring Turner client. We'll also be building a 58-megawatt data center in Malaysia for a long-standing repeat client. Construction has already started for a data center in Alcal , a joint collaboration with Dragados, Iridium, Turner, ensures with participation in the context of the data center platform. Additionally, we have solid medium-term visibility via our order book and our expanding product pipeline in North America, Europe and Asia Pacific. Energy-related infrastructure represents another strategic growth vector for the group, with structurally rising demand driven by the global energy and security of supply. ACS is strategically positioned across the full energy value chain from generation and storage to transmission and advanced technologies, with strong end-to-end capabilities and global engineering expertise. With several decades of experience designing and building nuclear power plants and complex energy facilities worldwide for leading utilities, the group is well placed to support the deployment of the next-generation technologies, including small modular reactors or SMRs as well as new build storage and decommissioning projects. This positions us in a market expected to exceed EUR 500 billion investment in Europe by 2050. At the beginning of 2026, an important spreading milestone was reached when we were selected as part of the Amentum's global project delivery team for the Rolls-Royce SMR nuclear program. And during the final quarter of 2025, we secured a major nuclear and civil works framework contract worth up to EUR 685 million, lasting up to 15 years involving civil infrastructure works at the Sellafield nuclear site in the U.K. Turning to renewables. We continue to strengthen our market presence, particularly in Australia, where our companies have delivered more than 20 major renewable and storage projects. Reflecting this momentum in new awards, CIMIC subsidiary UGL was selected for the Western Downs Stage 3 Battery project in Queensland, Australia to construct a major renewable energy storage facility with energy storage capacity of 1,220 megawatts hour. Let me turn now to Critical Minerals and Natural Resources, another strategic growth market for us. We're capitalizing on accelerating demand for critical minerals, driven by clean energy technologies, digital infrastructure and defense modernization. Leveraging the combined capabilities of Sedgman and Thiess, we have established a global position in minerals, processing and sustainable mining services across key commodities such as lithium, copper, rare earth, nickel, vanadium, uranium and zinc. In December, the group expanded its partnership with Vulcan Energy through a significant cornerstone equity investment, while securing an end-to-end role in the development of its lithium production and processing infrastructure in Germany. Under the agreement, we have also been appointed as EPCM contractor and named preferred supplier for the project's civil works. In addition, we have been awarded contract by Hindustan Zinc to support the delivery of India's first zinc tailing recycling facility. We're recently awarded the Mount Pleasant operation contract extension in New South Wales, Australia to provide full mining services. Moving now to Defense, where infrastructure investment is expected to increase substantially worldwide. In Europe, major multiyear defense investment plans, including in Germany, present substantial opportunities in defense-related capital works and potentially via the public-private partnership model. And in the U.S. and Australia, governments are also planning major increases in defense spending over the next decade. At the end of 2025, the group's defense backlog stood at EUR 3.5 billion, which included a recently secured involvement in a major 10-year collaborative contract for the German armed forces in Hamburg with a total project value of EUR 1 billion. Our North American civil business, Flatiron Dragados being selected as one of the companies for a 10-year construction contract for the U.S. Air Force Civil Engineering Center. And other projects, including the construction of a major dry dock at Pearl Harbor for the U.S. Navy, works for the Royal Australian Air Force base in Queensland and defense infrastructure upgrades in Australia. In biopharma, health and social infrastructure, we continue to hold in positions with several significant new orders such as: First, the New York Public Health Laboratory, consolidating the largest and most advanced state public health laboratory in the U.S. under one roof, the Regional One Health Hospital campus, a once-in-a-generation investment to expand critical services and strengthen community access to care in Memphis. The Philadelphia arena, including the construction management for the new state-of-the-art arena in the South Philadelphia sports complex. Two major building contracts in Germany, a hospital newbuild project in Flensburg, the first one in Germany using integrated project delivery and a PPP project for a research and administration building in Kiel. Finally, the group is also a global leader in transport and sustainable infrastructure with a very positive outlook driven by several infrastructure stimulus packages. In Australia, we were awarded the Perth Airport, new runway construction as well as the Queensland's Gateway to Bruce upgrade. We secured the I-59, I-40 highway upgrade in Duisburg, Germany. Recently, we won the Battery Park Resiliency project, a $1.7 billion construction in New York. And in Sweden, we secured a EUR 1 billion high-speed rail project under collaborative model delivery, part of the East Link program. Let us now move into the performance by segment. On Slide 10, we begin with Turner, which is delivering exceptional results, consolidating its leadership in strategic sectors. Sales grew by 33.9%, reaching EUR 25.8 billion, mainly driven by organic growth across data center projects as well as solid growth in areas such as health care, education, sports and airports. This solid performance was further supported by the contribution from Dornan, whose exceptional performance was up 70% in the year. Profit before tax increased to EUR 921 million, representing an outstanding increase of more than 61%. This was supported by continued margin expansion of approximately 80 basis points to 3.6%, reflecting Turner's successful strategy, focused on advanced technology projects in line with the group's strategic objectives. Net operating cash flow increased by EUR 523 million to an exceptional EUR 1.2 billion. Net cash as of December '25 was EUR 3.3 billion, up EUR 179 million even after the acquisition of Dornan. Turner's commercial strength are demonstrated by its new orders of EUR 33.6 billion in the year, an increase of 44.2% FX-adjusted driving record order backlog to EUR 37.7 billion. Moving on to our operations in the Asia Pacific region, we turn to CIMIC, where sales registered strong growth in the strategic areas such as advanced technology, health care and defense and were 11.2% higher, supported by the full consolidation of this and despite the winding down of large transport infrastructure projects. EBITDA margins grew by approximately 30 basis points underpinned by strong contribution from high-tech jobs across both UGL and Leighton Asia. Ordinary profit before tax increased by 12.3% year-on-year, FX adjusted to EUR 473 million. Attributable net profit grew by 1.4% FX adjusted year-on-year. Net operating cash flow before factoring grew by EUR 43 million, supporting a strong EUR 366 million net cash improvement, which also includes divestment of 50% of UGL Transport and the data center project. Our order backlog was solid, reaching EUR 21.8 billion, up 6% year-on-year adjusted on a comparable basis. New orders were up 5.6% FX adjusted, with particularly strong growth in data center, defense and critical minerals. Turning now to Engineering & Construction segment on Slide 12. We can see solid growth with consolidated sales increasing 15.1% year-on-year FX adjusted to over EUR 10.6 billion, driven by the strong performance in North America and the robust contributions from both Dragados and HOCHTIEF Engineering & Construction. EBITDA margin increased by 53 basis points to 5.9%, supported by significant contribution from Flatiron Dragados. Ordinary profit before tax grew significantly by 45.2% FX adjusted to EUR 275 million. and a strong cash conversion with net cash position up EUR 118 million. Engineering & Construction backlog rose by 10% FX adjusted to EUR 30.1 billion, reflecting a strong order intake of EUR 13.6 billion with notable momentum in sustainable mobility and transportation infrastructure. Looking ahead, the outlook remains very positive. And as I highlighted, we are particularly well positioned to benefit from the infrastructure investment plan in Germany. Continuing now with the Infrastructure segment on Slide 13. Iridium's increased its sales by 45%, driven by the additional contribution of the A13, the financial close of the SR-400 in Georgia and general positive performance across operating entities. Also, as you might know, we have been recently prequalified for the I-77 in North Carolina. This adds to the previous 2 prequalifications of the I-25 in Georgia and I-24 in Tennessee. Abertis' recurring business showed growth above 6%, although financial contribution was impacted by nonoperating results. Abertis distributed a dividend of approximately EUR 600 million in the second quarter of 2025. In the next slide, we provide for your reference, a breakdown of the invested capital and valuation as of December '25 for the portfolio of all assets in our greenfield platforms. Among others, we are now including the valuation of our stake in the data center platform as well as the average value that research analysts are assigning to our SR-400 project. On the next slide, we take a more detailed look at the Abertis numbers. Traffic grew by 2.1%, supported by a strong performance of heavy vehicle traffic. And we saw strong results particularly in Spain, Chile and France. On a like-for-like basis, the company delivered robust revenue and EBITDA growth of 4.5% and 6.2%, respectively, underpinned by the geographical diversification of the portfolio and inflation-linked tariffs. Regarding portfolio development, as you know, Abertis acquired 51.2% stake in the A63 toll road in France. Additionally, Abertis was awarded a 21-year extension and tariff-adjusted of Fluminense and acquired the remaining 49.9% stake in Tunels de Vallvidrera and Cadi. In Chile, the Santiago-Los Vilos concession began operations. Abertis has improved its liquidity and financial strength with net debt set at EUR 22.7 billion. On Slide 16, we show the breakdown of key figures by country for Abertis portfolio. Next, as we do every year, we dedicate a brief section to reviewing some strategic updates. This slide highlights the progress we are making across our strategic growth verticals, both from a developer and a contractor perspective. We have already discussed many of these key milestones in earlier slides. So let me quickly go over the key points. In digital, we continue leading in data centers. The backlog has grown at circa 70% CAGR over the past 3 years. Some important recent awards include the 1 gigawatt project from Meta in India announced only a few weeks ago. As a developer, 100 of our data center platform sites are now grid-connected with around 80% power supply already secured. We are in advanced negotiations for lease agreements covering 150 megawatts IT in the first instance, and we're targeting to sign the first lease in the first half of the year. In Defense, we are on track to deliver the 2030 revenue ambition of EUR 10 billion, driven by major wins like the German Armed Forces campus and the long-term contract for the U.S. Air Force. We're also seeing strong progress in critical metals. We recently acquired an engineering company in the U.S. Additionally, our participation in Vulcan is another crucial strategic step. Lastly, let me stress again the delivery partner role of our consortium with Amentum on Rolls-Royce Nuclear SMR program. Overall, these wins reflect our decisive progress in reinforcing our end-to-end leadership and leveraging our investment opportunities. On Slide 19, we take a deeper look at the outlook for AI-driven data center growth. ACS is strongly positioned to benefit from rising data center infrastructure investment underpinned by sustained structural demand. Market fundamentals continue to accelerate and hyperscaler demand provides multibillion, multiyear visibility. Our global data center intake has more than doubled in '25, up to EUR 17 billion. And finally, AI evolution is not only strengthening our backlog growth prospects, it's also enhancing our core capabilities and opening new growth avenues for ACS. And before we move to the conclusion, this slide delivers a simple yet powerful message. We have already achieved in 2025, our key 2024 CMD goals for '26, 1 year ahead of schedule. Revenue and NPAT have both reached or exceeded the goals we set for 2026, while the net operating cash flow generated between '24 and '25 exceeds the target set for the full 3-year period. To conclude our review of the full year 2025 results, let me highlight the key achievements of the group. First, we delivered a strong operational performance with sales reaching EUR 49.8 billion, up 19.7% year-on-year and ordinary net profit of EUR 857 million, up 25.3% and exceeding the top end of our guidance. The group demonstrated outstanding cash generation with net operating cash flow of EUR 2.2 billion, which in turn supported net financial investments of EUR 1.7 billion. Our order backlog stands at record high of EUR 92.9 million, underpinned by EUR 62.5 billion in new orders, up 26.9% FX adjusted, including EUR 17.6 billion in digital infra order intake. It's also worth highlighting the progress of our data center development platform, our partnership with BlackRock GIP to develop more than 1.7 gigawatt worldwide was a major milestone that reinforced our leadership in one of the fastest-growing global markets. And finally, we remain confident in our ability to continue executing our proven strategy. For '26, we're setting an ordinary net profit growth target of 20%, 25% up to EUR 1.070 billion. Looking ahead to 2026, we remain focused on our strategic growth markets and disciplined capital allocation. As discussed, we see significant infrastructure investment opportunities and continue to pursue bolt-on acquisitions to strengthen our engineering capabilities and long-term growth prospects. We're well positioned to continue delivering sustainable growth and attractive shareholder returns. Thank you again for joining us today. And now we look forward to your questions. Luis Prieto: Luis Prieto from Kepler Chevreux. I had 3 questions, if I could, please. The first one is we've seen the share prices of both stocks do beautifully. And I just wanted to ask you, to what extent it would be tempting for you to maybe reduce the stake in Turner through a listing in order to upstream monies and pay for development and investments at ACS level or, for example, do a reduction in the HOCHTIEF stake and with the same purpose and increase investments. The second question, we're seeing the same assets held for sale on the balance sheet in energy. They've been there for a while now. Any updates of how those disposals are evolving and when we should expect outcomes, news? And then finally, referring to one of the things you were commenting before, you have visibility in your order book until some point in 2028, but you make reference to another -- to a pipeline beyond that, which is obviously essential to sustain the valuations and the expectations that you have for earnings in data centers. Can you give us an order of magnitude of that pipeline beyond the order book that you might have over the today to 2030 period? Juan Cases: Thank you so much, Luis. So let me start. We do not have plans to reduce our shareholding in Turner so far right now or to reduce in HOCHTIEF. And let me take the chance to speak about the way we see the valuation of our share. And I get back to our Investors Day at the end of last year. First of all, we have 2 main businesses, right? The one that is visible through our EBITDA and that's supported by the growth of Turner, our future growth in Germany and HOCHTIEF and the performance of CIMIC. And what we are seeing is 2 main things, without getting into a lot of the details. A Turner that continues growing, a Turner that before 2020 was giving EUR 350 million PBT. And right now this year has delivered EUR 1.45 billion, but with a guidance of up to 30%, which would be around EUR 1.34 million in '26, which we consider very conservative, right? And the reason why we kind of increase is obviously before we are taking into account a lot of the planning, we rely on hyperscalers, we rely on clients, and we are in that planning mode, and we need to land on something before reaching a resolution. And also the U.S. dollars with all our assumptions imply that it will continue to go in the devaluation mode. So that's on the business, right? Now -- so Turner has multiplied by around 3.5x in a few years. But we believe that will continue growing at a very significant path. So not only has grown 70% in U.S. dollars, '25, and we're already giving a guidance of 30%. And we believe that we can double Turner. Now the question is in how many years, but certainly in a reasonable short to medium-term time. Then we do have the multipliers of Turner, right? Turner has a significant portion of its backlog in data centers. We are seeing that our peers in data center space are at more than 30x EBITDA between 20 to more than 30x. Average consensus for Turner is way below that, right? And the rest of the business in Turner goes through semiconductors, batteries, biopharma and other sectors that will continue improving margins. In data centers, we gave a feature for Turner of reaching revenue just in data centers around EUR 25 billion by 2030. So that's a business, right? Then we see Germany growing and defense growing, and we're not including any of these -- the verticals that we're working right now because we do consider that the real value will be seen medium to long term, nuclear, critical metals, et cetera. So we believe on the share and the share valuation. But what the share is not reflecting for obvious reasons is the assets because that's not reflected in the EBITDA. And a lot of what we're doing right now, it's investing in the assets, right? Data center platform, the edge data center platform, additional to the big one with BlackRock, greenfield, Abertis growth and not Abertis growth just inorganic M&A, but the organic M&A and the renegotiation of the contracts that we will provide some visibility this year, right? And then what we're doing in critical metals, industrial energy, et cetera. So we believe that the share will continue to reflect the value of all of this. So right now, we are not taking the view that it's the right time to sell anything basically. Two, asset for sales, I mean, we -- the reality is that there is a combination of facts here, right? One is from an operating net cash flow basis in the Capital Markets Day, we were always talking about approximately EUR 1.5 billion net operating cash flow, post dividend, EUR 600 million in dividends or shareholder remuneration, we had EUR 900 million net for acquisitions, basically or investment. Now that EUR 1.5 billion has ended up being EUR 2.2 billion this year, EUR 2.1 billion last year. So basically, we're talking about EUR 1.4 billion to EUR 1.5 billion firepower per year net of shareholders' remuneration, right? If you multiply that by 5 from now to 2030, there are significant firepower for investments. So there's a strategic piece that we're not so much in a hurry to divest some of the industrial assets. Plus, we want to make sure that they perform in the right way to maximize value, right? So there's a combination of both things. Now your third question was about the pipeline ambition. So you saw on the screen, we are close to EUR 93 billion backlog. Most of our projects, and this has been the real change of strategy in the last 4 years, by moving from being a commodity in construction to being an end-to-end service provider, most of our contracts are not low-price lump sum RFPs. They come at the back of a long negotiating process, design, planning and working with our clients. So there's approximately EUR 25 billion that are not reflected in the backlog, but we are currently working with our clients. Out of the EUR 25 billion, there's EUR 18 billion in Turner, approximately USD 22 billion, at Turner and out of which there's approximately a little bit more than half of it that is data centers. So all of that contribute to our visibility in the medium term and how comfortable we are with our potentially -- I mean our potential guidance that we believe not only at HOCHTIEF, but ACS is conservative, but we need to see how a lot of these projects land and when they do land. Unknown Analyst: This is [ Salvador Lindse ] from Alantra Equities. The first one is on Turner. I see you reported over EUR 3 billion in net cash. I was just wondering whether Turner needs so much cash to operate? And what would your policy on business cross-financing each other or are you moving cash flow to the headquarters in the future could be just to understand how your reported group net cash position is fully available for investments. And the second question would be on the timing and magnitude of the new cycles. Just wondering whether you see something like defense or nuclear reactors or critical minerals potentially becoming as big as the data center investment cycle is likely going to be? Or if it's just long term, but probably more spaced out and not as big as the current investment is? Juan Cases: So starting with Turner. The reason why Turner holds so much cash, and we're not taking it out of Turner is we have 2 reasons. The first one is bonding needs, right, in order to operate. I mean, Turner is reaching the USD 30 billion revenues just in the U.S., and that requires bonding and require security and making sure that you have the right collateral indemnity in the U.S. So that is a big driver of keeping that cash in Turner. But obviously, it's -- I mean, above what they need. The other thing is, for us, it's very important that Turner continues growing. And for Turner to continue growing, there's a few strategies that we're going to put in place. The first one is we need to continue adding engineering capabilities to Turner, number one. The good thing is that right now, with AI, you can escalate that very, very fast, but it will require some investments. The other one is the modularization strategy at Turner because that's the future of construction. So there's additional investments that we're going to be doing in that space. So let's preserve the cash because Turner will need some of that for investments to continue to grow. The good thing about Turner is what they have demonstrated with Dornan is that they can multiply it by 3, the value one company in almost a year, right? So we're quite confident that it's a very good place to allocate capital. Your second question was about the new cycle. So let's go through each one of them. Nuclear. Yes, Nuclear will be like data centers, but more long term, right? We are not expecting to see. But if we want to be in the long term and creating another cycle like data centers, we'll need to wait, right? But it's a long term. It's very high tech oriented. You need a lot of engineering and you need to be from the very beginning, developing that part, right? So it's a long term. We won't see anything in the P&L probably in the short term, but certainly, we are creating a lot of value. And nuclear, it's a very important part of the future not just of AI, but in global of energy. Defense. So defense 2 things can happen. The first one is we keep a Defense 1.0, which is basically infrastructure, and we expect that to continue growing, right? The EUR 800 billion of Germany starts being allocated. Last year, they spent EUR 74 billion. 2026, we're expecting EUR 127 billion, but they start allocating. And you start seeing that. I mean, HOCHTIEF has doubled, now tripling backlog and we will continue growing at the back of that. Same thing in Australia. We need to still see how it's going to develop some of the U.K., U.S., Australia initiatives they have in Australia. They are allocating like around EUR 40 billion in the next 5 years. but hasn't been allocated yet. And then we have North America, where we continue. Now Infrastructure 1.0 will not generate a cycle like data centers, right? It will allow us to grow at a very good pace, but it will not be a data center cycle unless we jump into Defense 2.0. And that's something that without getting into the more radical part of defense, but the dual use technology. That's something we're analyzing, and we haven't made any decision yet. It's easy for us as we do the infrastructure and client request for the full integration, not just the civil building component of it, but we're analyzing what to do with that. Critical metals, I do think that it can be a good cycle. I don't dare to say as good as data centers. It pretty much depends on right now, the rare earth initiatives of the U.S., how serious is it, a very important part. A lot of the copper projects in South America that they are going to initiate. So we are going to track. And then obviously, lithium and batteries evolvement, right? So depending on those 3 variables, it can be a very good cycle as well. And right now, we're not seeing that reflect in our balance sheet because it's pure engineering what we're doing at this stage. Once we have engineering that, we jump into the PCM part of it, which is where the revenues and the EBITDA is, not in engineering. So that's what is now reflected in our P&L. Ãlvaro Navarro: Alvaro Navarro from Bestinver. I have 2 questions. The first one about the dividend policy. After the strong results release and following that HOCHTIEF increase by 26% its dividend. Are you considering to revisit your dividend policy and go up from the around EUR 2 per share right now? And the second one is about this. I think that this year, you have the possibility to execute the put option over the remaining 40%. Is this a possibility? Or are you managing other alternatives? Juan Cases: Thank you, Alvaro. Starting with the dividend policy. I mean, we're always proud of being a yield plus growth company, right? We offer the 2 of those. The yield because traditionally, we have always had a very good dividend policy traditionally. But in growth because right now, we are in other vertical with high growth and high tech, and we want to make sure that we take advantage of being or becoming a leader in those verticals. That's why we are cautious with the dividend policy. Having said that, it's true. We are growing a lot. And yes, there's cash available. So we haven't landed in any conclusion, but most likely we'll increase our dividend policy up above the EUR 2 per share this year. To how much we are analyzing. On the Thiess, we cannot execute the put until the end of this year 2026, with the cash flow being paid in January '27. If there was an opportunity to acquire in advance, we would take it. But that doesn't depend on us. It depends on our partner. Unknown Analyst: It's Victor from Investing. Congrats for the results. I have 3 questions. The first one is on CIMIC. When do you expect a revamp on the cash flows at CIMIC after derisking of the backlog? The second one is going to be if you can confirm at the end of the year, a Capital Market Day in order to provide 3 years guidance for the group? And finally, what is your expectations about the data centers to be commissioned in the half of the year in the initial conversations? How do you feel about that? Juan Cases: Okay. So starting with CIMIC. What's happening in CIMIC, and that's a difference versus North America, Europe and the rest of the geographies is that a lot of the high-tech projects, energy projects, industrial projects are replacing civil and more traditional projects, right? We are building a lot of the additional backlog in Europe on top of the civil that hasn't been reduced -- hasn't been reduced. And in the case of North America, in the case of Turner, residential has disappeared. Commercial office space has gone down significantly in the last 4 years, but the high tech, it's so big and advanced technology, which account right now for 60% of the backlog of Turner, that, I mean, has replaced part of the old market but has exceeded well in advance and above. In the case of CIMIC, New South Wales, Victoria, Queensland has reduced significantly, tremendously the amount of expenditure in transport and civil, right, which were the big jobs. West Gate coming to an end, Cross River Rail coming to an end, all the WestConnex', the North West Rail, the Western Sydney project, all the rail level crossing programs in Victoria and so on and on and on, right? All of them are gone. Each one of these deals were like $5 billion. right? So it's very difficult to replace with transmission line, substations, energy plants, renewables, data centers, all that plant. So the problem is that we are growing and all those areas, CIMIC, UGL, Leighton Asia, they are growing significantly even Thiess, but not to the extent that they can replace those projects. Plus, those projects, they are collaborative. They do not have big advance payments. And right now, we are -- as we finalize those projects, we've been contributing. That 10% advanced payment that we took 5 years ago, we are pretty much spending right now. So you see that winding off cash at CIMIC not being replaced by the new project, right? So that's the issue. Now eventually, those projects will finally be done and which we are not far away. I mean, there's only 2 to go, out of 9, right? So it's a very good position to be. But I mean, so it will happen soon. Will that be in '26 or '27? I mean we'll see. Then on the Capital Markets Day, yes, we're going to have a Capital Markets Day like the one we had in '24, not like the Investor Day we had at the end of last year. We haven't confirmed the date. Don't take me on the month, most likely at the end of October, but not -- but it will be confirmed eventually. And then on Alcal de Henares, I'm going to take the chance to give an update on the data center platform, okay? So Alcal de Henares, which is around 20 megawatts utility like 14, 18 megawatts. That will be commercialized and in operations or at least service to commence operations by -- before the end of the year, Alcal . We will have additional 250 megawatts, before the end of the year, commercialized, probably North America, beginning of construction. And I think that's a reasonable number. And then obviously, that will -- only those once they are commercialized, that will justify in excess of the value of the price paid by our partner for the platform. Unknown Executive: Thank you. That's time for the questions from the other side. Let's start because some of the analysts and investors that have asked about clarification on the guidance. Regarding the guidance, one is, are we using exchange for dollar stable or devaluation of dollar or what it? And regarding also the guidance, what about the free cash flow? The operating free cash flow has been significantly higher. Marcin Wojtal from BofA is asking us if this EUR 1.5 billion free cash flow per annum could be in the lower side, and we could upgrade that. Juan Cases: Okay. So on the U.S. dollar revaluation, one of the reasons why our guidance is conservative. One of the reasons is because we are assuming that the U.S. dollar will continue to go south, and that's reflected in our guidance for the year. That's the most logical and unreasonable assumption in this stage. On the free cash flow, we prefer to be prudent when it comes to free cash flow. It's true that we -- in the Capital Markets Day, we spoke about the EUR 1.5 billion that has ended up being EUR 2.1 billion and EUR 2.2 billion, respectively. And if the market continues to grow, I mean, we certainly, those are the kind of levels that we can expect. But all our plan, all our capital allocation, all our firepower is based on EUR 1.5 billion, right, to make sure because we want to have also -- I mean more conservative approach to factoring, to confirming to that, I mean, we want to make sure that we are cautious in keeping our cash flow as clean as possible. So basically, I don't dare to give a forecast about the net operating cash flow. Obviously, growth typically drives a high net operating cash flows. But again, our firepower is based on a lower amount of the EUR 1.5 billion. Unknown Executive: And regarding that, there are some questions about our capital allocation strategy, especially on the infra assets, particularly Dario Maglione from BNP Paribas is asking us about an update on the status of SR-400, the project the managed lane in Atlanta, but also what is the overview on our capital allocation strategy in this particular assets? Juan Cases: So I get back to the Investor Day at the end of last year, right? Let's assume that we are able to generate the EUR 1.5 billion. Again, we are way above that at this stage, but all our numbers have been run with that scenario. That post shareholders' remuneration, we would have a net of EUR 900 million. From now to 2030, we multiply by 5, so that's EUR 4.5 billion. And we're still, out of the EUR 3 billion, the 1 -- the EUR 2 billion to EUR 3 billion noncore assets that we could divest that we did announce in 2024 in our Capital Markets Day, we have divested EUR 1.5 billion, there's EUR 1.5 billion left. So all of that comes up to EUR 6 billion. What do we want to do with those EUR 6 billion, right? And there's upside because -- I mean, this year, we had EUR 700 million upside to that amount. First, we want to spend in greenfield projects, managed lanes. So EUR 400 million. We got prequalified in the 25 in Georgia, we got prequalified in I-24 Tennessee. We recently got prequalified in the I-77 in North Carolina. There's 2 projects to go, the 285 West in Georgia, and the other one in Virginia. So that's an important part. The other part is data centers. We have the first platform that we signed with BlackRock GIP. We have the edge data center platform, and we are -- and we do have assets, big assets out of the first platform that we are working on them to secure the power and to pursue commercialization. We're looking at opportunities like in critical metals, like we did in Vulcan in Europe, and other potential opportunities in critical metals but also in the energy space. So I mean, a big part of that is going to greenfield. We have another EUR 1.5 billion that probably will go to M&A. And that M&A could bring Abertis, could bring bolt-on acquisitions for some of the things that I said before to enforce Turner engineering and our capabilities. So we are comfortable in general in the capital allocation. Unknown Executive: This question from Marcin as well from BofA regarding Abertis. Do you consider Abertis EUR 600 million annual dividend to be sustainable for the next 5 to 10 years? What is your idea on Abertis strategy? Juan Cases: Abertis is, if everything goes as per the plan, we hope to give a very good picture of the organization. First of all, let's get back to a few numbers of Abertis. Back in 2018, the EBITDA of Abertis was around EUR 3.5 billion, but we lost EUR 1 billion in PPPs that expired, right? So that's basically -- it was EUR 2.5 billion. This year, we have EUR 4.4 billion EBITDA. And our prospects post France, post France are right now between EUR 4.4 billion and EUR 4.9 billion post Sanef? When you look at some of the ratios, and I think we have given some of these ratios in the past, the net debt ratio pretty much versus EBITDA, I think that has gone from 6.6 to 5.2. I think we gave that figure. But our backlog EBITDA versus the net debt has gone up from 3.4 to 5.8, right? So that gives you a view of how we are managing Abertis in the last years. The most important thing in Abertis that there's 3 things going on right now, or 2, the renegotiation of further contracts, and we will give transparency this year, but very important increases of the overall EBITDA of Abertis at the back of these renegotiations and a couple of transactions that we're pursuing with Abertis. We hope that these transactions, the combination of these transactions will give enough visibility not just to the market, but the rating agencies that our FFO versus net debt ratio that has been increasingly from 7 to very high numbers. That is the main restriction to the dividend distribution will be unlocked and we'll get back to normal dividends. And that, yes, will confirm that not only that EUR 600 million is sustainable on time, but we'll have growth to the future and will increase the valuation of Abertis significantly, which right now is like the ugly duck for all the analysts, right? So that will be a nice one eventually. Unknown Executive: I'll change the topic as Graham Hunt from Jefferies is asking about the environment we have in data centers market, the competitive environment you're encountering as you assess additional data center development opportunities. Are you seeing any difference by region, Europe, Australia, of course, U.S. market? What is our position on that front? How we can be as competitive as we are demonstrating? Juan Cases: So different answers to this question, which is a very important topic. In general terms, we continue seeing huge investment. And we do see very important investments in CapEx, but more importantly, the hyperscalers because they need to plan the next 3 to 5 years ahead, they are giving a lot of visibility of what's coming. From the EUR 420 billion that were spent in data centers in '24, they are expecting altogether to reach EUR 1.1 trillion per year '29, right? So that's the kind of amount we're talking about in the market. There's pros and cons in terms of competitiveness, right? The pro is that right now, we believe we're more competitive than before because before, we were -- for every 20-megawatt data center, we were competing with 14 consortiums. For the 2 gigawatts to 4 gigawatts, there's no competition, right? There's little competition. it's more open book. It's more about the hyperscalers know exactly the price of these things and what competitive looks like, right? They don't need to put long-term RFPs. That's a waste of time for them. right? So what we need to make sure is we compete against ourselves and what hyperscalers can do, which is the bar, which is a very high bar, by the way, because they have a tremendous capability. They could do it themselves. If they use us or another contractor company is because they can do it in the same way or better than what they can, right? So that competition is that's one factor. On the other side, what we are seeing is that time is of the essence, but every year is more of the essence. So hyperscalers want to see is a huge reduction in the timing of construction of these data centers. So that's why we are investing in modular construction, and that's why we continue to increase the timing and therefore, making us more competitive. In terms of U.S. versus Europe versus Australia, completely different markets. U.S. is dominated by the fact that they use is a superpower in AI, that they are training the models, that they have all kind of data storage and most of the American companies, they rule the world when it comes to data, right? So that's why you're seeing the 2 gigawatts, the 4 gigawatts. Anything you do in the U.S., you commercialize very quick, right? There's a huge, very liquid market for this from hyperscalers but also medium companies, small companies. There's a lot of AI processing inference. There's a lot of AI training. There's a lot of data storage. And there's a race to become the most powerful data storage hyperscaler. Europe is very slow. And Europe is very slow because right now, there's a debate about what a data center can provide. And there's always a mismatch between direct and indirect value. Direct value. There's always a combination of high energy, high water, low employment. Indirectly, every time you have megawatts of AI process interference, or ecosystem, you build a huge ecosystem of start-ups around data center. And some example, like Virginia, when they got to the 2.7, 2.4 gigawatt capacity, I think that they brought -- they created 10,000 new start-ups as a consequence. Even some of the big operations in the U.S. moved into Virginia, but the same thing in other places. Something similar happened in Ireland, that plus tax incentives a few years ago. And you will be seeing that in Europe. So more and more and more countries, they see data centers as strategic national investments. But that takes time to get to that conclusion, right? Plus once you -- so that delays things a little bit, but it will come. Having said that, Europe is not training AI models yet. Europe doesn't have big hyperscalers yet. They are the American ones, mainly investing in Europe. And the power in Europe is very much intervened and has some restrictions, different country to country, but in the same line, right? So that doesn't help to the development of more data centers in the short term. But it will come, not as big, but it certainly will come and the industry will come to Europe. Asia Pacific, we've seen that booming, but obviously, they are not trained -- except China that -- I exclude China for now. They are not training big AI models, and they do not have that storage, but certainly Leighton Asia has been super active. Out of the backlog we currently have, there's like EUR 2 billion just in Asia Pacific without including Australia. And then Australia, it's going slow moving into data centers, but we're seeing progress in the country towards data centers. Unknown Executive: In that sense, Dario Maglione is asking about the data centers in Spain outlook because he asked that as we plan to have around 800 megawatts of data centers through our JV platform by 2032, how strong is the demand for data centers in Spain? Enough to absorb this amount? Juan Cases: Potentially, yes. potential, yes. That depends. In Spain, what I do think is going to happen is hyperscalers first will fold their demand with their current development. Once they go beyond that, then they will start asking for additional capacity, and that's where a lot of that excess capacity will be used, on a large scale. I'm not talking about ours. I'm talking about Spain, the countries in general, right? But there's demand for a medium companies that right now, they are not doing their own development, but they are looking for, I mean, megawatts of data centers available. I do think that the restriction is not so much on the demand. The restriction is more on the power. When we speak about AI or inference demand, that's different, right? Because that's a very more unique energy demand. It's not like pure data storage. It's more about inference. It's more about AI processing. I think that, that will take more time in Spain versus the rest of Europe or the U.S. Unknown Executive: Final question is coming from Filipe Leite from CaixaBank BPI. Regarding the platform, the data centers platform, he has 2 specific questions. One is regarding the commercialization? Any news about the commercialization on data centers for this year? And the second is much more technical. He's asking about why the cash in from the recent agreement with BlackRock GIP, sorry, is lower than the EUR 500 million we announced, which has been accounted for EUR 428 million? Juan Cases: Okay. I'll start with the first one, and then I will add to this, and I will ask Emilio to add anything he considers. Well, on the first one, I already said before, before 2026, we expect to have in Spain, 14 megawatts IT, which is basically 20 commercialized and built, in the U.S. like 250. And I believe that those could be conservative figures, and then we'll continue adding that every year. When it comes to the platform, I think that is just the inflow versus the outflow net. Emilio, if you want to add? Emilio Grande: Yes, correct. So the net number was estimated to be EUR 500 million is when we announced the transaction last year. It's slightly below that. The net number, EUR 860 million, minus EUR 400 million something. And the only reason is because of the terms of the agreement and the exact amount of investment as of the date of closing. So that's the gap or the difference between the EUR 500 million and the actual cash in net. Unknown Executive: Final question is regarding, as you mentioned, we are pursuing some managed lanes opportunities in U.S. Could you clarify why the consortium structure for the different bids are different from what we have been doing in the past? Or why the first? What is the reason that we have different partners? Juan Cases: No. I mean, we have only 2 consortiums. The main one with Meridiam, Acciona. I mean, we won with them 400 and were prequalified in the 285 and A24 with them in Georgia and Tennessee, respectively. In the case of North Carolina, Kiewit has been a traditional partner of Flatiron in North Carolina. I mean as you know, in terms of macro figures, Kiewit is the largest civil contractor company in the U.S. We are the second largest. But in North Carolina, in particular, we are both very, very strong in the lead positions, and we have been traditional partners. So some of these conversations were back before our consortium with Acciona. So it's just a specific situation in North Carolina. Unknown Executive: There's no more questions from the web. Juan Cases: Any further questions? Okay. Excellent. So thank you very much, everyone, for coming and joining on the phone. Look forward to any questions on an ongoing basis with the next days or weeks. Thanks a lot.

36天前Insight Analytics约5分钟阅读

WWW 2025 Q4 财报电话会议

Operator: Greetings, welcome to the Wolverine World Wide, Inc. Fourth Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star and the number 1 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. You may begin. Jared Filippone: Good morning, welcome to our fourth quarter fiscal 2025 conference call. On the call today are Christopher E. Hufnagel, President and Chief Executive Officer, and Taryn L. Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the fourth quarter and full year 2025, and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business and constant currency revenue growth rates, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our investor relations page on our website, wolverineworldwide.com. I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for fiscal year 2026, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis, unless otherwise stated. With that, I will now turn the call over to Christopher E. Hufnagel. Christopher E. Hufnagel: Thanks, Jared. Good morning, everyone, and thank you for joining us on today's call. The fourth quarter marked the conclusion of a good year for Wolverine World Wide, Inc. We made substantial progress in advancing our strategy and further transforming the company while delivering solid financial results in the process. We delivered high-quality revenue growth in line with our value creation model, led by Merrell and Saucony, our two biggest brands. Merrell drove high single-digit growth for the year, while Saucony posted a record year with a 30% increase compared to 2024. I am pleased with how our global teams navigated a turbulent year, executed our strategy with pace and distinction, and delivered top and bottom-line results that exceeded our expectations, highlighted by annual adjusted earnings per share up over 50% compared to the prior year, and further progress in strengthening our balance sheet. As we turn the page to the new year, I believe our brands, company, and team are better and stronger. Brand awareness and affinity are turning positively for Merrell, Saucony, Sweaty Betty, and Wolverine. We have taken market share in important categories. We have made encouraging progress in our DTC business, and we have well-defined plans in motion to again deliver mid-single-digit top-line growth, supported by our current order book, while continuing to expand profitability in the year ahead. Even with tariffs, and as we continue to responsibly invest in product innovation, demand creation, and modern tools and capabilities to drive the business this year and into the future. I want to start this call with an update on our biggest brands, their recent progress, and their plans for this year. Beginning with Merrell. Merrell remains focused on modernizing the outside, developing more athletic, style-led, versatile performance and lifestyle footwear while elevating the brand around the world. In the fourth quarter, Merrell grew revenue 5% with balanced growth across regions and channels. Notably, DTC inflected the growth with revenue up mid-single digits, even as we were less promotional in stores and online. The brand once again took market share in the U.S. hike category. Underpinning these results, we saw increases across key brand health metrics to finish the year, a positive indicator for the work we are doing to build better brands. Merrell's key performance franchise, the Moab Speed 2, nearly doubled sell-through year-over-year at U.S. Retail in the quarter, while the Moab 3 also continued to deliver solid growth. The Agility Peak 5 contributed good growth in trail running as well. Similar to key performance franchises, the brand's latest expression of versatile lifestyle footwear, the Wrapt collection, continued to grow rapidly, with the iconic Jungle Moc also delivering solid growth. In 2026, Merrell plans to deliver newness across its key performance and lifestyle franchises, including fresh colors and materials, seasonal energy drops, and new styles to bolster the collections. Just a few weeks ago, the brand launched the new Agility Peak 6, delivering better fit, stability, and traction within the trail run category. Early sales are tracking very well relative to our expectations. Merrell also expects to introduce the new SpeedARC Peak later this summer, leveraging the brand's highly innovative and visually disruptive SpeedARC technology to further strengthen its trail run offerings. With positive momentum and a strong product pipeline, Merrell's entering the new year with an enhanced marketing strategy and demand creation plan for record investment to further elevate the brand. Next week, the team anticipates launching a new global platform, unifying its storytelling under one umbrella and advancing the brand's powerful purpose: to share the simple power of the outside with everyone. To entrench the brand's role in outdoor performance footwear, Merrell has secured title sponsorships of the Skyrunner World Series and Skyrunner National Series in the U.S., encompassing more than 20 of the most elite trail running races globally. In addition, the brand plans to build on its key city strategy in Tokyo and Paris, adding London and New York, with a focused blend of integrated events, activations, and retail presentations. Merrell celebrates its 45th anniversary in 2026, and we expect this to be a milestone year for the brand. Shifting to Saucony. Saucony is uniquely positioned as a disruptive challenger brand at the intersection of the two of the fastest-growing categories in the market: performance and lifestyle running. To conclude the brand's record year in 2025, Saucony drove broad-based revenue growth across categories, regions, and channels, a total increase of 24% in the fourth quarter. Performance, the majority of the brand's business, was up over 20%, with lifestyle growing even faster. In the biggest quarter for DTC, the channel grew mid-teens. Importantly, Saucony saw further increases across brand health metrics, especially with runners. The brand continues to lead with pinnacle innovation with an Endorphin collection for elite runners, which again drove strong growth year-over-year at U.S. Retail in the quarter. The brand's core four franchises, the Ride, Guide, Hurricane, and Triumph, aimed squarely at the broader casual running opportunity, continue to contribute good growth as well. On the lifestyle side, Saucony continues to inject energy into the brand around the world. This past fall, the brand launched collaborations with Jae Tips and Engineered Garments, among others. In December, Saucony partnered with culture-shaping powerhouse, Westside Gunn, and influential retailer, Kith, to release a very special collaboration at Art Basel. The drop, featuring the Pro Grid Triumph 4, garnered global attention and drove record traffic to saucony.com and sold out in minutes. The brand continues to have a voice in the cultural discourse, in addition to innovating in performance running, and has strong plans in place once again for 2026. This year, Saucony expects to deliver new iterations for each of its core four franchises, starting with the Ride 19 launch last month, which has immediately become a top seller on saucony.com. With this year's updates, the Triumph 24 and Hurricane 26 are both slated to get new proprietary Incredilux foam, a high-end compound that delivers a luxurious ride with enhanced energy return, cushioning, and durability. Just 25 days ago, Saucony brought to market what we expect to be its biggest debut launch of all time to date, the all-new Endorphin Azura, fueled by a fully integrated global activation plan. The Azura is a lightweight super trainer with innovative geometry and advanced energy return foam to help the runner go fast every day, and delivers all this innovation for $150. The shoe represents a meaningful incremental opportunity for the brand and has been highly anticipated and well received by the market and consumers. At this early stage, demand at saucony.com is already far ahead of forecast, and sell-through at retail, both here and abroad, has been exceptionally strong. On the lifestyle front, the Pro Grid Omni 9, Ride Millennium, and other key silhouettes are planned to see fresh colorways and materializations this year. The brand once again anticipates an impactful lineup of collaborations, including additional drops with Westside Gunn, Misses New York, Engineered Garments, and others. In addition, Saucony anticipates reintroducing archive styles like the Grid Paramount, Kinvara 1, and Gripper at Tier Zero retail to continue to drive newness and influence at the very top of the distribution pyramid. To capitalize on the momentum we have built, we plan to step up Saucony's brand-building efforts in 2026, making our largest annual marketing investment ever in the brand. Saucony plans to continue to sponsor key events like the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K, and new this year, the Berlin 10K. Coming stateside with the Love Run Philadelphia Half Marathon in March, as well as organize its own events like The Maze, a series of exclusive run club races with recent installments in Seoul, New York City, and London. In addition, the brand anticipates expanding its key city strategy from Tokyo and London into Paris, with continued events and activations and the planned opening of a new pioneer store in Paris later this year. While we are investing in growing awareness and fueling brand heat, we continue to strengthen the brand's ground game as well, driving sell-through with point-of-sale and co-op activations and enhanced field support. Saucony possesses a significant global opportunity and continues to see momentum around the world. The brand has been able to marry performance and culture in a unique and compelling way, and we expect another year of double-digit growth in 2026. I now like to spend a few minutes on Sweaty Betty and Wolverine, two brands that gained traction as we closed the year. Starting with Sweaty Betty. The brand is focused on solidifying its positioning as one of the original activewear brands centered around empowering women through fitness and beyond. The brand drove mid-single-digit revenue growth in the fourth quarter, completing a full year of quarterly sequential improvement in year-over-year revenue performance. 2025 was a pivotal year for Sweaty Betty as we reset the brand strategy. Encouragingly, the brand has built momentum in the U.K., enhancing our product offering with more newness and driving the acceleration of DTC growth in the critical fourth quarter. We also made progress on expanding the brand's distribution outside of the U.K. with priority retailers and partners across Europe and into Asia Pacific. Importantly, we successfully strengthened the brand in its positioning, seeing meaningful gains in the fourth quarter across key brand health metrics, especially with younger consumers, the fifth consecutive quarter of improvement. Looking ahead to 2026, Sweaty Betty's product line continues to get stronger, powered by increased newness, better category diversification in outerwear and new bottom silhouettes, and a more focused strategy to go to market with greater impact. The brand storytelling continues to become bolder and more distinctly Sweaty Betty as well, in part with the launch of its new Born Sweaty campaign just last week. Finally, the brand is making good progress in evolving its global distribution footprint to scale more effectively and more efficiently over time. As a result, Sweaty Betty is well positioned to build on momentum in its home market, and it is seeing early benefits of expanding its international partnerships. While the U.S. reset that we initiated in the third quarter of last year remains a near-term headwind as the brand establishes a healthier foundation for future growth. Finally, closing with our namesake brand, Wolverine. The Wolverine brand finished the year a little better than we anticipated entering the fourth quarter, down approximately 11%. As we shared in November, the brand's performance has taken longer than anticipated to turn around. However, I believe we diagnosed the challenges and appointed the right leadership to effectively run a better brand and business moving forward. I am encouraged by both the progress we have made recently and the early results we are beginning to see in the marketplace. The product pipeline, which candidly had become tired, has improved. The team focused on developing more trend-right silhouettes to resonate with evolving consumer preferences, boosting innovation to strengthen more premium product offerings, and architecting better segmentation in the marketplace. The Rancher collection, with the Rancher Pro at a premium price point, has enabled the brand to capture opportunity in the important Western work category and drove significant growth at U.S. Retail in Q4. The Infinity System, the brand's pinnacle expression of its performance comfort technology, launched mid-year and performed well in the back half of the year. As a result of both new innovation and newfound strength in core offerings, the brand began to take back market share and work boots in the fourth quarter, our strongest quarter of share gains in nearly five years. In 2026, the team plans to build on this momentum, bolstering the brand's premium assortment further with the Loader franchise, extend its Western work offering into lifestyle with the new Wheatland collection, and expand its Infinity System technology with new iterations of the Alpha Infinity. Wolverine is stepping up its demand creation as well, investing up and down the marketing funnel. To expand reach, the brand partnered with country music star Jordan Davis throughout 2025 and was an exclusive presenting partner for Season 2 of Paramount+'s hit series, Landman. Partnership helped deliver tens of millions of impressions for the brand and drove new consumers to wolverine.com. The brand also enhanced its presence in social media. We are actively collaborating with influencers to support programs like the launch of the Infinity System and Landman, and have initiated a host of additional in-store Landman activations with key retailers. Encouragingly, the brand saw increases across key brand health metrics to close the year. With the product beginning to check and marketing efforts amplified, Wolverine's focus is now on recalibrating the marketplace, balancing inventories at retail and better aligning distribution to the brand's more premium leadership positioning. We expect this recalibration will take a couple of quarters, but we are seeing good progress as we enter the new year and anticipate Wolverine will deliver flat revenue in 2026 compared to 2025. I'd like to hand the call over to Taryn L. Miller to take you through our results for the fourth quarter and full year, along with our outlook for 2026 in more detail before I provide some key takeaways to close our prepared remarks. Taryn? Taryn L. Miller: Thank you, Chris, and welcome everyone. In 2025, we executed our strategy by advancing our product pipeline, accelerating marketing activation, and strengthening operations to support profitable growth. We delivered revenue growth, expanded margins, and further strengthened the balance sheet while navigating a dynamic trade policy environment. This performance reflects disciplined execution and positions us for sustained growth in 2026. I will start today with our full year 2025 results, then cover fourth quarter performance, and conclude with our outlook for 2026. Fiscal 2025 revenue was $1.874 billion, an increase of 7% compared to 2024 on a reported basis. Revenue increased 6% on a constant currency basis as foreign currency provided a $14 million benefit. Additionally, the 53rd week contributed approximately 70 basis points to revenue growth, with the benefit largely concentrated in the DTC channel. Gross margin was 47.3%, an increase of 300 basis points compared to the prior year, with the improvement largely driven by lower supply chain costs and a favorable mix shift towards more full price sales. The timing benefit from tariff mitigation efforts, net of higher tariff costs, provided a 50 basis point positive impact. Adjusted operating margin was 9%, an increase of 170 basis points compared to the prior year. Adjusted diluted earnings per share increased 53% to $1.35, compared to $0.88 in 2024. I will now take you through the highlights from our fourth quarter. Revenue was $517 million, above the $506 million midpoint of our guidance. The over delivery was driven primarily by the Active Group, with the Work Group also performing slightly better than expectations. Reported revenue growth was 5% compared to the prior year, or 3% on a constant currency basis, with foreign currency providing an $8 million benefit. The following channel, segment, and brand performance is provided on a constant currency basis. Wholesale revenue increased 3% compared to the prior year, driven by international growth. While the U.S. was approximately flat, as Wolverine and the broader Work Group continued their marketplace reset. DTC revenue increased 4% compared to the prior year, including the benefit of the 53rd week driven by the strength in EMEA and solid performance in the U.S. at Merrell and Saucony. Active Group revenue increased 10% in the fourth quarter, ahead of our guidance of high single-digit growth, while Work Group revenue declined 12% and was slightly better than expected. Merrell revenue increased 5% in the quarter, driven by strong wholesale performance in EMEA and in the U.S., supported by continued market share gains and its key city strategy. DTC returned to growth both in the U.S. and internationally, following a successful holiday season. Saucony revenue increased 24% in the quarter, driven by strong growth in both the U.S. and internationally. Double-digit wholesale growth was supported by continued positive sell-through at retail. DTC grew in mid-teens, and both performance and lifestyle categories delivered meaningful gains. Sweaty Betty revenue increased 5% in the quarter, driven by growth in EMEA, DTC, and wholesale. Results were supported by product newness, strength in outerwear, expanded international wholesale distribution, and the benefit of a 53rd week, partially offset by the brand's ongoing reset of the U.S. market to a more premium DTC business. Wolverine revenue declined 11% in the quarter, reflecting the ongoing U.S. marketplace recalibration. Retail sell-through trends were encouraging and supported market share gains, underscoring the brand's building strength in its core boot category. Consolidated gross margin for the fourth quarter was 47%, an increase of 340 basis points compared to the prior year and 70 basis points above our expectations. The year-over-year improvement reflects continued product cost savings, a favorable mix shift toward more full price sales, and an 80 basis point timing benefit from our tariff mitigation efforts net of higher tariff costs. Adjusted operating margin was 11%, an increase of 110 basis points compared to the prior year and 50 basis points above our expectations. The improvement was driven by a continued gross margin expansion, which more than offset strategic investments and higher incentive compensation. As a result, adjusted diluted earnings per share increased 13% to $0.45, compared to $0.40 in the prior year and exceeded our outlook of $0.39–$0.44. Turning to the balance sheet. In 2025, we built on the progress made over the past two years, delivering solid cash flow, further strengthening the balance sheet, and improving financial flexibility. Operating free cash flow in 2025 was $126 million, above the $90 million midpoint of our guidance, largely due to working capital timing. Improved profitability and better-than-expected operating free cash flow enabled us to reduce net debt by $81 million in 2025, ending the year at $415 million. As a result, we exited the year with bank-defined leverage of 2 times. Approximately 90% of our gross debt is now comprised of senior notes maturing in 2029, providing us with a well-positioned and flexible maturity profile. During the fourth quarter, we opportunistically repurchased approximately $15 million of our common stock at an average price of $16.13. The repurchase was intended to offset dilution from stock-based compensation and had no impact on 2025 earnings per share. We ended the year with approximately $135 million remaining under our current share repurchase authorization. Turning to our outlook for 2026, which is anchored in a focused strategy to sustain momentum in our largest brands, while continuing to drive more consistent performance across the rest of the portfolio. For full year 2026, revenue is expected to be in the range of $1.96 billion–$1.985 billion, representing reported growth of approximately 5.2% at the midpoint. This includes an estimated $14 million foreign currency benefit compared to the prior year. The absence of the 53rd week is expected to be an approximately 70 basis point headwind to revenue growth, with the impact largely concentrated in our DTC business. On a constant currency basis and excluding the 53rd week in 2025, we expect revenue to grow approximately 5.2% at the midpoint. In terms of phasing for 2026, we expect revenue growth to be slightly more first half weighted, with the majority of the foreign currency benefit expected in the first quarter, while the fourth quarter comparison reflects the absence of the 53rd week that benefited 2025. The following segment and brand outlook is provided on a constant currency basis. Active Group revenue is expected to increase mid-single digits, and Work Group revenue is expected to be approximately flat. Merrell revenue is expected to increase mid-single digits, supported by new product launches, including the Agility Peak 6, refreshes across core franchises in modern colorways and materials, and disciplined marketing investments. We also expect improved DTC performance, with the momentum generated in the fourth quarter carrying into the new year on a healthier foundation. Saucony is expected to drive outsized and broad-based growth in the low to mid-teens, with gains across both performance, which makes up the majority of the brand's revenue, and lifestyle. In performance, the recent Endorphin Azura launch and the planned refresh of all the four franchises in 2026, supported by continued marketing investment and ground game activations, are expected to drive global growth. Lifestyle growth is expected to be led by international markets, particularly in EMEA, where we are seeing healthy demand supported by key city activations. In the U.S., following expanded distribution, 2026 is focused on optimizing the footprint through sharper assortments and marketing to support full price sell-through and sustainable long-term growth. Sweaty Betty revenue is expected to decline low single digits, with growth in its EMEA DTC business and expanding distribution in select international markets, more than offset by the absence of the 53rd week and the ongoing transition of its U.S. business toward a more premium DTC model. Within the Work Group, Wolverine revenue is expected to be approximately flat, with performance anticipated to improve in the second half of the year as the brand continues to recalibrate the U.S. marketplace and the benefits of improved product and marketing builds throughout the year. Before turning to gross margin, I will walk through the tariff assumptions underlying our outlook. Our 2026 guidance reflects the continuation of the tariff rates that went into effect in August 2025. Based on that assumption, we now estimate the full year unmitigated impact from higher tariffs to be approximately $60 million, or an incremental $50 million versus 2025. Any tariff rate reduction would impact the second half of the year. If the recently announced 15% tariff rate were to be implemented and remain in place through the end of 2026, we estimate it would reduce the 2026 tariff impact by approximately $5 million–$7 million relative to our current guidance. We are closely monitoring recent trade policy developments. We will evaluate potential changes as clarity improves. Gross margin is expected to be approximately 46%, down 130 basis points compared to 2025. The decline is being driven by higher tariff costs, an estimated 300 basis point unmitigated impact, partially offset by pricing and other mitigation actions, a favorable mix shift towards more full price sales and product cost savings. Adjusted operating margin is expected to be approximately 9.1%, up 10 basis points compared to last year, reflecting the impact of higher tariffs on gross margin that is anticipated to be more than offset by operating leverage from revenue growth, cost discipline across the organization, and continued efficiency improvements. We continue to make disciplined investments in our brands, primarily in marketing and key capabilities. Interest and other expenses are projected to be approximately $23 million, down from $28 million last year due to the reduction in net debt. The effective tax rate is projected to be approximately 18%. As a result, adjusted diluted earnings per share is expected to be in the range of $1.35–$1.50, compared to $1.35 in 2025. We have not assumed any future share repurchases in our 2026 outlook. Operating free cash flow is expected to be in the range of $105 million–$120 million, with approximately $20 million of capital expenditures. Moving to our first quarter outlook. Revenue is expected to be in the range of $445 million–$450 million, representing reported growth of approximately 8.5% at the midpoint compared to the prior year. On a constant currency basis, revenue is expected to increase 5.1% at the midpoint, with most of the full-year foreign currency impact anticipated to occur in the first quarter. Active Group revenue is expected to be up high single digits, and the Work Group is expected to be down mid-single digits compared to the prior year. Gross margin in the first quarter is expected to be approximately 47.5%, down 10 basis points compared to last year. This includes an approximate 260 basis point unmitigated tariff impact. First quarter gross margin is expected to be higher than the full year average, as Q1 typically benefits from favorable channel mix. As the year progresses, tariff impacts are expected to become more pronounced, while the year-over-year benefit from mitigation actions implemented in the second half of last year is anticipated to moderate. Adjusted operating margin is expected to be approximately 6.6%, an increase of 30 basis points compared to last year, as pricing, product cost savings, and SG&A leverage are anticipated to more than offset tariff headwinds. Adjusted diluted earnings per share is expected to be in the range of $0.20–$0.22, compared to $0.19 last year. In summary, 2025 was a year of meaningful progress. We delivered revenue growth, expanded margins, generated strong cash flow, and strengthened the balance sheet, while continuing to invest in our brand-building model and the capabilities that support consistent execution across the portfolio. We look ahead to 2026, we recognize the operating environment remains dynamic. While there is more work to do, our strategy is sound, our investment priorities are clear, and we enter the year from a stronger financial and operational foundation. With that, let me turn the call back to Chris before we open it up for questions. Christopher E. Hufnagel: Thanks, Taryn. In the year ahead, we anticipate building upon the good work we have done to date and continue to transform the company to become great builders of global brands. We are focused squarely on building awesome products, obsessing over design to deliver innovative, trend-right performance and lifestyle products that help make our consumers' lives better. Telling amazing stories, amplifying marketing activations to raise our brand's awareness and deepen our emotional connections to consumers, and importantly, driving the business each and every day. I am pleased the heavy lift of the turnaround is behind us with our transformation now well underway. Our balance sheet is stronger and our business is much healthier. Our streamlined portfolio, enabled by our platform of lean centers of excellence, is focused on brands rooted in authenticity, product innovation, and category leadership. We believe our brands are well aligned with long-term macro consumer trends at their core and uniquely positioned to extend into broader adjacent lifestyle opportunities. Our biggest brands are growing around the world, and Sweaty Betty and Wolverine are getting better each day. Finally, our teams are motivated, aligned, and squarely focused on our consumers in executing our brand-building model with pace and distinction, working together as One Wolverine to make every day better. I would like to close by expressing my sincere thanks to our teams around the world for their work last year, not only delivering solid financial results, but also building better brands and a better Wolverine World Wide, Inc. in the process. You have been great, and I am excited to see what we can do together in the year ahead as we write the next chapter in our company's history. With that, thank you to all for taking the time to be with us this morning, and we will now open for questions. Operator? Operator: At this time, if you would like to ask a question, press star, then the 1 on your telephone keypad. To withdraw your question, simply press star 1 again. We kindly ask that you limit yourself to 1 question and return to the queue for any follow-ups. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jonathan Robert Komp with Baird. Please go ahead. Jonathan Robert Komp: Hi, good morning. Thank you. I want to ask about the outlook for Saucony for the year. A very healthy growth projected again. Could you give a little more context specifically on the domestic business, the drivers that you see across performance and lifestyle? If you could, any color on how distribution might play out year-over-year for the year, any color there? Just separately, unrelated question on tariffs. Are you changing any of your practices given the ruling with IEEPA tariffs? Are there scenarios that you accelerate any purchases or try to take advantage of lower rates here temporarily? Thank you. Christopher E. Hufnagel: Sure. Thanks, John. I will tackle the Saucony question first, and then we can talk about tariffs at the end. Saucony remains, I think, a very compelling growth story in total. Following a record year in 2025, we are looking at low to mid-teen growth in 2026, and that growth is really broad-based, performance and lifestyle, domestic and international. Performance piece is a very encouraging part of that business, the biggest piece of the business. We just launched the Endorphin Azura, which we think is going to be the biggest debut launch in the history of the brand at this time, and we are refreshing the brand's core four franchises, the Ride, Guide, Triumph, and Hurricane. The Ride just launched, and it is well ahead of our expectations out of the gate. We are coupling a very strong product pipeline with a record year of investments, going after our key city strategy and doubling down, because that has proved very beneficial around the world. Sponsoring events, the London 10K, the Shoreditch Half Marathon, the Eiffel Tower 10K, adding the Berlin 10K, and then bringing it stateside with the Philadelphia Love Half Marathon, and then our own events, like The Maze. Going further with the Run as One campaign, and then importantly, investing in the ground game, in POS and activation at retail, so we can do better on the sales floor where consumers are engaging in the business. On the lifestyle side, it is a strategically important piece of the business, but smaller than the performance piece in total, and going to grow this year. After a very good year last year, domestically, we gained 130, 140 basis points of market share in lifestyle in the U.S. respectively. We remain encouraged by that. Key styles are the ProGrid Omni 9, the Ride Millennium, and then importantly, a really strong cadence of collaborations again this year. Westside Gunn, Minted New York, Engineered Garments, and they are really targeting that Tier Zero account base, which we have had success with. Regional strength, I think it is important to note, it is not just a U.S. story. Very strong growth in EMEA. Pleased with how we are doing in China, and Asia Pacific as well. Encouraging trends relative to our DTC business. I think in total, if you are looking to evaluate the Saucony story, you have to look beyond a category or a channel and look at the global growth we are trying to drive at a sustainable level, and I think we are pleased with the progress. As it relates to your question about the domestic business, the lifestyle piece, like I noted, is a smaller piece of the business, albeit important. We expect lifestyle to drive growth internationally this year, and it is expected to grow faster than the performance piece of the business. There has been a lot of attention paid to that U.S. athletic specialty channel, which we talked about on the last call. We anticipate doors this year, while it will be down to second half of 25, will be flat from the first half of this year to the second half of this year, as we have taken the learnings from that rollout and applied them going forward. I think in total, we remain bullish on the Saucony prospects. Obviously, very pleased with an all-time record year last year, and then to be able to guide to low- to mid-teens growth this year and to see that growth really broad-based. There is not one category, one channel driving the growth. It really is across the board. Very optimistic about the Saucony brand, what we can go do. I still maintain, I think there is a great global potential for that business to be a very big, powerful player in the category and certainly very meaningful to Wolverine World Wide, Inc. in total. As it relates to tariffs, I will let Taryn talk a little bit about that, but obviously, it remains a very fluid situation. Obviously, with the Supreme Court decision late last week, and then the news out of the administration at the end of last week and then this week, we continue to monitor it. I am very pleased with how we reacted to tariffs coming out of Liberation Day last year. I think the muscle we built in the turnaround, how we worked to be nimble and agile and work collectively together as One Wolverine helped us navigate a very turbulent year last year. I am really pleased with the work that we did across the organization, the brands, the corporate centers, our global supply chain, and how we navigated that. I think we will continue that forward into this year as well. We are staying very close to it. We are trying to glean as many insights as we can on a daily basis and then work to move the organization appropriately to make sure we can both protect and deliver consistent results for the shareholders. Taryn L. Miller: John, as Chris noted, the tariff environment does remain dynamic, but our mitigation strategy, which you asked about, is unchanged, and it builds on the actions that we began in 2025 and that we are advancing further in 2026 as it relates to the pricing actions, the product cost savings, the focus on that full price discipline and discretionary savings. Our mitigation strategy is unchanged. Specifically, to your question about any planned acceleration of inventory, I would say, given the recent change to the 15%, the incremental tariff that was communicated, not implemented yet, and the continued policy uncertainty, we are not planning any material changes to our normal inventory receipts at this time. Christopher E. Hufnagel: That is all very helpful. Thank you. Thank you, John. Operator: Your next question comes from the line of Mitchel John Kummetz with Seaport Research. Please go ahead. Mitchel John Kummetz: Yes, thanks for taking my questions. Chris, on Saucony, the plan for 2026 U.S. lifestyle, it was not clear to me in your response to Jonathan's question if you expect U.S. lifestyle to be up for the year. I know you talked about the door count, which is helpful. I am curious what you are seeing in those go-forward doors that you added last year that you are continuing to sell into. Are you seeing growth there? How are you seeing that? Are they taking more product? Are they taking a broader assortment? I do have a follow-up. Christopher E. Hufnagel: Thanks, Mitch. I think we continue to see strength in U.S. lifestyle around the lifestyle assortment that we have. Again, the majority of doors that we opened over the past couple of years, those doors have checked and met expectations. A subset did not, and we are working quickly to rationalize those doors to make sure that the learnings that we have taken, we can apply to go-forward doors, and build a base from which to grow again. U.S. lifestyle globally will be up for the brand this year, and we anticipate it being up for this year. U.S. lifestyle will contract this year, just based on lapping that door count. We view that as a one-year lapping that door expansion, and then moving forward and building a healthier base going forward. Mitchel John Kummetz: You mentioned some things happening at sort of Tier Zero accounts. I am curious, you mentioned some franchises, so I was not clear to me what those were. Look, when you think about your lifestyle business, sort of Retro Tech versus classics, are you seeing, like, at the Tier Zero level, are you seeing more momentum in one or the other? If there is potentially, like, an uptick in classics, does that mean much in terms of eventually that translating to more mainstream lifestyle accounts? Christopher E. Hufnagel: That is a great question. I appreciate you asking about fashion and trend because that is really what we are competing in this piece of the Saucony business. Retro Tech remains healthy. I think three of the top five styles in the fourth quarter were Retro Tech styles, and I think four of the top five growth styles in the fourth quarter were Retro Tech styles. It remains a healthy piece of the business. At the same time, we are gaining share in that category, up over 100 basis points in both. I think we are thinking about where the world moves next and then the diversification of the product line. I will be very honest, I am really lucky that Saucony is a 100-plus-year-old brand that has an amazing archive from which to pull from to react to trends. Not all brands have that privilege, we do. We are trying to bring newness and diversification to the line. I think Tier Zero, those great retailers, those trendsetters that edit and curate where the world moves, they are thinking about what is next and what can be next, and we are showing them other products from the archive that are certainly resonating with them. It does not mean that the big commercial opportunity in Retro Tech is over because we are still capitalizing on that. At the same time, we have to make sure that we stay in tune to where trend and fashion is going and out in front of those retailers, and importantly, the very influential customers they serve. Mitchel John Kummetz: That is helpful. Thanks. Christopher E. Hufnagel: I am getting choked up, I am. Operator: Your next question comes from the line of Peter Clement McGoldrick with Stifel. Please go ahead. Peter Clement McGoldrick: Hi, good morning. Thanks for taking my question. I was curious if you can help us think about the makeup of revenue growth in 2026. It is really encouraging to see the improvement in DTC. Can you quantify what is embedded in your DTC outlook and the pace of direct consumer engagement across your brand portfolio? Taryn L. Miller: As regards to DTC, we talked about the improvements that we saw in the fourth quarter, as that has been a focus in terms of improving the performance in the holiday season, and encouraged by the improvement we saw in that fourth quarter. Looking into 2026, we did not give specifics in terms of DTC versus wholesale, but I would say that we would expect growth in both DTC and wholesale contributing to the business. Peter Clement McGoldrick: Could you give any color across the brands, is it Merrell or Saucony leading that, any outsized performance relative to the brand guidance that you represented for 2026? Taryn L. Miller: I would not call any specific brand out. The approach that our team is taking, Chris talked about how we are looking across the portfolio when we are building out capabilities, and the team came together and demonstrated that in the fourth quarter, looking into the holiday, in terms of what were the learnings that we are applying, whether it is Saucony, whether it is Merrell, whether it is Sweaty Betty, or the Work Group. We have a healthier foundation in total across the business. As I look at DTC, the only thing I would call out is DTC in the fourth quarter of 2026 will have an absence of a 53rd week. As I said in my prepared remarks, the 53rd week does have a bigger impact on DTC, given just the nature of that business model of always on when you think of e-commerce and in the stores. Peter Clement McGoldrick: Okay, very helpful. Thank you. Christopher E. Hufnagel: Thanks, Peter. Operator: Your next question comes from the line of Anna A. Andreeva with Piper Sandler. Please go ahead. Anna A. Andreeva: Great. Thank you so much for taking our question. Nice results. To Taryn, on the guide for 2026. You guys have been in investment mode for, I guess a good portion of two years now. Can you break down the sources of leverage implied in the 2026 guide? How should we think about marketing within that? I think you mentioned a marketing campaign at Saucony coming up. Can you just talk about the durability of SG&A leverage in the context of your longer term margins? Chris, sorry if we missed this, on Sweaty Betty growing mid-single digits in 4Q, how did the business perform in the core markets in the U.S. and U.K.? I think you said still in the reset mode in the U.S. Maybe talk about specific initiatives to return the brand to stabilization and then growth. Thank you so much. Christopher E. Hufnagel: Sure. I will go first, and answer the Sweaty Betty question, and then have Taryn talk to you about investment and leverage. I think we are pleased with Sweaty Betty's performance in the fourth quarter. We the business. Again, I think the important thing is how we have redefined and reset that strategy, really focusing on the home market. I think that the business checked in the fourth quarter, we are pleased, less promotional. I think the messaging is resonating. We are seeing increases in brand health metrics, and then importantly, we are seeing new category diversification working well for that brand. Outerwear, new bottom silhouettes are certainly encouraging. In the U.K., which is a fairly tough trading environment right now, and certainly a fiercely competitive category in which that team operates. Pleased with the product pipeline, pleased with the DTC performance, pleased that the heavy lift of the integration is now behind us, and that team is really laser-focused. I think this year, moving forward, I spent time with the team just a couple of weeks ago reviewing product and marketing, and I think that they are very well lined up and situated really well for this year, both on the product piece, but it is really getting back to their distinctive voice, this distinctly Sweaty Betty, this rebellious roots. I think that Born Sweaty campaign is a perfect amplification and manifestation of that approach. In the U.S., frankly, after the acquisition, we became very promotional, and it was really damaging to the brand in total, and we did not have the financial wherewithal to make all of the needed investments around the world that were planned. We have worked to reset and retrench that U.S. business, becoming less promotional, becoming more full price, becoming more premium, and thinking about that in the longer term. We are coupling that reset in the U.S. with doubling down on the U.K. business and then plugging Sweaty Betty into our international business and really beginning to grow across EMEA and in Asia Pacific. I am really pleased with the progress that team has made. I am very happy with the strategy and certainly the results in the fourth quarter and how we are thinking about 2026, give me increased confidence about that brand and what it can mean to the portfolio. Taryn L. Miller: Anna, for SG&A, the leverage that we are guiding to in 2026 really reflects the work we have been doing as part of our broader strategy, which is making those targeted investments that we have talked about the last two years in our brands and in our key capabilities to support growth. While we have been making those investments, we have also been continuing to drive efficiencies across the rest of the organization. More specifically, a meaningful portion of the leverage comes from scale efficiencies on that higher revenue base. As we have made those investments in the brand and in those capabilities of growing the revenue, we are getting scale efficiencies there. The leverage from that, from the majority, where we are seeing the leverage is across the majority of our cost structure outside of those four brand-building investments. It is not just one area, it has been broad-based as we have been looking for those efficiencies in the business. We are also benefiting from the targeted cost actions that we took in 2025, that we brought and carried into 2026 on a structural basis. I think how I would summarize it is that SG&A leverage in 2026 is driven by a combination of the scale efficiencies and the targeted cost actions that we have been taking over the last two years, that we had called out that it would be key to our value creation model. The final point regarding your specific question on marketing, we have made over the last couple of years, needed investments into marketing and building that brand awareness, building out the brand building model. I would expect in 2026 that it would remain fairly consistent, as a % of revenue, as where it was in 2025. Anna A. Andreeva: Appreciate it. Very helpful, and best of luck, guys. Christopher E. Hufnagel: Thanks, Anna. Operator: Your next question comes from the line of Mauricio Serna Vega with UBS. Please go ahead. Mauricio Serna Vega: Great. Thank you. Thanks for taking my questions, and congratulations on the results. First question on the Endorphin Azura. Maybe could you elaborate a little bit more on what gives you confidence about this franchise long-term opportunities? Do you think it could drive more distribution over time? The second point more to Taryn, maybe could you talk a little bit more about the cadence of the tariff impact on gross margin? I think you alluded to more meaningful impact or bigger impact as the year progressed. I just want to understand, like, in terms of cadence, like, which quarter should be the most impacted and so forth. Thank you so much. Christopher E. Hufnagel: Sure. Thanks, Mauricio. We are bullish on the Azura. I think the team did a very nice job identifying an opportunity in the marketplace, and then importantly, building a beautiful product that performs. It was really well anticipated by the marketplace, given everything that we had built into it, and all of the initial reaction to it. I think we are even more encouraged by the initial response to it. It is important, it is not just a domestic response, but we are hearing feedback both domestically and globally. Ahead of expectations, a good launch at saucony.com, beginning to feed into retail here in the U.S., and we are encouraged by that. I love the fact that we have, as Saucony, a leader in innovation and bringing elite products to elite runners, our ability to take innovation and democratize that, and identify white space in the marketplace, and then build a beautiful shoe at a $150 price point, is a testament to that product team, and certainly the opportunity we think that it possesses in the marketplace. I do think it opens up additional distribution for us, places that we may not have great exposure to today. Pleased with the Azura. Again, we anticipate it to be the single biggest debut launch in the history of the brand, to date, because we are going to try to do it again. Certainly pleased initially out of the gate, with Azura and what it can mean to the Endorphin franchise and the broader Saucony brand. Taryn L. Miller: To the tariff question and the phasing of that, based on our guidance of approximately $60 million of full-year unmitigated impact, we would expect more of that already coming through in the first quarter, reflected in the guide, that in the first quarter, we said it would be unmitigated around 260 basis point impact to gross margins, and on the full year, around 300. That indicates that the unmitigated impact will start to come through more in the second quarter and into the back half of the year. The reason Q1 is a little lower than the average is primarily related to the composition of the inventory that is flowing through the P&L in the quarter, and that includes some differences in brand mix and sourcing mix as well. Somewhat, to somewhat degree, as you will recall, there were different tariff rates last year, too. Why Q1 is lower is more, somewhat lower, is a combination of that brand mix and sourcing mix. Mauricio Serna Vega: Got it. Is it fair to assume that it goes all the way to Q4 of this year, the tariff impact? Taryn L. Miller: Yes. Mauricio Serna Vega: Thank you. Taryn L. Miller: The $60 million. Mauricio Serna Vega: Yes. Taryn L. Miller: ... like I said, being that 300 basis point impact, we have assumed it through the end of the year. Mauricio Serna Vega: Great. Thank you so much. Christopher E. Hufnagel: Thanks, Mauricio. Operator: Your next question comes from the line of Laurent Andre Vasilescu with BNP. Please go ahead. Laurent Andre Vasilescu: Good morning. Thank you very much for taking my question. I wanted to follow up on Saucony. On the last call, it was mentioned that new doors was a third of Saucony's third quarter growth. Curious to know how much it was for 4Q. Then slide 9, it details your global distribution network, but this quarter, it removed a list of key accounts like DTLR, Foot Locker, JD, which was detailed in the three key slides. Curious to know why was that the case? Are there any accounts, Chris, that you are actually exiting for FY 2026? Then I have got a question following up, Taryn, on the FIFO accounting treatment. Christopher E. Hufnagel: Can you repeat the second half of—I got a little lost on the first part of your, the door count question? Laurent Andre Vasilescu: Sure, Chris. For sure, 4Q, what, like, what was the like for like? The second question really was around the fact that your slide nine, in your presentation this morning, it used to give you the list of a key account, and it does not show it. I am curious to know, of that 1,300 doors, are you exiting out any of those accounts? Just if you can, for the audience, can quantify, is it, like, 300 doors, is it 400 doors you are exiting out? That would be very helpful. Thank you, Chris. Christopher E. Hufnagel: We anticipate for U.S. Saucony Lifestyle to be in about 1,000 doors in the first half of 2026 and the second half of 2026. The retailers that make up those door counts include the likes of JD, DTLR, Foot Locker, Champs, Journeys, Nice. That is that expansion, and how we are thinking about those door counts, specifically. Laurent Andre Vasilescu: Wonderful. Thank you, Chris, for answering the question. Appreciate it. Then, Taryn, your 3Q 10-Q shows that 3Q EPS was boosted by $0.02 or about 7%, with the FIFO accounting change, which helped your gross margin, I think about almost 50 bps. Curious to know how much the FIFO change helps your 4Q gross margin and EPS, and how do we think about that change in accounting, as we think about 1Q, 2Q? Because I would think, when you change to FIFO, it is helpful in an inflationary environment with tariffs. Thank you very much. Christopher E. Hufnagel: Thanks, Laurent. Taryn L. Miller: Yeah, Laurent. You will recall that we made the change in the third quarter. Laurent Andre Vasilescu: Yep. Taryn L. Miller: The majority of our inventory was already on FIFO accounting. Actually, earlier in the year, we had had part of when we were looking at how do we simplify, how do we more standardize when we look for efficiencies, part of it was related to the inventory accounting in terms of why did we have it two ways. There was an effort to put the minority of the business in line with the majority of it to move to FIFO, which we did in the third quarter. What is displayed in the tables, and Jared can expand, is just an explanation of if we had not done it. I think what is important to call out is that in the guidance that we gave in November, we had already made that accounting change and contemplated the impact. Laurent Andre Vasilescu: How much— Christopher E. Hufnagel: Yeah, Laurent. Laurent Andre Vasilescu: Yeah. Christopher E. Hufnagel: Yeah. Laurent Andre Vasilescu: Yes. Christopher E. Hufnagel: There will be— Laurent Andre Vasilescu: How much was the benefit? Christopher E. Hufnagel: On four Q? Is that the question? Laurent Andre Vasilescu: Yeah, how much was it for Q4? It will be in the 10-K, obviously, that is, I think it is filed a little later. For the audience, how much was it in terms of EPS benefit for Q4? Christopher E. Hufnagel: Yeah, I would say, obviously, based on our guidance in November, this was already implied, so no impact on results versus guidance. In the quarter, just so you know, we will have a full year table. We provided the tables in 3Q call. Doing the math, it is on the COGS line, it is about $1.4 million or so. Laurent Andre Vasilescu: Okay. Thank you very much. Best of luck. Christopher E. Hufnagel: Yep. Thanks, Laurent. Operator: Your next question comes from the line of Samuel Marc Poser with Williams Trading. Please go ahead. Samuel Marc Poser: Thank you for taking my question. I wanted to follow up on. You say that, well, I am just trying to decipher how much bigger, what percent is the lifestyle business versus the performance business within Saucony? Can you give us some idea of the differential? Christopher E. Hufnagel: We, yeah, we talked about that last call. Performance is the majority of the business or a lion's share of the Saucony business. Lifestyle is a smaller segment. Samuel Marc Poser: At any degree? I mean, is it 60, 40, or, I mean... Christopher E. Hufnagel: We have been consistent. The performance is the lion share of the business in Saucony, Sam. Samuel Marc Poser: Secondly, in the U.S., maybe I am not sure if it is overseas, you have a third party, managing or a third-party sales team selling your lifestyle product. I am wondering why that is and why you have not brought that in-house. Because I think if you had brought that in-house, you might not have had the 1,300 stores, and you might have avoided some issues. Christopher E. Hufnagel: I think that the model which we use, a combination of in-house sales teams, along with agents and agencies, is not unique to us, especially in growing businesses. The partners that we do have, we retained for, they bring a certain expertise to the business. I think we are obviously continuing to evaluate those relationships going forward and get to a normal course of business. I think so far, the relationships have served us well. Samuel Marc Poser: All right. Thank you very much. Christopher E. Hufnagel: Thanks, Sam. Operator: Your final question comes from the line of Ashley Anne Owens with KeyBanc Capital Markets. Please go ahead. Ashley Anne Owens: Hi. Great. Thanks for taking our question. Maybe just to start, given Saucony's low double-digit plan for the first quarter, anything you can say on the guardrails you have set with accounts on initial buys versus chase to ensure that pull, not push model holds through the first half? Secondly, talked a lot about improving that full price mix within the portfolio. As you look at the early 2026 reads, how is the consumer absorbing those higher AURs? Any categories within active that you are seeing greater elasticity? What are the areas you believe you can still lean into some more premiumization? Thank you. Christopher E. Hufnagel: Sure. Thanks for the question, Ashley. I think, as we think about growing the success that we have had in Saucony, where it was two years ago, to posting an all-time record year last year, again, with low to mid-teens growth anticipated for this year, I do think we think really closely about distribution decisions, both domestically and internationally. I think that is a big part of the Saucony story that hopefully is coming through, that it is not just a U.S. story or a single category or a single couple of shoe story. It really is broad-based growth. We do think about that. Accounts that we open up, what we offer them. I think in the past, historically, we probably have not done as good a job as a company as thinking about segmentation, distribution, and who gets what. I think that is part of our new global brand building model and the discipline we have tried to enact over the past couple of years, and that is certainly a piece of that. At the same time, with a global business, we learn a lot. We are always trying to learn both what is happening within brands in different parts of the world, at the same time, sharing learnings from brands across the other brands in the portfolio. I think our EMEA business, I think that team has done a really great job, specifically in Merrell, Saucony, growing those brands, and then certainly think about how they think about the marketplace and distribution and segmentation. Those are all things that we are paying close attention to. We do think we are at a special moment in Saucony's history. Certainly pleased with the progress we have made. At the same time, I think there is a much bigger opportunity that we need to go chase. Taryn L. Miller: Regarding your question on what we are seeing in terms of the market and the pricing action. While our price increases, they have only been in market for a little over two quarters, generally, the market response has been in line with our expectations, and I think that is reflected in we were looking at fourth quarter in the busy holiday season, and that came in line with our expectations in terms of the performance. Across the business, we have taken deliberate actions, and that includes the pricing that you are referring to that offset the tariffs and improve our cost structure. We have also been innovating our products and investing in the marketing so that we can achieve more of that full price selling. I think that that healthier source from product mix, improved full price realization, and the disciplined channel execution that Chris spoke to, all of those, we are looking at contributions in terms of the growth. I would say so far, what we have seen is in line with our expectations. Ashley Anne Owens: Super helpful color. Thank you, and best of luck for the year. Christopher E. Hufnagel: Thanks, Ashley. Operator: That concludes our question and answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

36天前Insight Analytics约5分钟阅读

DIA.MC 2025 Q4 财报电话会议

Alberto Valdes: Good morning, everyone. I'm Alberto Valdes, Head of Investor Relations. Welcome to our full year 2025 results presentation. Before we begin, I would like to draw your attention to the disclaimer regarding forward-looking statements on Slide 2. Today's discussion will include certain projections and non-IFRS metrics that provide a clear view of our underlying performance. Today's presentation will be led by Martin Tolcachir, our Group CEO; and Guillaume Gras, our Group CFO. After their remarks, we'll open the floor for a Q&A session. I'll now hand things over to Martin. Martin, the floor is yours. Martin Tolcachir: Thank you, Alberto, and good morning, everyone. I am proud to present what I believe are truly excellent results achieved in the first year of our Growing every day strategic plan. Looking at the outline on Slide 4, our story today rests on 5 key pillars. Dia Spain is not just on track, it is accelerating the delivery of our strategic plan, and we are now significantly outperforming the market. Dia Argentina has stabilized. After a resilient second half, we are now well positioned to capitalize on the recovery in food consumption expect from 2026 onwards. Dia Spain remains the engine of the Group's financial results, driving substantial margin expansion, multiplying net profits and generating robust cash flow. Our exceptional stock performance in 2025 validates our strong operating performance and solid prospect for profitable growth. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. Now let's talk at this in greater detail. Let's start with Dia Spain and the accelerate delivery of our strategic plan on Slide 6. One year ago, we presented our Growing every day strategic plan, which set out 4 clear targets for leading the market in profitable growth. Our performance in the first year clearly demonstrates that we are not only on track, but exceeding delivery on these targets. We opened 94 new proximity stores, boosting total sales growth to an impressive 8.6%, more than doubling the guidance average rate and increased our adjusted EBITDA margin by 54 basis points to an impressive 6.8%. At the same time, we added to the average capital expended budget, resulting in increased returns on robust deleveraging. As you can see in the next slide, this rigorous delivery is spread across the 4 dimensions of our strategic plan. Our strong like-for-like sales growth, our expanding customer base and improving NPS score is evidence of the positive response by our customers to our improved value proposition. Meanwhile, our franchisee excellent NPS score and our inclusion among Spain's most reputable companies are more than just a source of pride. This enhanced satisfaction and reputation enables us to recruit the best talent to support our operations. Finally, our exceptional share price performance and our surge in liquidity are both powerful market endorsement of our strong results and of our enhanced investor relationship outreach. Let's now move on the main highlights of Dia Spain's operating performance, starting on Slide 8. The rate of sales growth has surged from 5.5% in 2024 to an impressive 8.6% in 2025. Our total sales in Spain reached EUR 5.5 billion. Like-for-like growth reached 7.4%, driven primarily by market-leading volume growth of 5.7%, fueled by an expanding customer base and higher frequency rates. Price inflation was just 1.6%, strategically remaining below general food and beverage inflation and highlighting our commitment to affordability. Finally, despite being in the ramp-up phase, new store contribute an additional 1.2 percentage points to our sales growth. As a result, our total sales growth strongly outperformed the market, enabling us to increase our market share by 12 basis points and consolidate our position as the fourth largest national player and absolute leader in the Proximity segment. Moving to Slide 9. You can see how our customer-centric strategy is promoting loyalty and as a result, sales growth. Our value proposition centers on quality, convenience and affordability, offering a comprehensive and innovative assortment of product and the freedom to choose from leading brands. Thanks to our commitment to quality and local sourcing, sales of fresh product increased by an impressive 15% and now represent 28% of total sales, a significant 160 basis point increase year-on-year. Similarly, our commitment to offering high-quality Dia brand product at affordable price has driven a 10% growth in this category. These products now account for 59% of our fast-moving consumer goods basket, an impressive 170 basis point increase on 2024 and is evidence of a growing base of loyal customers. Continuing on Slide 10. Loyalty sales account for an impressive 56% of gross sales in 2025, marking a 9% increase. This was driven by an increase in the number of loyalty customers and the frequency of their purchases. It is worth noting that the average purchase frequency and basket size of loyal customers is double that of the non-loyalty customers. In this context, the additional of 200,000 loyalty customers in 2025 is of a great value, bringing to -- the total to 5.8 million. The digitalization of our loyalty base continued to progress rapidly, fostered by our gamification initiatives and exclusive promotions. Currently, 58% of our loyal customers who account for 1/3 of our sales interact with us via the application. This channel is growing exceptionally well. It grew by 13% last year. This growth has been driven by double-digit growth on both our own platform and those of third-parties despite the temporary slowdown experienced by delivery platform while they adapt to the recent riders law. Our digital platform complement our proximity network perfectly, reaching 84% of the population and offering the best service level. Over 90% of the orders are delivered on the same day within a 1-hour time slot. Our digital ecosystem combines the unparalleled speed and convenience of our e-commerce platform with the intelligence of our Club Dia loyalty program. This provides customers with a personalized omnichannel experience and us an outstanding Net Promoter Score of 60 points. Turning now to Slide 11, you can see the progress of our store expansion plan. Our goal is to open 300 new proximity stores by 2029. These stores have been selected from a pool of 1,500 high potential locations identified through our proprietary analytic tool. We are giving priority to areas where we already have a strong presence, such as Madrid, Andalusia, and Castilla y Leon, to further increase our store density and improve our logistic efficiency. By focusing not only on large urban hubs, but also on smaller multi-municipalities, we can capitalize on our capital-light format and thrive in areas where large competitors are less efficient. We are now leveraging our scalable franchise model to accelerate the rollout of these select stores, boosting organic growth and share profitability. In 2025, we opened 94 proximity stores, more than offsetting 38 strategic closure and achieving a net expansion of 56 stores. Our aim is to double net openings in 2026. With over 100 net store opening, we will drive organic growth and further consolidate our position as the market leader in Proximity segment. Most of these new stores, 73% are managed by franchisees who currently represent 67% of our network. These hard-working, experienced entrepreneurs help us to bring Dia value proposition to every neighborhood. They manage the store, growing on their local knowledge while we provide infrastructure, product, logistics and service standards. This specialization ensures complete alignment of interest, maximizing productivity and profitability for both parties. The success of this model is reflected in our franchise impressive Net Promoter Score of 75 points. As shown on Slide 12, the expansion of our store is being supported by the modernization of our logistics network. By 2029, we aim to resize and renovate 6 of our 12 logistics platform, improving their service level and capturing significant operational savings. This follows the successful model of our first renovate platform in Illescas, Toledo. In 2025, we opened a second logistics center in Dos Hermanas, Sevilla and start construction of a third Leon scheduled to open in the coming months. A further 3 logistics platforms are planned for Malaga, Levante and Catalunya in 2027, '28 and 2029, respectively. These new platforms are built to the highest standard of efficiency, productivity and sustainability and enable us to optimize our operating margins. Renovating refrigeration equipment is also helping us to improve our energy efficiency and reduce our carbon footprint. To date, 68% of the logistics network and 24% of our store have been decarbonized. The next slide #13, shows our continued progress on ESG. Here, I am pleased to announce our new sustainability plan to 2029, named The Value in Every Day, which will positively impact all our stakeholders. Having successfully complete all the initiatives proposed under our previous sustainability plan by 2025, we have defined 84 new actions for the next 4 years grouped into 5 categories. Firstly, actions to improve our customer awareness of quality nutrition through strategic alliances with suppliers and nutritional experts. Secondly, action to extend our ESG training programs to all employees and strengthen our inclusive hiring and diversity targets within our meritocratic culture. Thirdly, action we will contribute to the development of urban and rural communities by sourcing locally, creating new jobs, improving accessibility and taking social actions. Fourthly, action to accelerate our decarbonization plan, lift our 0 waste and food waste prevention targets, consolidate our responsible sourcing standards and implement the DRS scheme for packaging recycling. Finally, we will further improve our reporting and disclose enhancing our ESG rating visibility and fostering customer perception and trust. Now let's turn to Argentina's operating performance on Slide 15. Dia has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume, delivering positive adjusted EBITDA and free cash flow and maintaining a robust net cash position. Firstly, we refine our product assortment to increase shelf productivity, and we implement a high-return promotion strategy supported by enhanced communication to stabilize sales volumes. Secondly, we optimize our network by closing underperforming stores, streamline in-store operation and reducing our logistic footprint to cut secondary distribution costs and restore profitability. Finally, in terms of finance, we optimize our inventory levels to free up cash and only invest in maintenance to preserve the business self-financing capacity. The success of these measures is clearly evident in our second half performance metric. Firstly, we achieved 2% like-for-like sales volume growth in the second half of the year, gaining 31 basis points in market share. Secondly, we successfully turned the margin around, moving from minus 0.5% in the first half to plus 1.3% in the second. And most importantly, we moved from a negative cash position to generating EUR 12 million in free cash flow in the second half of the year, ending with robust liquidity. As you can see on Slide 16, we believe the worst is already behind us. While the year-on-year comparison still shows a decline in like-for-like sales volumes, the sequential quarterly trend indicates clear stabilization in the second half of the year. 2026 is set to be a pivotal year for the Argentina, as you can see on the next Slide 17. The Argentinian economy is already showing positive signs with more moderate inflation, a stabilized exchange rate and a solid growth prospect for the coming years. The consolidation of Argentina macroeconomic framework and relative price stability with the bulk of fiscal adjustment now complete, should allow for a gradual but sustained recovery in the household disposable income. This will enable consumers to return to more normal food consumption patterns. In this scenario, our leading position, operational efficiency and financial discipline provide a solid foundation on which to capitalize on the expected recovery in food consumption from 2026 onwards. As you can see in the next Slide 18, our leading market position in Buenos Aires gives us a solid base from which to rebuild growth and profitability. We are the leading proximity food retailer and top-of-mind brand in the Buenos Aires region, thanks to our competitive prices, high-quality products and successful loyalty program. Our balanced assortment includes a high-quality private label, generating close to 30% of gross sales, well ahead of the market average. We offer a high-quality fresh product assortment, combined with guaranteed product availability to meet essential customer needs. Our strong value proposition results in best-in-class consumer satisfaction, as reflected by an impressive Net Promoter Score of 78 points. I will now hand you over to Guillaume, who will briefly explain our financial results. Guillaume Gras: Thank you, Martin. Let's start with Spain's strong financial results on Slide 20, which demonstrate the effectiveness of our strategy. As mentioned earlier, gross sales increased by 8.6% to reach EUR 5.5 billion, while net sales, excluding the franchise margin and value-added tax, grew by 8.2% to reach EUR 4.6 billion. The slight difference in terms of gross and net sales growth reflects a stronger growth rate from franchise-operated stores. Our adjusted EBITDA margin increased by an impressive 54 basis points to reach 6.8%, one of the highest in our sector. This was driven by operational leverage and rigorous cost management, resulting in an 18% increase in adjusted EBITDA to reach EUR 313 million. Finally, I would like to highlight the threefold increase in our net income to EUR 166 million, including EUR 52 million from the recognition of deferred tax assets in the second half of the year. Given the positive net income achieved in the last 2 years and our robust profit forecast, we are well positioned to activate tax assets. Dia Spain still has over EUR 660 million in tax loss carryforwards pending activation. This equates to over EUR 165 million in potential future tax savings, meaning that Dia Spain's effective tax rate will remain below 20% in the medium to long-term. Excluding this tax effect, our net income would have reached EUR 114 million in 2025, doubling that to previous year. Our high profitability also led to strong free cash flow generation, totaling EUR 140 million. This resulted in a significant reduction in net debt, as you can see on Slide 21. Cash flow from operations reached EUR 301 million. This figure includes the recovery of EUR 33 million in tax refunds during the first half of the year, following the official removal of the regulatory cap on certain tax deductions. Net CapEx totaled EUR 161 million during the period, representing a 60% year-on-year increase linked to the execution of our store expansion plan. Following the refinancing of our debt in December '24, which provided the stable framework needed to execute our 5-year strategic plan, net financial payments totaled EUR 61 million. As a result, we achieved a net debt reduction of EUR 79 million. This represents a 24% decrease compared to the end of 2024, bringing the total down to EUR 251 million. You can see this on the next Slide #22. The company boasts a set of solid credit metrics. Firstly, it has a low financial leverage with an adjusted net debt-to-EBITDA ratio of just 0.8. Secondly, it has a long-term financing structure with no significant debt repayments until 2029. And thirdly, it has a solid net cash position of EUR 295 million at the end of 2025. These robust credit metrics offer ample flexibility to support accelerated growth while maintaining a low leverage profile. Now let's turn to the financial results of Dia Argentina on Slide 23. As previously mentioned, gross sales in Argentina decreased by 15% to EUR 1.5 billion, affected by a 10% decline in like-for-like sales volume and above all, by the translation effects of the 40% depreciation of the Argentine peso in 2025. Net sales mirrored the performance of gross sales, declining by 15% to EUR 1.2 billion before the application of IAS 29 accounting rules for hyperinflationary economies. These rules had negative noncash impact of EUR 104 million. It is important to reiterate that our decisive cost control and financial discipline enabled our adjusted EBITDA margin to recover by 180 basis points to reach 1.3% in the second half of the year. This resulted in a positive adjusted EBITDA and free cash flow of EUR 4 million and EUR 3 million, respectively. As you can see on Slide 24, rigorous working capital management and targeted maintenance CapEx protected our cash position throughout a challenging year. The EUR 27 million working capital inflow was driven by optimizing stock levels, unlocking trapped cash and covering targeting maintenance CapEx, which preserved Dia Argentina's net cash position, almost intact before the foreign exchange took effect. The depreciation of the Argentine peso by 40% in 2025 had a translation effect of EUR 25 million on its net cash position, which closed the year at EUR 61 million. This solid net cash position, together with our rigorous financial discipline, ensures that the business remains self-funded and ready to capitalize on Argentina's expected macroeconomic recovery. Finally, let's conclude the review of the financial results with a brief summary of the Dia Group's consolidated results from continuing operations, on Slide 25. Dia Spain continued to be the driving force behind the Group's growth and profitability. It achieved a 3% increase in consolidated gross sales, reaching EUR 7.1 billion as well as an 8% increase in adjusted EBITDA, reaching EUR 316 million. This resulted in a 30 basis point improvement in the consolidated adjusted EBITDA margin, reaching 5.4%. Notably, our consolidated net income for continued operations more than doubled to a robust EUR 115 million, excluding a EUR 14 million profit contribution from discontinued operations. This relates to the reversal of unapplied contingencies regarding the sale of the Portuguese business in 2024. Conversely, in 2024, discontinued operations contributed a loss of EUR 107 million linked to our exit from Brazil. The company is thus returning to profitability following a successful transformation process that has established its position as Spain's leading supermarket chain in the Proximity segment. It now boasts a robust and profitable business with promising prospects for growth. Finally, the Group's free cash flow reached a robust EUR 143 million. This resulted in a net debt reduction of EUR 51 million, bringing it down to EUR 190 million at the end of the year. Now I would like to draw your attention to our exceptional stock performance in 2025, as shown on Slide 27. This powerful market endorsement is a testament to our strong achievements and solid prospects for profitable growth. Dia's share price has made an extraordinary recovery, rising by 140%, while our average daily liquidity has surged fivefold and is now consistently above EUR 2 million. Our market cap grew from EUR 0.9 billion at the end of 2024 to over EUR 2.1 billion at the end of 2025, releasing EUR 1.2 billion of shareholder value. Despite this impressive performance, Dia is still trading at a discount compared to our peers. Closing this gap should increase our market cap to over EUR 2.7 billion, in line with the current analyst consensus valuation. Our share price recovery and surging liquidity reflects renewed and growing confidence from institutional investors, underpinned by our proactive investor relations outreach. Last year, we executed 14 targeted roadshows in major financial hubs and participated in 10 investor conferences, effectively presenting our new equity story to over 190 high-quality investors. We have added 2 new brokers to our sell-side coverage, and we are actively encouraging new coverage from pan-European brokers to further increase our visibility among institutional investors. We are committed to broadening our investor base and building deeper, long-standing relationships with investors, ensuring that we fulfill our value creation commitments. Now I hand you back to Martin, who will deliver his closing remarks and outlook for 2026. Martin Tolcachir: Thank you, Guillaume. I will now conclude this presentation with some closing remarks on Slide 30 before moving on the Q&A session. The excellent results achieved in the first year of our Growing every day strategic plan validate the success of our proximity model and the strength of our customer-centric strategy. We are delivering robust volume-led like-for-like growth, significantly outperforming the market, while accelerating the rollout of our expansion plan ahead of the schedule. This operational excellence is driving a substantial expansion of margins, a twofold increase in the net income and strong cash flow generation. Looking ahead to 2026, our goals are threefold. Firstly, to maintain our position as the market leader in like-for-like growth. Secondly, to accelerate the rollout of our expansion plan with over 100 net store openings this year. And thirdly, to continue to increase our adjusted EBITDA margin. We will also continue to monitor strategic opportunities in Spain's fragmented market that could generate additional shareholder value. In any case, please note that we only view these opportunities as strictly supplementary to our core organic growth road map, and we won't allow any distraction from it. Meanwhile, Dia Argentina has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume and delivering positive adjusted EBITDA and improving free cash flow in 2025, while maintaining a robust net cash position. Our leading position, operational efficiency and financial discipline give us a solid foundation on which to capitalize on the recovery in consumption expected from this year as the macroeconomic environment normalizes. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. With a significantly strengthened balance sheet and proven proximity strategy, we are now well placed to deliver long-term value. This transition is being increasingly validated by the financial market, as reflected in our exceptional share price performance and enhanced stock liquidity. Thank you for your attention. We are now open to your questions. Alberto Valdes: Thank you for your attention. The Q&A session is now about to begin. To ask a question over the phone, please press the asterisk, then the number 5 on your telephone keypad. As a shareholder, you may also submit questions through the red button on your webcast screen. Once we have verified your ownership, we will answer your question. If we are unable to do so during the session, we will respond directly to your e-mail address. Questions received from analyst covering our stock will be addressed first. Thank you. All right. Here comes our first question from Alvaro Bernal at Alantra. Alvaro Bernal: I have 3 questions, if I may, all related to the 2026 guidance. The first one is regarding sales growth. You have grown at 9% in Spain in 2025, ahead of the 4% to 6% guidance. What do you expect for 2026? If you can provide a mix on volume, price, store opening, it would be very helpful. Second one is regarding margins. You delivered a solid 6.8% margin in Spain. What do you expect for 2026? And what are the drivers of this improvement? And the last one is regarding CapEx in Spain, having in mind that you're accelerating your store opening plan to a targeted 100 net openings in 2026, what can we expect in terms of spend? That's all. Congratulations on the results. Alberto Valdes: Thank you. Very clear questions, Alvaro. I think the first 2 are for Martin. The last one on CapEx, maybe is more suitable for Guillaume. Martin, if you're ready. Martin Tolcachir: Sure. Thank you, Alvaro, for your question. Clearly, 2025, our sales delivered an impressive 8.6% increase, as you mentioned. This performance was built on a robust 7.4% like-for-like, basically supported by volume growth and also an initial contribution of our expansion plan that added 1.2% to the top line. So going to your question on '26, what we can share is that, what we expect is to maintain our market leadership in like-for-like growth. We really think that the value proposition that we are proposing is clearly the one is choose by customers, and we are going to keep our rhythm of like-for-like ahead of the market. On the expansion, what we expect is also overperform the growth of square meters of the Spanish market. We are targeting 100 net openings for the year, and that will also allow us to accelerate the growth again in 2026. This acceleration means that in total growth, 2026 is projected to again outperform our guidance range of 4% to 6%. On the margins, what I can share with you is that clearly, Spain again reached 6.8% in 2025, that this is 54 basis point expansion. That was driven basically by this strong operational leverage and rigorous cost discipline, as was already presented by Guillaume. Outlook for '26, our focus is clearly on accelerating our organic growth. We expect, based on that, a fixed cost dilution and rigorous cost management to offset wage and transport inflation, again, enabling us a further improvement in margins this year. However, this -- there will be a more, let's say, normalized pace compared to the extraordinary jump seen in 2025. Perhaps for the CapEx, I can give to Guillaume. Guillaume Gras: Thank you, Martin. First, to remind, in 2025, Dia Spain net CapEx totaled EUR 161 million, in line with the guidance provided and 60% above the EUR 99 million invested last year in 2024. So the year-on-year increase is mainly related to our store expansion plan. Looking ahead to 2026, we expect to double our rollout speed with more than 100 net store openings. Consequently, we should expect around EUR 50 million higher CapEx than in 2025, pointing to over EUR 210 million. Remember that this CapEx is fully financed by our operating cash flow. This enables us to maintain low financial leverage throughout our strategic plan. Alberto Valdes: Thank you very much, Martin and Guillaume. The next question comes from Luis Colaco at JB Capital. Luis Colaco: I have 4 questions on my side. The first one would be regarding the breakdown in terms of sales growth for 2026. We saw an exit rate of like-for-like of circa 7.7%. You guided before -- last year for 2% to 3% like-for-like. And we are seeing the inflation in Spain still in the food sector already at 3%. Do you think that this guidance that you provided last year between 2% and 3% isn't conservative at this stage? Second question would be on the expansion of stores that you project. You said that you expect 100 net new stores for 2026. You opened 54 already in 2025. So I wanted to understand if the 300 net new stores that you projected from 2025 to 2029, also, does it look conservative at this stage? And I assume that the 300 is net new stores. That wasn't clear for me, in the past. And the third question would be on the debt. You've been deleveraging in a very fast way. We know that you refinanced your debt in 2024 at a very high rate. Bearing in mind your current net debt-to-EBITDA, do you think that you will be able to refinance your debt at the end of this year? And what type -- if this is -- if you agree with me, do you think that -- can you provide us some color on what type of spread should we be assuming for debt refinancing? And the fourth question would be also on the market in general in Spain. We've been seeing the nominal food retail sales growing -- accelerating the growth. What do you attribute this to, immigration, higher purchasing power from consumers? If you could give us some color would be great. Alberto Valdes: All right. Very clear questions. Thank you very much, Luis. I think the first pool of questions regarding the sales growth in Spain, also our store expansion and the macroenvironment, could be very good questions for Martin and the one regarding our financials is more suitable for Guillaume. Martin, are you ready? Martin Tolcachir: Thank you, Luis, for your questions. What we are seeing in -- for Spain in terms of growth -- the drivers of growth, we expect now inflation position between, say, 1% to 2% this year. We still have some pressure, especially in fresh product. But then we have also a mix effect that will offset partially this pressure, so again, between 1% to 2%. In volume like-for-like, what we expect, or what we are expecting is a consistent growth between 3% and 4%, which is a robust growth in this market. And in terms of expansion, what we are assuming now is a contribution of around 3% coming from this plan. In terms of our acceleration in expansion, but more broadly, the acceleration that we are seeing in the execution of our plan in 2025 and our solid prospect for 2026, we really think that while we are delivering ahead of the schedule and accelerating in general, it may be premature to review our strategic targets only 1 year after its launch. However, given, again, this positive trends, I wouldn't rule out revising our targets plan next year, let's say, in 2027. Concretely, concerning the opening stores, you can assume that, yes, the 300 additional stores openings are net -- in the framework of our plan. Then some comments on the macroenvironment, as you pointed. We expect in Spain a solid growth in terms of GDP. 2025 was at 2.8%, which is a real strong performance, especially when we compare with the rest of biggest economy in Europe, Germany, France. So really, really strong support of this growth. We consider as we see in the -- all the available information that 2026 will remain a strong year for Spain. We project this growth around 2.4%, again, driven by a strong domestic demand and all the external sector. In terms of inflation, 2025 was already a year of the moderation, and we expect 2026 with a number of around 2% in terms of inflation. We really are -- appreciate seeing a clear improvement of the disposable income from household, which is really important for our business. Last year was already a positive year and all the information we are gathering confirm that 2026, again will be a positive year in terms of recovery of this real disposable income, which, again, it's key for our business. So last element that we can share is that in terms of population and tourists, we are still seeing solid numbers that will sustain this trend looking forward. Guillaume Gras: And regarding the refinancing, today -- the lockup period of the current financing expires at year-end, paving the way for a potential refinancing from 2027 onwards. As this time approaches, we intend to leverage our strengthened credit profile, reduced leverage and proven operating track record to optimize our cost of debt. And this should reduce financing costs and unlock our current capital allocation constraint, providing us with greater flexibility to remunerate our shareholders. How much do we expect? It's too early to say, but we expect a relevant reduction cost of debt. Luis Colaco: Just a follow-up question on what you said. You mentioned before the like-for-like between 1% and 2% in terms of prices, if I'm not wrong, 3% to 4% in terms of volumes. But that already surpasses the 4% to 6% total sales growth that you guided for. Is that correct? Martin Tolcachir: With the prospect we are having today for 2026, clearly, we expect to outperform our range, the range of growth that we give as guidance in 2026, clearly. Alberto Valdes: Yes, that is very clear. Thank you, Martin. The next question comes from Jose from CaixaBank. José Rito: So I have 3 questions. The first one is on net debt evolution at the consolidated level in 2026. If -- based on the fact that you should expect to accelerate store openings and also CapEx, if you expect to reduce net debt by 2026 versus 2025? That will be the first question. The second question related with the tax credit. So the activation of the tax losses were carried forward, I think that you had around EUR 1 billion in the balance sheet at least last year. There was some activation this year. Can we assume that the company will activate a similar amount in 2026? And how should we assume the phasing of this? If you can provide a little bit more details on this, I think it will be helpful. And finally, the third question on the working capital evolution in Spain. There were slight cash outflows in 2025, reason for this? And also how do you expect this to evolve in 2026? Alberto Valdes: All right. Thank you, Jose. If I understood you well, you're asking about our net debt prospects for the coming years and if we are going to be reducing our net debt position again in 2026. That is a good question for Guillaume. You also ask about our income tax in 2025 in the second half, which was significant. If you can give Guillaume a little bit more color on that and also on our prospects? And finally, I think you ask about the working capital change in Spain in 2025 and also your views, Guillaume, regarding next year, 2026. So when you're ready. Guillaume Gras: Thank you, Alberto. Regarding net debt projection for this year, as we increase our CapEx, we expect to maintain our current net debt. So that's the first point. Second, regarding income tax, in light of our positive performance and strong future profit expectations, we had EUR 52 million out of a total deferred tax asset balance of EUR 217 million, that was activated in the second half of the year. This, together with the one-off reversal of a fiscal provision totaling EUR 9 million registered in the first half, this more than offset the corresponding annual corporate tax resulting in positive tax income of EUR 47 million in 2025. So regarding 2026, Dia Spain still has deferred tax assets totaling EUR 165 million pending activation, which will not expire. We plan to activate these assets progressively over the coming years, which will result in an effective tax rate below 20% in the medium to long-term. Regarding the working capital change in Spain, the outflow you mentioned of EUR 10 million, if I'm not mistaken, is linked to a calendar effect here in our supplier payments. So it's just something punctual. Looking ahead to 2026, we expect a positive working capital inflow driven by our projected sales growth and expansion plan. Alberto Valdes: Thank you, Jose, for your questions. We've got another one coming from Pablo Fernandez from Renta 4. Pablo Fernandez: Congrats on these solid numbers. Just 3 on my side. The first one is just a follow-up on growth and margins, in this case about Argentina. Could you provide some color about the [indiscernible] picture and maybe offer some guidance on your expectations about sales and margin expansion in '26? And the second one, do you keep considering the business in this contract as a strategic or maybe this first green shot could be a good opportunity to divest in the country? And the final one is regarding the EUR 10 million of assets held for sale in your balance sheet. Maybe you could provide some color about it? Alberto Valdes: Thank you, Pablo, who is now shifting to Argentina. He's asking about how we see the macroenvironment and our prospects for 2026? Also, if we consider this as a strategic business or we could consider its divestment? And finally, a question regarding assets held for sale, that is more suitable for Guillaume. So Martin, the floor is yours when you're ready. Martin Tolcachir: Thank you, Pablo, for your question. On Argentina, in terms of GDP, following the sharp contraction in 2024, GDP is estimated to have a recovery of, let's say, 4% in 2025, driven mainly by a rebound in the agriculture sector and the gradual recovery of the energy and the mining sector. The economic forecast suggests this recovery will continue in '26 with the GDP growth expected to remain between 3% to 5%, but with an increased contribution from private investment and consumption in addition to the primary sector. In terms of inflation, as you know, inflation has significantly decelerated from the inflationary peak of '23 and '24 to a single-digit monthly rates at the end of last year. In this context, the real disposable income began to recover in '25 amid rising wages and more moderate inflation. Still, it remains at a very low level and following 20% cut in 2024 due to measure implemented to eliminate the fiscal deficit. So looking ahead, what we expect -- the consolidation of Argentina's macroeconomic framework and relative price stability are expected to enable the sustained normalization of household disposable income and the gradual recovery of food consumption from this year onward. As you know, we have a strong position in Argentina. We have a leading position in Buenos Aires. We have a strong brand, a loved brand in the country and a brand that is perceived as the -- more competitive in terms of prices and the leader also in terms of own brand quality and loyalty program. We have an operational and supply chain solution that is really competitive in that market, and that means a real value for us. We have a value proposition that also combines this own brand, fresh products and national brands that differentiate our value proposition from the other players. In this context, the -- we consider that the consumption is now bottoming, and we expect a gradual recovery from this year onward. So in this context, again, we are not considering the sale of the Argentina at the moment. Selling the business now will fail to capture the value we really think this operation have and this strong position that we have in the country and more particularly in our leadership in Buenos Aires. And again, all the potential recovery that we are foreseeing based on the healthy and the strengthening of our value proposition. What we expect in terms of sales growth is, again, this gradual recovery during 2026, although the sequential quarterly trend should continue to improve. The positive year-on-year comparison will be more evident, especially as the year progress. Last question on also margins for Argentina. As you know, we have put in place decisive cost control and financial discipline that allows us to get to a positive adjusted EBITDA in the year. The second half of the year we have been already capturing the benefits of all that strategic decisions. And again, the full year, we finally closed a positive 0.3% of adjusted EBITDA margin. This year will be a year where we are capturing -- we are going to capture fully all this -- the benefits of all that decision, and we expect to improve our adjusted EBITDA margins in Argentina. Guillaume Gras: And regarding the question about assets held for sale, the EUR 10 million you are seeing, corresponds to real estate assets belonging to Dia Argentina. We talk about one warehouse and 14 stores. These assets are up for sale in 2026 with the aim of reinforcing the company's net cash position. As you know, and just to remind, Dia Argentina had a net cash position of EUR 61 million at the end of the year. This, together with our rigorous financial discipline and the monetization of real estate, will ensure that the business remains self-funded and ready to capitalize on Argentina's expected economic recovery. Alberto Valdes: Very clear, Guillaume. Thank you, and Martin. We have a final question from Marisa Mazo from GVC Gaesco. Marisa Luisa Mazo Fajardo: Alberto, congratulations for the results. I have 3 questions. The first one is in logistics. Can you remind us how may be impacting costs when you continue opening your new warehouses? And how much is the annual investment? The second issue is on the financial debt and the repayment. If I'm not wrong, you have to pay penalty on the -- if you repay the debt from year 2027 onwards. And also, you're still accounting for the opening fee. How we -- may we think about which will be the trade-off between renegotiating the debt and all the other impacts it has? Alberto Valdes: All right. Marisa, thank you for your questions. If I understood you well, you're asking about your logistic optimization plan, specifically how much we think it could contribute to improve our adjusted EBITDA margin by 2029 and how much we are -- we expect to invest in each of these platforms and throughout the plan. That is a good question from -- for Guillaume. And you also asked about our -- if I understand you well, the potential refinancing of our debt as from 2027 and how much it could contribute to reduce our financial costs, both questions for Guillaume. The floor is yours when you're ready. Guillaume Gras: Yes, Alberto. Regarding logistics, the gain we expect from this optimization plan by the end of 2029 is 30 bps and requires yearly investment by 20 -- sorry, EUR 10 million to EUR 15 million per year. Regarding debt, as I said, we have a strong penalty until the end of 2026 if we repay now the -- our current debt. So that's the reason why we are waiting for 2027. And today, it's too early to know how much we can save, but we believe that it will be a relevant saving. Alberto Valdes: All right. There are no more questions from our analysts over the phone. Let's now review the written questions received from our shareholders who are following us through the webcast. Some of them have already been answered. Fernando was asking about our plans regarding the business in Argentina and a potential divestment. I think that has already been addressed very clearly by Martin. Then Luis and Jose are asking about the share price potential and also about potential M&A in Spain. I think the first one could be a good question for Guillaume and the one regarding M&A, maybe for Martin. So if you're ready, we can answer these ones. Guillaume Gras: So regarding the share price potential, it's -- of course, we cannot provide any guidance regarding our share price. We know that our stock price has made an extraordinary recovery last year, validating our successful business transformation. However, we see that we are still trading at a significant discount to our European peers on 2026 consensus numbers. According to the latest analyst consensus average, target price is EUR 46 per share. So there is still a significant upside potential. This fundamental upside is based on, let's say, 5 points: one, our unique business model which gives us strong competitive advantages. Our strong -- two, our strong organic growth that significantly outperformed the market; three, the profitability that is above the average of the sector; and also our strong cash flow generation and low leverage profile. That's the main element for the share price potential. Martin Tolcachir: Thank you for this question on M&A. And I would like to start by first saying that our focus and our full priority is to deliver on our strategic plan, the plan that we have shared with you last year and that we are executing rigorously, and any other consideration has to be considered, again, with no possibility to distract us from the execution and delivery of this plan. And this plan is based on customer experience improvement, like-for-like growth and our organic expansion. However, our robust financial position enable us to evaluate potential M&A opportunities within Spain. Spain is still a fragmented market. And we consider that they can be with opportunities that could create additional value for our shareholders and our responsibility is to analyze and consider these options. In any case, not that we -- again, we only consider these opportunities as supplementary to our core organic growth road map, and we will not allow anything to distract us from it. Also important to share with you that we already defined clear criteria for evaluating any M&A opportunity in Spain to ensure that any potential transaction will really create long-term value for our shareholders. In that regard, we only consider assets that are profitable and generate cash flow that are complement to our business model and national footprint, that create clear opportunities of quantifiable synergies, have limited integration cost and offer a real attractive returns. In any case, any event of this nature materialize -- if in any case an event of this nature materialize, we will disclose it to the market swiftly in accordance with the applicable regulations. Alberto Valdes: That is super clear, Martin. Thank you very much. We have another question from [ Alvira ] and Jose. They are both asking for potential dividends or shareholder remuneration in the context, again, of a potential refinancing as from 2027? That maybe is a good question for you, Guillaume. Guillaume Gras: Yes, Alberto. So as you know, dividend payments are not permitted under the current refinancing agreement, but this is not definitive. Delivering -- we think delivering our strategic plan and fulfilling our financial commitments will give us the flexibility to reconsider our capital allocation priorities in due course. And of course, an early refinancing of our current debt facilities from 2027 onwards could remove our current capital allocation constraints. Alberto Valdes: Thank you, Guillaume. The last question comes from Mohanty. He is asking about our store closures in Spain and our prospects? Maybe Martin, if you can answer this last one? Martin Tolcachir: Sure. No problem. You have seen that in 2025, Dia Spain closed 38 stores. This is twice the natural rhythm of annual turnover, as we didn't close any store in 2024 that will be incompatible with the redundancy program that was in place. Looking ahead to the coming years, what you should expect is a natural turnover of around 15 to 20 stores per year. And these closures are mainly based on the change to the rental conditions, store relocations or the closure of underperforming stores. But we will come back to this historical average rhythm -- natural rhythm, I would say, of around 20 stores per year. Alberto Valdes: Super clear. And there are no more questions from the webcast. Thank you very much, Martin and Guillaume. If you require further clarifications, please contact us, the Investor Relations department. And you will find the contact details on this presentation or on our web page. Thank you very much, again, for your attention and look forward to connecting with you at our first half results presentation. Have a nice day.

36天前Insight Analytics约5分钟阅读

AALBF 2025 Q4 财报电话会议

Rutger Relker: Good morning, everybody. Welcome at our full year 2025 results presentation. It's good to see so many of you joining today's webcast. I'm happy to introduce to you our CEO, Stephane Simonetta; and our CFO, Frans den Houter. Stephane will kick off the presentation with some business highlights, followed by Frans, who will give an update on our financial developments. Stephane will then share some insights on strategy in action and provide an outlook for the year 2026. After the presentation, we will give you the opportunity to engage directly with us via the Q&A session. Later today, we will make both the presentation and the recording of today's webcast available via our website. Please welcome Stephane to start the presentation. Stephane Simonetta: Thank you, Rutger, and good morning, everyone. Let's start this presentation with a few key messages about our 2025 results. First of all, it is no secret that our performance has been impacted by the continuous short-term end market softness. And during the year, we have been focusing at Aalberts in what is within our control where we could still take action, and we did some good progress in our operational excellence initiative in order to protect our margin. Very good progress in free cash flow improvement with lower inventory, lower CapEx. Very good progress. This is for me one of the key highlights in '25 with our portfolio optimization with great acquisitions and also progress in our divestment. But '25 was also the first year of the deployment of our Thrive 2030 strategy, a foundation for future growth. So in a year when on one hand, we celebrated our 50th anniversary at Aalberts, we took a lot of action to strengthen our portfolio, improve our position and navigate through the end market challenges. The results going into the numbers, and Frans will give you a more details in the financial development. So EUR 3.1 billion revenue with a negative organic growth of 2.5%, EUR 410 million EBITDA equivalent to 13.2% of revenue and sustaining good added value margin of 63%, more than EUR 360 million free cash flow, CapEx at EUR 189 million and as a consequence, an earnings per share at EUR 2.61. In terms of shareholder returns, we are proposing a stable return with a stable dividend at EUR 1.15 and starting a new share buyback program of EUR 75 million. Many of you know us. Let me just remind you the value proposition in our 3 segment. In our building, we are engineering solutions in heating, in cooling, in sanitary system, mostly in residential and commercial building. In industry, we are providing services to all the global industrial OEM in Europe, in U.S.A. with heat treatment, with surface treatment, and we are helping our customers to improve their energy consumption. And on semicon, offering system solution to all the global OEM, not only in the front-end, but now also on the backend side of the value chain. So definitely, we want to continue to engineer mission-critical technologies, enabling a clean, smart and responsible future. And when we look at the long term, why Aalberts is still very well positioned for the long-term growth driver because we are very well exposed to 4 global trends. These 4 global tailwinds, which are urbanization, technology acceleration, reshoring and decarbonization. Long-term value creation is still very well promising. Now let's go to our operational development in 2025. How did we do in building? How did we do in industry? How did we do in segment? Starting with the global revenue. The breakdown of our revenue by segment, by end market, by geography and by SDG goal. So on the geographical side, no major change compared to last year, same on the SDG exposure. And you can see that building is still 50% of our revenue, industry 35% and semicon 15%. I'll come back to the exposure by end market during the next slide. Our strategy is the same. We want to have leadership position, and we want to be aligned with attractive end market. And so where we are investing is definitely aligned with some of these megatrends. Our performance by segment, a mixed picture. We will not repeat again what I said earlier, but we are back to growth on building with 1.3%, still a moderate organic growth. But of course, the margin has been challenging with 11.7%. Industry, better organic growth than last year, but still minus 2.8%. And this is where also we sustain very solid margin at 17.2%. And in semicon, as you remember, it started in the last quarter of 2024, and we have seen quarter after quarter still the destocking ongoing from our customers. Now it is coming to an end, but '24 was still -- '25 was still minus 13.8%. And our margin as a consequence, down to 11.9%, but also with a conscious decision for us to sustain our capability for the long term and not go too low in our cost optimization. Now let me go through each segment and tell you some of the highlights and some of the low light. So in building, on the good side, on the market, continued growth in commercial building in our key prioritized verticals like data center, like hospitalization, like district energies, and this is where we continue to optimize. Very good solid growth also in the U.S.A., in our overall segment and more challenge in France and Germany, more challenge in our connection system, some of the highlight on the market side. And on the performance side, we continue to optimize our footprint, continue to drive operational efficiency and are now also accelerating purchasing initiative to get back to a more robust margin in the coming years. Looking at the market trend, you see what we face in '25 and what is our view about 2026. So more stable trend on 2026 in residential building more positive on commercial building and also on infrastructure industry and utility building. So we continue to have very good position in residential building, but we don't expect major growth on the market side, and we actually see many growth opportunity where we are also pushing organic growth initiative in commercial building and in infrastructure. That's our view about the 2026 market. Now if I go to the other segment with industry. So -- where did we do well in '25 with a good growth with good organic growth in aerospace, in defense, in power generation and where we face the most challenge has been definitely in automotive, in the machine build and that's also what we continue to see in '26. Solid margin, we continue to drive operational efficiency, further footprint optimization and have the success to continue to deliver such a good performance. And the market trend, a bit similar to 2025. Actually, we see automotive now coming to a plateau with a flattish organic growth. Same for machine being and other industrials, but more positive, and we continue to see more order, more positive growth on aerospace, power gen and defense, where our order book in some part of the business is really increasing. So positive momentum, some more stable. And semicon, I mentioned it already, challenging on the front-end with the destocking from our customers, but we start to enjoy the growth of backend only two months since the acquisition of GVT. Very good also progress in defense in this segment where we have some of our technologies, some of our factories also supplying a major OEM in the defense area. And as you can see now in our breakdown by technologies, you have a new segment called system build and qualification, which is actually what we do in GVT. I'll come back later about our backend exposure and why we are so excited about the future growth opportunity. And here for '26, it's actually more positive, right? We see growth in the front-end, even higher growth, growth in the backend and growth in other industries. So more positive based on what we see on the market trend, based on what we see on our customer order book and all the requests we are getting. So a positive momentum going forward. And to conclude the 2025 operational performance, very pleased, very happy to report that we are still on track with our sustainable commitments, still with more than 70% of our revenue linked to sustainable development goal. We are reporting 71%. And year after year, continuing to reduce our CO2 emission in Scope 1 and Scope 2 absolute emission also based on the portfolio, acquiring company, divesting companies. So good progress, aligned with our targets. So pleased with the performance on the environmental side. And that's what I wanted to share for our 2025 operational performance. Let me now hand it over to Frans that will give you an update about the financial development of the year. Frans den Houter: Thank you, Stephane, and good morning, everybody. And indeed, let me talk you through the financial developments of 2025. First of all, on the revenue, you see on the left here, the challenging market circumstances resulted in a negative organic growth of minus 2.5% and the year ended with a total of EUR 3.09 billion. On that revenue, we delivered 13.2% EBITA margin, which is 1.8% lower than 2024 and translates into EUR 410 million of EBITDA. The net profit landed at EUR 284 million. We have been focusing on finding the right CapEx balance, and we aim to be below EUR 200 million by year-end, and we landed the number for CapEx on EUR 189 million, still investing in the future of the company in organic expansions, in innovation, but also being mindful of the cash impact. As such, free cash flow number is really strong, EUR 361 million, 64% conversion, really a good number, of course, reflecting the CapEx that I just discussed, but also inventory, net working capital, and I will come back on that in a bit more detail in a slide to come. So 30.2% margin as a conclusion in a challenging market for the year 2025. Let me give you a breakdown of our revenue impact. And first of all, corrections for the M&A. In the acquisitions, you see EUR 105 million plus, basically driven by the acquisition of SGP in 2024, and we did 3 acquisitions that we completed in 2025. Geo-Flo, Paulo and GVT were added to the portfolio and delivered, as I said, EUR 105 million. On the divestment side, in 2024, we divested EPC and December '25, we announced divestment of Metalis and also confirmed that we have reduced our shareholding in KAN to 45%. With that, that company is now accounted for as an associate and no longer fully consolidated in our books. EUR 59.6 million minus on the divestment in terms of revenue. ForEx did not work in our favor in the revenue side, specifically the U.S. dollar, minus EUR 26 million. And the organic decline translation of the minus 2.5% total EUR 77 million, bringing it to EUR 3.09 billion on the revenue. If we then go to the EBITDA breakdown, again, of course, the M&A impact, and you see for the acquisitions that we've done, really a good contribution to the EBITA margin, EUR 18.7 million in the first year of integration. And on the divestment side, as we have progressed our portfolio also there, the minus EUR 4 million is the impact on the EBITDA. Of course, also a small currency effect, minus EUR 3 million, basically also predominantly the U.S. dollar. And then the organic decline on EBITDA is EUR 73 million. And that requires a bit of context because there are a few elements in there, I would like to highlight. First of all, minus EUR 20 million on inventory, a noncash one-off correction as we have revised the group accounting policy for inventories to make it more robust and aligned throughout the company. That again, resulted in a minus EUR 20 million noncash correction. On holding elimination, we see a year-on-year deterioration of EUR 10 million. I will come back on that in the next slide. And then the remainder is really the drop-through of the lower revenue that we saw in the previous slide. Also, please bear in mind that on semicon, we have been careful in flexing our costs as we see and want to be prepared for the growth in this segment in the short future. Totaling EUR 409 million, 30.2%, basically most important driver, the lower organic decline. Coming to free cash flow. I already mentioned we're very happy with this number, EUR 361 million. That's a healthy free cash flow. We have a 64% conversion, which is 10% higher than the previous year. And we -- in the waterfall, you see, first of all, of course, the negative impact of the lower performance, almost EUR 60 million of EBITDA impact on the cash flow in a negative way and that we knew to compensate with CapEx and net working capital. In the line item other, there's a cash out on the provisions that explains this item. On a earnings per share bridge, yes, you, of course, see here the translation of the lower organic performance also in the EPS impact, EUR 0.3 the biggest one in this list, but also be very mindful of the financing costs that have gone up with EUR 0.13 as we have increased our debt level in the company with EUR 300 million to support the acquisitions that we have done. Yes, acquisitions and nice to see also that the acquisitions contributed positively and were value accretive from an earnings per share point of view. Small impact positive from the share buyback and then totaling the earnings per share on EUR 2.61 for 2025. On the segment reporting, yes, Stephane already showed the revenue and the profitability, but here, you see also the CapEx that we added. If you look in the building segment, be very mindful in the 11.7% EBITDA margin, there's also the impact of the one-off noncash inventory correction of EUR 20 million that I just explained. But also please be mindful of the CapEx, where you see really almost 50% reduction. As we have been investing also in '24, in preparing for growth, you see this year that is more a modest number. In industry and in semicon, CapEx numbers are in both segments comparable with the previous year. Well, in industry, we keep investing, of course, in our footprint and in expansion and also good to see 17.2% EBITDA margin in a challenging market. I think still earmarks a resilient performance in that segment. In semicon, markets have been tough, but still, we are fully confident in the long term. We have invested in an acquisition in a nice company called GVT, but also you see here that the CapEx is still of a high level, EUR 53 million. As we also invest in our new factory in Dronten, which will come into operation early 2027. So you see still there a lot of assets that we are having under construction in this segment. As I said, holding elimination in the last column requires a bit of context. We see a minus EUR 4 million in 2024 as a comparable number. Please be mindful that there was an insurance claim proceed in that number. So that number was really lower than it normally is. For this year, 2025, minus EUR 14.8 million, which basically translates the normal run rate of holding cost. We earmarked that between EUR 10 million and EUR 50 million, and that number is in this range and comparable with last year. On top, the movements in '25, there were significant additional M&A costs. You already saw some of that in the first half, but we have been able to compensate that with the book profits on the divestments that we have done. So that netted out. That was circa EUR 30 million of book result compensating the additional M&A costs and bringing this to basically reflecting the normal run rate on holding cost. In the tech line, you see at the bottom here, low profitability due to challenging end markets. I think that summarizes from a P&L point of view. If we go to the balance sheet, on the left top, net debt increased with EUR 300 million, I already mentioned, which translates into a leverage ratio of 1.8. Yes, we target always to be below 2.5, and we're comfortably below that number. We already deleveraged a little bit, of course, additional year-end because of the proceeds from the divestments that we have done. And then with that, a leverage of 1.8x. On the equity side, we see, of course, the impact of the lower result, but also, again, the dividend that has been paid and the share buyback had impact and yes, a small step down in solvency, but still 56.1% earmarks a resilient company and also has the balance sheet to support the Thrive 2030 agenda in the coming years. The capital employed and the ROCE at the left bottom, yes, ROCE has come down with 2% to 12.7%, partly because of the majority is explained by the lower profit from the P&L. And the other part is because of the increased capital employed, which is driven by the higher debt that we also just touched on. A bit more context on net working capital because there, yes, we see really an important step from 80 to 71 days, EUR 563 million net working capital, reflecting lower inventories. We improved our inventory position with 12 days to 82 days DIO which is a good number. We had a three day improvement on accounts receivable and a six day lower accounts payable, which then compensates the other two parts because the lower payable position is a cash out, of course. And with that, on balance, a nine day improvement. If we go into a deep dive a little bit on the 12 improvement days on the inventories, there are a few elements to mention. Roughly half of it is really hard work by many people in the organization, managing our stocks, managing our supply chain and really understanding well what the forecast requires from our inventories. That is half of the progress. The other part, we were also supported with some tailwinds. Two days of ForEx, for example, in our favor. The whole M&A mix and the impact on inventory was also another two days, and the inventory item, the noncash EUR 20 million correction that I've discussed earlier translated in a two working day improvement. So six days of one-offs and the rest is really because of progress on inventory management, which was absolutely in a good step in 2025. Then let's go to the exceptional costs. Three items in there totaling EUR 84 million. First of all, operational excellence, EUR 40.8 million. Yes, we keep making our -- progressing on our efficiency programs and drive operational excellence into the organization. And with this EUR 40.8 million, we target a yearly reduction of EUR 50 million as a benefit. Then EUR 28.9 million as an impact from the write-off on investments. The majority of this is explained by semicon innovation where we have been investing money. But yes, we do not see the perspective on how to commercialize this. So it's a nice technology, but we have no -- not sufficient confidence and perspective on commercialization, resulting in a write-off of EUR 28.9 million. In 2024, the company has already decided to exit Russia, which is a lengthy and complex process. Again, in 2025, we made progress on this and EUR 14.5 million as a result in the exceptional cost for, yes, the Russian exit that we are working on. And with that, let's also take a little bit of a wider perspective into capital allocation. And you can see in this slide, we keep, of course, investing in our company. In CapEx we just discussed how it was for 2025. In M&A, we also touched on this and here you see over the past five years, how we have been investing in the profitable growth agenda. Next to that, we value shareholder returns, and we think it's important. And you see here a perspective on the past five years, where we allocated almost EUR 700 million to the shareholders, normally in dividends, but in 2025, also complemented by a share buyback program. And that is a nice bridge to the proposed shareholder return for this year. As my last slide, and as Stephane already mentioned, we proposed a dividend of EUR 1.15 over the year, and we announced a share buyback program that will start tomorrow of again, EUR 75 million. And with that, 2025, we deliver a stable return to our shareholders. And with that, I would like to hand over back to Stephane to update you on our strategy. Stephane Simonetta: So let's talk now how did we do progress in our Thrive 2030 strategy. First of all, let me say that while I'm not satisfied with the performance and the lack of organic growth in '25, I'm actually quite pleased with the progress we did deploying our four strategic action. And you know our Thrive 2030 strategy. I mentioned already, we still see positive long-term trend with the four global tailwind, and we still have the same four priorities. So let me now just give you an update for these four strategic actions on profitable growth, on leadership position, the Aalberts way and sustainable commitment. And let's start with growth. And you see that we are not pleased with the progress. On one hand, we continue to see good traction on many end market, on many -- of our initiatives. But on the other hand, we are still reporting negative organic growth because of many of our end markets, which have not been growing. I already mentioned it, exposure to residential, exposure to automotive and destocking in the semicon. So we need to do better on profitable growth. Leadership position, very good progress. I'm really pleased about the shaping of our portfolio, making 3 acquisitions, making 3 transaction in our divestment program, aligned with our strategy, right, progressing in the U.S., entering backend and Southeast Asia in semicon and making a divestment program, mostly in our European footprint for industry and building segment. So good progress for the first year of our strategy. The Aalberts way, a lot of progress in all our functional excellence, driving synergy across our businesses, but also making progress on productivities and synergies. I will show you a few examples later today because I think we've start to see the impact either in our balance sheet or in our P&L. And on sustainable commitment, another year where we made progress, so well aligned with our 2030 and 2050 target. Let me now go through one by one and give you a few highlight about the progress in this four strategic action. So organic growth, this is where we are investing. There was limited impact in '25, but we are more positive about '26 and '27. In building, going from component to system to solution, working on to be able to offer also digital offering linked to connectivity. And this is where the One Aalberts building segment portfolio makes sense. When you put everything we do in our connection system, in our valve, in our prefab solution, in our boiler room technology, we have a unique proposition. Industry, it's continued our geographical expansion. Like Frans mentioned, our greenfield are coming to an end. We have now additional capacity in East Europe, additional capacity in Europe and the U.S. also to support the growth of aerospace. We have also entered Mexico, so all ready to capture the growth. And semicon I mentioned already front-end, we see now potential recovery later on and now also we are exposed to the backend. So global footprint, synergy between all the technologies that we have unique value proposition for our customers. And one example of data center, which is still today quite small when you look at the numbers, only 2% of our building segment revenue is exposed to data center, but it's a $1.5 billion addressable market. And this is where we see double-digit organic growth in the coming years. It's about offering cooling solution. It's about reliability, it's about connectivity. And this is where, as I mentioned before, offering all solution together in term of valve, in term of system, in term of engineering system, prefab solutions, our packing and connection system, we have a unique proposition. And we are working with the big data center OEM, helping them to drive energy efficiency or helping them to have better cooling solutions. So more to come. We will be reporting in our half year result the progress we are making. Of course, the organic growth, it's not only with the geographical expansion, it's not only with capacity expansion, it's also with innovation. And I'm quite pleased actually that we have delivered another year with 20% of our revenue coming from innovation done during the last four years. So at the end, delivering what we call innovation rate at 20%. Even if, as you know, innovating in building, innovating in industry or innovating in semicon is actually quite different. And that's what we continue to do. So good traction also, good progress here. Of course, this is more long term. And once again, we have now to do better on this strategic action to get back to positive organic growth. Portfolio, I mentioned it. We started in '24, fantastic progress in '25 and committed to do more progress in '26 and 2030. So our strategy is the same, our three priority is the same, Good progress in industry with the acquisition of Paulo, and now we want to make further progress in '26 and '27 in aerospace in the U.S.A. Good progress in semicon with the acquisition of GVT. So of course, now the full prioritization is on the integration, on the driving synergies. Good progress in building in the U.S. with the acquisition of Geo-Flo, but this is where we need to accelerate. And this is, of course, top of our mind to continue to drive growth in what we call the source to emitter scope in the U.S.A. We have also water treatment as a key focus area. So this is where we are prioritizing and to do further progress in our building segment in terms of inorganic growth. And divestment, fantastic progress. We are basically halfway with our 2030 target. So still some opportunity to make further progress in our divestment program, especially in our building and industry segment. And just as a nutshell, why I'm so positive, why I'm so excited by the transformation acquisition we did with GVT. Not only we are entering a new part of the semicon value chain, but also we are now entering a new geographical area, and we have now a global footprint between our footprint in Europe, our footprint in Southeast Asia. Having both technology altogether, we are able to provide to all the global OEM exposed in front-end and backend, a unique value proposition. And as you can see in front, in back and also now being exposed to life science with some of the technology, so not only in lithography, but also in advanced packaging, in measuring, in metering and in other key equipment, we are ready for the growth. We have seen already positive momentum in '25 with GVT in only two months, and we are excited by the further progress in 2026. If I go to the third priority, operational excellence, a lot of effort deploying all the lean toolbox, implementing our Aalberts production system, but I'm pleased that we start to see the impact, and it is just the beginning, continuing to optimize our footprint, four site were closed in 2025, and we will continue to optimize major progress in inventory, like Frans mentioned, driving lower days on hand, especially in our building segment. This is where we have the further opportunities. And driving operational productivity to align our capacity, to align our cost based on the customer demand. So a lot of initiatives to reduce fixed cost, secure our added value margin and do better job to do sometimes the same with less or to be ready to do more with the same cost and at the end, support our margin expansion. That's very high for our building segment, industry doing quite well and some opportunities in semicon. And to conclude, on the last strategic action, delivering our sustainable commitment, good progress on Scope 1 and Scope 2, as you can see with our CO2 intensity reduction, where here we have a baseline compared to 2018. And now also doing further progress on Scope 3, where on one hand, we continue to make progress on the purchasing good CO2 intensity. So going down, but also making progress in reporting on the waste, but also here, not so pleased because we have actually an increase in our waste, and this is where also we need to do better, mostly linked to portfolio change, but also because now we have better reporting, so more transparency, which give us opportunity to improve. So well aligned with our 2030 target and definitely on track still to reach our long-term 2050 to be net zero or earlier. That was the update about 2025. You have seen how did we do on operational side. You have seen how did we do on the financial side. So let me tell you how do we see 2026. I mentioned some of the market trend, but let me repeat some of the element segment by segment. It's actually a mixed picture. On building, we continue to see the same trend in 2026. Expect commercial building to continue to grow, expect to continue to see positive momentum in the U.S., but also not yet expecting a recovery in residential and French and Germany market. Still a lot of uncertainty about the U.S. trade, that's what we see for '26 on the building market. In industry, a bit continuation as '25, positive aerospace, power generation, defense, more flattish market trend in automotive and also in the French and German industrial and many uncertainty again in the U.S. But in semicon, it's now very clear. We see growth. We see our order book increasing. We see the customer destocking coming to an end. So backend has been growing very well and I think the growth is not an issue. But now also front-end, we really see an opportunity to have a recovery in the second half of '26. So being more positive. Long term was never an issue in semicon, but now we do see an opportunity to have a recovery in the second half. So based on this market trend, our outlook is actually quite simple, is to improve organic growth and improve EBITDA margin in 2026, improve organic growth, improve EBITDA margin. And on the other hand, continue to deploy our four strategic actions. So in a summary, 2026, we have a key priority is to get back to growth, driving organic growth in our attractive end market with our business development, geographical expansion and innovation. Like I mentioned earlier, you can count on us to continue to drive operational excellence, to improve margins, and should the market increase and improve better than we expect, it will automatically drive even better margins. On the other hand, continue to manage the short-term dynamics. So something I think we have done quite well in '25 is to manage both low case and high case, and we will continue to do that in '26. Be ready for a potential higher growth, but also be ready in case the growth is not that high. Continue to do a good job on free cash flow. After such a good year and always optimize our working capital. And at the end, continue to do what we did very well in '25 to optimize our portfolio, rebalancing between Europe and U.S., rebalancing the end market and divesting when we believe we are not the best owner. So in a nutshell, continuing to strive for the long term, but also now perform and perform for us is what we put in our outlook, better growth and better margins. That's the end of the presentation. Now let's open the Q&A session. Rutger Relker: [Operator Instructions] And I would now like to give the word to David Kerstens from Jefferies. David Kerstens: I've got three questions, please. Maybe first question on semicon. Organic revenues were down 13.8% last year. Yes, the slide shows much more positive outlook for 2026. But did I hear you say you only expect a recovery in the second half of the year? And how should we see that recovery in the light of the much better-than-expected order intake and guidance from your largest customer, ASML? Stephane Simonetta: Yes. Thank you, David. You're absolutely right that we are more positive for 2026 because during the last three, four months, our order book have been increasing month after month. Also, we are getting a lot of requests for additional capacity simulation. So you should expect better numbers also in the first half. But talking about recovery, we see it more in the second half. Also in the second half, we will also have the further organic growth coming from GVT in the backend. So better number in the first half, but the major impact will be more in the second half because it simply take times for the order to go through a customer order book to their customers and then finally to us. So Q1, you should expect, I think, a moderate improvement. Q2 a bit better and definitely second half much positive. David Kerstens: All right. That's clear. That sounds good. And then second question on the margin. I mean, a lot of moving parts in impacting the margin this year with last year's acquisitions of Paulo and GVT and GVT towards the end of the year and then all the divestments announced in December. How will that portfolio optimization impact your EBITDA margin this year? Frans den Houter: Frans here. Yes, we haven't given specific guidance on an EBITDA margin impact for the year '26. But obviously, also visible in the waterfalls that we just showed that these are at the lower margin end of the range, but also the revenue impact totaling EUR 400 million. That was the number that we gave year-on-year with already then the first EUR 60 million in the waterfall you saw in the presentation. So no specific guidance on the exact margin impact, but we did give some numbers there. David Kerstens: Yes. Okay. And maybe finally, on the one-offs in EBITDA before exceptionals. You highlighted the EUR 20 million inventory write-down and a EUR 30 million book gain. Were those all booked in the fourth quarter? Frans den Houter: Yes. Both items were booked. So the EUR 30 million book gain following the divestments we've completed in December, and the inventory correction also a Q4 event in the closing process. Rutger Relker: Thank you, David. Now I'd like to give the word to Chase -- Chase Coughlan from Van Lanschot Kempen. Chase Coughlan: My first question, just regarding the guidance, and I suppose it's more to do with semantics. But when you say you expect improving organic growth, is that an improvement versus what we saw in 2025? Or is that really implying actual organic revenue growth? Stephane Simonetta: It's actually improving compared to what we saw in 2025, and we also mean it for our 3 segment. So we expect better organic growth in our 3 segment compared to 2025. Chase Coughlan: Okay. Yes, that's clear. And I wanted to ask a little bit about your raw material prices. So copper obviously inflated quite a bit alongside some other metals. And I understand you're planning to protect your gross margin and pass that through. What do you think will be the net effect on volumes or the competitive positioning of Aalberts products throughout the course of 2026? Stephane Simonetta: We see a continuation. I think -- 2025 is the best evidence about how well did we manage the situation with our price increase and the added value margin that we sustained at a high level. So we are confident to do it again in 2026. We see definitely an opportunity to have price increase in 2026 and without having an impact to our margin. So monitoring very closely, but we have a good, I think, operator model to manage that and sometimes it gives actually an additional opportunity to improve margin based on the good work we are doing on the purchasing side on the raw material. Rutger Relker: I'd like to give the word to Tijs Hollestelle, ING. Tijs Hollestelle: My first question is about the semicon business that there was an organic decline of about 10% in the fourth quarter and quite a substantial impact already from the Grand Venture Technology acquisition. What is the annual expected euro number from the Grand Venture Technology business in 2026? And is there any seasonality in that business? That's the first question. Stephane Simonetta: You are right that Q4 was around 9%, 10% negative organic growth. But let me remind you that when we report organic growth percentage, it is still excluding GVT, right? So you will see the impact of GVT in our revenue top line increase and I can tell you it's going to be very good in 2026. But the organic growth of GVT, you will see only the impact in Q4 2026 when we have own GVT a full year. So just to manage that. So the number you see in Q4 are pure with the former scope of advanced mechatronics. Tijs Hollestelle: Yes. And let me rephrase it. I understand that the acquisition is not in the organic growth number, but it seems that the Grand Venture Technology already generated almost EUR 30 million of turnover in the fourth quarter based on two months. Is that a fair assumption that it includes the December month, which in my view, a light one. Frans den Houter: So maybe Tijs, the number we put out there, SGD 160 million equaling more than SGD 120 million annual revenue in GVT and it was in our books in the fourth quarter. And then Stephane already mentioned that we see good growth in this company. So that also helps already in Q4, in the top line. But you don't see that, of course, as Stephane explained, in the organic revenue number as a percentage until Q4 next year. Does that clarify? Tijs Hollestelle: Yes. Stephane Simonetta: And coming back to the seasonality to make sure we answer your question. We see more seasonality actually in the front-end with a better second half than first half, like I explained earlier, compared to GVT in the backend, which is actually quite more balanced. Tijs Hollestelle: Okay. Yes. And then I appreciate your additional comments you just made on the recovery in the second half of the semi business. But can you give us a bit more feel for the, let's say, the potential magnitude? What kind of scenarios can we expect there because we have seen massive, let's say, organic declines in some of the quarters earlier in 2025. Is that something we can also expect for, let's say, that recovery? It is not impossible that, for instance, in the third or fourth quarter, organically, the business is coming up by 20%? Or would you say it's more moderate? Stephane Simonetta: I can only repeat what I said that we see second half will be much better than in the first half. And we have decided not to give a specific organic growth outlook by segment. But you are right that Q3, Q4 should be much better because we also see much higher number in 2027. We just need to have more time to see all the orders coming in the value chain, but we don't disclose number by segment. Tijs Hollestelle: Okay. No, that's fine for now. And then if I may, I also have a question about the building division. I was also -- I mean, I think you mentioned back to organic growth, but that was indeed on the full year basis. So there's also a small organic decline again in the fourth quarter. I think underscoring that market conditions remain very volatile, difficult to predict. But what was the impact of the write-downs because I saw a EUR 3.4 million write-down somewhere in the press release. And if I, let's say, apply that to the fourth quarter EBITDA of the building business, it explains, let's say, a more normal margin. But you also mentioned EUR 20 million. So where is the EUR 20 million showing up throughout the year in the building business? Frans den Houter: Yes, that's reported in the inventory line item in the balance sheet and then taken as a cost in our margin. So you don't see it as a separate line item, not as a write-off, Tijs. It's an inventory revaluation. Tijs Hollestelle: But the EUR 38.1 million EBITDA in the building division seems to be very low. Is that -- these write-downs or not? Frans den Houter: Tijs, could you repeat your last question because the line was bad. Tijs Hollestelle: Is the -- let's say, the EUR 38.1 million EBITDA in the building division in the fourth quarter, is that negatively impacted by some inventory write-downs and how much? Frans den Houter: Yes, the EUR 20 million is in there. Yes. Sorry, Tijs, I misunderstood your question -- The EUR 20 million inventory correction is impacting the 11.7% margin in building and has been taken in the fourth quarter. I thought you were asking where -- fully, yes. I thought you were asking where to pinpoint it in the press release, but you don't see it in the numbers on the P&L as a separate line item, of course, I thought that was your question. But it's in the books, in Q4 impacting the building performance. So EUR 20 million one-off noncash if you do your calculations. Tijs Hollestelle: And then the [indiscernible] the 15.5% EBITDA margin, is that kind of the level we should take into account going into 2026? Frans den Houter: Again, sorry, Tijs, the first part is you are -- we lost you and that probably was the most important part of the question. Can you repeat? Tijs Hollestelle: I asked that the fourth quarter, 15.5% margin then adjusted for that, is that also the margin underlying to take with us going into 2026? Frans den Houter: Yes. So that's -- we don't give guidance per quarter per segment, but -- and I think you have to see this in the light of the whole year. There are always quarterly swings, pluses and minuses. But yes, there's no denying that the fourth quarter for building was really strong if you take this one-off out. But I think you should look over the overall picture, 11.7% and put the EUR 20 million as a one-off correction in doing your numbers. Rutger Relker: I'm happy to give the word to Kristof Samoy from KBC in Belgium. Kristof Samoy: Just I want to come back again on semicon and you're quite firm in terms of the anticipated recovery in the second year half. But if you look at the numbers of your largest front-end customer, ASML, from a high-level perspective, you see that their new system sales drop, yes? So they're selling more expensive products. How -- in such an environment, how can this have positive volume impact for a subcontractor such as Aalberts? This is the first question. And then on the portfolio review, you have been very active in the strategy execution in terms of disposals and acquisitions. Can we assume that for 2026, management has enough on its hands and focus will be on post-merger integration, and we should not expect major transformational M&A this year? Stephane Simonetta: Thank you, Kristof. Two great questions. The first one, I would like to say that, first of all, we are not a subcontractor, right? We are a strategic partner of ASML. We are a strategic partner in the whole semicon ecosystem, so much more than a subcontractor, right, just to clarify this point. And you're absolutely right. I think you have a very good point looking at the numbers. That's what also we have been explained in 2025, the link between the number of system shipped and the link to what we produce, right? And then you have, of course, the inventory in the middle. But where we see the highest growth is definitely all the growth expected by our key customers and what they see from their customer on the EUV. And on the EUV, we have unique positioning. This is where also we have the capacity ready. And this is where the AI push would require more and more of this technology. And we will benefit from this growth, and that's why we expect it in the second half, not in the first half because the whole value chain need to ramp up. So we're actually quite bullish for 2027. And like I mentioned earlier, that's what we expect every quarter to improve so that the whole value chain ramp up. So that's why we see it. Even when you look at the last quarter, you are right, there was a mix change between what they ship on high value, between what they do in terms also of services and refurbishment, where we are not exposed, but EUV is definitely more promising in 2026. And on the second point, I will say, definitely, yes, on semicon, you are right that our top priority is post-merger integration, right? Now utilizing our global footprint that we have between Europe and Southeast Asia, now the broadening portfolio that we have with all the technologies that we have from our advanced mechatronic and now from GVT and supporting the customers in their technology road map with this full offering. But on the industry, we still see opportunity to continue to make bolt-on acquisition, especially in aerospace and in the U.S.A. So we have a strong funnel, and we are still active in this segment. And in building, this is where also we see opportunity to make further progress either in our water treatment source to emitter and also in the U.S.A. So you should expect us to be more active in building and industry, but less active in semicon. Rutger Relker: [Operator Instructions] I would like to now already touch two questions which have been sent in via the Q&A form. And the first one is for you, Frans. That's about guidance for CapEx for the year 2026. Could you give us a bit of a comment there? Frans den Houter: Yes. But before I do that, maybe a small correction. I just mentioned for GVT, the Singapore dollar revenue, SGD 160 million, which is correct. The exchange rate would translate into SGD 207 million of revenue, just to make sure that number is accurate out there. Maybe on CapEx, so EUR 189 million this year, which is a good number. I already mentioned in the -- when discussing the slides, assets under construction is quite high, EUR 226 million. And also there, you see a bit of a step-up versus our depreciation, which is EUR 170 million. As we are investing in our business in organic growth in -- also in the new company, GVT that we acquired. So you need to correct, of course, for M&A. If you do all that, based on the current portfolio for the coming year, we are still -- will be around the same level that we spent this year. So circa EUR 190 million as a first number for 2026. Rutger Relker: Okay. Thank you. There's another question I want to -- is coming in now, which I think it's a relevant one for I think for you, Stephane, about the write-off on the semiconductor innovation part of the exceptional. Perhaps you could give a bit of a color on that topic. Stephane Simonetta: Yes. So let me remind you that, first of all, I see the question. It has nothing to do with GVT, right? It's really something we started four, five years ago, right? And when you start to innovate, when you start a new technology, so it was linked to a deposition technology, which was very promising at that time with a lot of opportunity to further commercialize. But after four, five years, we came to the conclusion that there is still not a path to commercialize, and that's why we are putting this cost as an exceptional cost. So not linked with our current business and not linked with GVT. Rutger Relker: Okay. Thank you. I'd like to -- it's a very long question. I can see whether I can summarize it a little bit. Yes, there's a question on the data centers. I think you already gave quite a bit of a color on what we do there. So I think that -- I think that answer -- that question has been answered. Then I find another question on CapEx for you, Stephane, whether you could give a bit of color where you spend the CapEx? Would it be mostly growth, innovation, ESG, capacity? Well, you have a lot of options, I see. If you can give a bit of color there. Stephane Simonetta: Absolutely. I think you have seen in the number that Frans presented, first of all, that our CapEx intensity is quite different by segment due to the nature of the industry, right? Definitely, in semicon, this is where we have been investing a lot for capacity for the long-term growth. So most of the investment we have been doing of the CapEx we have been doing in semicon, it's for capacity, it's for technology. When you look at industry, a big part of the CapEx we do is for repair, it's for maintenance, but also for geographical expansion with new footprints because it's a very local and -- local and local-for-local business. So we follow our customers when there is a need. So a lot of capacity expansion, repair and maintenance. And when you look at building, this is more for efficiency. This is more for productivities because we already have the good footprint, and this is also where we are driving more automation in order to improve the utilization of our assets. And then across the three segment, we continue to invest for our people, working condition, sustainable environment. So quite balanced overall at Aalberts between ESG, between capacity, between operational efficiency and also now more and more on innovation. As I mentioned, I think, already last year, our weight linked to new building and capacity expansion is coming to an end. So we are going to spend more on R&D and on innovation. Rutger Relker: Thank you very much, Stephane. I see also that somebody has joined the queue, which is Philippe Lorrain from Bernstein. Philippe Lorrain: I'm quite new to the case, but I wanted just to ask a question on earnings adjustments. Because I see in the press release and also from what you say that there's a bunch of things that you flagged in the text, which are actually not adjusted from the earnings, i.e., this inventory write-down in Q4 and also the insurance proceeds. But at the same time, you have many different adjustments that you flagged at the back of the press release. So what's your policy on that? And what should we expect going forward? Frans den Houter: Yes. So thank you for the question. Yes, be very clear. So there are -- indeed, there are three items that we earmark as exceptionals. And those we report in a separate section in the press release and also in a separate slide in my presentation. Basically, all the numbers that we see are excluding the impact of the exceptionals. So with that, we want to make sure that the numbers of the company are well comparable year-on-year. So you can do also the underlying performance evaluation in a better way. And that's why we put them in a separate bucket, if you like. We label them exceptionals. And of course, we explained very well what's in there. And then -- there's an operational excellence element in there. There is the innovation in semicon that Stephane just discussed, and we're in an exit of our Russian businesses, yes, which are three very specific one-off items that we label as exceptionals -- And they are not reflected in all the other numbers that you've seen. Is that clear? Philippe Lorrain: Okay. Perfect. Yes, that's clear on that front. And just to follow up on that. So the write-down in innovation in semicon, is it related actually to fixed assets like in terms of PP&E? Or is it more intangible assets? Frans den Houter: It's a combination. So it's intangibles because there's absolutely also development and innovation, intellectual property in there, but also, yes, some other balance sheet items. So it's a combination. We didn't give the breakdown, the total impact. There are also some other elements in there, we said the majority is the semicon items and the total that we disclosed is EUR 28.9 million. Rutger Relker: Then I think there's a follow-up question from Chase coming in. Chase Coughlan: I just wanted to come back quickly on the guidance, particularly to do with the margin. I think it was asked a little bit earlier as well, but I'm trying to understand sort of a large portion of this margin improvement you expect in '26 is probably a result of the divestments, of course. Could you also talk a little bit about what you expect sort of from an organic standpoint as well from a margin level? Stephane Simonetta: Yes. I understand, I think, the question. So we actually see four enabler and why we are confident to say we will improve margins. So let me go through the four points, which we believe will help to have a better margin. First of all, we are planning to get better organic growth. And automatically, that will generate better margin because where we are growing also, this is where we have been investing and all the key verticals we are growing have also better margin profile on commercial building, in aerospace, power generation, defense and semicon. So first, organic growth. Second, you will have indeed the benefit of all the operational excellence program that we did in the previous year of footprint optimization so that you will have the benefit -- the in-year benefit in '25. Third, you have definitely the impact of the divestment that we did, right? So that also will help us to improve the margin. So some -- three elements that will definitely help us. And then -- the last one is that we don't expect another one-off in our building segment. The one we took in Q4, like Frans mentioned, the EUR 20 million, that also will not happen in 2026. So these 4 elements give us confidence that we will improve our EBITDA margin in 2026. Rutger Relker: And then I think the last question of this today Q&A, I'd like to give to Tijs again, also a follow-up. Tijs Hollestelle: Yes. Stephane, I was thinking about what you said on the semi recovery. And I think you also mentioned visibility for 2027. So is it fair to assume that you are very busy with the current planning of the shipment schedules of your clients, and that makes it difficult for you to pinpoint, let's say, an exact recovery trajectory, but you have the orders and you have the client activity. Is that a fair assumption? Stephane Simonetta: Yes and no because I -- we already have some good orders, and that's why we are confident it will be better, but we expect even more order to come, right? So I think '26 looks very promising. Now the question is how will be the ramp-up? I think we have always said over the last year that long term, the growth was never an issue. The only question was when it will be coming. And now we see definitely coming in '27. We are actually quite exciting by 2027. And the question is how much will be already happening in the second half of the year. So we are, of course, now very confident based on the current order book. So we know '26 will be better. We are not getting a lot of capacity simulation request, and that we don't know yet how much of this simulation will become a real order or not. And that's why answering your question, we cannot confirm yet because there are different scenario. But in all scenario, it's a growth scenario. Tijs Hollestelle: Yes. And the current existing capacity of Aalberts is sufficient that you can handle much higher revenue levels? Stephane Simonetta: Again, that's why it's such a good news because it just confirms the strategic investment we did. Our factory in Dronten in the Netherlands has always been there for the growth of EUV. So we see now very good utilization potentially in '27. So perfectly in line. Of course, we will have hoped to have it earlier. But now '27, it will be there. So the question is how big will be the utilization, but we have invested capacity, if you remember, for the '27 2032 growth. So we have -- we are ready for the growth. And now on top of that, you have the backend growth and our footprint in Southeast Asia, so we can also support our current customer, we have also access to all the new customers we didn't have before. And now we can also do load balancing depending on their need. Do they want deliveries in Europe or do they want us to supply from Southeast Asia, we are ready to support them. Rutger Relker: Thank you, Stephane and Frans, for the answers. Yes. As we conclude today's webcast, I would like to thank everybody to join us today. And also please remind that both the presentation and today's recording will be available on the website later today. Thank you.

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CRAI 2025 Q4 财报电话会议

Operator: Good day, everyone, and welcome to the Charles River Associates Fourth Quarter 2025 Conference Call. Please note that today's call is being recorded. The company's earnings release and prepared remarks from CRA's Chief Financial Officer are posted on the Investor Relations section of CRA's website at crai.com. With us today are CRA's President and Chief Executive Officer, Paul Maleh; Chief Financial Officer, Eric Nierenberg; and Chief Corporate Development Officer, Chad Holmes. At this time, I'd like to turn the call over to Dr. Nierenberg for opening remarks. Please go ahead, sir. Eric Nierenberg: Thank you, Melissa, and good morning to everyone. Please note that the statements made during this conference call, including guidance on future revenue and non-GAAP EBITDA margin along with any other statements concerning the future business, operating results or financial condition of CRA, including those statements using the terms expect, outlook or similar terms are forward-looking statements as defined in Section 21 of the Exchange Act. Information contained in these forward-looking statements is based on management's current expectations and is inherently uncertain. Actual performance and results may differ materially from those expressed or implied in these statements due to many important factors, including the level of demand for our services as a result of changes in general and industry-specific economic conditions. Additional information regarding these factors is included in today's release and in CRA's periodic reports, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. CRA undertakes no obligation to update any forward-looking statements after the date of this call. Additionally, we will refer to some non-GAAP financial measures and certain measures presented on a constant currency basis on this call. Everyone is encouraged to refer to today's release and related CFO remarks for reconciliations of these non-GAAP financial measures to their GAAP comparable measures and descriptions of the calculation of EBITDA and measures presented on a constant currency basis. I will now turn it over to Paul for his report. Paul? Paul Maleh: Thanks, Eric, and good morning, everyone. Thank you for joining us today. Revenue for fiscal 2025 increased by 9.3% to $751.6 million, marking CRA's eighth consecutive year of record annual revenue. Our performance benefited from broad-based contributions across the portfolio. Both lines of business contributed to the year's revenue growth as our legal and regulatory services increased 10.3% relative to fiscal 2024. And our management consulting services expanded 6.4% year-over-year. For fiscal 2025, 7 practices grew their top lines with 3: Antitrust & Competition Economics, Energy and Intellectual Property delivering double-digit revenue growth relative to fiscal 2024. Geographically, both our North American and international operations contributed to the year's revenue growth, increasing 7.3% and 19.5%, respectively. During this period of revenue growth, we continue to manage the business effectively achieving full year utilization of 77%. Our strong utilization and overall execution drove record profits for fiscal 2025 as measured by net income, earnings per diluted share and EBITDA. Turning to the fourth quarter. Our portfolio strength drove an 11.6% increase in revenue year-over-year, resulting in the best quarterly revenue in CRA's history. Continued growth of our sales pipeline supported this record Q4 revenue. During the quarter, our weekly average project lead flow and new project originations increased 9.3% and 7.7%, respectively, relative to the fourth quarter of 2024. For the fourth quarter, 6 of CRA's practices grew their top line with 4 Antitrust & Competition Economics, Energy, Forensic Services and Labor & Employment, delivering double-digit revenue growth year-over-year. Revenue in the fourth quarter for CRA's legal and regulatory services increased 14.3% relative to last year. The Antitrust & Competition Economics and Forensic Services practices led the way with each delivering quarterly revenue growth of more than 20% year-over-year. With this notable performance, each practice established new records for both quarterly and annual revenue. In addition to these 2 practices, the labor and employment and risk investigations and analytics practices expanded revenue year-over-year. During the quarter, CRA's Antitrust & Competition Economics practice worked on merger transactions across a range of industries and geographies as worldwide M&A activity in 2025 totaled $4.6 trillion, an increase of 49% compared to 2024 and represented the strongest annual period for dealmaking since 2021. For example, the practice was retained by the Hershey Company, an industry-leading snacks company with iconic brands to advise on its acquisition of LesserEvil, a maker of organic snacks. The CRA team provided support to Hershey on the competition and regulatory compliance aspects of its acquisition. [ Although ], a global CRA team advised Boeing with the submissions made to competition authorities across the world in connection with its acquisition of Spirit AeroSystems. The transaction closed in December 2025, following the consent order from the FTC and earlier clearances by the U.K. Competition and Market Authority and the European Commission conditional on full compliance with commitments offered by the emerging parties. During the fourth quarter, the Forensic Services practice worked on hundreds of ransomware, wire transfer fraud, employee misconduct, trade secret and various litigation matters. Our team is consistently retained by companies ranging from large Fortune 500 companies to smaller private companies that are in crisis. For example, when a company is crippled by ransomware. Our team provides support for clients to contain incidents, recover operations, advise on business interruption claims and manage stakeholder communications in alignment with relevant authorities. During Q4, the labor and employment practice continued to assist clients in all phases of employment-related litigation. The practice was routinely engaged for pre-litigation support, expert testimony and proactive consulting services in complex employment matters. For example, a CRA Vice President was retained as an expert by a large tech company in a nationwide class action matter involving alleged violations of the Fair Labor Standards Act as well as California's and New York's labor codes. During the fourth quarter, the risk investigations and analytics practice worked on several large investigative and damages matters across multiple jurisdictions. In the U.S., the practice was retained as an expert on behalf of a leading global energy company to opine on damages from an alleged breach of contract in relation to a joint development agreement between the parties to develop heat exchangers and a related acquisition. In the United Kingdom, the practice was engaged on behalf of an African utility company that commenced arbitration proceedings regarding the concession agreement with a national government entity. CRA consultants are providing financial analysis of multiple elements of the concession agreements. Within our management consulting offering, the energy practice continued to operate at the forefront of key industry developments during the fourth quarter with revenue increasing more than 20% relative to the fourth quarter of 2024. Activity was particularly strong around data center-driven load growth where the practice supported 1 electric utility and 2 gas utilities in evaluating strategic options to attract and serve large-scale data center customers, including consideration around infrastructure investment, tariffs and regulatory positioning. In parallel, the practice remained engaged on electricity market design and planning issues as clients increasingly recognize that existing market structures are under strain from rapid load growth, resource adequacy challenges and evolving reliability needs. This work included advising utility developers and other market participants on the implications of these changes for investment, operations and policy. CRA's Life Sciences strategy work continues to span the product life cycle. As an example, during the fourth quarter, a couple of our major projects involved opposite ends of the spectrum in liver disease. For one of our clients, we engaged in mapping the patient's journey and identifying unmet needs to assist a pharmaceutical company in identifying new therapy development opportunities in liver disease. On the other end of the spectrum, we helped the pharmaceutical company prepare for a loss of patent exclusivity on a blockbuster product. Recapping our record financial performance, CRA reported revenue for fiscal 2025 of $751.6 million and non-GAAP EBITDA of $96.8 million, producing a non-GAAP EBITDA margin of 12.9%. CRA achieved this performance during a period of market turbulence and external disruptions. From geopolitical and macroeconomic shifts to industry-specific volatility, CRA absorbed the shocks and continue to expand its bench of talented contributors. On the consulting side of the business, during fiscal 2025, we promoted 8 colleagues to Vice President and hired 19 new Vice Presidents. As previously announced, we made investments to expand our leadership ranks on the corporate side, drawing from our deep bench of management talent to promote Eric Nierenberg to CFO; Brian Langan, to Chief Strategy and Business Transformation Officer; and Sandy David, to Principal Accounting Officer. We further expanded our leadership team with the external hires of Graham Ross as CRA's Chief Marketing Officer; and Curt Lefebvre as Vice President of Artificial Intelligence to oversee CRA's deployment of AI across the organization as we move beyond broad experimentation and toward disciplined enablement. Moreover, we made all of these investments without missing a beat in our financial performance. Overall, I'm grateful to my colleagues for their hard work during the fourth quarter and throughout the year as we delivered outstanding services to help our clients address their most challenges -- their most important challenges. For full year fiscal 2026 on a constant currency basis relative to fiscal 2025, we expect revenue in the range of $785 million to $805 million and non-GAAP EBITDA margin in the range of 12.0% to 13.0%. Based on current forecast, we expect that currency effects will decrease our reported revenue by roughly $5 million and will decrease our reported EBITDA by less than $1 million when stated on a constant currency basis. In addition, noncash forgivable loan amortization, which is reflected as an expense when presenting EBITDA metrics is expected to increase approximately $15 million or more than 30% year-over-year in fiscal 2026 due to the increase in talent investments completed in fiscal 2025. Finally, as a reminder, fiscal 2026 returns to CRA's typical 52-week year, whereas fiscal 2025 contained an extra week and resulted in a 53-week year. To close my prepared remarks, I would like to share my thoughts on the recent market volatility. Over the past month, CRA's strong operating performance has been overshadowed by apparent unease in the broader equity market over the potential impact of AI on all types of businesses, including those in the consulting space. We view AI as a catalyst for improved productivity and revenue growth. Since the public release of ChatGPT and the resulting attention on large language models, my colleagues have found innovative ways to deploy a variety of AI tools and techniques with client projects. For example, AI tools have accelerated the creation of computer code and scripts in support of our analytical work, enhanced first pass document review, including foreign language translations and accelerated basic desk research. What may seem like small productivity enhancements allow my colleagues to reallocate more time and resources to part of our clients' challenges where CRA can provide unique insight. The combination of CRA's industry-leading expertise and the capabilities of these new technologies allows us to identify opportunities and deliver the creative solutions that our clients have come to expect from CRA. For example, our energy practice has developed an artificial intelligence-driven resource adequacy model known as CRA Adequacy X that utilizes a Monte Carlo-based loss of load approach. It uses artificial intelligence and synthetic data to simulating future grid conditions such as changing load shapes and generator unit performance to capture correlated events like high load coupled with wide-scale outages during cold winter events. By stimulating future conditions, CRA can accurately capture the capacity contribution of different generating technologies and identify critical reliability risks, which would be missed by only simulating historical conditions. Additionally, AI is expanding the range and complexity of economic decisions that can be evaluated from regulatory scenario testing to competitive simulations and litigation, the value is not in the machine selecting the answer. The value lies in expert judgment, framing the right questions, choosing defensible assumptions and defending conclusions, AI can accelerate the work. but it does not replace the credibility in complex and high-stakes environments. Importantly, our approach to AI adoption is disciplined and governance focused. We are integrating AI through controlled pilots, strong quality control processes and reproducibility standards and strict data security safeguards. Human oversight remains central to every client-facing deliverable. As we scale adoption, our priority is to use AI in ways that strengthen quality, speed and consistency while maintaining the standards our clients and courts expect. As I have often said, our long-term business drivers are complexity, regulation, litigation and high-stakes economic decision-making. These are not going away. If anything, they are likely to intensify. We see AI as strengthening the position of firms like CRA with deep expertise, strong governance and established credibility. Our culture of expertise and rigor is durable. We remain confident in our strategy and in CRA's ability to continue delivering long-term value to our clients, colleagues and shareholders. With that, I will turn the call over to Chad and then Eric for a few additional comments. Chad? Chad Holmes: Thanks, Paul. Hello, everyone. I want to update you on our capital deployment during the quarter. CRA continues to generate strong cash flows, demonstrating the strength in our operations and the quality of our revenue, CRA's fiscal 2025 adjusted net cash flows from operations increased 17% year-over-year to $108.4 million. Stated another way, during fiscal 2025, CRA converted 112% of its non-GAAP EBITDA into adjusted net cash flows from operations. This strong performance is consistent with prior years as CRA has converted EBITDA into adjusted net cash flows from operations at rates of 111% and 112% over the past 3 and 5 years, respectively. These cash flows represent a discretionary pool of capital used to fund reinvestment in the business and distributions to our shareholders. I will now detail how we allocated our capital during the fourth quarter. We repaid $61 million of our net borrowings under our revolving line of credit to bring our year-end balance to $34 million. We ended the year with a cash balance of $18.2 million, resulting in a net borrowing position of $15.8 million. Since year-end, we repaid the entire amount of outstanding borrowings under our revolving line of credit, bringing the balance to 0. The fourth quarter of 2025 also saw net cash outlays for talent investments of $17.6 million. For the full year, we spent $87.9 million to acquire and retain senior revenue-generating talent. We spent $1.1 million on capital expenditures, bringing our year-to-date total to $3.9 million. For fiscal 2026, we expect spending on capital expenditures in the range of $4 million to $5 million. We paid $3.7 million of dividends to our shareholders during the fourth quarter. For the full year 2025, we returned a total of $61 million to our shareholders through a combination of share repurchases and quarterly dividends. This amount represents 56% of CRA's 2025 adjusted net cash flows from operations and is consistent with our ongoing aim of returning half of our adjusted cash flows from operations to shareholders. Since stating this aim at the beginning of fiscal 2021, we have returned to shareholders 54% of CRA's aggregate adjusted net cash flows from operations. Specifically, over this 5-year period, we have returned a total of $239.3 million to our shareholders, consisting of $54.8 million of dividend payments and $184.5 million of share repurchases at an average price of $110 per share. As announced earlier today, CRA's Board of Directors authorized an expansion to our existing share repurchase program of $55 million. With this expansion, we now have $65.9 million available under our share repurchase program. Taken together, our capital allocation decisions demonstrate continued confidence in CRA's long-term prospects as we look to invest in the business for profitable growth, while at the same time, returning substantive capital to our shareholders, all with the aim of maximizing CRA's long-term value per share. With that, I will turn the call over to Eric for a few final comments. Eric? Eric Nierenberg: Thanks, Chad. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website under prepared CFO remarks. Before we get to questions, let me provide a few additional metrics related to our performance in the fourth quarter of fiscal 2025. In terms of consultant headcount, we ended the year at 959, consisting of 164 officers, 563 other senior staff and 232 junior staff. This represents a 1.4% increase compared with the 946 consultant headcount reported at the end of fiscal 2024. Non-GAAP selling, general and administrative expenses, excluding the 1.0% attributable to commissions to nonemployee experts was 16.1% of revenue for the fourth quarter of fiscal 2025 compared with 15.9% a year ago. For the full year fiscal 2025 and fiscal 2024, the ratio was 16.1% of revenue. The effective tax rate for the fourth quarter of fiscal 2025 on a non-GAAP basis was 28.8% and compared with 30.9% on a non-GAAP basis for the fourth quarter of fiscal 2024. The lower rate in the fourth quarter of 2025 was largely attributable to the impact of the prior period remeasurement of our deferred tax assets as a result of changes in tax laws that were nonrecurring in the current period. For the full year fiscal 2025, the effective tax rate on a non-GAAP basis was 28.4% compared with 29.2% on a non-GAAP basis for the full year fiscal 2024. The lower rate for the full year fiscal 2025 was largely attributable to the impact of state legislative changes in the prior year that were nonrecurring in the current year. The effective tax rate for fiscal 2026 is projected to be in the range of 31% to 32%. The year-over-year increase is largely attributable to changes in legislation impacting executive compensation. Turning to the balance sheet. DSO at the end of the fourth quarter was 108 days compared with 115 days at the end of the third quarter of fiscal 2025. DSO in the fourth quarter consisted of 78 days of billed and 30 days of unbilled. We concluded the fourth quarter of fiscal 2025 with $18.2 million in cash and cash equivalents and a further $162.2 million of available capacity on our line of credit for a total liquidity of $180.4 million. That concludes our prepared remarks. We will now open the call for questions. Melissa, please go ahead. Operator: [Operator Instructions] Our first question comes from the line of Marc Riddick with Sidoti & Company. Marc Riddick: I wanted to sort of get the -- get some thoughts around the revenue guide starting first with sort of how you look at that, especially compared with sort of where you ended the year on consultant count and the strength of utilization, it seems to be as strong as the year finished. And given where headcount is, it seems as though it'd sort of be approaching the sort of historical higher end of the ranges that you're usually operating in. And given your commentary on the guide, maybe you could sort of give us some thoughts as to maybe what goes into that given sort of where you are in headcount utilization. Paul Maleh: Sure. Well, let me start by saying, I think your interpretation of our messaging with respect to our financial performance and its implications on 2026 is dead on. We had a fantastic fiscal 2025, and we're really quite bullish on fiscal 2026 as can be seen by the guidance that we provided. We're growing revenue, and we're growing it profitably. Even with the success, it does not mean that we are not constantly refining and improving our portfolio. Sometimes we double down on investments. Sometimes we scale back investments in certain practices. As we've discussed in prior quarters, that, of course, has an impact on the headcount that you observe in terms of the aggregate headcount. But that does not necessarily mean that the headcount of our growing practices is not growing more commensurate with their revenue expansion. As we have said also in the past, if you get to sort of a medium, long term, headcount should roughly approximate revenue growth. So the flattish headcount growth in 2025 should not be seen as a more normal case or a new steady state for CRA. Going forward, I expect headcount growth would increase. Marc Riddick: Okay. Excellent. And then maybe we could shift gears in the prior quarter, you've spoken about the strength in the litigation activity I was wondering if maybe you could sort of give an update as to maybe what you saw there in the fourth quarter and then how sort of that figures into the 2026 commentary? Paul Maleh: Sure. the performance by several of our practices, and I'm going to highlight our Antitrust Competition Economics practice and our forensic practice. Their performance in Q4 is, I don't know how else to put it [indiscernible] to have the largest practice at CRA and probably the largest practice in the world, delivering 20% year-over-year growth is mind-boggling. I don't know how else to describe it. As did it surpass my expectations in Q4? Absolutely. And the reason we came forward with the guidance we put out for 2026 is I don't really see any near-term signs or any signs for that matter of it slowing. So much congratulations is due to my colleagues in the practice, both in North America and in Europe. You saw the growth rate of the European expansion, right, which just talks about the kind of strength that my European competition colleagues are demonstrating in the marketplace. Forensics, is I'm happy to say it looks to be on a nice growth trajectory. And they also posted their best quarter ever in Q4. And as we've been highlighting for the last several quarters, I know it's not in legal regulatory, the energy practice is taking advantage of this unique moment in the utility energy industry right now and capturing share. So very proud of the accomplishments of my colleagues. Marc Riddick: Excellent. And then the last one for me, I guess, there's a lot of pieces that are certainly contributing to the strength that you're seeing. Maybe you could talk a little bit about the -- certainly, the revenue mix appears to be very positive. Maybe talk a little bit about the pricing dynamic that you're seeing underneath because it seems as though that's a contributor as well. But maybe you could talk a little bit about what you're seeing there and if there are any particular areas where you're seeing any particular pushback that's meaningful in any way? Paul Maleh: Sure. Pricing always goes hand-in-hand with the CRA's ability to deliver value to our clients. you're able to raise prices because clients deem that your services are continuing to be valuable in their -- addressing their challenges there. So for 2025, we were right in that 3% range of rate increases. That stuck largely during the year. So we're very happy with that. and ways you can see it's sticking, we have not experienced any kind of increase in write-offs or the collectability of our revenue. We're still collecting $0.97, $0.98 on the dollar, and we deliver our revenue at our reported rates. We are not an organization that goes into the process of significantly discounting rates depending on the practice. We get what we charge, which talks again to the quality. Looking forward, we expect rate increases in the low single digits, maybe a little higher than the 3% in 2026. As we also have discussed in the past, we will start getting a better read on the stickiness of those rate increases sometime during Q2. But all signs are that we should be just fine as the year progresses. Operator: Our next question comes from the line of Kevin Steinke with Barrington Research. Kevin Steinke: I want to say thank you for the comments around AI as it relates to your business, it's obviously very timely in light of what's been going on in the equity markets. But I wanted to drill down a little more specifically on you're mentioning that you brought on a VP of Artificial Intelligence and that you're kind of looking to move more towards an execution phase from an exploratory phase on internal AI initiatives. And just wondering if there have been any initial thoughts or discussions internally about is that perhaps an enabler of margin expansion over time? Paul Maleh: Right now, it's difficult for me to compute whether I would see a margin expansion over time. For me, I see it more as a revenue enhancement opportunity as we get to move to higher value-added services more rapidly. The reason we brought on a leader of the initiative internally is this sort of individual experimentation that has been going on over the past couple of years is gaining a lot of steam, and I want to make sure we are coordinated as an organization and even more importantly, that we are respecting the confidentiality of our clients' data on that. So that is probably the main reason for the coordination, but I also believe the coordination will allow for a more rapid ramp of a lot of these initiatives. Kevin Steinke: Great. That sounds great that you actually see it as an enabler of revenue growth. So just moving on to again, I wanted to follow up on the Forensic Services practice. That seemed to kind of really pop here in the quarter as you discussed. But Were there any particularly large projects that rolled in? Or has the pipeline strengthened there? Just kind of any more detail on what's going on there? And is it -- do you feel like there's some sustainability there or some legs there to that practice continuing to grow, maybe not at 20% plus, but just kind of how you see it playing out over the year? Paul Maleh: Sure. We highlighted the lead flow growth in Q4. The reason we did that is we're having just almost as robust and inbound of new project opportunities as we were able to deliver on the revenue growth, and that bodes really well for 2026. We always have large projects across our practices that come in and go off of our books. What I've been really impressed with the consistency of the quarters during 2025 and years prior is that we don't miss a beat that we have enough of a backlog that we only experienced what I would call temporary softness in any one practice before we move on to the new revenue opportunities. I think the lead flow in our forensic practice has been rather robust. And I remain bullish for their 2026. Like you said, I think it's asking a lot for them to deliver 20% revenue growth quarter after quarter, but I see a lot of good things ahead for that consulting team. Kevin Steinke: Okay. That sounds good. And I just wanted to ask about the forgivable loan amortization. Obviously, you had -- based on your announcements you had throughout 2025, a really strong year for attracting talent. And just wanted to kind of confirm that, that's what's really driving the expected increase in forgivable amortization in 2026 and you're not necessarily having to pay more or pay more to attract a particular consultant compared to history. It's more just the volume of hiring, I would guess. Paul Maleh: Sure. So let me begin with the last part of your question and then move back with it. So first of all, our -- the acquisition cost of bringing on incremental revenue has remained relatively constant or consistent with prior quarters and years. So we have not experienced a rising purchase price for a lack of a better descriptor with respect to that incremental revenue. We brought on a lot of great new talent. We also, given the disruptions in the broader marketplace in 2025, there was money paid to retain some talent. Retention of revenue-generating resources within our organization is not new. If I look at the expectations for CRA, when I look at 3-, 5-year windows of time, the outlays that are made in 2025, yes, they may be a bit concentrated, but are consistent with our medium-term 3- to 5-year forecast. So that is also not out of the ordinary. Both are contributing to an increase of forgivable loan amortization as we enter in 2026. And the reason we highlighted that more explicitly when people are interpreting our reported GAAP financials, please take in consideration that you have a large noncash expense flowing through that income statement. If you account for that, look at EBITDA like we demonstrated in our investor deck and look at the forgivable loan amortization. If you sum those 2 pieces up, it's probably as high a measure as CRA has ever delivered. So by no means are we becoming less profitable as an organization. And it's so good, I really want to say it again. We are not becoming less profitable as an organization. We continue to be able to deliver impressive revenue growth at expanding margins because every year is a new high point for the company. So again, good things ahead in '26 and beyond. Kevin Steinke: Okay. Great. That's helpful. And obviously, your ability to attract talent, it bodes very well for your future revenue growth and your future just market opportunities. But just I want to ask lastly about share repurchases it looks like you didn't complete any in the fourth quarter, but I assume with the increased repurchase authorization and the recent dislocation in the stock price that you'd want to continue to be active on the repurchase front. Is that correct? Paul Maleh: That is correct. Our share repurchases tend to be a little bit front-loaded in the year because as we enter any year, we expect to deliver strong results, and we expect the market to reward us for those strong results, thus expect an increasing stock price. So you typically find share repurchases to be more heavily weighted towards the first half of the year relative to the second half of the year. I would say that's point one. Point two, I'm clearly not happy where my stock price sits here. We are significantly undervalued. There's not much I can do about that immediately. I can deliver -- we can continue to deliver the strong results. And I think it's safe to assume that you also anticipate CRA being an active repurchaser of its shares in the quarters ahead. Operator: Our next question comes from the line of Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to ask on the M&A environment. I apologize if I missed it, but I think most of the commentary was specific to what you saw in '25. Have you seen M&A and relatedly M&A-related Antitrust stay or accelerate with strength so far this year? Paul Maleh: I think there was definitely an acceleration as the year progressed. But again, when you look at the consistency of the results, of the firm quarter-to-quarter. That's hard to exactly pinpoint on that. The 20% year-over-year growth by the competition practice in Q4 clearly points to a really strong quarter for the practice, both in North America and internationally. And right now, we see no signs of that slowing down. They're working on matters that they secured in '25 and the lead flow year-to-date has also been quite strong. So it seems like the market is conducive to high value-added services. Andrew Nicholas: Great. That's constructive. I appreciate it. And then for my follow-up, I wanted to go back to the AI topic. I heard you on kind of the AI efficiency examples. Foreign translation or foreign language translation, some of the capabilities around contract review, maybe data analysis. All of that sounds super helpful and interesting. I'm just curious because I think, Paul, you said the expectation is that some of that is handled with AI, you can move your focus to higher value type work. Can you walk me through just kind of how you think about that from an impact in the economics of these projects? Does that work moving from lower value to higher value equal the same hours at higher rates or better utilization? Or just kind of thinking about kind of the second order effects of that and how it might impact the model as that becomes a bigger and bigger part of the way that you work. Paul Maleh: Sure. I do not anticipate a worsening or a decrease in our staffing leverage at CRA. I think it's important to note that our staffing leverage is somewhere in the 4:1 or 5:1. And by that, I'm saying about non-Vice Presidents to Vice Presidents at CRA. So in the legal -- particularly in the legal regulatory area on that. So we are not particularly highly levered. So the displacement base is smaller than -- you may think at some other consultancy. So I will start with that. To date, because these large language models or a lot of the tools I described are not something that we just started using in Q4. We've actually been using these tools for the last couple of years with it. And to date, we have not seen a decrease in the utilization of our junior staff. Those are the individuals we hire directly from undergraduate institutions, and we have not decreased the leverage with respect to the junior staff that assist us on delivering our revenue. So we believe we can effectively use that staff because the staff is working at the direction of these senior experts. And when you're talking about the complexity of the problems we have, the size of the data sets that we're dealing with, the senior most expert cannot handle that work by themselves. They delegate it out to their project team for helping them deliver. So I've seen no evidence to date on that. And right now, I also -- I'm not worried about any kind of negative consequences in '26, but time will tell. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Maleh for any final comments. Paul Maleh: Thank you, Melissa. Again, thanks to everyone for joining us today. We appreciate your time and interest in CRA. We will be participating in meetings with investors in the coming months, and we look forward to updating you on our progress on our first quarter call. That concludes today's call. Thank you. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

36天前Insight Analytics约5分钟阅读

FRTAY 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the freenet AG Conference Call on the Preliminary Results for the Financial Year 2025. At this time, all participants are on a listen-only mode. The floor will be open for questions following the presentation. Let me now hand over to Robin Harries, CEO of freenet AG. Robin John Harries: Good morning, everyone, and welcome to our earnings call. I'm Robin Harries, the CEO of freenet. Overall, we are happy about the operational performance and the strong customer growth. We see many opportunities ahead of us, but we are not happy about agreement with the network provider that we have, which was closed in '24. This agreement might lead to a minus EUR 13 million impact in '25 and to up to EUR 50 million negative EBITDA impact for the year '26 to '28. We are at the moment in discussions with the management of the network operator and are negotiating, trying to negotiate a better deal. This is already -- so the risks that I mentioned are already reflected in our numbers. So we are in ongoing discussions and we'll provide an update as soon as we have something. Freenet becomes more lean, focused and effective. We did some nice strategic moves in the last years. One is that we streamlined the executive board. This made us faster, more efficient and we have a clear focus. We optimized a lot in terms of marketing and sales initiatives. We have a clear focus on KPIs and performance. I think we created a lot of transparency within the organization, streamlined the focus. Everybody is on board here and is delivering, and this is I think quite good. And then we acquired the mobilezone last year, and this was one of our competitors, and we are happy about that as well. Another strategic move was that we have started a customer value management project, and this is a really a high-impact project. At the moment, our conversion rates are not great yet, but I think we have a lot of potential here. So when we compare our churn rates with competitors, we are at the moment behind, and this is potential. Because if you think about reasons why customers leave network operators, companies, the top 2 reasons are: first, they find a better deal somewhere else, and the second one is that they are not happy about network performance. Both of these things, I think, doesn't make a lot of sense when you look at freenet, because we have really great deals and we are able to offer products on all networks. So our churn rate should be good. So that's why this project is really important. We made big progress. So we are working on over 50 initiatives. And this quarter or this month, we will bring live our first AI voice bot in the customer service, and we have another AI tool for our call center agents, which will facilitate the selling process. And we are quite confident that we will have -- that we will see better outcomes here in the near future. We have some really great operational highlights. We achieved an all-time high in terms of postpaid net adds. We achieved over 300,000 organic postpaid net adds. When it comes to waipu.tv, that's -- there we achieved over or around EUR 36 million adjusted EBITDA. This is also a big step forward. In the past, we could prove that we can achieve strong customer growth there. Now we also proved that we can become profitable and show nice EBITDA. And we have a record dividend proposal of EUR 2.07. Now let's dive deeper into the mobile segment. We have -- our strongest brand is Freenet and the second one is klarmobil. And we put now a lot of focus on freenet. This is our premium brand. We changed a lot over the last month. For example, we moved the freenet offerings from the domain freenet-mobilfunk.de to freenet.de in the end of January. And so we prepared it over the course of last year. And yes, so this will be our premium brand. We will put our money on freenet. So today starts a new TV campaign and we also invest into digital out-of-home. That's important. We also shifted our marketing budgets to performing channels. We stopped the stuff that doesn't really work and now invested where we have a direct sales impact. And we will invest into our brand and that's a nice opportunity when you look at unaided brand awareness and brand awareness -- aided brand awareness. You can see that many people in Germany know the brand freenet, but when it comes to unaided brand awareness, our numbers are still very low and far below the competition, and that's a huge opportunity. So by investing into brand marketing, so we will be able to increase this, and I think this is also a nice upside potential. Beside our premium brand, freenet, we also launched new branded shops, Unlimited Mobile and Mobilfunk.de. We have a nice portfolio of brands that we position on various platforms and target specific user groups. I think this works quite well. We also relaunched our freenet FUNK app. And what's also very interesting and important is that we started our partnership with 1&1. At the end of last year, we had the first tests in selected shops where we started to sell also 1&1 mobile plans, and this test was very successful. We could achieve incremental sales. That's important for us that we not just replace one partner with another. No, we were able to really generate incremental sales. The partnership with 1&1 I think is very good. We are in the process of scaling this partnership now and roll it out to more and more shops. We have very good relationship to them, also to our partners, Vodafone and Telekom. So I think that we are very well positioned in the market, we showed that we can grow where we're strong, and yes, now we are further optimizing it and scaling the things that work. And the acquisition of mobilezone was also one important step. We could add even more brands, and this will further strengthen our market position. We have -- we are very dominant now on certain channels, and we could also add more marketing channels. And we will grow together as one organization. This will lead to nice synergies, the mobilezone team, very smart, very dynamic, moving fast. So I think that's a very good and cultural fit. The teams already work together closely, and we expect further potential there. On the next slide, this is a really important slide because you know that there's a lot of price competition in the market, a lot of pressure. And what you can see here is the freenet and frontbook pricing over the course of the last 2 years. And you could see that beginning of '24, it went down a lot, also beginning of '25. However, in the end of '25, we were able to do -- to increase it again. This actually is I think very important for us and for the market, and we could already see it during the Cyber Week. This is always a period where it, in the previous years, it became even more aggressive. This was not the case this year. We even increased our prices. This is also what we are doing at the moment. So we keep increasing our prices. We see that this works. In the last 6 months, we tested a lot or we did a lot of elasticity tests on our marketing and sales channels, that we showed our models. We could see that we can achieve very, very strong growth in terms of customer growth, new customer growth. But for us, it's more important to actually do this on a really healthy basis. That's why we started -- in Q4 last year, we started to increase prices, and we'll keep doing this. So for us, it's -- and quality is more important than quantity, and we put a lot of focus on it. So the guidance for '25 was moderate decrease, and this will be still the case for '26, because even though we increase frontbook pricing, we still have impacts from our customer base, and this will take some time. But I think it's very important that we see a shift here and that we will keep focusing on quality and try to further increase prices. On the next slide, you can see that we really gained momentum in the end of last year, we achieved all-time high customer growth, 306,000 customers, this is really outstanding result. And on top of that, we also could add 240,000 net adds from the acquisition of mobilezone. So this led to 546,000 postpaid net adds. So we outperformed our guidance here, which is great. And on top of that, there are also still 95,000 subs from base and tariffs. So overall, I think in the mobile segment, strong growth, many opportunities through our customer value management and through AI, also the marketing channels, and we just started there. I mean, last year, the TV campaigns, we started with klarmobil, now with the move to freenet.de. We also switched our marketing campaigns to freenet, to our core brand. And this is what we are -- that we want to scale this year and also afterwards. Next slide. This is our TV and media business. Media Broadcast shifted to segment orders. In Q1 '26 onwards, here you can see the freenet TV subscribers. The decline continues. And however, we have some stabilization measures. So we increased prices, we introduced a Hybrid TV stick, we prolonged a content contract, so we are working on this side as well. This segment, we also have waipu.tv and the IPTV market grows continuously. It's a strong market. Also the position of waipu.tv is very strong in this market. It was 20% to 25%, and the market will continue to grow. I mean, we are very well positioned in the competition. The product is very strong. When you look at ratings, when you look at reviews, it's an outstanding product, and we believe that we will further grow here and the market will further grow. So this is I think a very good market to be in. On the next slide, you can see our organic growth. We did some cleanups during the last quarters. We always talked about the O2 impact. And so here in this view you can see that now we deducted it, so we cleaned it. And now we have with 1,755,000 customers. We have now a clean base, because we deducted the O2, the O2TV customers. I think the migration will be finalized during this quarter, but we already deducted them in order to have a clean base. And we also deducted further unprofitable subs. So this brought us to the new and clean base. Overall, I think the growth was 152,000, is healthy. And beside this, we could show that we increased the profitability a lot and reached EUR 36 million adjusted EBITDA besides this nice growth. So on the next slide, you can see our priorities and the guidance for full year '26. Our focus areas are to strengthen the freenet brand. We will keep investing into our brand, into performance-based brand marketing campaigns. We have experience with it. It's important to have a clear branding and messaging impact of our campaigns. And then we will further develop our customer base value management and work on our initiatives. We will further optimize the conversion rates on our website. At the moment, when you go to freenet.de, you can see that we moved the domain, but there's still also a lot of room for further improvements in terms of user experience and page speed, conversion rates. So we are working on this. There will be further updates in the next months, which will also lead to further sales potential. And we will keep integrating the mobile phone channels. We work closely together with the teams. We will also reaccelerate the waipu.tv growth and the customer base. So we are -- we see potential in the market. We see potential through the product very good product. And we -- our objective is to become the AI telco company in Germany. So we started our projects in the customer value management, but we will also roll out AI tools to all different areas. It's -- for us, it's really important. We see that this is a huge path. Our guidance for '26 in terms of postpaid subs and moderate growth. I said that we have many opportunities here. But here, for us, it's the ARPU, the quality is more important. So we -- I think we showed that we can grow. We can outgrow the market. But for us, quality is more important. And postpaid ARPU, we expect still a moderate decline because of the impact of the customer base. However, we believe that the pricing for new customers that we are quite confident. In waipu.tv, we expect noticeable growth. With that, I hand over to Mr. Arnold. Ingo Arnold: Yes. Thank you, Robin. So I'll start with the group financials. So yes, to be honest, at the beginning, I'm disappointed by the figures, especially because there's one effect. I think all the figures are quite fine. The performance was quite fine during the year. And a lot of initiatives, what Robin was talking about, they worked quite fine and quite well. And then there is one effect now, which is a little bit disturbing, the picture here, but coming to the details further on. So if we look into the revenues here, yes, I would say, it's nearly stable. What we see here, we sold this WiFi business, which was called the cloud. We sold it mid of the year '25. This was an effect, especially in the second half of the year. If we look into the Q4 revenues, we see the effect from the cloud, the missing revenues. On the other side, if you remember, last year, we sold these IP addresses in Q4 last year, which was a positive effect in revenue of nearly EUR 20 million last year. So more or less, the miss in the revenues in Q4 is explained by these 2 reasons. I think what is important that revenues from high-margin services continue to grow. Switching to the gross profit. Here, what we see, we see a miss in Q4, but we still see that the gross profit is stable. Even with the bad Q4, it is stable for the whole year. What are the effects in Q4? I already talked about the phasing of the sale of IP addresses, which took place in the third quarter in '25 and took place in the fourth quarter in 2024. On the other hand, from the sold business, there was a gross profit contribution last year of something like EUR 5 million. And then Robin was already talking about the effect out of one single MNO agreement, where we chose to be very conservative in our accounting. Robin already mentioned that we are in discussions here, especially about a totally new agreement. These discussions are ongoing. And as we are here, as you know us, we are conservative. We are cautious. Therefore, here in the actuals, we chose to be -- to build up a worst case, and this is what we also did in the figures starting with '26 into the future. Adjusted EBITDA, here again, the reason is this -- especially this MNO agreement, which is a negative effect of nearly EUR 13 million in Q4. What we also saw as a negative effect was this sold business. Again, the cloud, they generated an EBITDA of EUR 2.7 million in Q4 '24. And so if you deduct or if you normalize by these 2 effects, it would be a very good quarter, and it would be a very good full year deeply in the guided range. Moving to the next page, mobile business. We see these -- we see on the one hand, in the revenue in the quarter that we lost some revenues in the segment here, hardware other. It is again this disposal of the WiFi business. But on the other hand, we -- and Robin explained it, we focused or we had to focus in marketing -- in online business, we had to focus on our discount brand, klarmobil. And with the discount brand, klarmobil, I think this is as usual, you do not see a lot of bundles. You see a lot of SIM-Only. So what I do expect for '26 ongoing is that with the new brand, and we just started with the new website, freenet.de, where we can sell the more premium quality tariffs and where we can sell more bundles. I do expect these hardware/other line to increase again. The service revenues, here on this page, not separated the postpaid service revenues, which grew slightly during the year. The miss here in service revenues is based on a reduction in prepaid business. So I think there is still a number of something like 1.5 million prepaid customers, what we do have, but it is reduced step by step. And therefore, we see a reduction of revenues here, but unprofitable revenues. Gross profit in the mobile business, here, you see it even clearer the effect from the conservative accounting of the MNO agreement. So without it and without the effect from the sold WiFi business we would be in the quarter. But definitely, on a yearly basis, we would see at least a stable gross profit. Adjusted EBITDA, again, the same reasons here. I think without the special effect, we would be near to the level -- much nearer to the level what we saw last year, and we would be deeply in the guided range. So moving to some KPIs of the postpaid business. Robin already talked about the growth in the postpaid business. So I think it was a proof of concept in the fourth quarter, especially in the fourth quarter, where we generated this high figure of new customers, but I think also for the full year. So -- but just to make clear here, and I read it from also some of our competitors, but for us, definitely, this is a top priority here for generate customers and to have the priority value over volume. So in the first quarter, I do not expect a comparable figure to what we saw last -- the Q4. But I think this makes a lot of sense because in the middle of this chart we see the ARPU, and Robin already talked about the base effect. We still -- we are happy that the ARPU of the new customers could be stabilized and even increased in the last month. And this is also what we focus on in the first quarter. We try to increase the prices. We would like to have a turnaround here in the ARPU situation. But during '26, it will stay difficult because of the base effect. But I think we are so happy that on the new customer side it was possible to stabilize it now. Digital lifestyle revenues are stable compared to last year. TV and Media, yes, definitely a success story with waipu.tv. Here, this is a page which definitely makes the CFO happy. All figures could be increased, higher revenues, higher gross profit, higher EBITDA, everything inside the range what we guided, even at the upper end of the range, the EBITDA. So I think it's a very good picture. It was possible to prove that waipu could not only grow, but could also generate relevant EBITDA. And so I think it's really a success story what we see. On the next page, financial structure. I think it's no changes to what we had in the other quarters. Still a very low leverage, a very healthy balance sheet. Yes, if you see the debt maturities, it is obvious that we do have to do a refinancing in the first quarter. I think we postponed it to April. It's no reason by market or that it would be difficult, but we will place promissory notes. We just started the process with the banks. So there will -- a refinancing will take place. And I'm optimistic that it will be possible with similar margins what we saw before. Free cash flow, I think we came in -- I think, yes, the EBITDA was lower than expected in our last call because of the now known effect. But all the other buckets are near to what I forecasted during our last call. Net working capital, I think I forecasted minus EUR 45 million. We came in a little bit better. Taxes, I forecasted EUR 60 million. Now we -- EUR 4 million better, EUR 56 million. In the -- on the CapEx side, we instead invested, especially on the AI side, we decided to invest some additional CapEx at the end of the year. Lease, as forecasted. And also, interest nearly as forecasted. And then we have to deduct the EUR 12 million here from the sale of this WiFi business. As you know, we generated sales -- we generated a price of EUR 40 million. So this was the cash in. We are not allowed to show the cash in, in our free cash flow based on our definition. Out of this EUR 40 million, EUR 12 million was relevant for the EBITDA, but we reduced it here again, but the cash is in the company, definitely the EUR 40 million. What we also did to be fair to our shareholders, and we know that a lot of shareholders are shareholders because of our high dividend, and there were some payouts in the second half of the year because we reduced the number of Board members here. And then there were some compensation severance payments, which were necessary in the second half of the year. Yes, it was linked to LTIP programs. This is correct on the chart, but it were compensation payments. And in a normal world, these would not have -- we would not have to pay them in the second half of the year. So therefore, we corrected this figure. And after correcting it, we are on a free cash flow level above EUR 300 million. And on this level, the calculation of the dividend is based and we stick to our promise to pay 80% of our free cash flow as a dividend. This is a calculation now and this leads to EUR 2.07 and the EUR 2.07 will be also proposed to our AGM. And I'm of good mood that they will support it there. Then on the next page, the guidance for '26. I already said that what we built up here in the guidance and also in the ambition for the years, we built up a worst case from this agreement with the network operator where we do have a problem now, where we do have the discussions. And therefore, in the guidance '26 and also in the following years, there is a negative EBITDA effect of EUR 50 million, EUR 5-0 million from this topic. And this is -- and therefore, I think on the first view, the figures may look disappointing. But if you put this into consideration, I think it is clear that basically we believe in the business, we stick to what we promised and we are -- for the underlying business, we are still very optimistic. It is only this one problem what we do have at the moment. And so we had -- we showed in the actual EBITDA of EUR 515 million. You have to add EUR 25 million for mobilezone, then you would have EUR 540 million. But on the other hand, you have to reduce the difference from this network operator agreement. So we already had EUR 13 million in '25 in the figure of EUR 515 million. And so in addition, there is something like EUR 37 million. This is a negative impact. And so therefore, we see EUR 500 million to EUR 530 million on an EBITDA level and free cash flow is corresponding to this. As the free cash flow may be a little bit disappointing. We would like to give some certainty to our shareholders and to make very clear that we believe in the business and that we do not see any negative signs in the business and in the underlying business. And therefore, we decided to promise to pay at least EUR 2 as something like a minimum dividend for the years '26 to '28, payout '27 to '29. But definitely, if the 80% of the free cash flow, what I believe today, if it would be higher than the EUR 2, definitely, this rule is still valid. So maybe these explanations to the guidance here hopefully helpful. Then I would hand over to Robin again to discuss the ambition what we renewed. Robin John Harries: Yes. Thanks, Ingo. So we updated our ambition. We have -- our 2 pillars are the mobile business and the IPTV business. Mobile, I think we have a healthy market share. We have over 8 million postpaid customers. The big advantage is that we offer all networks. So now we also offer 1&1. I think that's a very good value proposition. We have a multi-brand strategy, and we have strong sales channels. We have our own shops around 500. We have exclusive partnership with MediaMarktSaturn. We start brand marketing in TV. We do connected TV. We have many affiliates, online partners, offline partners. We acquired mobilezone. So this really gives us a very, very strong footprint in the market, and I think it's a very strong position. So we will -- and I mentioned it before, it's not only the new customer growth or the new customer potential that we see through our strong offerings. It's also the improvements in our customer base, and we want to reduce churn. So all of that let us believe that we have a potential to grow here, a stable business. It's healthy. And in our second pillar, the IPTV business, we have a product that is really outperforming the market, very strong, very good reviews. So we have a nice market share there as well, highly recommended and we believe that the market will further grow. And so the customer base will grow. On the next page, yes, so you can see our plans to become a leading AI telco in Germany. Our big advantage is that we are the smallest. So we are much smaller than our big partners and big competitors. And so I think that's an advantage. So we have a flat hierarchy. So we can -- we are very strong in decision-making. We can make decisions very fast and we are doing this. So we did this in the customer value management. So this was started last year. So this month, we already bring the first AI tools and agents live. So we are very, very quick here. And we do this in all different areas in the company. So we have customer care, customer base management, then we also bring our AI tools to our shops. So as I mentioned, we have 500 -- around 500 shops in Germany and the tools that our salespeople there use, they will be -- they will get new tools so that they will get information, which are -- they will get AI information. And this will make the user experience within the shops and the experience for our salespeople much better and hopefully also increase conversions. We also keep investing into our staff. So we are -- we have our people here. They are able to adapt quickly. So they have -- I think we have many, many growth mindsets here. They are able to change. And yes, so this is, I think, whenever you do something like a transformational company, 70%, 80% is people. And here, we are, I think, very strong. So -- and besides these big lighthouse projects, we apply AI wherever we can do this. So for example, when you look about -- or when you think about creatives, how to produce creatives for your advertising campaigns, we want to use AI. And when you look into mobile, so I mentioned it, we have a strong customer base. We have strong offerings. All networks makes a lot of sense to come to freenet and to buy products there. And we improve our customer value management. We use AI. So -- and this will lead to a reduction in churn, and we will also increase our sales after service. So when people call our hotlines and they have a service request, we help them. After that, we will also start to do more sales after service and sell family cards, for example, or waipu.tv. Customer acquisition, so a premium strategy that's important for us. We will focus on Freenet, on our premium brand. And when you look into unaided brand awareness, there we are around 10%, which is very low where our competitors like 1&1, they are, I think, around 50 or even higher percent. So there, we have a lot of room to grow. And we will close this gap by investing into smart performance-based marketing campaigns. We know how to do this. We already tested this with klarmobil last year, and those campaigns were very successful. We really saw a nice sales impact and also -- and then that's important. So whenever we do brand marketing invest into TV, we do this with a clear sales approach. So we produce our creators always with a clear focus on a product, on a price, which drives sales. So this is a combination of performance and brand. And yes, so also when you look at our websites, so they are getting better step by step, but there's also a lot of room for improvements. Our conversion rates have become or we already have improved them a lot, but there's still a lot of room for further improvements. This will also help us to further increase performance here. So therefore, we see a potential to an uplift of EUR 30 million by '28. Next slide, IPTV. Waipu.tv is a success story, very strong customer base, strong offerings. And besides this, also the advertising business within waipu, it's growing very strong. We see further potential. We have strong partners here. And we believe that we will further grow our subscribers and we will further grow subscription revenues, advertising revenues. And all of that, I think, is really a huge opportunity, and we expect an uplift of EUR 85 million by '28. As I said, here, the market is healthy. Our customer base, we expect that we will grow very nice until '28. So this is reflected or this is due to our strong products, the outstanding product, but also through the market development. If the market itself will grow, we will grow. Therefore, we are quite confident that we can see nice subscriber growth. And we have strong advertising partnerships with RTL, [ ProSieben ]. And besides this, we will also grow in our advertising business. Ingo Arnold: Yes. Coming to Page 26, I think base information which is relevant when we published the financial ambition for '28, the first time 2 years ago, I think we based it on the EBITDA of '23. Now here, there is a new baseline. The baseline here for this financial ambition is the year 2025. In mobile, yes, we -- Robin already mentioned the plus EUR 30 million, what we see here compared to '25. Here again, we have this negative impact from this MNO agreement. On the other side, we have mobilezone. We have cost efficiency, especially from AI projects. So we see possibilities here to reduce our cost line by something like EUR 10 million. And then from all the initiatives, which we started here and what Robin already talked about, we expect something like EUR 30 million. And this seems possible. We also restarted freenet energy. We restarted freenet fixed net. So I think we -- there are a lot of initiatives. And so we are very confident to reach at least EUR 30 million out of these initiatives in the next years. In IPTV, we slightly increased our ambition compared to what we published 2 years ago. Because what we did that time was only to put into consideration the increase from the subscriber -- from the subscription and from the service revenues. This time, and Robin already showed this, the revenues from advertising, which are increased. So therefore, we increased it here compared to last time. And then in the other holding, there is also an increase compared to the last ambition '28, what we published because of the lower Board salaries. So all in, we increased our ambition from more than EUR 600 million to more than EUR 620 million. And yes, I think it's challenging, but I think especially if we get a solution with one network operator. And if you use it and if you would correct it by this and if we could solve it, then it would be even higher and definitely higher than what we published 2 years ago. Moving to the free cash flow ambition. Yes, I think we have the positive effect from the EBITDA, what I already described. The other items of the EBITDA to free cash flow bridge are more or less unchanged, but we have the negative effect from the taxes. I think everybody is prepared to it because the tax loss carryforward will be -- will fall away in '28, up to the end of '28. And therefore, there will be a higher tax what we will have to pay. So all in, a free cash flow of more than EUR 340 million, which implies a dividend of something like EUR 2.30. And this is still based on the promise that we will pay out 80% of the free cash flow with the addition now what I already mentioned that we pay a minimum dividend or we grant a minimum dividend of EUR 2. And dividend is still the first priority in capital allocation. So no changes here. Second pillar or second priority is growth. And third priority is to do any share buybacks in the future or to reduce the leverage further, but this would not make any sense from my point of view. So therefore, for the last page, I hand over again to Robin. Robin John Harries: So here, you can see what freenet will stand for in '28. Our 2 strong pillars, mobile pillar. We will -- we believe that we can grow our customer base by doing smart performance-based marketing, reducing churn. And we are implementing AI first and tools and want to have an AI first operating model. So we believe there will be steady profitability, and this will lead to highly cash generating -- this will be highly cash generating. In our IPTV business, so here, we see a very strong second -- core business is developing. We believe we will grow the business up to 3 million users. The advertising will be additional revenue stream, and we believe that there will be an EBITDA of at least EUR 120 million in '28. So all of this, I think it's -- we have very healthy financials, low leverage. We are growing free cash flow. We have a nice dividend policy, which I think is a very healthy and attractive business. Ingo Arnold: So therefore, we give back to the operator to start the Q&A, please. Operator: [Operator Instructions] And we have the first question from Polo Tang from UBS. Polo Tang: I have 3 questions. The first question is just about the MNO shortfall. So you highlighted a EUR 13 million profit shortfall with one MNO contract that could rise to EUR 50 million if you do not meet certain volume commitments. However, do your deals with the other MNOs have a similar structure? And is there a risk of further profit shortfalls if you do not achieve volume targets? Second question is really just about the impact of AI. Do you see a risk of the MNOs becoming more efficient at acquiring and retaining customers, meaning they will be less reliant on independent third-party channels like freenet going forward? Alternatively, if you look at it the other way around, do you see AI as an opportunity? Third question is just on waipu.tv. You indicated that your underlying net adds in 2025 were 150,000. Your mid-term guidance indicates that growth will pick up to 300,000 net adds per annum going forward. But can you remind us what caused the underlying slowdown in 2025? And why are you so confident that the net adds will rebound and improve going forward? And who do you think your main competitors are when you look at waipu.tv? And is Vodafone bundling cable TV for free with broadband having any impact on waipu.tv? Ingo Arnold: Yes, your first question, I think we have very favorable contracts with the other MNOs. I think it's only one partner where the agreement is as it is. This was done before Robin started. It was done in '24. So I think we -- and both partners now think that discussions do make sense. So also for the operator, it is not a healthy agreement. And I think we are on the same side there. And so with the other operators, no, we do not have comparable risks what we see at the moment. Then I take the third question about waipu. Yes, I think you linked your question to the 152,000. On the other side, what I would do in my calculation is I think we were free to clean up the unprofitable subs. We decided to clean it up by the 88,000. If you would not do so, then we would have something like 240,000, which is not that far away from what we guided and the 240,000 is something like 15% of growth. And this is something what we also see for the future, something like between 15% and 20%. So I think even in a year where we reduced our marketing spending, where we were not that aggressive, it was possible to grow the business by 15%. So therefore, we are optimistic here for the future. The IPTV market is growing. And I think you also asked about bundles. It is possible. We are in discussion here with different suppliers in the market for fiber, for broadband, etc. And so I think maybe -- and also in the mobile area, maybe there it will be possible in the -- maybe in the second quarter to another contract with one of the big players. But I think I do not want to promise anything today. Discussions, negotiations are ongoing. But I think we are -- basically, we are happy now with the waipu base because it is clean. I think we do not have to discuss in '26 about Telefonica customers. We just can show the growth, and we are very optimistic already for the first quarter to be on a relevant growth path again. And then we had this AI question. Robin John Harries: I'm happy to take it. So for us, AI is an opportunity, it's not a threat. And to be clear here, so when you talk about direct, freenet is direct. Freenet is no comparison website. Freenet is no intermediary. We are direct. People come to us, customers come to us, they book with us, they become our customers. And so we compete like with all the other direct players, the network operators. And when you look at our offering, so we offer all networks and we offer this to very nice prices. So -- and I mean, AI should be smart. And if you look at the benefit of companies and products, I think we are in a very good position to benefit from this. So I see this really as an opportunity because of the very attractive offerings. And we also have a multi-brand approach. It's not just one brand. So we have premium brands. We have brands for pricing. We have budget brands. So we are very well positioned through the offerings of our brands and through the massive footprint that we have in all marketing and sales channels and then through the attractive price and because we are direct, we are no intermediary, no comparison website. Operator: The next question comes from Ulrich Rathe from Bernstein. Ulrich Rathe: 3 questions for me as well, please. So again, on the MNO contract, could you talk a little bit about when this became apparent during 2025? It sounds like this became apparent only during the fourth quarter. How is that possible? I mean, the market trends have been unfolding throughout the year. So it's a bit difficult for us to understand how only in the fourth quarter you suddenly see something developing that costs you EUR 13 million this year and EUR 50 million next year. That will be -- and with regard to the mitigation for this issue, is there a precedence for such a contract renegotiation? Or are there any other reasons for confidence you can give us that the renegotiation would be successful? My second question is on the waipu outlook for 2028, which you have raised. Could you talk a little bit about your level of visibility here in terms of the customer revenue and margin outlook? I mean, there is -- it is very optimistic, but I suppose I'm trying to sort of gauge to what extent you're guiding for things that you feel are very achievable compared to sort of a little bit like a moonshot kind of guidance on waipu. And my third question, if I may, you pointed to a voice robot launch in the context of this better customer value management. Now my question on that is, why would be an AI robot, a voice robot be better at customer value management than engaging with a person? I understand why AI is cheaper. I also understand why it might help your sales force to put the right information in front of them when they deal with the customer. But do you actually believe that a voice robot has the ability to manage customer value better than a person? Ingo Arnold: Ulrich, from my side to the MNO topic, I think at the end of the third quarter, we were still optimistic to have no gap in '25. We already started some discussions with the network operator, but with the former management of it. And so yes -- and therefore -- and I think the conditions what we get for the tariff plans, the margins, this all was not sufficient to promote this network. And therefore, we reduced it during the fourth quarter, and therefore, we saw the effect. So it's -- and now we are in these discussions to make, but to make it clear. And you asked about some -- I cannot give you a confidence level to it, how -- what level -- how the success rate could be of these discussions, what we do have there. But what we -- what I can definitely say is if the discussions would not be possible, then we would also take legal actions against it because we think the behavior of the network was not fair to us here. Then about the waipu outlook, maybe I take it also, Robin, if you're fine. I think it is -- the increase versus the ambition what we gave 2 years ago. The increase is based on the advertising contract what we could close with the big TV channels here in Germany. And on the other side, and it refers to the question of Polo, we think that it is possible even on the reduced base what we see today to increase the customer base to 3 million customers up to the end of '28. And this is also -- this is another effect. If you have more customers, then your advertising revenues are also higher. And if you have more customers, definitely, your service revenues are higher. So I think we did the calculation. And yes, it works if we have the increase by something like 15% to 20% in the customer base year-by-year. And this looks for us -- and I think this is the key to the ambition here. But I think I tried to make clear already with Polo's question or with the answer to Polo's question that even in a year where we focused on EBITDA, it was possible to grow the base by something like 15%. And so I'm optimistic that this could also work in the future. Robin John Harries: And related to your question regarding the voice bot, so it will be an AI voice bot. We will start the first test this month in our service line. And you -- so normally in the service line, you get many requests that you could also answer if you go through the FAQ section. So at the beginning, we are building our knowledge base. This is important. So this is the fundament for the AI bot. And so the benefits of the AI bot is that it's available 24 hours, 7 days. It's very efficient in terms of cost. It has a huge knowledge base. So the knowledge is -- I mean, it's huge, so it can answer many, many questions. And it's continuously improving and learning. So calls will be transcripted, they go back into the machine, they will learn, they will develop. The AI bot will also do sales after service afterwards. So for example, if like by the way, her name is Ginnie. And if you, for example, have a service request, you talk to the very friendly Ginnie. So afterwards, she might ask you, okay, now that we've solved your problem, I see that you also have 2 kids. And may I also offer you like a family card for your kids, stuff like this. And I think this is -- that's the future, and we have made huge progress during the last weeks, months with also with the help of external consultants. And that's a huge workforce here internally is working on this. And I'm sure that we will make a big step forward this year. Operator: We have the next question from Florian Treisch from Kepler Cheuvreux. Florian Treisch: I have to ask a question on the MNO agreement. My one is on the EUR 50 million headwind you mentioned. I think in your remarks, you phrased it as a worst case. I just want to double check. Does it really mean EUR 50 million is the absolute worst case in a way it cannot get lower? And what is, to be fair, a base assumption we have -- we can make for '26, i.e., a lower number than the EUR 50 million you have mentioned? The second one is on mobilezone. Can you give us a feeling what is the implied EBITDA contribution in '26? And are you expecting already a net positive synergy effect, i.e., after the integration cost in '26 or is it something more likely for '27? And the last one, you just mentioned that you are restarting freenet energy, the broadband operations. I mean there was a reason to shut it down in the past. What has changed here? Ingo Arnold: Florian, your answer about the worst case, I think what is the worst case in the world? I think, yes, I would say from -- and I called it worst case and I mean it is a worst case. We do not know what happens in the world. But if the framework is as it is today, yes, it's definitely a worst case. I think there is only a possibility to optimize it. And therefore, definitely, it is a worst case, EUR 50 million. Mobilezone, I think for the year '26, we used an EBITDA of EUR 25 million. We have not calculated or put into consideration any synergy effect. I think the team is working hardly to get synergy effect. And so yes, there is an additional chance. But yes, I would support your idea that it makes more sense to show the synergies or to get the synergies then in '27. I think that we'll -- we will start in '26. We will -- there will be some low-hanging fruits. This is what we already saw. but we have not calculated these synergies. I think we have to get more knowledge of the business of mobilezone. We just started at the beginning of January to discuss with all the operating with the finance people. So I think it is too early to put any synergies in our forecast, but I'm optimistic that we will have some. And so there will be additional chances definitely compared to the plan for '25 and for our guidance. Robin John Harries: Yes. And related to the other products, broadband and energy, so we are on it. We are calculating cases. We are talking to partners. So for us, that I think it's obvious that it makes a lot of sense to sell broadband and fiber. So we have a strong footprint with our owned shops, almost 500 in very good areas. And if you want to sell broadband, it's important that you have a face to the customer, that you can talk to them, that you can explain them about the process, how to get fiber in your home. So that's the opportunity. And we are -- also there, we are in discussions with all the important players. They are all very interested in us supporting them. You can see that for all of them, fiber is, I would not say, a pain, but it's a top priority. And it's really difficult to do advertising and marketing and sales for broadband because you really have to talk to people, explain that to them. And we are there in a very good position. So this is -- it's not so easy to develop the product. So from the IT, from the technical side, yes, broadband is complicated. But -- and therefore, we are looking into solutions, how we can get there, external solutions, internal solutions, talking to partners. So -- but makes a lot of sense. We are quite confident that this will be an opportunity for us. In energy, it's the same. I think it's also obvious if you think about our shops and if customers come to our shop or to buy a mobile, so then it also makes sense to ask them, okay, where do you buy your energy? And if you have a good offer, so why would you or why shouldn't you try to sell this as well? So I think this is something where at the moment we are -- where we small, tiny, but we are working on changing this. Operator: The next question comes from Karsten Oblinger from DZ Bank. Karsten Oblinger: I have 2 questions. The first one is a follow-up question on the waipu outlook for '28. So how much of the advertising business with ProSieben and RTL is included in the guidance? So is it EUR 10 million, EUR 20 million? So could you give us a rough idea here? And the second question is related on the new business with 1&1. Could you give us an idea on the magnitude of the business so far? Ingo Arnold: Karsten, I would say, from the advertising side, as we had an EBITDA forecast or ambition in the last time of EUR 100 million without marketing revenues. Now it is without additional marketing revenues or advertising revenues. Now it is including advertising revenues. So it is something like the EUR 20 million. Robin John Harries: Yes. And related to the 1&1 partnership. So we started it in Q4. So we started it in the first shops. We selected some shops in order to have a test group. And I mean, for us, it makes sense to sell 1&1 if we get incremental sales. And yes, so the test was successful in the first stage. So that's why we scaled it. We are in the process of scaling this. Overall, I mean, we want to be the place where you get all networks, also 1&1. We want to have an offering for the customer, the best out of all worlds. And so therefore, 1&1 is important for us. But it's also -- I mean, they have attractive products. They have a strong brand. They do a lot of brand advertising as well. That's good. So people know the brand. If they see that they can get it also in our shops, they will come to our shops. This might further increase the frequency. And then on the other hand, Mr. Dommermuth, I mean, he's a smart guy, and it's always possible to make smart deals with him. So therefore, we are quite confident that this can become a fruitful partnership for the future. Operator: We have the next question from Joshua Mills from BNP Paribas. Joshua Mills: A few questions from me. I wanted to come back to the MNO shortfall and the rationale you have for how you could renegotiate that contract. So my understanding is that the freenet position is we're not being given the right kind of tariffs in order to meet the volume commitments with an operator, which would be necessary. So if that operator isn't giving you those tariffs and without them you can't hit the target, what levers and what legal backing or support do you have to demand access to those tariffs? I would assume that given you're accounting for the headwind now and you're putting into guidance, there's at least a degree of uncertainty to whether you do have any of those levers. And can you also confirm that beyond 2028, you'll roll on to a new contract with that MNO? And if so, should we expect to see a similar kind of setup or similar headwind? I just really want to understand what your negotiating position is on this if they decide that they don't want to use your services as much going forward? And secondly, you did mention that if the negotiations broke down, you could resort to legal action. Can you remind us what the legal backing for freenet's role as a reseller in the German market is today? I believe it is that MNOs must negotiate with freenet in good faith. But as far as I'm aware, there's no guarantee on paying a certain amount to freenet or giving them access to all tariffs. So if you could clarify that would be helpful. And then finally, on the waipu subscriber guidance, I think comparing to the 2024 guidance update, it looks like you have scaled back the subscriber target somewhat even with the 300,000 run rate, which you're looking for. Is that right? I know there's been some adjustments with the O2 sub base. And I just want to understand whether the better waipu TV EBITDA assumption is in part driven by the fact you expect to deliver fewer subscribers than previously under the old plan? Ingo Arnold: Maybe I'll start with the waipu question. I think it's still 3 million. I think in the last quarter, we already forecasted something like 3 million as a customer base for 2028. And so there's no relevant change. About the legal actions and possibilities, I do not want to talk about. I think this is something -- I think this is not what both parties want to have. We want to have a solution in the discussions and in the negotiations. But if these negotiations fail, then we have to think about legal possibilities and legal actions. And we see possibilities there, but I think it's -- you would understand that we do not want to talk about it. And I think first priority for all parties is to find a partnership solution. We want to have a good partnership with all networks. And I think we -- in the talks, we see a very good mood. We see that all -- both parties are interested in a solution. So we are very optimistic to find a solution. But I think we have to wait and see what happens. And after -- I think we have to wait what happens after '28. I think we give an ambition and an outlook up to the year '28 and then the other years have to be negotiated. So this is what I can comment on it or what we want to comment on it. I think we have discussed it in depth now. And I think I do not want to give further information about it from our point of view. I think we said what has to be said. And then I think we have -- action has to follow. Joshua Mills: And maybe just one follow-up. So if we assume that this particular MNO contract expires in 2028, could you just update us on when the other 2 MNO contracts expire? I think one -- another one is in 2028 as well and then one in 2030, but just to get some clarity on that. Ingo Arnold: I have not said that it ends in '28. Operator: And we have one question from Siyi He from Citi. Siyi He: I have 2, please. The first question, I just want to go back on the waipu.tv 2028 guidance. And it's just looking at your guidance for '26, and it seems that there will be a quite big step-up on EBITDA growth for '27 and '28. Just wondering if you can help me to understand why the acceleration? And I think you mentioned that advertising revenue would be EUR 20 million. Do you expect the full impact of that EUR 20 million to start hitting from '27 onwards? And my second question is on the synergies you talked about regarding mobilezone. I'm just wondering you can give us a little bit more details of where are the low-hanging fruit? And also what would be the ultimate situation for you when you're looking at potential synergies with mobilezone? Ingo Arnold: Yes, I think waipu, I already tried to explain that we saw on an adjusted base, we see already a growth of 15% we saw in '25. And so this is something what we do expect for the following years. The IPTV market hopefully grows again further, then we could grow further. We think a similar market share, stable market share is possible with a very good product what we offer. So I think we are -- it's -- yes, it's a forecast, it's an ambition, but we think this looks possible to us. With the synergies at mobilezone, yes, I think we -- what we did is we had a lot of meetings with the management first, but then we connected all the people who do similar jobs. And so we have a lot of small teams now and they are looking into their business. This is different thing. This is the HR department. This is the marketing department. All departments are talking with each other. And then you have some small low-hanging fruits, you have some bigger low-hanging fruits and then you have the operational business. And on the operations side, sometimes we have the same partners. So we -- it's like scaling the business with the partners. You talk with the partners, what could be possible. We talk with the MNOs, which could be possible, which is their interest, which is our interest. And so -- and also on the side, they have in an Apple contract to buy iPhones directly. This is something what we did not have in the past. So we can use this channel now to buy iPhones, to buy Apple products. And so I think there's a lot of fast development in all these conversations what we do have with all these discussions. And as I said, I do not want to -- I gave you some examples, but I think if we would talk to the teams now, you would have 50 examples where the synergies could be possible. And a lot of them could be get fast. But I think it's too early. I think we will keep you informed in the upcoming quarters. And then I think we will see how it develops. But I think we already have a lot of initiatives which are started. So we are on the way to generate it. Robin John Harries: Yes. So yes, thanks for your -- thanks for attending this call. I think we are happy about the operational progress. We have many, many initiatives. We have a very motivated team here, and we are working on this and try to deliver step by step. We are not happy about the current situation with the network provider, but we are working on this. And as Ingo said, we are in fruitful discussions. Both parties share the view that we have a sick agreement there that we need to change it, that we have to work on a new agreement. We are doing this. But yes, I see like many, many opportunities, and I'm really happy to be here in this company. It's a lot of fun. We are working on this. And yes, thanks for your time. Wish you a great day.

36天前Insight Analytics约5分钟阅读

FTDR 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, welcome to Frontdoor's Fourth Quarter and Full-Year 2025 Earnings Call. Today's call is being recorded and broadcast on the Internet. Beginning today's call is Matt Davis, Vice President of Investor Relations and Treasurer, and he will introduce the other speakers on the call. At this time, we'll begin today's call. Please go ahead, Mr. Davis. Matt Davis: Thank you, operator. Good morning, everyone, and thank you for joining Frontdoor's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today are Bill Cobb, Chairman and CEO; and Jason Bailey, Senior Vice President and CFO. The press release and slide presentation that will be used during today's call can be found on the Investor Relations section of Frontdoor's website, which is located at www.investors.frontdoorhome.com. As stated on Slide 3 of the presentation, I'd like to remind you that this call and webcast may contain forward-looking statements. These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the SEC. Please refer to the Risk Factors section in our filings for a more detailed discussion of our forward-looking statements and the risks and uncertainties related to such statements. All forward-looking statements are made as of today, February 26, and except as required by law, the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. We will also reference certain non-GAAP financial measures throughout today's call. We have included definitions of these terms and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures in our press release and the appendix to this presentation in order to better assist you in understanding our financial performance. I will now turn the call over to Bill Cobb for opening comments. Bill? William Cobb: Thanks, Matt Davis. We had a great 2025. But before I get into the financial highlights, here are 3 key takeaways for today's call. First, we expect ending member count to grow in 2026. Second, we are raising our long-term adjusted EBITDA margin target. And third, this business generates significant cash, and we are on track to complete our current share repurchase authorization by this time next year, well ahead of schedule. With that, let's get to the financial highlights for the year. Revenue increased 14% year over year to nearly $2.1 billion. Gross profit margin increased 150 basis points to a record of 55%. Net income grew 9% to $255 million. Adjusted EBITDA grew 25% to $553 million, and we bought back a record $280 million worth of shares. Now before we step into 2026, I want to connect our results back to our priorities for 2025 laid out on Slide 5. Our first and most important focus is to grow and retain home warranty members. And in 2025, we achieved an important milestone. We stabilized our member count. This was supported by traction across the business with growing demand and improving conversion in DTC, strong second half momentum in the first-year real estate channel and higher renewal rates. Our second strategic priority, scaling non-warranty revenue is playing an important role as we expand the way we serve our members and create value. The new HVAC program grew an impressive 48% to $128 million, and we still have a massive opportunity ahead. We also took the next step in broadening our portfolio by launching our appliance upgrade program in select markets. And we're complementing that momentum with outside partnership opportunities with our contractor network, such as our Moen program that delivered $15 million in its first full year. Finally, our third strategic priority is optimizing the integration of 2-10. This was a highly strategic acquisition, and execution has exceeded our expectation. We have already realized more than $20 million of cost synergies, way ahead of our original 2025 target of $10 million. We are well on our way to a fully synergized multiple of less than 7x by 2028. And we are actively working on revenue synergies, including migration of the 2-10 Home Warranty platform to our systems in 2026 and creating additional opportunities with 2-10 Builders. The 2-10 acquisition was a great deal, and there is still a lot of runway left. Now let me take a moment to double-click on our #1 priority at Frontdoor to grow and retain our Home Warranty members. Slide 6 captures the outcome. Member count stabilized in 2025. This was an excellent result and well ahead of schedule. And what is even more impressive is that we built momentum as the year progressed. Tariff concerns eased, housing supply improved, and our consistent execution paid off. Let's turn to Slide 7 to take a deeper look at the real estate backdrop in 2025. There are 2 distinct dynamics. First, existing home sales volumes remain constrained near historic lows. This weighed on our ability to sell home warranties in this channel. Second, the market began shifting toward a better balance between buyers and sellers, one of the most important drivers for our business. Inventory increased with average supply exceeding 4 months for the first time in 5 years and over 60% of homes sold below their original list price, the highest level since 2019. In addition, our team moved quickly to capitalize on this changing market dynamic. We increased localized investment. We deepened engagement directly with real estate agents, and we launched promotional pricing in the real estate channel for the first time. And the result, we had 2 consecutive quarters of sequential member growth to close out last year, the first time this has happened in the past 5 years. Now turning to Slide 8. Direct-to-consumer has been a source of consistent momentum for the business. Our differentiated strategy, discipline and focus drove 3%-member growth in the channel for 2025. At a high level, our DTC strategy is built around 3 pillars: brand leadership, growing demand and improving conversion. Starting with brand leadership. We continue to hold the highest levels of awareness, interest and trust in the category. Our technology enhancements through the AHS app and virtual experts have increased member value while further sharpening our differentiation with consumers. Second, growing demand. We continue to strengthen our value proposition to deliver more targeted and relevant messaging to key segments, including younger homebuyers. Utilization of AI in our marketing has allowed us to reach higher intent consumers more effectively. And finally, we are improving conversion through website and SEO enhancements, promotional pricing and AI tools to prompt our sales agents, we are creating a more personalized experience for prospects aiding us in getting them across the finish line. Turning to Slide 9. Renewal rates improved by 150 basis points to 75%. This is a very big deal. I am particularly proud of our performance with direct-to-consumer members. First year DTC renewal rates improved even as members moved away from introductory prices and into the renewal channel. This reinforces that our promotional pricing strategy did not come at the expense of renewals. Our performance is being driven by continued improvements in the member experience and includes the following actions. First, adoption of the AHS app continues to grow since its launch in October of 2024, and we now have nearly 600,000 member downloads. Second, video chat with an expert has become a clear point of differentiation. Since launching in February 2025, we've completed about 80,000 chats, helping resolve issues virtually. Third, we increased the number of members on monthly auto pay by about 100 basis points to 84%. Additionally, we've strengthened onboarding, continued strong usage of our preferred contractors and improved our internal processes. The impact of these efforts is showing up clearly in member feedback with record high 5-star reviews alongside record low 1-star reviews for all of 2025. Now turning to Slide 10. With a strong foundation in our core membership base, we continue to advance our second priority in 2025, scaling non-warranty services. And the most meaningful driver within non-warranty today is our new HVAC upgrade program. In 2025, new HVAC upgrade revenue grew by $41 million to $128 million. And we remain in the early innings with only about 55,000 installations in the program to date, leaving substantial opportunity across our 2.1 million members. Let me spend a moment now on new HVAC upgrade margins because this is an area we feel very good about. Gross margins for our new HVAC program are currently around 20%. While this is lower than our core business, the economics are favorable for 3 reasons. First, increasing share of wallet with our members supports higher engagement, satisfaction and retention. Second, contractors value the program supporting stronger adoption; and third, we get higher revenue and incremental gross profit and EBITDA with little to no customer acquisition costs. Now let's look forward and talk about our aggressive long-term goals on Slide 11. First, drive member growth, still the #1 priority at Frontdoor. Second, scale non-warranty revenue streams; third, deliver on structurally higher margins; and fourth, remain disciplined with our capital allocation strategy to create long-term value. Let's turn to Slide 12 for a deeper discussion on driving member growth. I'll start with the key takeaway. We expect total member count to grow in 2026. This would mark the first year of ending member count growth since 2020. This growth is driven primarily by continued strength in our first-year channels, which we expect to grow about 5% on a combined basis. This reflects disciplined execution across real estate and direct-to-consumer, supported by a more constructive market backdrop. Renewals remain a critical part of the equation. While we expect renewal rates to remain strong, renewal member count is expected to be a modest headwind in 2026 [Technical Difficulty] first year real estate units over the past several years. That dynamic is temporary. Growth in first year acquisitions in 2025 and 2026 flows into the renewal book with a natural lag, positioning renewals to become a tailwind beginning later in 2027 and accelerating beyond. Taken together, this is about building a durable growth engine, driving first year growth today while setting up renewal-led growth over the longer term. With that, let me turn to Slide 13 and our non-warranty business. As this slide shows, our approach is straightforward. Non-warranty consists of a 3-part strategy: grow share of wallet with our 2.1 million members, leverage our base of 17,000 contractors and unlock the opportunity across our network of 19,000 homebuilders. Starting with members. Our focus is on growing share of wallet, which is the most immediate opportunity and where we're seeing traction today. We've proven this model with our new HVAC upgrade program and are now extending it into appliances. Second, we're leveraging our contractor network more strategically. We started this initiative last year with Moen. Longer term, we're exploring additional partnership models and other ways to monetize the network. Third, we see a meaningful opportunity to unlock additional value from the 2-10 Builder network. Through our new homebuilder relationships, we're exploring ways to broaden the set of products we offer builders over time, creating a potential B2B distribution channel. And as non-warranty continues to scale, we are confident in our ability to protect overall profitability. That brings us to our next priority on Slide 14, delivering structurally higher margins as we scale. Our performance over the last several years reflects a fundamental shift in how we run the business, which gives us confidence that these improvements are structural. How have we done this? We have really leaned into our dynamic pricing model, which has been a game changer for us. We have become more nimble at using trade service fees to further protect margin. We have increased our use of preferred contractors. We have improved our purchasing power across our supply chain, and we are seeing more SG&A leverage as we scale. Taken together, we now have the confidence to raise our long-term adjusted EBITDA margin targets, which Jason will walk through shortly. These margin gains translate directly into strong cash flows and capital deployment. With that, let's turn to the next slide. As this slide shows, our capital allocation priorities are consistent and straightforward. First, we prioritize accelerating growth through organic investments to drive growth and retention and through selective M&A like 2-10. Second, our strong balance sheet and financial profile provides us flexibility in how we deploy capital. And third, as you have seen from our recent actions, we buy back a lot of shares, allowing us to consistently return capital back to shareholders. Taken together, this framework drives long-term value creation. I will now turn it over to Jason to walk through the financial results and outlook. Jason Bailey: Thanks, Bill, and good morning, everyone. With a record 2025 and a strong fourth quarter, our results reflect solid revenue growth, expanding profitability and excellent cash conversion that led to record amounts of share repurchases. Let's start on Slide 17. Here, I will quickly cover the financial highlights for the fourth quarter. Revenue grew 13% versus the prior year period to $433 million, reflecting higher volume from 2-10 as well as higher price. Gross margin grew 70 basis points to 49%, reflecting low single-digit inflation and a continuation of our strong operating performance. Adjusted EBITDA grew 21% to $59 million. Fourth quarter adjusted diluted earnings per share was $0.23. And lastly, during the fourth quarter, we returned $87 million to shareholders via share repurchases. Now let's pivot to full year 2025 results, starting with revenue on Slide 18. Revenue increased 14% year over year, surpassing the $2 billion mark. This was driven by 2-10 volume, expansion in non-warranty and other and approximately 3% from higher price. On an organic basis, revenue grew 3.7%. From a channel perspective, renewal revenue grew 10%, driven by higher 2-10 volume and price. First year real estate revenue grew 13% from the addition of 2-10. First year direct-to-consumer revenue grew 4% with higher volume, partially offset by lower price and non-warranty and other revenue grew 66%, driven by the success of our new HVAC and Moen programs as well as the addition of new homebuilder revenue from the 2-10 acquisition. Now moving to Slide 19 to discuss our gross profit and margin. Gross profit dollars grew 17% versus the prior year, exceeding $1 billion. Gross margin expanded 150 basis points to a record 55%, driven by higher realized price, low single-digit cost inflation as operational execution helped offset macro pressures and favorable weather impacts of approximately $7 million. Turning to Slide 20. Let's review net income and adjusted EBITDA. For the full year, net income grew 9% to $255 million versus the prior year, and adjusted EBITDA grew 25% to $553 million. Adjusted EBITDA margin expanded more than 200 basis points to 26%, reflecting the gross margin improvements we discussed earlier. While SG&A dollars increased year-over-year due to the addition of 2-10 and higher personnel costs, we generated approximately 100 basis points of operating leverage across the business. Now let's turn to Slide 21, and I'll walk through how the strong earnings performance translated into cash generation, a strong financial profile and capital deployment. Our recurring revenue business model continues to generate robust cash flow, which underpins an exceptionally strong financial profile. We generated record free cash flow of $390 million, reflecting the strength and capital-light nature of our business. We remain in a strong financial position with ample liquidity of about $660 million and a strong net leverage ratio of only 1.4x. This positions us well to invest in the business while also returning excess cash to shareholders. In 2025, we completed our fourth consecutive year of increasing buybacks. Now let's turn to Slide 22, where I'll highlight our track record of share repurchases. Our repurchase program has been a meaningful driver of shareholder value. Since 2021, we've used $720 million to repurchase approximately 17 million shares, reducing our shares outstanding by about 17% on a net basis. Additionally, we completed almost half of our current $650 million authorization that started in late 2024, and we are on track to complete the remaining $329 million by early 2027, ahead of schedule. Let's now move to our 2026 outlook on Slide 23. We expect another year of revenue growth with revenue in the range of $2.155 billion to $2.195 billion. We expect to maintain strong gross margin levels in the 54% to 55% range. SG&A is expected to be relatively flat versus the prior year and range between $660 million to $680 million. Adjusted EBITDA margins are expected to remain strong at approximately 26% with adjusted EBITDA of $565 million to $580 million. This outlook includes about $16 million of interest income and adds back about $8 million of integration costs and stock-based compensation of $33 million. Additionally, our conversion of adjusted EBITDA to free cash flow is expected to remain at a very high rate in the low 60% range. We anticipate CapEx of $30 million to $35 million. And lastly, our effective tax rate is expected to be approximately 25% for 2026. Turning to the next slide, I'll walk through how we're thinking about revenue growth in 2026. From a channel perspective, we expect low single-digit growth in our renewals channel, reflecting higher price, partially offset by lower volume due to the natural lag of when first year members flow into the renewal base. A low single-digit decline in our first year direct-to-consumer channel, reflecting the deliberate revenue trade-off to drive member growth through promotional pricing, first year real estate channel revenue to be relatively flat as volume stabilizes; and lastly, non-warranty and other revenue to grow to $220 million to $240 million, driven by the continued scaling of our new HVAC upgrade program, which we expect will generate about $165 million in revenue. These dynamics translate to total revenue growth in the range of 3% to 5%. Let's now turn to a detailed look on how we are thinking about margin performance in 2026 on Slide 25. At the adjusted EBITDA level, we expect margins to remain strong at 26% for the year. Gross margin is expected to be in the range of 54% to 55%. This outlook reflects higher price, similar incidence rates, low single-digit cost inflation, normalized weather and a higher mix of non-warranty revenue. Our 2026 margin outlook reflects structural improvements across the business. Turning to the next slide, I'll summarize how we're using that foundation to raise our long-term margin target. As Bill discussed, over the last several years, we've made improvements across pricing, contractor management and cost discipline that have fundamentally increased the earnings power of our model. As a result, we're pleased to announce that we are increasing our long-term adjusted EBITDA margin target from the low 20% range that we shared with you at Investor Day last year to the mid-20% range. Included in this Investor Day comparison is a stronger gross margin framework along with operating leverage as we scale. Our long-term revenue assumptions remain unchanged. We expect our revenue growth to accelerate in 2027 and further in 2028 as more first year member growth transitions into our renewal base and non-warranty continues to scale. This translates to $2.5 billion by 2028 and mid- to high single-digit percentage growth over the long term. Now let me quickly touch on our first quarter outlook for 2026 on the next slide. For the first quarter of 2026, we expect revenue to be in the range of $440 million to $445 million. This reflects a mid-single-digit increase in renewal revenue, a low single-digit increase in our first-year real estate channel, a high single-digit decrease in the first year direct-to-consumer channel and a mid-double-digit increase in non-warranty and other. We expect adjusted EBITDA to be in the range of $95 million to $105 million. It's important to note we are lapping a $7 million favorable claims cost development from Q1 of last year. This outlook also reflects higher gross profit from revenue conversion and increased SG&A investment as we better balance sales and marketing spend throughout the year to capitalize on the strong momentum we've built in our first-year channels. With that, I'll hand it back to you, Bill. William Cobb: Thank you, Jason. Once again, Frontdoor has delivered. We have had 3 great years. As you know, one of the hardest things about positive business trend -- business trends like ours is now we have to overlap last year's results, let alone the last 3 years of outsized performance. But I am confident in our strategy and our team, and we've got momentum. Now I want to close with the 3 things I told you upfront. First, we are growing member count. This has been a key focus as we've kept home warranty membership at the core of all our business objectives and growth initiatives. Second, I'm proud to be raising our long-term adjusted EBITDA margin target. This comes with continued efficiencies, effective cost management as well as technology and AI enhancements. And finally, we generate a lot of cash. We bought back a lot of shares, and we're not done yet. We will continue this trend into 2026, returning capital to our shareholders at an impressive rate. With that, I want to thank everybody for joining us today, and we'll now turn it over to the operator for Q&A. Operator: [Operator Instructions] Our first question is coming from Sergio Segura with KeyBanc. Sergio Segura: I have a few. So I guess first one on just pricing growth, just how we should think about it with the promotional pricing strategies, specifically in the DTC and real estate channels, how we should think about pricing growth for 2026? And then as those customers graduate to renewal customers, does that create any initial drag on the renewal channel growth for pricing? That's question number one. William Cobb: Yes. I'll take the first part, and I'll let Jason handle the second part. Our pricing strategy remains the same. We will not be increasing the number of discounting days on the 50% off program we've been running. But we're very pleased with the urgency that, that brings to prospective members, and we'll continue to employ that, but not at an increased level. We are going to move into the real estate channel with some promotional pricing directly with agents. It will not be anywhere near the level of 50% off, but we've tested it, and we've seen it's been effective at spurring action to drive attach rate. So we'll pulse that into the into the program. And like I said, it's proven to be a strong benefit to us in DTC, and we think it can be like that in real estate. Jason, I'll let you take the second half question. Jason Bailey: Yes, Sergio. As Bill mentioned, I think we're real happy with the results from the pricing. And maybe what I'd do is highlight some of our comments from the call on the renewal rates. As we -- this year was our first full year in thinking about promotional pricing. So you'll see that kind of flow over into 2026. But our renewal rates have been extremely strong in that channel as we've transitioned them to the renewal book. So we're pretty pleased with the balance there on how we're able to add the member count and looking at total overall revenue. Sergio Segura: Got it. That's helpful color. And then a second one, if I could, on the real estate channel. Could you guys just speak to where attach rates and your market share within real estate is now? And then for your 2026 outlook, what are your expectations for existing home sales and attach rates for 2026? William Cobb: Yes. In terms of existing home sales, there's various estimates. NAR is always very rosy in their predictions. We anticipate slight growth, substantially the same, but there may be -- we've seen a lot of reports around 3% or 4%. So that's what we modeled. In terms of attach rates, we don't -- we're not going to disclose exactly what our attach rate is. In terms of our share, it continues to be about one-third of the real estate side of the business. And -- but that is clearly the focus of our real estate team is to drive those attach rates. And like I said, with some of the work we're doing on increasing localized investment, dealing directly with real estate agents and the promotional pricing I just spoke of, we anticipate -- we're forecasting 5%-member count -- sales unit growth in 2026. Operator: Our next question is coming from Jeff Schmitt with William Blair. Jeffrey Schmitt: You're assuming SG&A expenses stay kind of roughly flat in '26. And I know a good portion of that is marketing costs. Could you speak to how you'll keep costs flat there? And do you see that having any impact on growth? Jason Bailey: Yes. I think from an overall perspective, we expect sales and marketing to also be relatively flat year-over-year. With the team -- working closely with the team, we've gained a lot of efficiencies in how we go to market, in particular, some of the tools Bill mentioned earlier on the call, as we think about our Warrantina campaign really taking hold, kind of now in its second edition, use of AI tools and a couple of other things. We look to be much better from a sales and marketing conversion standpoint. William Cobb: Yes, I think that's true. I think there's always a tendency or an urge to spend more, but I'm proud of the marketing team and the efforts that Kathy Collins and her team have done, just driving much more efficiency, much more effectiveness and I think that we feel good about how the plan is laying out. Jason, I don't know if you mentioned, we may shift a little bit quarter-by-quarter in terms of the spending to go between -- depending on the drive period we have and look for new Warrantina commercials during March Madness, by the way. So just a little commercial for that. Jeffrey Schmitt: Good. All right. And then you mentioned that you launched the appliance upgrade pilot recently. How long do you plan on staying in that pilot stage? And then maybe just more broadly, how do you view that revenue opportunity compared to HVAC? William Cobb: Yes. A couple of things on that. So we are hoping to launch that post peak later on in the year, around Q4 is our current plan. We're still working through in the markets exactly the model that we have. Obviously, we're modeling it, if you will, on the way we've approached HVAC. What was the second part of the question? Jeffrey Schmitt: Just that how do you view the revenue opportunity? Yes. William Cobb: So it's going to be a different revenue opportunity. I apologize, Jeff. It's going to -- because obviously, the price point between HVAC and appliances is quite different. There are many more appliances. So we do think that there's a real opportunity here. But that's what we're working through. And the replacement rates on appliances are also less than they are in HVAC. So that combination gives us a lot of confidence that this can be a business of some scale. But more to come, but we're still trying to work through, and I want to make sure we get this right before we just launch this out there. But we're targeting towards the end of the year. Jason, do you want to add some? Jason Bailey: Yes, just a minor impact on 2026 growing into -- yes. Operator: Our next question is coming from Mark Hughes with Truist. Mark Hughes: The -- what's your assumption in terms of the kind of the real estate market for this year, talking about steady real estate revenue, some discounting. What do you think is going to happen? What's your baseline case? William Cobb: Well, I've really become a student of this market over the past few years. But I think NAR is very bullish on where existing home sales are going to go. I don't think we share that enthusiasm. We think it's going to be more a modest increase of 3% or 4%. A lot of it depends on interest rates, but we are encouraged by the increase in inventory. We're encouraged by some of the things we've been doing with our real estate team and the like and their direct engagement with real estate agents where we've got a lot of hopes for how our promotional pricing will impact our units. So I think we feel pretty good about that, but we don't anticipate a large increase in existing home sales. If it comes, that would be great because that will -- this all becomes an attach rate game. Mark Hughes: Yes, yes. How about Assurant has launched a home warranty product. They've got some relationship with Compass. Does that -- how does that impact you all, do you think? What's your assessment of that initiative? William Cobb: Yes. Assurant is a terrific company. I've known a couple of the Board members there, and they've always spoken highly of the business around the work they do in auto warranties and cell phone warranties. And in reading about what they stated about coming into home warranty, I'm encouraged by them talking about looking to expand the category, which is certainly something that I think will benefit all of us as they enter. Having said that, there are a couple of things I do want to point out. We've had a long-standing marketing services agreement with Anywhere. We've moved on from that. They signed up with Assurant. But it's not an exclusive arrangement. It's really a marketing agreement. Agents continue to have the freedom to discuss and select whatever home warranty product they feel best meets their needs. So that's why we're -- we've got a lot of agents we've worked with for a lot of years who choose AHS. So we are confident that we will do just fine. The other thing is that I think they'll find is we cover 27 systems and appliances throughout the home, not just appliances. We have a contractor network. That's the advantage of being in this business for 50-plus years. We have contractors that have been with us for a long time. And I think notwithstanding that, we bring new contractors on all the time. They are vetted, they're trusted. They're on our schedules. You can see from our retention and renewal rates, how strong that's been, especially as we increase our preferred contractors. So we have the full array of service trades, not just appliances. So I think we're still in good shape, and we're just going to execute our plan and our model. Mark Hughes: Very good. I'm not sure if you've elaborated on this. I missed the first question or 2, but the B2B sales channel development with builders, how meaningful could that be? And could you maybe elaborate a little bit on what you're looking at? William Cobb: Not meaningful in 2026, and that's in development. We've been talking to the builders about various ways that with our supply chain, we could help them. We have a number of small and midsized builders. And with our purchasing power, they might be able to put together a system where we can help procure -- help them with procurement. But early days with that, but I think it's just another way that we're thinking about how we leverage our system to find new revenue streams. Mark Hughes: Yes. And then promotional or marketing spend in 2026 versus 2025, how are you thinking about that? William Cobb: In line with 2025, around the same level of dollars. And part of that is we feel really good about the efficiencies we've gained both in search marketing. We're obviously jumping on AI with the way that is advanced as a search tool. So we've had to adjust our algorithms to basically make sure that we can appeal -- we can drive efficiencies through that, if you will, channel. So we think that we've kept it the same. We've been -- we've also done a lot of work on our website and SEO conversion. So I think a good marketing plan these days covers a lot of areas. And I think that we feel good about where the total marketing spend will be at. Jason Bailey: Yes. I would probably add, Mark, the one thing you will see this year, we'll probably pace a little differently through the year. Bill and I talked about kind of coming out of Q4 and some of the momentum we have to stay really balanced. So we'll probably -- you'll probably see us load a little more sales and marketing in the first half of the year than prior year. But overall, as Bill said, consistent with prior year spend right now. Operator: Our next question is coming from Cory Carpenter with JPMorgan. Cory Carpenter: I had 2 questions. Maybe Bill, I want to start with the revenue. Good to see you reiterate your 2028 target. I know that in the acceleration that you expect in '27, '28. When I look at Street numbers, I think people are generally a little bit below that today. So that may be helpful. Could you just bridge us on kind of how you're getting to that number and that accelerating growth and what you're seeing today giving you confidence in reiterating that framework? William Cobb: Yes. And -- Jason can certainly jump in. What we're trying to do, and I mentioned that in the script, the durable growth engine, what gives us confidence that we look for an increase in the revenue line in '27 and further in '28 is as we've had success and continue to drive success with first year units, that's going to fold into the renewal book, assuming as we do that we've put together a strong program of keeping our members retained. We have reduced the number of cancels we have. So I think it's just really a mathematical exercise that as we fill the top funnel and it feeds through into the renewal book, with our dynamic pricing model, we can be very consistent with what we realize in pricing. So as we model it out, we think that based on the guidance we gave for '26, we still think the $2.5 billion is the right target. But Jason, do you want to add anything to that? Jason Bailey: Yes. The only thing I'd add is we also see a lot of opportunity with non-warranty and lots of different ways to attack that part of the business. I think you're spot on to that... Cory Carpenter: And then -- sorry, second one, just claims cost inflation was a big topic. I think it ticked down actually this quarter. I think it was 4% last quarter. You're saying low single digit in 4Q, and you guided to low single digit next year. One question we get a lot is just around tariffs. Of course, there's been a little bit of a recent reflaring of uncertainty there, if you will. So maybe could you just remind us how tariffs are or not impacting you and kind of what you're assuming in your outlook for that? Jason Bailey: Yes. I think just to comment on '25 and how we close out the year. The teams have done an excellent job all year long, managing through both the contractor network. So a big shout out to the contractor relations team as well as our supply chain team. I think we've managed through that. Historically, we talked about the way we would manage through that is around price, trade service fee and operational execution, and we've certainly done that. For our outlook, Bill and I, we are constantly talking about tariffs on, tariffs off, tariffs on, tariffs off. But we think we are in a good position for low single digit again this year where the team can manage through that with those same tools. Preferred contractor network usage is at a high point in the mid-80s. Supply chain keeps doing well, has lots of options between our suppliers for parts and equipment. Our biggest exposure is probably in appliance trade when we think about circuit boards and a couple of other products from there. In HVAC, we're less exposed, a lot more domestic manufacturing. So I think we'll handle it pretty well. William Cobb: Yes. That's why what's been a benefit to us is that beyond appliance, we're pretty much domestically sourced. So that is certainly why we've been able to maintain a low single-digit approach. And certainly, we're guiding to that. Operator: Our next question is coming from Ian Zaffino with Oppenheimer. Isaac Sellhausen: This is actually Isaac Sellhausen on for Ian. On the home warranty count up this year, I know you touched a bit on the drivers in the prepared remarks and the higher growth in the first-year real estate, but maybe you could just provide more color on mix expectations for first year real estate and DTC, that would be great. William Cobb: Yes. We're looking at 5% growth -- unit sales unit growth for 2026. We think of each channel, we're anticipating doing about the same. Obviously, there is a -- it's about the 3:2 ratio of DTC to real estate in terms of size. So I think that we anticipate continuing. And like we said, we look at it all as first year growth. There are different retention rates and renewal rates as we go forward, but we look for 5% each for each of the channels. Isaac Sellhausen: Okay. Understood. And then as far as first quarter guide, just curious if you guys anticipate any weather headwinds or anything baked into that outlook? Jason Bailey: I think our guide for Q1 kind of factors in the weather we've seen year-to-date. And I'd say we're probably expecting what I'd call normal weather for the balance of the quarter. William Cobb: Yes. I think the other thing, Isaac, is especially with some of the Snowmageddon and bomb cyclones, these become insurance claims as opposed to warranty claims. So notwithstanding the fact that we want to certainly serve our members in whatever way we need to. But I think Jason and team have done a good job of taking that into account as we look at the guide. Operator: Our next question is coming from Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe just put a finer point on a lot of the topics we've talked about, especially in the prepared remarks. When you think about the next 12 to 18 months, what are your must do in terms of investing in the business that align with your strategic priorities? Because I guess we're trying to think through some elements of upside or torque on the margin side of the equation as some of those investments come more to the good as you think over the next sort of 1 to 2 years. William Cobb: Yes. I think that we're trying to be very balanced. We're excited about the growth engine that non-warranty can provide. So as we continue to bring -- put together the platform and the process to make that more efficient for our contractors, we like the fact that we -- it's a low cost of acquisition channel as we use our contractors and there's great benefit for the contractors in having larger jobs to handle. I think in addition to that, it's always the sales and marketing investment, as we talk about our #1 priority. We are holding steady on the actual dollar amount, but I think the team, we've gotten more efficient in the field. We're working very hard with what we call our integrated sales or inside sales group. We're using AI tools to help the sales agents with various prompts and objections that they get. It's really big. It's early days, but we're really pleased with how that is helping us. And then like we said a few times, with the creative horsepower we're showing with the enhancements we've made to the website and SEO, our work in the whole AI area of search. We think we can do that in an efficient way. But really, we're trying to stay balanced on our investments while having a real eye toward our #1 priority of growing ending member count. The other thing I would say is the great thing about our model, and I talked about it, Jason, I talked about it throughout, we turn up a lot of cash. We have very low CapEx relatively. I think we're guiding, Jason, to $30 million to $35 million. So with the cash generation we have, we're fortunate that this is a model that requires relatively low CapEx. Operator: Thank you. Ladies and gentlemen, this will conclude today's question-and-answer session and also today's conference. You may disconnect your lines at this time, and we thank you for your participation.

36天前Insight Analytics约5分钟阅读

SULZF 2025 Q4 财报电话会议

Suzanne Thoma: Ladies and gentlemen, welcome to our annual results communication. Thank you very much for taking the time and the effort to be here personally. It's a great honor for us. Thank you also to the 27 or so audiences that -- not audiences, but the people who are joining us from remote. Thank you for your interest in our company. And now 2025 has been an exciting year, I think, for all of us. One thing that you can see in our results, hopefully, here we are, is that we -- as Sulzer, we are serving essential industries. Now this is not just something we are saying because we need to have a nice slogan. It has a deeper meaning. The deeper meaning is that we are producing or we are serving industries that are essential for people and industries, customers, businesses around the globe. And with industries like energy, the chemical industry, and definitely, natural resources, which in the case of Sulzer is mostly linked to water, we have an underlying growth trajectory because there are more people in the world and more people moving into middle classes. And we also have in the already developed economies, a trend towards using more energy, more chemicals, and definitely also more water. But at the same time, these industries have a heavy ecological footprint. So whether this topic is in right now or not, we, as a society, will have to find way to have a higher energy efficiency to reduce emissions, to reduce pollution while keeping everything affordable. And that is what Sulzer is doing for our customers in our industries. This is why although 2025 was, let's call it an interesting year, we had an underlying growth momentum and an obvious growth momentum in all of our industries. This has not gone away. Due to the situation with the volatile political environment and the tariffs and all things that you know very well, we did in some industries, for example, in the oil and gas industry and also in the chemical industry, see that customers don't mind delaying some final decisions for their large-scale projects. If I look at our order pipeline in this industry, it is still growing. Not all the projects were only delayed, some of them were also stopped. But if I look at the figures, it's about 80% of the projects that were supposed to happen in 2025, and I'm speaking about the large-scale projects, have moved into 2026. So they're not dead. They will come this year or next year. We are still running against an ever-increasing Swiss franc, which for all the Swiss companies that are reporting in Swiss francs, of course, is on the one hand, a continuous fitness training. And at the other hand, of course, does have a certain influence on our results, particularly in sales and order intake because we are really very well distributed regionally. It does have a certain impact, but not such a high one when it comes to our profitability. Thomas Zickler will be speaking more about that. So let's look at 2025, a little bit more concretely on what we did. Well, we accelerated our strategy implementation. And our strategy is a rather down to earth, not so complicated strategy. It doesn't mean it is easy to implement it because it's thousands, many thousand different steps that we are taking. We concentrated on our markets and on our customers. And this means, for example, that we invested in our sales force. So while we were very cost conscious, we also consciously invested in our sales force and in the upgrade of our sales force. We also upgraded or invested in supporting technologies for commercial excellence. And you see it a little bit in our margin development. We learned to find a price point better than in the past, and we are on a journey to improving that. We have made important steps, but we are not there yet at all to stop having a fragmented approach to our customers to go as a One Sulzer wherever it made sense. We accelerated in the area of effectiveness and efficiency, which we summarize under the term of Sulzer Excellence. This is quite a fundamental culture change in Sulzer because we come from a history, a successful history that prides itself almost only on innovation and engineering excellence. Now this is still important for our company, no doubt, but it has to be paired with being effective and efficient from the first moment we analyze a market until we do aftermarket business with our customer. We reorganized Chemtech. We did not restructure Chemtech. It's reorganizing. That is an interesting word because we -- or interesting plain word because we believe that Chemtech is going to come back to a good level. This is also why we invested also in Chemtech in more salespeople and in an upgrade of the salespeople. But at the same time, of course, we cut costs wherever they did not contribute to value creation or not enough. And what we also did, and that was very important for Chemtech, we streamlined innovation. What do I mean with streamlining innovation? We made sure that our innovation is set up in a way that it really serves market needs and customer needs. We still have some budget for blue sky research, but most of it is now really mid-term oriented and also research for our core business, which is focusing on purification and separation. We upgraded and developed our supply chain, finding the right balance between resilience in this volatile time and purchasing from best cost country. Also, this is a journey, but we made nice progress in it, and we did report a good contribution to our profitability. And I am very proud to say that we have improved in on-time delivery. We have improved in quality, and we have improved in safety records. Now for you, that might not be so important as a very financial outlook, but it shows an underlying -- again, an underlying quality improvement in the company, including the safety record. That is why I mentioned it. And all of this leads that we can report highest reported sales, order intake, and profit. Now our CFO, Thomas Zickler said, and you have to say, Suzanne, currency adjusted and also, sorry, in constant currency and also adjusted for acquisition and divestment. And yes, he's, of course, right, like mostly, but it is also almost -- we could almost say nominally. But we are correct, right? Yes, of course. So I will go quicker through these figures because Thomas will go a bit deeper on that. We had an order intake of 2.1%. We had strong growth in aftermarket and in what we call noncyclical or water, which is more than 60% of our turnover. Our business of smaller projects, short-cycle projects grew nicely in all 3 divisions because this is the type of decisions that our customers like to do also in those volatile environments that we are acting. And we did have some large projects, customer projects that were delayed, particularly as I mentioned already, in oil and gas, in the chemical industry, and also some in what we call the new technologies. We still have order intake above sales of 1.06%. So the company is still definitely growing. And what is also growing is the customer pipeline. Now a pipeline -- and I don't mean the technical pipeline -- but, I mean, the order pipeline. Now an order in the pipeline is -- a project in the pipeline is not an order, clearly. But if you don't have a full pipeline, it's probably difficult to have orders. So it's like an early sign. We are happy to say that we grew our sales, and we did grow them with commercial discipline. We increased our margin. We were not buying sales and we're not buying order intake. And so we increased our profitability figures significantly. As you see it here, Thomas will speak about them more. These are our figures at the glance. I would just like to highlight earnings per share going up very nicely and also our EBITDA, which is a record EBITDA. We're a little bit lower in free cash flow, in line with expectation. Thomas will speak about it more. Here, you see the relative development. Again, what can I mention, yes, we upped 140 basis points in the return on capital employed. The return on capital point is a very important figure for us and the earnings per share went up 19%. If you look at this slide, we look back a little bit for the last 3 years. And the summary of this slide is the strategy is working. The strategy is working. You see that our sales grew on the average 10%. We increased the EBITDA since 2022 by more than 700 basis points, and we really upped the return on capital employed, one step after the other very systematically. And this is how we are running Sulzer with a lot of fire in our heart and at the same time, very systematically, it goes together actually quite -- it goes quite well. Given this very positive development and because we are really convinced that independent of how good 2026 is then really going to be, our company is on the right way forward. The industry that we are serving are growing and what we have to offer is more needed than ever. And at the same time, internally, we are becoming better. So we increased our dividend again by CHF 0.50 if it is approved by the general assembly to CHF 4.75 per share. So ladies and gentlemen, now let's look a little bit deeper into our figures with our CFO, Thomas Zickler. Thomas Zickler: Thank you very much, Suzanne. So good morning and good day also from my side. A lot of well-known faces I see here in the room, and thank you also for dialing in. As you heard already from Suzanne, we had in 2025, quite a good year when it comes to our profitability, but also to sales. Before I go into the details of the year 2025, let me say one thing upfront, and Suzanne mentioned this already. When you look at our order intake and sales numbers, you have to have the following thing in mind and Suzanne stressed that I noted when she's doing her presentation that we need to be aware of the FX impact. So when you look at our order intake and our sales, on both KPIs, we have around about CHF 190 million negative FX impact. So in other or in easy words, our order intake and our sales would have been around about CHF 200 million higher, excluding the negative FX impacts. Let me talk about our growth. We have a very robust growth. And when you look at our share of the aftermarket business, over the last 3 consecutive years, Services has grown double digit. So we have achieved over the last years that our aftermarket share has grown to 62%, which makes us really a highly resilient company. Why I'm addressing this? I'm addressing this because when I have to characterize the year 2025 in 1 or 2 sentences, it's that overall, I will say, smaller and non-cycle business is running very well. However, the larger orders, this was the topic of 2025, and I'm not going into the story of the geopolitical uncertainties. But you see here was then landing at around about 2% plus order intake and 5.6% plus on sales, that we are really a resilient company. When we look in Q4, you have seen on a quarter-to-quarter comparison, so Q4 2025 to Q4 2024, that we had by the end of the year 2025, our order intake growing by around about 12%. So you see that towards the end of the year 2025, we really picked up in our business development. Also, when you look at our order intake margin, we haven't really bought any orders in just to get order intake. And this is very important. I'm saying this for now 4 years in a row. We are getting our order intake with a still increasing order intake margin. And you see this compared to last year, still 70 basis points higher order intake margin. And as said by Suzanne, we have overall talking about the whole Sulzer Group, still positive book-to-bill ratio of 1.06. So talking about our EBITDA profitability. It is indeed a record profitability over the last at least 20 years. And when you look at our profitability at the EBITDA, you see it's CHF 556 million. And what you have to know, and I mentioned on the first slide that we were seeing headwinds from the FX side. On our EBITDA, we had a negative FX impact of around about CHF 40 million. So to say it in other words, our EBITDA without this negative FX impact would have been close to CHF 600 million or somehow around CHF 600 million. When we talk about the success, why is our EBIT and EBITDA increasing so much? And you see 140 basis points compared to last year. It is on the one hand side, yes, we still have very favorable markets. We are growing in most of our market segments, except of Chemtech, where I go a bit in the details later on. But we have also a lot of success from our rigorous improvement of our Sulzer commercial and operational excellence. What do I mean by this? I really mean that we have improved our production efficiency, our project execution efficiency. We are much better on the supply chain side. And we are much better on people excellence. We discussed about getting on the sales side more, from the farmers to the hunters, changing the company. And here, you see in the numbers, the success. This is what I want to address here. On the return on capital employed, I think the story is very simple because, yes, we have a higher EBIT because of all this what I explained. And on the other hand side, we have more or less a stable CapEx and, say, efficient use of our capital. And this means higher EBIT, stable capital, that the return on capital is growing up by 140 basis points. So now let me come very proudly to this slide. This is basically a reflection on the period when Suzanne and I started beginning of 2023, you see the total shareholder return of Sulzer is 121% compared to the Swiss Performance Index already also including the dividends with 33%. So we really have outperformed the market. Also when you look at the tables with the dividend and the proposed dividend for the year 2025, you see we increased the dividend then finally by almost 40% over the last years. And market capitalization, I checked just 5 minutes ago, our share price, we are more or less flattish compared to yesterday. So you see that our market capitalization from 2023 to end of 2025 went up to CHF 5 billion. When you take our share price as of today, we are close to CHF 6 billion. So I calculated we are currently at CHF 177 million. If we would have been at CHF 178 million, we would be at exactly 6.0 market capitalization. So let's go a bit deeper into our individual divisions. When we talk about Flow, what is the overall story? In Flow, we had in 2025, a really good development on the sales side and on the profitability. Look at the profitability increase. Flow increased by 160 basis points compared to last year when we talk about EBITDA profitability. They are currently standing at 13.3% EBITDA profitability. And as I said, in Flow, we have also seen a lot of operational excellence measures really realizing in 2025, helping to optimize the cost setup, helping also to improve the profitability by also, in parallel, increasing the sales. And when I talk about the sales, you see that sales in Flow increased double digit by 12.3%. And when you look at the sales increase, you see that we have here one BU really standing out. This is energy with over 20% sales increase compared to the prior year. But we also have had a very good sales development in the water and in the industry area. So overall, it is really on the sales side, on the top line, a success story for Flow. Let me also talk a bit about order intake in the Flow division. Order intake is a bit of, I call it, a more mixed picture. Why is it mixed? Because let me start with Energy. In Energy, we had in H1 2024, one large big order -- elephant order from the Middle East with USD 100 million. And these large orders, they haven't come in, in 2025. This is the overall storyline for 2025. So when you look where Energy landed by end of the year 2025, Energy landed with around about minus 3%. So minus 3% without having the USD 100 million large order means if you would have taken out this one order, energy would have been at least plus 5% and more. So you see that also on the energy side, we have a very, very good base business, which is reflected in these numbers. What we see also on the order intake side in Water, that on the Water side, we grew double digit. As you know, we are not announcing the numbers separately for Water and for Industry. So let me leave it here with the statement, Water grew double digit in 2025. And annoying Water grew double digit, you maybe have seen in January, our announcement where we announced a water treatment center of excellence, combining all our expertise, which we have in our company and even -- to even focus more on the further development of the water and wastewater treatment. As I said, when you look into Flow, you see a really very excellent improvement on profitability and sales. And as explained on profitability because of a high base with large orders, a bit of a mixed picture. When we look in the last quarter of Q4 2025, we have also seen in Flow, a very positive development. Flow had in Q4 compared to Q4 the prior year, a plus of around about 18%. So you saw also in Flow an uptick when it comes to the business performance in 2025. Then let me go to Services. Services is also really -- I'm so proud to tell you all these stories. It's a new record result when it comes to profitability. You see services, they grew by 150 basis points. So there's an internal competition, 10 basis points lower than Flow, but they grew with 150 basis points on the profitability. And what is the reason for this? Yes, also operational excellence. But as I have mentioned on the first slide, services is growing for the third consecutive year in order intake and also in sales. And you see it here in the headline, we have done in services a lot of investments into growth. Let me just give you an update of what have we done in 2025 for this growth. So in services, we opened a new service center in Argentina for the market there, for whole Latin America. We have bought in January a company called Davies and Mills for the Middle East in Bahrain. This was basically an EMS company, where we now with our full services network, we expand this. We use this as a regional footprint to tackle much more the market in the Middle East for services because you know more than half of the services business is coming out of America. This is a very important strategic move to also grow services more in the Middle East region. And last but not least, we have invested in the U.S. in our, and I wrote it down, in our largest turbomachinery center in North America. And we further invested to extend the production and service capacities there because of the still highly booming U.S. markets when it comes to pump services and turbo services. Why is it growing so much on the services side? Story is very simple. We have on the CapEx side, a bit the hesitation, the delays, the postponements from the customers. But we have also, on the other hand side, a lot of equipment which needs to stay really reliable and safe for the customers. And here, services is on its way with upgrades, modernization, repairs, retrofits to really ensure that all the customers have a reliable energy, yes, equipment available. That's from my side. I forgot one point, also order intake because I got this question this morning in some analyst calls. They said, Thomas, what's going on with services? The Q4 to Q4 order intake is only growing -- is only growing by 3.8%. I tell you the story. The reason is very simple. Last year, in Q4, we received a larger order in the region Europe, for South Africa for a big energy provider there. And when you have then the like-for-like comparison, Q4 to Q4, you have the impact that then the region Europe and Africa, they were in the minus because of this high base impact last year. But believe me, still Americas, and you saw it also in the e-mail, which we shared this morning with most of you and in the press release that Americas is still growing almost by 10% and also EMEA by more than 25%. Then more challenging environment, Chemtech. Chemtech, what is here the headline is really the overcapacity, especially the refining overcapacity on -- sorry, it's not working. Okay. Chemtech, we have the overcapacity, especially in the refining area for the refineries in China. But we have also the overall, yes, weak market sentiment in the chemical industry. When I talk about orders in Chemtech, we have seen a mixed picture. We are missing here also the larger orders, which we have received in the past because of this uncertainty in the markets. So we have basically in this smaller projects, short-cycle base business, we have a reasonably good order intake. We also have grown in Chemtech, our aftermarket services share where we go now because the equipment is there more on the services side, in the tower field services, turnaround services, and so on. So here, the strategy is really working very well. We have, on the Chemtech side, also achieved when we talk about order intake. And you know that we had our footprint mostly coming out of China and Asia. We have reduced the share of, say, orders coming in from Asia from around about 50% to 37%. So this is a reduction by 12% of the Asian share. And on the other hand side, we have increased the share in EMEA by around about 11%. And some of you remember, we are going to open a service shop in Saudi Arabia for Chemtech this year, by mid of this year. So you see also from the numbers, our strategy a bit, going out is the wrong word, relocating our focus from Asia, which were historically grown more now to the Middle East. This is working out. Last word to Chemtech on the profitability side. Yes, the profitability on Chemtech went down by 2 percentage points. But here, and Suzanne already addressed it, I really want to explain to you, this is a very value-accretive margin. And why I'm saying this? Because, yes, the profitability went down because Chemtech lost 13.6% of their sales. But on the other hand side, we have done a lot on operational excellence on the Chemtech side. We have done a reorganization where we refocused on the regions, India and Middle East and combined. We also have, on the R&D side, focused more on market topics. We have improved our supply chain by centralizing a lot of functions. And we also merged 2 BUs within the Chemtech organization. And we did cost cutting, cost cutting in the headquarter, cost cutting also in China, where basically, we dismissed more than 200 people in our factories in China. So all in all, you see that with this 2% decrease in the profitability for Chemtech, this is a very good result, seeing the sharp decrease on our sales. And on the other hand side, this means when we achieved this year on the Chemtech side, that they are slightly going up in 2026. This is what we expect, that then you have a much lower cost base, and then you will see that we have also an acceleration coming on the Chemtech side when we talk about profitability. Outlook also a bit with the Q4 to Q4 comparison. Also in Chemtech, we had around about 18% plus in order intake Q4 compared to Q4 2024. What is very important for me to address is that especially in MTCS, we had on a quarter Q4 '24 to quarter Q4 '25, an increase of more than 13%, which indicates that we most probably have seen the end -- the light at the end of the tunnel. Then let me go to the EBIT and net income. EBIT, you see here with 22% plus. I think story is the same. I don't want to repeat it. It is that we really were able to expand our gross margins, rigorous cost management, and implementation of Sulzer Excellence. Also here on the EBIT, I want to address the FX impact. Our EBIT would have been around about CHF 36 million higher if we wouldn't have had a negative FX impact on our EBIT. Net income, kind of the same story. Why is net income not growing so much than our EBIT in percentages, mainly, say, 2 reasons for this. We have because of the lower interest rates globally, lower interest income for Sulzer. And also since we earn more and more and get a higher and higher profitability, finally, we also have to pay higher taxes, and this is the reason why we are a bit lower in the growth on the net income side. Then let me talk about our cash flow. Cash flow, most of you remember when I gave updates, I think cash flow really came in, in line with expectations. Why I'm saying in line with expectations? Some of you said, hey, Thomas, why is the cash flow not going up to almost CHF 300 million? Explanation is very simple. Please recognize that in the year 2025, because of Chemtech delivering no cash flow -- free cash flow because of their business situation because they had to invest in one-offs. They had to take care of their profitability. We have missed completely the contribution for Chemtech for our free cash flow. Okay. Well, thank you. Yes. And with this, we would have been close to CHF 300 million with a working Chemtech. However, when we look in our free cash flow, you see that we are CHF 22 million less despite the fact that we have higher tax payments and lower interest income, and just to drop the numbers, tax payments are around about CHF 10 million higher and lower interest income is around about CHF 7 million. So alone, when you add these 2 ones, you see that we can explain the lower cash flow. Now it's working. So balance sheet and net debt-to-EBITDA ratio. What I did this time, I changed a bit the layout on this slide and the content because some of you were almost always addressing, Thomas, why do you show not just the net liquidity of Sulzer, and this is what we have done here, and we do it in the future. You see that when you talk about our cash and cash equivalents, and these are the cash and cash equivalents, which belong to Sulzer. This is not including the Tiwel cash. You know that we have the dividends which we basically keep in our house, and this would then increase the cash. But this is only the cash which you see for 2025 with CHF 640 million. It's only our own Sulzer cash. And on the other hand side, the debt, nothing has changed. Why is the debt around about CHF 30 million higher? Very simple. Last year, we had an expiring bond of CHF 300 million, and we replaced this bond with 2 new bonds in the total amount of CHF 330 million, and this is why we have CHF 30 million more debt. And then when you do the calculation, net debt divided by EBITDA, we have then a net debt in 2025 of CHF 555 million and an EBITDA of CHF 556 million. So you see it's 1.0x. And when you compare this with last year, it's basically a no change. It's a stable 1.0x on the net debt side. Okay. So now my last slide. Let me talk about the dividend. Suzanne already addressed it that we are proposing for the AGM to increase the dividend to CHF 4.75 per share. Just let me give you some reasoning. Look at the left side of the chart, we started with 2015 with a dividend of CHF 3.50 and you see then a lot of dots. And then until 2021, you have here still CHF 3.50. And you see in the last years that we steadily increased the dividend because we are, as you know, on our Strategy 2028, we are focusing on organic growth. We always said that we are not doing big M&A transactions, but we are also sharing a portion of our success with the shareholders. And this is why we have steadily increased the dividends. What is important because some of you already addressed, is this too high or how does it look like? We have a dividend policy within Sulzer, which stays between 40% and 70% of our core net income is in our dividend policy, what we can pay as dividend. And you see it here on the right side, in the last bullet point, we have a dividend payout ratio of 50%, in this range between 40% and 70%. So we are still on the lower end side of the possible range of the dividend. And I think with this, you see that we are very carefully also deciding on the dividend increases, and we are focusing more on a steady development in the future than increasing the dividend onetime by higher amounts. With this, I would like to hand back to Suzanne and then ask -- should we do the question? No? Suzanne Thoma: No. I still have a few things to. But as a matter of fact, we have already 45 minutes, so I will try to really stick to the most important things and not mention every word on the slide. I'll try to be short, but still, yes, interesting, I hope. So these are our industry spoke about it. The change that we have in our understanding of Sulzer is -- well, it is a fact. We just see it differently now is that our divisions serve by and large the same industries. And in many cases, they serve the same customers. This is something that we have started to leverage in 2025 and that we are going to increasingly leverage going forward. That does also require some internal changes. I'm not speaking of a reorganization, but of the way we are handling business demands from one customer to several divisions. There we are sometimes a bit our own enemy. Yes. So let's look at energy, our #1 market. We have spoken about it that large projects, exploration, large extensions, rather a little bit subdued. We do expect in 2026 to get some large orders coming through because momentum is really still there, both in the Middle East, but also the large American companies do speak about producing more in the area of oil and gas, and not less. What stays is that these operations, all energy operations have to be safe and have to be clean and compliant. And this helps our business because what is it that we are doing, we are helping to make the processes and the infrastructure of our customers more efficient and cleaner and better. Power generation is the topic. We need more electricity around the globe, which also leads to the fact that, for example, old gas-fired turbines are coming back up into operation after having been overhauled very often by our service division. The chemical industry, new capacity is indeed subdued, except for some specialty segments, purification and separation, very, very high-level purification and separation, for example, for semiconductors, for example, for batteries and other high-tech applications are increasing. If you have infrastructure, it has to be safe. It has to be compliant. It has to be energy efficient. And if you have an aging infrastructure, this is even more the case. So this is where Sulzer has a growth potential also short-term in the chemical industry. If we look at water, that is a simple story. Water is like power production, the topic around the world. We need more water, cleaner water. We cannot take, for example, for mining more and more groundwater out. We have to take care of our water, and we need more. And so industrial and municipal wastewater treatment is very important. Water in mining, you see it here in the picture, is a big topic. Desalination is coming up more and more. And water infrastructure also to transport a lot of water, for example, from the sea to a desalination plant and then to a city is an increasing business. We are looking forward to double-digit growth in water as well. New technologies, mostly Chemtech, not only. There are some uncertainties. But what you read in the news right now about new technologies does more reflect the political speech, let's say that, than what we do see in our market. We clearly see improved interest and, hopefully, large projects in 2026 when it comes to bio-based plastics. We see it in the Middle East and in Asia, not in the United States and not so much in Europe. We see carbon capture still being there, but it is clearly a niche market. It depends on the regulation and, also, let's say, on the social license that, for example, large oil companies want to have or don't want to have when they invest heavily into gas-fired power plant for data centers in the United States. What we see growing in many regions is alternative fuels, be it sustainable aviation fuels, be it bioethanol. So what do we expect for Sulzer in 2026? We see a solid order intake. It is most likely going to be somewhat muted in the first semester. And there, we are also suffering from the comparison base. If you look at our Q1 order intake, the base is around about CHF 1 million -- CHF 1 billion. So if you have a CHF 50 million order in March or you have it in April, makes a difference of 5 percentage points. This is why we really don't think that the Q1 order intake has too much of an information value. So we see not so much momentum in H1. We see very good momentum in H2. We are not just saying that because we hope that this is the case, but we see it in the pipeline of the large projects. And the communication of our customers when these orders are going to be placed in a legally binding way. We do see for all 2026, continued growth in aftermarket in small-scale project and in the water. And we do see an upwards trajectory for our new technologies in most of the regions of the world. Trying to summarize it. Our markets are growing structurally for the reasons that I mentioned at the beginning of my presentation. The macroeconomic situation creates a certain volatility, which leads to our customers maybe hesitating a bit longer than they would otherwise for projects that they are planning to do. At the same time, if we look at what is happening with population growth and so on, the global opportunities are there for our company and the challenges that our customers have in order to have safe, clean, less emission, and so on is also driving our markets. So we believe that Sulzer is clearly on an upward trajectory, potentially not every quarter. So what do we do in 2026? We accelerate and intensify our strategy implementation. It is not so easy because this company is successful. And we are now really changing the ways that we are doing certain things, and we are making it better and more efficient, but it's still a change. And human beings are not so comfortable with change. But we are pushing that through. We strengthen our aftermarket business. We are further streamlining our order winning process. We are too slow and too complicated when it comes to order winning, when it comes to tendering and when it comes to order specific engineering. And we are moving towards integrated customer solutions, solutions for specific industry centers like water, where all of our 3 divisions are selling into right now, still mostly in a fragmented way. Again, this requires to change how we are doing things. We are going to push that forwards in 2026, which also means One Sulzer. Our fragmented way of accessing customers, I put it in a positive way. There is a lot of potential for growth if we eliminate the fragmented way of accessing our customers while still staying very effective, no, becoming more effective and efficient in how we are doing our processes. This leads us to the following outlook. Now giving an outlook these days, ladies and gentlemen, is not that easy. And this outlook stands unless we -- what I want to say is this is a quite significant information. There would have been some reasons to give you a higher outlook. But it is difficult. The visibility is rather low because of the geopolitical situation. So we are guiding an order intake of 1% to 5%. We are guiding sales for 2% to 5%. And we do see an EBITDA margin that is further improving to about 16.5%. Very short. I have been told you like these examples. So I will do it, but I'll be 3 in 5 minutes, I promise. So we are still making traditional energy cleaner and less expensive and readily available. And that will continue this business for a very long time because the world needs more energy. And you see an example here where a customer of our thought they had to replace 2 full compressors, which would have shut down their offshore operations for apparently several years. But we came in with our retrofit solutions from the Services division and could upgrade the compressors. We contributed to less -- to a smaller environmental footprint because the energy consumption of the operations is now down 14%. And for the customer, most importantly, we could -- the project time was strongly reduced. This is really engineering. When we speak about repair and maintenance, it sounds so easy, but this is real engineering work and Sulzer is very good at that. Now we still speak about keeping the energy transition moving because it is still moving almost worldwide, and this is a nice example for a bioethanol plant in Brazil, where we were the main supplier and the feed for this plant is biomass from waste, very important. Now the water treatment, the Global Center for water treatment, Thomas mentioned it. We have launched it now 2 months ago. This is following the strategy of having industry-specific offers from a One Sulzer perspective. And here, very specifically, we have around the globe quite some very, very good, but smaller companies active in water treatment, who are regionally well established, and now we are opening our sales channels to them globally, and we expect very nice growth from the water treatment. Last but not least, we are scaling our global capabilities through shared business hubs. We have 4 business hubs now in Mexico, in Madrid, in Pune, and in Suzhou for the type of work that can be very easily standardized and automated mainly in some business functions and in the finance function. It has to do with sales support and tendering support and, of course, supply chain support. This is another important building blocks to support a One Sulzer approach in our back office processes. This is one example from the excellence front. Let me finish, ladies and gentlemen, key takeaways. We see further order intake and sales. In a volatile market, in the areas that we have grown nicely already in 2025, but we do see some large projects that are in the pipeline, this growing pipeline that we have that will materialize in 2026. We are working together to strengthen the foundation of Chemtech so that it is very well prepared to pick up the growth that we are expecting this year, growth compared to 2025. We don't expect a full recovery to the level of 2024 in this year. But as Thomas said, it will also then improve the profitability significantly. Sulzer Excellence is the key to making Sulzer a top industrial company. We are going to intensify and accelerate what we are doing there with also an increased excellence organization that works hand-in-hand with our business to improve the many, many good things that we are doing. So our strategy is working, and we push on with this strategy by staying very adaptable to what is going on in the world. Thank you very much, ladies and gentlemen, for your interest. That is what we wanted to present to you looking back and looking forward in 2025. We are now going to take questions, if you have any, Thomas and I together. Thank you. Patrick Rafaisz: Okay. Patrick Rafaisz from UBS. Is it -- how many questions? Can I go with 3 to start? Suzanne Thoma: It depends how complicated they are. Patrick Rafaisz: Okay. Let's start with 2 first. One is on the order intake margin. And Thomas, you mentioned the 70 bps improvement. But if I look at H1, H2, H2 was actually down, on my calculations. Can you elaborate on that? Is that mostly mix? And how should we think about the order intake margin in '26? Thomas Zickler: I'm thinking about the answer, but I'm like always, very transparent. The order intake margin when you compare H1 to H2 is a bit lower in H2 because we had the difficulties with our order intake to really come to the guidance to the end of the year. So this means towards H2, we pushed really on the order intake side to get some more orders in. And this is the true story. It is no business development, no change on the business side. It's just that really we then landed at above 2%. Patrick Rafaisz: That is indeed very transparent. Thank you. Does that maybe also explain the softer guidance for H1 or the more muted guidance because you may be brought forward some orders? Suzanne Thoma: No, it did. It was not to a large extent, definitely not. H1 is simply that when we look at our pipeline, we believe that the large projects will rather come in H2. Many of our customers have no reason to decide finally in H1. Patrick Rafaisz: Okay. And then a question on the margin expansion. It's very impressive, adding another almost percentage point or thereabouts in '26. If you allocate that to the 3 divisions, I mean, Chemtech you already mentioned will definitely improve. But how do you think about services and Flow versus '25, right? Suzanne Thoma: For 2026. Well, I definitely expect a further margin expansion in services because their relative increase was less than in Flow. Definitely still expect a continuation of the margin increase, maybe at a little bit lower level, not -- well, rate in Flow. But we are not buying sales that is very -- and not buying order intake. Patrick Rafaisz: Yes. Suzanne Thoma: The margin, of course, also not only depends on the price, it also depends on the efficiency of our operations production, and we will work heavily on the efficiency of our operations. Patrick Rafaisz: Can I go for one more? Suzanne Thoma: If it's a short one like that. Okay. Patrick Rafaisz: It's a short one like that. I just -- you talked about the large orders for the second half. Just trying to understand how much do you build in? How much optionality do we have if all goes well versus the guidance? Suzanne Thoma: We are business people, not analysts. So we don't do quite such calculations. That was meant in a referent way. Just really also like Thomas answering how this really are. I can just -- I know you want the figure for your thing. What's now? Thomas Zickler: Maybe I take over. Suzanne Thoma: Yes. Thomas Zickler: For the guidance, which we have given on order intake, we have planned very conservatively, which includes I wouldn't say almost no larger order, but say, the big orders which we are planning for and which are in our order intake pipeline for H2. These orders are not included in this guidance because of the geopolitical environment, and this was also what Suzanne addressed when she talked about the guidance. These uncertainties are too high that we are really able now to forecast for the next 12 months or next 10 months on our order intake coming in. Christian Arnold: Christian Arnold from ODDO BHF. On the margin, EBITDA margin, I mean, you achieved the record high EBITDA margin, 15.6%. Now you are guiding for quite a step actually in '26, 16.5%, which is impressive. Thinking about your order intake margin increase of 70 basis points, sales growth of 2% to 5%, which probably leads to some operating leverage. And then think about the Chemtech division, which you refocused and probably also achieving higher margins. I mean, we could even think about a higher margin than the 16.5% you are targeting despite the fact that the level is very, very high. So what could go against you? Are these higher personnel costs? Are these product mix effects, which we have to think about? Yes. Suzanne Thoma: Well, one thing that theoretically could go against us is a tightening in the raw material situation with higher costs, let's say, for steel, for example, that could be -- we don't -- we see it only a little bit right now. We don't see it in a significant way. That is one thing. We still believe that to go another percentage step up, percentage point, is already quite ambitious. It is true, some of the measures that we have taken in 2025 and also have costs will have an effect in 2026. But then you never know what's going to happen. So we give our best guess, not estimate, but assessment. Thomas Zickler: Yes. And also, we want to be in line and sustainable with the last 4 years, where we have almost every year guided with 1 percentage point growth. And we think, as Suzanne explained, we think also for 2026, we can do it. However, and I don't want to repeat everything, the geopolitical uncertainties, just think about what is happening with Iran, what is happening to other topics. I think the 1% with our excellence, which we do, we are quite comfortable. And the rest, let's see how it really develops during the year. Christian Arnold: Okay. Thank you very much. And maybe just a small question on CapEx. What do you think what will you spend in '26 and '27? Suzanne Thoma: I have to say... Christian Arnold: Yes. Sorry, same levels. Thank you very much. Alessandro Foletti: Alessandro Foletti of Octavian. Can I ask you also 2, 3 questions, please. Maybe first on the H1, H2 split. I think you guided in the press release that H1 will be lower than H2. But the backlog entering the full year is quite high, like basically like last year. Why still this H1 weakness somehow? Suzanne Thoma: Our guidance was related to order intake, not sales. Alessandro Foletti: Okay. So that means on sales that we should not expect this huge H1, H2. Thomas Zickler: Yes. Alessandro, sales is always much more stable coming from the order backlog than order intake. But our message was addressing on the order intake, where we see really from especially the larger projects in our pipeline that they are coming in the second half of this year and not in the first 6 months of this year. Alessandro Foletti: Okay. Thanks. On the profitability again, in Flow, particularly, I think Ms. Thoma, you mentioned that you did have some help from the market to increase the profitability there. Can you dissect how much of this improvement is your own actions and how much is market tailwind? Suzanne Thoma: What do you mean with help from the market? Alessandro Foletti: Good markets mean good prices, means good margin. Suzanne Thoma: Well, the markets are quite competitive in the Flow area. We did definitely have good markets in Water. I cannot dissect it per se. Maybe you can. Thomas Zickler: No, it's very difficult. What we have on the Flow side, especially is still a market where we have a bit of a pricing power left. It is much more competitive than it was whatever 2 years ago, for sure. And then this combined with our, say, cost measures, this enables us to get the profitability up. But on the pricing side, I think we are very disciplined. We have new pricing tools. We are using here a bit more sophisticated tools. But overall, yes, the markets, they are supporting this development, but I cannot really give you whatever XYZ percent. Alessandro Foletti: All right. Maybe last one on the large orders again. There were some discussion with you during the year, last year about carbon capture. Now you mentioned it, but I'm not sure that there's still the levels. Are they still around these projects? Are they not around, where? Suzanne Thoma: So we have a large project in 2025, the Teesside project in the U.K. And we are speaking about several larger carbon capture project interestingly in the United States. Why? Because they are going to use so much more energy, they will need the gas-fired turbines to do so. And there is not only -- not only a question of whether there is political support for the big AI companies. It's also a question of the social license. I mean there are still many people also in the United States who think we should reduce our CO2 footprint even if the government says something different. And in that sense or in that playing field, for the moment, we see momentum. You see in my long explanation that I'm also not completely sure about it, but we do see momentum in carbon capture. Also in the Middle East, we do not -- we see discussion in China, but that will come much later. We do not see it in India. Alessandro Foletti: Right. But is it correct -- I understand correctly that these hyperscalers or data centers, they would do it voluntarily basically? Suzanne Thoma: Possibly. Possibly. Well, voluntarily in the sense that they like to do it, I don't know. But they also -- they already do have some push for that. Thomas Zickler: Without the regulation. Suzanne Thoma: Without regulation, possibly, yes. That is the discussion they are having with us. Are they -- with very clear projects. Are they pushing it through, that I cannot guarantee. Alessandro Foletti: Right. And your assessment of the competitive landscape for those projects? Suzanne Thoma: We are definitely the market leader when it comes to large-scale carbon capture projects. Unknown Analyst: If I remember correctly, you mentioned of the 9-month orders that you have a couple of bigger projects in the pipeline where you hope to let them materialize before the end of the year. Can you tell us if some of them materialized and the projects you see now, the bigger projects coming rather in the second half of these new projects? Or are they still the same and wait another half year. Suzanne Thoma: Very good question. They are partly new project, but it is also true that many of them have moved into 2026, even H2. Some were also lost. I mean I can give you a bit of feeling for our Energy and Infrastructure business unit. In September, we were still speaking about project volume. We wouldn't have gotten all the projects, but in the order of CHF 300 million, of which we maybe would have gotten half or 40%. And of those, CHF 220 million have moved into 2026 and CHF 80 million were lost, but there are some new that have become more concrete so that they -- they weren't that concrete in September, so, I didn't speak about them. So all in all, that's what I was trying to say with my underlying momentum. There is a strong underlying momentum when it comes to energy generation worldwide, not only in power, also in oil and gas. We will -- would be very amazed if we wouldn't have any orders in the next 12 to 16 months that are really major, most likely in -- very likely in the H2. Arben Hasanaj: Arben Hasanaj from Vontobel. My question would be around the outlook for the service business for this year and also next 2, 3 years. I mean, if you look at the CapEx budgets also in the area of data centers, they have become even more bullish. So I was wondering how confident are you that this kind of momentum continues and maybe even still double-digit momentum. Yes, I was wondering, how do you see the market this year and next 2, 3 years? How long can this super cycle last in your view? Suzanne Thoma: We are very positive over the next 2, 3, 4 years because of some underlying drivers. Thomas Zickler: Yes. Let me add to this. I just want to manage a bit the expectations, and you know me, in the meantime, I'm a bit more conservative on the expectation management and then overachieve, then vice versa. So you said double digit in the next years. If we can agree mid-high single digits over the next years, I'm fine. But I think we cannot commit on double-digit growth over the next year. Suzanne Thoma: No, that was not -- that was an ambition and expectation. It was not an additional guidance. Thank you for raising that. Any other questions? Well, then we come -- no, then we come to the -- yes, exactly Marlene coming in with maybe questions from. Marlene Betschart: Yes. I have 2 questions from Fabian Piasta from Jefferies. The first one is, can you please provide more details on specific measures taken as part of operational excellence program? How much headroom is there left for improvement? Suzanne Thoma: There is a lot of headroom left for improvements. I cannot quantify it. In my assessment, we have only started in 2025 in a very systematic way with operational excellence. Now operational excellence is also many, many, many small steps. So it does take energy and it does take time, and it is a continuous improvement that we will have and not a step change. But we are definitely at the beginning in many dimensions. Marlene Betschart: Thank you. Second question for Thomas. Can you provide more details on the strong Q4 order intake? Does this mark a trend reversal or is this more seasonally driven with respect to your guidance implying a more muted first half of 2026 versus second half of 2026? Thomas Zickler: It's the latter one. It's more the year-end, the strong Q4, which we normally in the industry have every year. When with the customers, we push for the year-end closing. So we had very strong numbers in 2025, and this doesn't indicate a trend. This is why we are so cautious with our H1 order intake guidance. If it comes better, then it comes better. But seeing it, I really would say it's a normal process which happens every year in Q4, where the industry as well as the industrial companies push for order intake and also for sales in the year-end race for the Q4 numbers. Suzanne Thoma: Which also means we have already done it in 2024. So the comparison basis also Q4 in every year. So -- right? But I would also not take it as a -- not yet take it as a fundamental trend change, too early. Marlene Betschart: Fabian Piasta says, great. Thanks. And this has been -- no, wait a second. Sorry. I have another question from [ Loui Bion ]. Could you give us more details on your operational capacity in North America for the energy market? If the gas turbine maintenance market experiences a boom, will you be able to keep up with demand? Suzanne Thoma: Okay. Our business is not linked to the new turbines directly. As you know, the new turbines, they now have delivery times of 4, 5, and 6 years. Now that does still impact our business positively because in many cases, let me say, it a bit old turbines are being dug out or, let's say, reinstate with reengineering and put into operations again because that goes much faster. So taking care of the older and the old turbines is our business, a very good business because also the new turbines become old within a cycle. So indirectly, we will profit from that. Definitely, we see it today. And yes, we have invested in our operations in the United States, also capital investments, which our American colleagues were very happy about because they haven't gotten that much over the years. And also, we have improved our operational excellence, which also means that you can do the more things, more volume with plus/minus the same operations. So yes, we are going to profit from that, but not in an extreme way because there is this distribution over time in our business, which is good. Marlene Betschart: This has been the last question online. Thank you. Suzanne Thoma: Thank you very much. So again, thank you very much for attending online, and thank you very much for taking the time and the effort to come here, is much appreciated. And we are happy to invite you now for a small uncomplicated lunch like every year and continue our conversation. Thank you very much. Thomas Zickler: Thank you.

36天前Insight Analytics约5分钟阅读

WHD 2025 Q4 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Cactus Q4 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Boyd, Treasurer and Director of Corporate Development and Investor Relations. Please go ahead. Alan Boyd: Thank you, and good morning. We appreciate you joining us on today's call. Our speakers will be Scott Bender, our Chairman and Chief Executive Officer, and Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President; Steven Bender, Chief Operating Officer; Steve Tadlock, CEO of Cactus International, and Will Marsh, our General Counsel. Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements. In addition, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. With that, I will turn the call over to Scott. Scott Bender: Thanks, Alan. Good morning to everyone. We finished 2025 with strong performance in both segments. Pressure Control revenues and margins exceeded expectations on a strong mix of product sales and a more resilient rig count than anticipated, while Spoolable Technologies declined seasonally as expected, but maintained strong profitability, thanks to all of our associates for remaining customer-focused and for delivering excellent performance to close a year, that was challenging from a macro perspective and transformational for the company. Some fourth quarter total company highlights include revenue of $261 million, adjusted EBITDA of $85 million, adjusted EBITDA margins of 32.7%. We paid a quarterly dividend of $0.14 per share, increased our total cash balance to $495 million. And on January 1, we closed on the acquisition of the majority interest of Baker Hughes Surface Pressure Control business which we will refer to as Cactus International. I'll now turn the call over to Jay Nutt, our CFO, who will review our financial results. Following his remarks, I'll provide some thoughts on our outlook for the near term, including the Cactus International business before opening up the lines for Q&A. So Jay? Jay Nutt: Thank you, Scott. As Scott mentioned, total Q4 revenues were $261 million, which were lower 1% sequentially. Total adjusted EBITDA of $85 million was down 1.7% sequentially. For our Pressure Control segment, revenues of $178 million were up 5.8% sequentially, driven primarily by higher levels of products sold per rig followed and improved rental revenues on an increased customer activity. Operating income increased $4.1 million or 9.3% sequentially with operating margins expanding 90 basis points. Adjusted segment EBITDA was $4 million or 7.2% higher sequentially, with margins improving by 50 basis points. The margin increase was due to a fuller benefit of cost reduction initiatives as compared to the third quarter. We believe our U.S. Pressure Control business is performing at its highest level, since the inception of the company. For our Spoolable Technologies segment, revenues of $84 million declined 11.6% sequentially as anticipated due to the lower U.S. customer activity levels in the seasonally slow quarter. Operating income decreased $4.9 million or 18.9% sequentially, with operating margins compressing 220 basis points due to reduced operating leverage. Adjusted segment EBITDA decreased $4.9 million or 13.6% sequentially while margins declined by 90 basis points. As a reminder, Q2 and Q3 are usually our strongest periods. Corporate and Other expenses were $9.7 million in Q4, up $700,000 sequentially due to increased transaction and integration costs. Adjusted corporate EBITDA moved unfavorably in Q4 by $0.5 million to $4.7 million of expense. On a total company basis, fourth quarter adjusted EBITDA was $85 million, down 1.7% from $87 million during the third quarter. Adjusted EBITDA margins for the quarter were 32.7% compared to 32.9% for the third quarter. Adjustments to total company EBITDA during the fourth quarter included, a noncash charge of $6 million in stock-based compensation, $3.3 million for transaction-related professional fees and expenses, $164,000 for additional restructuring actions to rightsize the organization in response to the lower activity levels and a $1 million loss related to the revaluation of the TRA liability. Depreciation and amortization expense for the fourth quarter was $16 million, which included $4 million of amortization expense related to the intangible assets resulting from the FlexSteel acquisition. During the fourth quarter, the public or Class A ownership of the company averaged and ended the quarter at 86%. GAAP net income was $48 million in the fourth quarter versus $50 million during the third quarter. The decrease was largely driven by lower operating income and the loss booked for the revaluation of the TRA. Book income tax expense during the fourth quarter was $14 million, resulting in an effective tax rate of 22%. Adjusted net income and earnings per share were $52 million and $0.65 per share, respectively, during the fourth quarter versus $54 million and $0.67 in the third quarter. Adjusted net income for the fourth quarter and the full year 2025 were net of a 25% tax rate applied to our adjusted pretax income. During the fourth quarter, we paid a quarterly dividend of $0.14 per share, resulting in a cash outflow of approximately $11 million, including related distributions to members. We also made a cash TRA payment of $23 million following completion of the 2024 tax filings during the fourth quarter. We ended the quarter with a cash balance of $495 million, including $371 million of cash held in escrow to facilitate the closure of the Baker SPC acquisition on January 1. The cash balance represented a sequential increase of $49 million, despite the TRA payment and transaction-related disbursements associated with the acquisition. Net CapEx was approximately $4 million during the fourth quarter, and net CapEx for the full year 2025 was $39 million, just under the range guided to, in October. In a moment, Scott will give you our first quarter operational outlook. Some additional financial considerations when looking ahead to the first quarter include, an effective tax rate of approximately 20% and an estimated tax rate for adjusted EPS of approximately 24%. Our tax rates will be impacted by the ongoing purchase price allocation exercise that will affect reported earnings. I would also like to further explain our reporting structure following the Cactus International acquisition. Full results of Cactus International on a 100% basis will be included in our Pressure Control segment going forward. Additionally, a pro forma illustrated balance sheet and income statement as of September 31 -- as September 30, 2025, will be filed before the end of the first quarter, including the initial purchase price accounting-related adjustments and details. Total depreciation and amortization expense during the first quarter is expected to be $21 million, $12 million of which is associated with our Pressure Control segment, including Cactus International and $9 million in Spoolable Technologies. The Pressure Control D&A guide includes our preliminary estimates regarding purchase price accounting write-ups to fixed assets and intangible assets. Our full year 2026 net CapEx expectations are in the range of $40 million to $50 million, including our investments at Cactus International. Continued manufacturing efficiency investments in FlexSteel, routine U.S. branch facility upgrades and the completion of our Saudi Arabia Wellhead facility enhancements initiated in 2025 are the primary drivers of the planned spend. 2026 anticipated CapEx is largely in line with 2025 spend despite the addition of Cactus International. Finally, as previously announced, the Board approved a quarterly dividend of $0.14 per share, which will be paid in March. That covers the financial review, and I'll now turn the call back over to Scott. Scott Bender: Thank you, Jay. I'll now touch on our expectations for the first quarter by individual reporting segment and provide some introduction to historical and future trends in our Cactus International business. During the first quarter, we expect total Pressure Control revenue to be approximately $295 million to $305 million. In North America, we see stable drilling and completion activity, and we expect modestly softer sales on lower levels of products sold per rig, following the high rates achieved in the fourth quarter of last year. International sales are expected to contribute approximately $130 million to $140 million to Pressure Control in the first quarter. Adjusted EBITDA margins in our Pressure Control segment are expected to be 23% to 25% for the first quarter. This adjusted EBITDA guidance excludes approximately $4 million of stock-based compensation expense within the segment and the expected amortization of the write-up of Cactus International inventory due to purchase price accounting. Margins are expected to decline from those achieved in the fourth quarter due almost entirely to the inclusion of Cactus International. The tariff environment as it applies to our imports in the U.S. had stabilized over the last several months, while future costs now appear to be trending down slightly but remain far from certain. To be clear, tariffs implemented under Sections 301 and 232 still totaled 75% on the majority of goods imported from China. Our Vietnam facility, where Section 232 tariffs remain at 50% is ramping up in Q1 with API certification now expected early in the second quarter. This should allow us to progress the displacement of shipments into the U.S. from China later this year as planned. I'd also like to take this opportunity to explain trends in the Cactus International business over the course of 2025 and through early 2026. As previously disclosed, the company closed 2024 with over $600 million in backlog. In 2025, the company recorded $627 million of revenue, including a substantial amount associated with unbilled revenue and the backlog ended 2025 at approximately $550 million. Considering this order slowdown, we see the full year 2026 as being more in line with previously announced 2024 results from both the revenue and adjusted EBITDA perspective. We are anticipating increased order activity in the second half of 2026 and into 2027. Having owned Cactus International business for nearly 2 months at this point, we remain very pleased with our decision to pursue this transformational acquisition. As we shared since announcing the agreement in June of last year, we believe there are even more opportunities to improve the business, which currently lags its largest competitors in the Mid-East from a technology and customer execution standpoint. We believe that our U.S. conventional expertise and execution focus, will benefit clients throughout the Mid-East and are encouraged by early customer responses in the region. More on this next quarter. You may recall, we announced a target for $10 million of annualized synergies within 1 year of transaction close. And we now have far better visibility into meaningful supply chain savings into 2027, not incorporated into our original budget as we leverage our U.S. model. Such actions will take more time to achieve due to the timing of order placements in this long-cycle business. We intend to share more on this topic over the next 2 quarters. Switching over to Spoolable Technologies. We are proud of how we finished 2025 with another strong quarter of international shipments, which led to a record level of international products sold in 2025. Despite accelerating strength in international orders, we expect first quarter revenue to be down mid-single digits relative to the fourth quarter on continued North American seasonality, similar to what we saw in 2025 as our customers have been slow to increase activity through January and early February. We expect adjusted EBITDA margins to be approximately 33% to 35% in Q1, which excludes $1 million of stock-based comp in the segment. Lower operating leverage and somewhat higher input costs are the primary contributors to the expected step-down in margin. In addition, we are introducing several new SKUs, which we expect will enhance our market share and improve the moat around our technology in the future. We expect to pilot several of these new SKUs with a large Mid-East customer in 2026, which should impact 2027 revenues. Adjusted corporate EBITDA is expected to be a charge of approximately $5 million in Q1, which excludes approximately $2 million of stock-based comp. In closing, our team and I are energized by the formation of the Cactus International joint venture, and we're pleased to have a strong footprint in the most important oil and gas service markets in the world, North America and the Mid-East. The near-term outlook for domestic and international markets remains soft, which presents short-term challenges to our business. However, we will continue to deliver industry-leading margins and returns with a focus on the fundamentals of our business and by introducing our responsive, agile customer-focused culture into the Cactus International operations. With that goal in mind, I'm pleased to confirm that Steve Tadlock has been appointed CEO of Cactus International. Steve has been highly successful in leading our FlexSteel segment and integrating it into Cactus these past several years, which gives me the utmost confidence in this continued success in leading the joint venture through similar culture shifts. With that, I'll turn it back over to the operator so we may begin Q&A. Operator? Operator: [Operator Instructions] Our first question comes from the line of Stephen Gengaro of Stifel. Stephen Gengaro: I have two things for me. The first on the Cactus International side, you talked a little bit about the synergies. When you think about sort of applying the Cactus way to that business, any guidance on how we should think about margin progression in that business over the next 3, 4, 5 quarters? Scott Bender: Well, I think you will see -- let me start again. Stephen Gengaro: And Baker is not listening. Scott Bender: How do you know that? Stephen Gengaro: I'm joking. Scott Bender: I think that, we're going to see very, very meaningful supply chain savings as we begin to use our own supply chain. The problem with that, Steve, is that most of the orders have been placed for 2026. So we won't begin to see that margin enhancement until 2027, at which time I think it will be fairly substantial. In terms of flattening the organization, we can discuss that more, perhaps in the next call, but you have to understand that after only 2-months, we're still feeling our way through that. I can tell you that although my team may kick me under the table, I'm very optimistic that we'll exceed our projected synergies even for 2026. Stephen Gengaro: Okay. That's helpful. And then the other quick question was on the U.S. Wellhead side. When you think about just kind of the rig count progressions that we've seen, can you just give us kind of your view of how you see the U.S. activity evolving? You generally have a very good insight into activity in the U.S. So I'm curious what you're thinking? Scott Bender: You mean my unpopular insight into the progression of it. I think that most analysts are around $510 million exiting 2026, from $530 million. This is onshore only. So we're at $530 million now. Most of them have an exit rate of $500 million to $510 million. I think the outlier would be TPH at $475 million. My personal opinion is we're going to be in the range of probably $490 million because we have yet to see the full impact of consolidation. And I'm always very, very concerned when prices are supported largely by geopolitical factors because they can change so rapidly. I don't know what premium our current oil price places on Iran and Russia, but they're having talks today. And I really can't predict the outcome of that. But that lack of perhaps clarity on that subject makes me nervous. We all prefer to rely upon supply and demand. So call it high 400s. Operator: Our next question comes from the line of Scott Gruber of Citigroup. Scott Gruber: I wanted to ask about the International segment. Congrats on the close. Scott, you mentioned orders likely picking up later this year. I would assume that likely reflects some increased activity in Saudi. But we're also hearing about additional tenders outstanding across the region. So just how do you think about the growth prospects for the International segment over the next, call it, 3 years or so? Scott Bender: Yes. Well, Scott, everything is relative. So I think that you're going to see far greater growth prospects, particularly in the Middle East, you know that, then we're going to see in the U.S. So we're in a period now, particularly in Saudi with some de-stocking. The Saudi's ordered far in advance, and they're on a program right now to increase their cash flow. So you can be sure they're going to be using what they have in stock and moderating, and we're already seeing some evidence of that moderating their forward purchases. But they are adding 70 rigs, and that's why I'm so optimistic that 2027 is going to be considerably better than 2026. In Abu Dhabi, it looks to be very stable. I think that Qatar has prospects of improving. I think Kuwait has prospects of improving. I think that as we begin to expand our sales team, at International, you're going to see some additional revenue coming out of Sub-Saharan Africa. We're also -- these are areas that were chiefly -- I wouldn't say ignored, but they were sidelined, by our predecessor. So look to see some improvement from the Far East and for Sub-Sahara Africa. So in general, I feel much better about it. Scott Gruber: Good, good. And then you're starting to answer my second question, but I wanted to just hear your thoughts around share capture in the Middle East. Obviously, in the U.S., you guys are on a pretty steady trajectory for a decade, and you guys operated in the Middle East in the past life. So just some thoughts around the puts and takes of picking up share in the region, the kind of the strategy -- some thoughts on strategy to go about doing so? I know you don't want to reveal too much, but just some thoughts about it. Scott Bender: Yes. I think that we see a huge opportunity in Saudi because our market share there is well below what it should be at roughly 1/3. And that has -- there are a lot of reasons for that, all of which we've identified and are addressing right now. So look to Saudi to be a large market share gain for us going forward. In Abu Dhabi, we shared that contract 50-50 with FMC. But throughout the Mid-East, we have quite a bit -- quite a few new opportunities. And frankly, these were opportunities that just were not prioritized by the previous management. So we've always been really great salespeople at Cactus, and we intend to pursue that strategy in the Mid-East as well. Operator: Our next question comes from the line of Derek Podhaizer of Piper Sandler. Derek Podhaizer: I guess sticking with the Cactus International, maybe some comments around the aftermarket services piece of Cactus International SPC. I believe North Sea, you have a pretty good footprint there. Just hoping to hear some color on how impactful this is to the business as your installed base grows? I would imagine it's margin accretive. Just maybe some more thoughts and outlooks around the aftermarket piece of the business. Scott Bender: That's an excellent question and one we are intensely focused upon. Legacy Vetco Gray has a huge installed base. So let's forget about increased market penetration and let's think about installed base. So right now, we're undergoing an extensive exercise into identifying where Vetco Gray had the largest installed base, that particular area has been -- has not been a focus of Baker. They talk about it. It's the highest margin part of the business, but we see very substantial opportunities, particularly in West Africa and in the Far-East, where Vetco Gray had dominant positions. So we're going to be focusing our attention on that. It's honestly been ignored. Derek Podhaizer: Got it. No, that's helpful. And then maybe just -- I know you've already provided some color and comments around the forward outlook. But just to clarify, '26 should look more like 2024. Are you hoping '27 then looks like what we heard from Baker on their previous call around the 2025 financials? Just trying to think about how we ramp back to the 2025 levels and when that could come? Scott Bender: Yes. So let me just qualify my statement by telling you that, although Baker provided their financial reporting in accordance with GAAP, we differ in how we report our financials. So if you look at their full year 2025, we underwrote a number substantially below that amount, to account for the way we approach our financials. So you have to temper your expectations a bit. But to answer your question, I think that 2027 will probably be north of the midpoint between 2025 and 2026. The substantial improvement in EBITDA will come from supply chain initiatives. This is a big number for us. Operator: Our next question comes from the line of Jeffrey LeBlanc of TPH. Jeffrey LeBlanc: I just wanted to see if you could talk about how you're thinking about U.S. drilling efficiencies because it seems like every year, operators continue to find ways to improve cycle times. And what inning you think we are, though, for you all? It's somewhat agnostic given that you're well count levered, but just kind of curious your thoughts on continued drilling efficiencies. Scott Bender: I get asked this question, it seems like every year. And we all think that increased drilling efficiencies are behind us, and we're always very surprised. So we are seeing greater efficiencies. We certainly saw them in 2025, which translates, frankly, into more wells per rig. So the best proxy for our business is really wells drilled, not rig count. And when we do our budget, we think about wells drilled. It's just that, it's so much easier to use rig count as a proxy. Where we go from here? I don't know. But I think that some of our very large customers have deployed some very interesting technology. And I think that you'll see over time that some of the smaller operators will mimic that. So I'm actually pretty bullish on increased efficiencies. Operator: Our next question comes from the line of Don Crist of Johnson Rice. Donald Crist: I wanted to ask about Vietnam and kind of API certification. I know it's been a quarter or 2 since you talked about that. And what kind of margin impact that could have as you're importing those pieces and parts to the U.S. today that have to be -- go through a different step before they're actually sold. Can you talk about that, [ Tom ]? Scott Bender: Well, keep in mind that in the ever-changing landscape of tariffs, Vietnam is going to be -- we expect about 25% percentage points lower than the tariffs out of China. So if you consider -- I don't know, can we talk about how much we paid in tariffs? No. Well, if you consider the volumes that we were bringing in from China and as we displace that from Vietnam, I think it's going to be pretty substantial, particularly in 2027. In terms of API certification, we have already begun to move product from Vietnam into the U.S. and then we're applying the necessary value added in Bossier City to apply the Bossier City monogram. We've already gotten through the first stage of our API certification in Vietnam. And Joel, now we expect the second part of the audit to occur when? Joel Bender: It's in process as we speak. It's supposed to finish this week. And then we'll get reports back from API. So I would say pending the results, another 30 to 60 days before we actually have the monogram. Scott Bender: Okay. So once we -- we're still operating as quickly as we can, but we're constrained by not having that monogram in place. Donald Crist: That should boost the margins, right? Scott Bender: Absolutely. So Vietnam is inherently lower cost than China and then you apply the tariff differential and that boosts the effective margin even higher. Donald Crist: Okay. That's what I thought. Good to hear. And one quick one on North Africa. I know you talked about Sub-Saharan Africa. But we're hearing a lot of operators start to talk about Algeria and Egypt and other places, Turkey, et cetera, in that area. Do you all have an installed base that you got with the international acquisition that could grow that meaningfully over the next couple of years? Scott Bender: Yes, indeed. Operator: I'm showing no further questions at this time. I'll now turn it back to Scott Bender, Chairman and CEO, for closing remarks. Scott Bender: Okay. Everybody, I want to thank you very much for your attention, and we look forward in the coming quarters of giving you more visibility into what we expect on a go-forward basis with Cactus International. Thanks a lot. Have a good day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

36天前Insight Analytics约5分钟阅读

NCDL 2025 Q4 财报电话会议

Operator: Welcome to Nuveen Churchill Direct Lending Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I'd now like to turn the call over to Robert Paun, Head of Investor Relations for NCDL. Robert, please go ahead. Robert Paun: Good morning, and welcome to Nuveen Churchill Direct Lending Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. Today, I'm joined by NCDL's Chairman, President and CEO, Ken Kencel; and Chief Financial Officer and Treasurer, Shai Vichness. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the company, our current and prospective portfolio investments, our industries, our beliefs and opinions and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-K and supplemental earnings presentation are available on the News and Investors sections of our website at ncdl.com. Now I would like to turn the call over to Ken. Kenneth Kencel: Thank you, Robert. Hello, everyone, and thank you all for joining us today. I'd like to start by discussing our results for the fourth quarter and full year, and then I'll provide some thoughts on the current market conditions, economic environment, portfolio positioning and our forward outlook for 2026. I'll then hand the call over to Shai for a more detailed discussion of our financial performance. Before getting into the results for NCDL, I think it's important to reflect on the past year. 2025 was littered with headlines, including a change in administration, tariffs, interest rate reductions, geopolitical tensions and a few large bankruptcies. Private credit also garnered significant media attention, largely, we believe, due to the meaningful growth of the industry over the past decade. All of these headlines led to temporary market fears and a pullback in BDC stock valuations. In our view, the disruption in the sector has created a compelling investment opportunity. We remind investors that direct lending has been around for several decades. It did not appear overnight. And the investments in our portfolio are primarily directly originated and negotiated loans. At Churchill, we remain intensely focused on generating attractive risk-adjusted returns. We believe we are uniquely positioned with our focus on the traditional core middle market and our distinct sourcing advantage. Our conservative underwriting strategy and long-term track record of nearly 20 years have produced strong returns for our investors and stakeholders over time. Overall, NCDL had a successful year in 2025. NCDL generated an ROE of nearly 11% on net investment income. We paid total distributions of $1.90 per share, equating to a 10.7% yield based on our year-end 2025 net asset value. We took an important step to optimize our balance sheet and capital structure by issuing $300 million of unsecured notes in the first quarter of 2025. And finally, NCDL's portfolio performed well as we ended the year with only four portfolio companies on non-accrual status, representing 0.5% of the total portfolio at fair value. Now turning to the results. Despite the noise in the market, we are pleased with NCDL's operating performance and the stability and quality of our investment portfolio. This morning, we reported net investment income of $0.44 per share during the fourth quarter compared to $0.43 per share in the third quarter. Gross originations totaled approximately $59 million in the quarter compared to $29 million in the third quarter. Additionally, the Churchill platform continued to see strong asset growth and new originations during the fourth quarter of 2025, as I will discuss a little later in my prepared remarks. NCDL's investment portfolio remains healthy and resilient, and our portfolio companies continue to perform well, largely due to the strength of our senior loan investments. Net asset value was $17.72 per share at year-end compared to $17.85 per share at September 30, 2025. The modest decline quarter-over-quarter was primarily due to a slight decrease in the fair value of certain underperforming portfolio companies. In terms of the current market environment, the broader U.S. economy proved more resilient in 2025 than originally expected. U.S. GDP increased at an annual rate of 1.4% in the fourth quarter and 2.2% for the full year, reflecting a strong, resilient economy. M&A activity also continued its positive momentum in the fourth quarter of last year, building on the rebound in the third quarter. We believe stabilizing market conditions and renewed private equity sponsor confidence in the macro environment contributed to increased transaction activity. In our view, the ingredients for continued improvement in M&A and LBO activity are still intact. Lower financing costs, improving buyer and seller alignment and pressure on sponsors to transact should create a more constructive environment for increased deal flow and investment activity in 2026. During the fourth quarter, the Federal Reserve continued its interest rate cut cycle with two 25 basis points cuts in October and December. This marked the third consecutive cut. As many expected, the Fed paused in January of this year as they held interest rates steady. However, markets continue to price in two more 25 basis point cuts in 2026. Despite the reduction in interest rates and the potential for further cuts, we continue to see an attractive risk return profile for private credit and direct lending, especially on a relative basis compared to other fixed income asset classes. And it also goes without saying that we will not compromise our conservative underwriting strategy by stretching for returns in a declining interest rate environment. Turning to our investment activity. During the fourth quarter, we continued to see an increase in transaction activity, particularly new deals for high-quality assets that are in resilient business sectors. At the Churchill platform level, the number of deals reviewed in the second half of the year increased 23% from the first half. And for the full year 2025, Churchill closed or committed $16.3 billion of investments across 389 transactions, driven by a record-setting first quarter and a resurgence of activity in the second half of the year. In NCDL, we continue to operate at the upper end of our target leverage range, and we remain focused on actively reinvesting cash received from repayments and sales into high-quality assets. We also continue to benefit from attractive opportunities and activity at the Churchill platform level, particularly in senior lending, which represents approximately 90% of the fair value of the overall portfolio. During the fourth quarter, investment fundings totaled $80 million and repayments and sales totaled approximately $84 million. We think it's important to remind everyone that at Churchill, we focus on the traditional core middle market, benefiting from our differentiated sourcing and long-term track record. We continue to target companies with $10 million to $100 million in EBITDA, which we believe helps insulate us from the more aggressive structures and loosening terms prevalent in the upper middle market and broadly syndicated loan space. We believe that risk-adjusted returns in this segment of the market remain among the most compelling in private credit, particularly for scaled, highly selective managers with deep private equity relationships. We see the core middle market as a durable opportunity to generate long-term value and enhanced portfolio diversification for our investors. Now turning to our investment portfolio and credit quality. The continued strength of our portfolio reflects healthy overall performance from our borrowers as well as the quality of deal flow we've experienced over the past several years. In addition, our rigorous underwriting, high selectivity and focus on diversification have been critical to minimizing losses and generating strong returns across multiple market cycles. That same discipline extends to today's shifting macro landscape. At December 31, 2025, our weighted average internal risk rating was 4.2, in line with the prior quarter and versus an original rating of 4.0 for all of our investments at the time of origination. Our internal watchlist remains at a manageable level. It's approximately 8% of fair value. Credit fundamentals within the NCDL portfolio remains strong with portfolio company total net leverage of 5x and interest coverage of 2.3x on traditional middle market first lien loans. These metrics are a direct result of conservative structuring and relatively low attachment points that we target when underwriting new transactions. NCDL added one new non-accrual during the fourth quarter with a cost of $5.7 million and fair value of $2.7 million at year-end. As of December 31, non-accruals represented just 0.5% of our total investment portfolio on a fair value basis and 1.2% on a cost basis. We believe these percentages continue to compare extremely well versus current BDC averages and the long-term historical BDC average. We continue to believe the strength of our platform, including our experienced workout and portfolio management teams will continue to drive favorable results. At year-end, we had 227 companies in our portfolio, and our top 10 portfolio companies represented approximately 13% of total fair value. This diversification remains a key focus of ours and is critical as we seek to maintain exceptional credit quality and originate additional attractive investment opportunities. We've achieved this diversification with a continued high level of selectivity, facilitated by the significant proprietary deal flow, our sourcing engine is able to generate from the breadth and depth of our PE relationships. Before I conclude my remarks, I'd like to take a moment to talk about our software exposure and investment strategy in this sector. Recent market concerns around AI's potential disruption of software businesses have raised a lot of questions around private credit portfolios software exposure. Churchill's platform does not have meaningful exposure to the types of software companies in the headlines, susceptible to displacement from AI and has limited exposure to software in general. NCDL's high-tech industry sector, where software businesses fall, accounts for only 4% of the total portfolio. Within this industry categorization, the exposure is largely weighted towards specialized managed service providers, systems integrators and cybersecurity consultants. NCDL's portfolio exposure to true Software-as-a-Service or SaaS businesses is around 2% of the total portfolio. Additionally, it is important to note that we have avoided annual recurring revenue or ARR loans, which have been common in the technology sector. The software platforms that we have invested in, these are cash flow generating mature businesses with high customer retention. These businesses are also typically modestly levered, ingrained within the operations of the customers they serve and non-discretionary. Churchill has been monitoring AI as a potential positive and negative catalyst across the portfolio long before these headlines emerged. We maintain an active dialogue with the senior management teams of all of our borrowers as well as the private equity firms that own them so that we have an informed and real-time view of this and any other risks our borrowers may face. As we look forward, there are many reasons to be excited about the future of our business and the tailwinds of the private credit market. We are encouraged by the steady growth in our pipeline and the quality of businesses seeking financing solutions. During the second half of 2025, we experienced a resurgence of M&A activity, leading to a buildup in our traditional middle market pipeline. Additionally, we believe corporate management teams are now more focused on long-term strategic initiatives and investing in their businesses for sustained growth. This, coupled with an interest rate cut cycle, will lead to increasing deal flow and financing opportunities in 2026 in our view. At the same time, we also acknowledge the impact on our earnings and the return profile of NCDL from recent interest rate cuts, projections for further cuts as well as the competitive market environment in which spreads have remained below 500 basis points on average. Given these market dynamics, we have declared a $0.40 per share quarterly distribution in the first quarter of 2026, which consists of a base distribution of $0.36 per share and a supplemental distribution of $0.04 per share. Our total first quarter distribution of $0.40 per share equates to an annualized yield of 9%, which we believe is competitive in today's market environment. Shai will discuss our distribution policy in more detail during his remarks. Finally, although 2025 was a challenging year for BDC's stock prices, we continue to believe our portfolio remains healthy and resilient, and we believe the current share price offers a compelling investment opportunity. As a result, today, we announced that the Board authorized a new $50 million share repurchase program. And now I'll turn the call over to Shai to discuss our financial results in more detail. Shaul Vichness: Thank you, Ken, and good morning, everyone. I will now review our fourth quarter financial results in more detail. As Ken outlined, NCDL reported net investment income of $0.44 per share for the fourth quarter compared to $0.43 per share in the third quarter of 2025. Total investment income declined slightly to $50 million compared to $51.1 million in the third quarter of 2025. This was primarily driven by the decline in portfolio yields as a result of underlying loan contracts resetting to lower base rates. At year-end, our gross debt-to-equity ratio was 1.27x compared to 1.25x at September 30, while our net debt-to-equity ratio, net of cash was 1.2x, in line with the end of the third quarter. In January, we paid our Q4 dividend of $0.45 per share. And as Ken mentioned earlier, for the first quarter of 2026, we have declared a $0.40 per share dividend which consists of a regular dividend of $0.36 per share and a supplemental dividend of $0.04 per share. Both distributions will be paid on April 28 to shareholders of record as of March 31. Consistent with our communication to the market on our dividend policy since we IPO-ed in January of 2024, we intend to operate with a supplemental dividend program that sees us paying out a portion of the excess earnings over and above our regular dividend. This should allow us to deliver the benefits of higher returns to shareholders when market returns are higher as well as provide stability to NAV while allowing us to reinvest earnings for growth. We have assessed various scenarios related to interest rates, asset spreads, financing costs and credit performance, and we've concluded that a regular quarterly distribution of $0.36 per share is an appropriate level that we feel our earnings will comfortably cover for the medium to long term. On an annualized basis, our first quarter 2026 total dividend of $0.40 per share equates to an approximately 9% yield on our December 31, 2025, NAV. Our total GAAP net income for the fourth quarter was $0.32 per share compared to $0.38 per share in the third quarter of this year. Our fourth quarter net income included $0.12 per share of net realized and unrealized losses primarily due to a decrease in the fair value of certain underperforming portfolio companies. Our net asset value was $17.72 per share at the end of the fourth quarter compared to $17.85 per share at September 30. At year-end, NCDL's investment portfolio had a fair value of $2 billion, consistent with the third quarter. Gross originations totaled $59.4 million and gross investment fundings totaled $80.4 million, compared to $29.2 million and $36.3 million of gross origination and gross investment fundings, respectively, in the third quarter of 2025. During the fourth quarter, repayments sold $84.3 million a rate of approximately 4%, slightly lower than our long-range assumption of 5% per quarter, but also slightly up from the prior quarter of roughly 3%. We had full repayments on six deals totaling $73 million and partial repayments for another $9 million. As we mentioned on our prior call, we expect to continue to redeploy capital received from repayments with a view towards maintaining leverage at the upper end of our target range. We also remain focused on redeploying capital into traditional middle market transactions across the capital structure with the vast majority of new investments into senior loans. At December 31, 2025, our total investment portfolio consisted of 227 names compared to 213 names at the end of the third quarter. We continue to remain highly focused on diversification within our portfolio with the top 10 portfolio companies representing only 13.1% of the fair value of the portfolio down from 13.6% at September 30. Our largest exposure is only 1.6% of the total portfolio, and our average position size is 0.4%, down from 0.5% in the prior quarter. As far as deployment and asset selection goes, our new originations during the fourth quarter were again weighted towards senior loans with $47.5 million out of the $59.4 million of gross originations deployed into this strategy. The balance was deployed into subordinated debt and equity in the fourth quarter. We strongly believe that our focus on the traditional middle market segment will benefit NCDL shareholders over the long term as we see meaningfully higher spreads and tighter documentation terms in the traditional middle market as compared to the upper middle and BSL markets. Spreads on new investments in the fourth quarter were consistent with the prior quarter with the average spread on first lien loans at approximately 470 basis points. Our weighted average yield on debt and income-producing investments at cost declined to 9.5% at the end of the quarter compared to 9.9% as of the end of the third quarter. This decrease in yield was primarily due to lower base interest rates. As far as portfolio allocation, at year-end, first lien loans represented approximately 90% of the total portfolio, while junior debt and equity comprised approximately 8% and 2%, respectively. Our allocation strategy remains unchanged as we continue to target a portfolio comprised of roughly 90% senior loans with the balance allocated to junior debt and equity. Turning to credit quality. And as Ken mentioned earlier, we continue to be very pleased with the overall health and strength of our investment portfolio as the performance of our portfolio companies remain strong. During the quarter, we placed one investment on non-accrual status. And at year-end, NCDL had only four names on non-accrual, representing just 0.5% on a fair value basis and 1.2% at cost. This compares to 0.4% on a fair value basis and 0.9% at cost at the end of the third quarter. At December 31, our weighted average internal risk rating was 4.2%, consistent with the prior quarter and our watchlist consisting of names with internal risk ratings of 6 or worse remains at a relatively low level of 8% at the end of the fourth quarter, slightly up from the 7.3% in the prior quarter. And finally, our conservative approach to underwriting is highlighted by our weighted average net leverage across the portfolio of 5x and interest coverage of 2.3x as of the end of the quarter. With respect to our debt capitalization. Our debt-to-equity ratio at December 31 was relatively unchanged quarter-over-quarter at 1.27x compared to 1.25x since September 30. On a net basis, our debt-to-equity ratio was 1.2x at December 31, net of our cash position at quarter end. As we spoke about on prior calls, our goal is to redeploy capital received from repayments and maintain leverage towards the upper end of our target range of 1x to 1.25x debt-to-equity. Our focus for the near term is on optimizing the asset mix within the portfolio and actively reinvesting cash received from repayments and sales into high-quality assets. Subsequent to quarter end, in February of this year, we closed the refinancing of the NCDL CLO-II transaction, reducing borrowing costs from SOFR plus 250 basis points to SOFR plus 144. In addition, we were able to secure a 5-year reinvestment period. Pro forma for this transaction, NCDL's weighted average cost of debt declined by 17 basis points to SOFR plus 186. This strong capital markets execution reflects the reputation that NCDL and Churchill have in the debt capital markets and represents a meaningful improvement in borrowing costs for NCDL. We will continue to look for ways to optimize the debt capital structure of NCDL going forward. Finally, as Ken highlighted earlier, our Board has authorized a new $50 million share repurchase program, which is designed to take advantage of discounts in the trading price of our shares relative to NAV. This move reflects our confidence in the overall strength of our portfolio and our cycle-tested investment approach. I'll now turn it back to Ken for closing remarks. Kenneth Kencel: Thank you, Shai. In summary, while the stock performance of NCDL and the entire BDC industry was underwhelming in 2025 to say the least, we believe NCDL had a successful year from an operational and financial standpoint. We also believe NCDL is well positioned for 2026 with an experienced investment team and our ability to originate high-quality investments in the context of a diversified portfolio and strong capital structure. I would like to thank our entire team for their hard work and dedication during this past year. Thank you all for joining us today and for your interest in NCDL. I will now turn the call over to the operator for Q&A. Operator: [Operator Instructions] Our first question is from Douglas Harter with UBS. Douglas Harter: Can you -- with your commentary that you look to stay at the upper end of the leverage target, can you talk about how you would weigh share repurchase versus making new loans and kind of just a little bit on the thought process there? Shaul Vichness: Yes. Doug, it's Shai. Yes, look, I mean, I think it's the classic sort of capital allocation thought process that we will go through, sort of evaluating the level of the discount and reinvesting in our portfolio that we've obviously conveyed confidence in the health of that portfolio and our ability to buy it at a meaningful discount, obviously, is an attractive opportunity. At the same time, we're also continuing to see attractive investment opportunities in the market. So I think it will be a question of sort of analyzing those two. As we have done in the past with our share repurchase programs, they are essentially programmatic, so designed to take advantage of discounts in the trading price and sort of operating independently. So we'll keep an eye on that activity and do all of that with a view towards maintaining leverage within our target range of 1x to 1.25x and as we've stated, sort of operating towards the upper end of the range given our confidence in the portfolio, the diversification and our ability to run that level of leverage against the type of portfolio that we have. So hopefully, that helps. Operator: [Operator Instructions] Our next question is from Arren Cyganovich with Truist Securities. Arren Cyganovich: The investment activity was really strong in 2025. Maybe you could share your thoughts on what the recent public market volatility has -- how that may have shaped your outlook for activity in 2026? Should we kind of expect it again to be a little bit more back-end weighted given the kind of near-term volatility we're seeing? Kenneth Kencel: Yes. Thanks, Arren. It's Ken. I'd say a few things. One is, as I think we pointed out, across the platform, we had an extraordinarily busy year and actually quarter-over-quarter going into third quarter, fourth quarter and now even into the first quarter, deal activity has been extraordinarily busy and that really hasn't slowed. We entered the year with probably our largest pipeline overall as a firm in January. And we continue to see a very, very significant level of activity and obviously, in the core middle market. That said, I think that some of the dynamics in the public markets probably does shift some of the pricing power back to us. So on a marginal basis, I think it does put lenders like ourselves in a better position to get better structures and potentially even tighter covenants. And certainly, some of the spread tightening we saw developed earlier in 2025 has really subsided. Spreads have, in our view, stabilized around that kind of 450 to 475 level. So we think they've reached a floor. We certainly don't see any material tightening as we go through the first half of 2026. But I do think interest rates overall, as they come down, will continue to drive and unlock sponsor activity, sales of companies, M&A that obviously is a big driver of our efforts. So I would say the broader trend remains very, very good both with respect to deal activity and spreads. A little bit of volatility in the public markets has generally worked in favor of us as a mid-market lender. But overall, the trends have been very good, and we haven't seen any change in that in more recent activity. Arren Cyganovich: And I appreciate the commentary on software. Clearly, you have a very small exposure to there, much smaller than a lot of the peers in the BDCs. Maybe you could share a little bit of why you've avoided that historically and why that's not an area because, obviously, it was a very kind of steady earnings business or industry for a long time. Kenneth Kencel: Sure. So look, I think when you think of us in our underwriting approach from a credit perspective, we are very traditional, right? So we are looking at fundamental cash flow metrics, free cash flows of the business, both gross and net cash flow. We're looking at the fundamentals of the company with respect to the stability of those businesses and the ability to service the leverage profile that we're underwriting. So that traditional approach leads us to a number of conclusions. One is that we have never, in our history, in our 20-year history, ever done an ARR loan. And from our perspective, that's just not -- financing recurring revenue is not, in our view, an appropriate risk profile for our platform. We finance recurring cash flow, right? And so, if you look at the types of businesses that has led us to within the software area, it's been principally specialized managed service providers, systems integrators, cybersecurity consultants, businesses that are more traditional and away from Software-as-a-Service or SaaS businesses, which represent, as I mentioned, only about 2% of our portfolio. So when you think about the fundamentals, cash flow-generating businesses, mature businesses, where we are financing and obviously looking at things like customer retention, these are businesses are typically modestly levered, ingrained within the operations of the customers they serve and generally non-discretionary. So it really comes down to the fundamentals of our underwriting approach. But the reality is, not only are we not an ARR lender, we're also generally not looking at those very, very highly levered are deals that are being done in the upper middle market and the broadly syndicated market. So I think this is yet another situation where our focus on the fundamentals on the core middle market against the backdrop of some of the -- backdrop of some of the noise in the market actually shows very well for us. Operator: [Operator Instructions] There are no further questions at this time. I'd like to hand the floor back over to Ken Kencel for any closing comments. Kenneth Kencel: Great. Well, thank you very much, and thank you all for joining us today. We appreciate your support and look forward to moving forward with hopefully continued great performance and feedback to you all as we continue in the business. Thank you. Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.

36天前Insight Analytics约5分钟阅读

MCBRF 2026 Q2 财报电话会议

Unknown Executive: Welcome to everybody. We're just going to wait half a minute or so, to let everybody get on to the event today. There's been a lot of interest, which is good to see. So just bear with us. Right. Okay. I think we've got a decent number now. So welcome to the webinar today from McBride, who will be covering their recently announced interim results and also talking a little bit about the outlook for the business. One or two administrative points first. This presentation is being recorded. So should you miss any of it, you can watch it again. We will be very keen to address questions after the formal presentation, which you can submit via the question button on your screen. And the presentation deck that the boys will be talking to is already available on the McBride Investor Relations page as well, along with lots of other useful materials. We're very pleased to be welcoming back CFO, Mark Strickland; and the CEO, Chris Smith. And I'm now going to pass over to you, Chris, if you can start the presentation. Christopher Ian Smith: Thanks, Andy. Good morning to everyone, and welcome to our interim results deck and presentation for the 6 months to the 31st of December 2025. We'll cover today -- on the next slide, please, Andy, a series of -- I will cover off headlines and an update on our business progress before I hand over to Mark, who will take you through a more detailed look at some of the financials, and then I'll come back to myself for the outlook and then into questions, as Andy said. Before I step through the various slides, I'd just like to comment that there are three key themes that the past 6 months can really be summarized by: First, a continued delivery of our strong financial and operational performance for the third consecutive year now. Secondly, the passing of a significant milestone in our transformation journey with our first SAP go-live in November. And then third, a clear demonstration of a balanced approach to capital allocation to support both short-term shareholder returns and longer-term value creation from business investment. Next slide, please, Andy. This is the sixth set of results, interims and finals that I presented, where the group has reported profitability levels at double the historic average, cementing our new financial strength and our optionality to deploy resources to support future growth, in line with our ambitions as we set out at our Capital Markets Day about 2 years ago. The market continues to move in favor of the private label offer we provide with the latest data showing that private label share has started rising above recent all-time highs, providing a solid platform for McBride to continue to prosper. Our divisional and central teams continue to drive the business forward, tightly aligned to their strategies, supporting our customers as our private label proposition expands to provide value to the retailers and consumers alike. McBride's private label volumes continued to grow this past period, albeit at slightly lower levels than we saw in the past 2 years, with total sales revenue increasing just under 1% to GBP 475 million. We have secured a robust pipeline of new business wins, expected to start during the second half year, leading to positive momentum as we exit financial year 2026, and we move into the next financial year of '27. Our excellence and transformation agenda has continued at pace these past 6 months. Productivity and other operational improvements, together with tight management of overheads has seen margins maintained despite competitive pricing pressures and inflationary pressures. EBITDA, EBITA, and PBT all remain consistent with the first half of last year, with EBITDA margins just under 9% for the first half and with the full year expected to be over 9%. I'm really pleased to be able to confirm that our first SAP S/4HANA go-live in the U.K. was successfully completed in the period after 2 years of preparation and design. This multiyear program is the platform for future efficiency and operating excellence as we upgrade McBride to the latest best-in-class ERP systems. Our continued strong profit levels and cash generation has supported a balanced approach to capital allocation. In the period, nearly GBP 13 million of shareholder returns were deployed in the form of reinstated dividends, share buyback program and share purchases to reduce future dilution from employee share awards. Our overall share price rise since September 2025, represents a market cap price of approximately 40%. Additionally, capital expenditure rose to support growth, efficiency and transformation programs. The group remains active in considering all options for deployment of capital in seeking to grow shareholder value. I'm now going to move on to provide an update on a series of key business progress topics. At our Capital Markets Day in February 2024 -- the next slide, please, Andy -- we set out a number of key ambitions to measure our progress. At this midpoint of FY '26, we remain committed to these key targets over the coming years, and our progress since 2024 continues to perform in line. Our volume growth, whilst a little slower these past 6 months, is comfortably ahead of the target set in 2024 cumulatively. We have an encouraging set of contract wins starting in the second half, which is expected to support better growth rates into FY '27, and a number of other material growth options in development at this time. Our EBITDA margins are consistently around the 9% level, with another 1% required to reach our 10% ambition and almost at the double of the level of the historic levels of 5%. We said at the Capital Markets Day in February 2024, that shareholders should expect some minor variability of this ratio as modest input cost swings will either benefit or impact the group's profitability between periods. Our debt position remains well within our targets, and this is after nearly GBP 13 million deployed in the past 6 months for shareholder returns. Our long-term committed facilities and liquidity availability provides ample scope for further capital deployment in pursuit of our strategic ambition. ROCE remains well above the targets and our work on excellence and transformation is delivering tangible improvements to support and develop the robust platform the group needs to support long-term success. Moving on to an update on the markets that we supply. We present here the usual panel data, which we receive each quarter. As a reminder, the data is 12 months trailing value and volumes. It covers the top 5 economies of Europe, all the bricks-and-mortar retailers and all the household categories that we supply. We've been tracking this data for over 4 years now. Having grown substantially between 2022 and 2024, private label market share in volume terms, as shown by the green line on that chart, stabilized over the last 12 to 18 months. This latest data insight, however, shows that the overall total market continues to grow a little bit towards the lower end of our 1.1x to 2x -- sorry, 1% to 2% projections, with private label again outperforming brands across all categories, with private label volume share now up to 36.1%, a 0.3% rise compared to the last 4 quarters. We will wait to see over the next 2 data drops if this further rise is sustained, but this latest data confirms our view that the more likely direction of travel is for private label to continue to take share and not revert back to pre-2022 levels. Moving on to the divisions, and I'll now give a brief update from all the businesses. Next slide, please, Andy. Mark will cover off the financial performance later, but we have seen strong profits progress overall in Unit Dosing, and Aerosols, but Liquids, and Powders was slightly weaker. The Liquids division has had a very busy period and at the same time, has had to handle the first go-live of the S/4HANA program at the U.K. Liquids site. The division saw overall volumes higher, especially from contract manufacturing, which was up 9%, with private label flat. The uncertainty on the rollout of the EU's deforestation regulation or EUDR, has seen pressure on certain raw materials, especially for the Liquids business, where palm oil derivatives are actively used. As a result, the division did see modest rises in material costs in a market where such small rises are not really able to be passed on. The business, however, was vigilant, of course, in its cost management and product engineering, and managed its margins very well in the period. With future growth anticipated, especially from laundry, the division continued to invest in capacity and new packaging formats to be able to secure new business going forward. In Unit Dosing, we saw a strong operational performance with the benefits of our Flexilence program, where we now ensure that all our pod formats can be supplied in all the various packaging formats required by customers, yielding output and headcount efficiencies. Overall volumes here were lower year-over-year, but all in contract manufacturing, where a loss contract from last year annualized out at December. Private label volumes were flat, some ins and some outs amongst various customers and some delays in a few product launches. But strong wins in recent tenders are expected to launch in the second half and early into FY '27 to provide good growth prospects ahead. The Powders business continues to outperform its strategic targets overall. The market for private label laundry has remained steady with private label share growing as branded volumes continue to fall. Total volumes for our division in McBride in Powders were broadly flat with an overall private label slightly weaker than our contract business, which is about 40% of revenues in this division. Like the other divisions, recent wins expected to launch again in the next 6 months or so will provide good growth in future periods. In the meantime, strong operational control and focus has seen margins steady with some automation capital investment introduced helping drive margins higher. Our Aerosols team have delivered again this year. Volumes were 15% higher and are now close to the 100 million cans target. Very strong growth in Germany was a result of focus over the past few years in this targeted market. A GBP 2.5 million investment in a new production line is mostly complete now and is providing the capacity needed to take us past the 100 million cans level. Finally, our Asia business, so we had a bit of a mixture with weaker-than-expected private label sales in Southeast Asia, and a quieter Australia with a loss of one part of the traded goods supply from our European business. However, prospects are looking more positive with our first household wins in Australia for products made in Malaysia expected to launch in the next month or so and a series of new contract manufacturing opportunities in discussion. Moving on to an update on our transformation program or excellence agenda, as I call it, and this has continued at pace through the period. After over 2 years of setup and design work from the SAP team, we successfully launched the new global template with the first go-live start of November in the U.K. business and Corporate Center. It is pleasing to confirm that the business is operating as usual with some limited disruption in the early few weeks to our warehouse operations, where whilst the systems are working, we became capacity limited. We did miss some sales in that short period of time, which we estimate to be about GBP 3 million with a roughly GBP 1 million impact to EBITA. This challenge was resolved quickly, and the business has seen record output and shipment days since. The focus here has now moved quickly to lessons learned, and we're now deep into planning the Wave 2 rollout of this new global template to ensure we maintain pace towards the efficiencies and benefits that will accrue once we have more locations on this new platform. The other 3 main programs in the overall plan: service, commercial, and productivity are all now into business as usual, with the service program completing in September and the commercial excellence project completing in December. Both are yielding good results with improved processes in use across the business and visible KPI improvements. Next slide, please. The past 6 months has demonstrated the group's flexible approach to capital allocation. With the strength of the group's trading position and its funding capacity, we have deployed nearly GBP 30 million in shareholder returns. At the AGM in December, shareholders approved the Board's recommended recommencement of annual dividends with the resulting payment in November of GBP 5.2 million. In light of the market valuation so far below the Board's view on where the group should be valued, the Board launched two value initiatives in the autumn. First, GBP 6.4 million was spent on buying shares at an average price of GBP 1.26 through the Employee Benefit Trust, or EBT, in order to fund the EBT with adequate share levels to use for satisfying future incentive awards that are expect to divest in the next 2 years. These share awards would normally be satisfied by new issue shares, thus diluting the total shares in issue. And hence, this action worth approximately 0.7p per share of reduced dilution in future EPS calculations. Secondly, the Board launched a GBP 20 million share buyback scheme in December. There was only 1 month for buying until the end of the half year, but GBP 1.3 million have been deployed to 31st of December. All of these actions have supported a strong recovery in the share price and our market capitalization, up approximately 40% since final results in September last year, a significant rise. But as a reminder, we are still only trading on a 4.9x EV EBITDA multiple. At this point, I'm now going to hand over to Mark for a more detailed financial review. Mark Strickland: Thank you, Chris, and good morning, everyone. The McBride business has delivered another solid set of results. As well as delivering good results, the business has also demonstrated a balanced approach to capital allocation, prioritizing short-term shareholder returns whilst at the same time, retaining the flexibility to fund our longer-term ambitions. As a result, I continue to have huge optimism for what the business can continue to deliver for its shareholders into the future. So looking at the financial highlights. Group revenues were up GBP 3.8 million, 0.8% on an actual basis, but on a constant currency basis, they were down slightly 2.1%. Whilst private label and contract manufacturing volumes were both up, McBride branded volumes suffered slightly and declined. Adjusted operating profit was down slightly to GBP 31.5 million. Without the SAP impact, adjusted operating profit would most likely have been up slightly. As in previous years, profit levels have been maintained through good margin management and overhead cost control. Adjusted EBITDA at GBP 41.8 million was on a par with the previous year's first half. Earnings per share were down to 10.8p per share, predominantly due to a particularly hard prior year comparator in relation to taxation, which was 25% in the last year first half versus 30% this year. We expect full year 2026 taxation to be broadly in line with the full year prior year rates. Over the last 3 years, we have progressively strengthened our balance sheet through cash generation and debt control, this period being no different. For the first half of the financial year, our free cash flow was a generation of GBP 24 million. And our debt -- net debt only increased slightly to GBP 120.6 million despite the nearly GBP 13 million paid out in dividend, the EBT and on share buyback. This shows that the business through its proactive capital allocation policy has the ability to balance both the short-term shareholder returns whilst retaining a flexible platform for future investments in growth, be they organic or through M&A type activities. Looking at financial performance. This slide looks at the group and divisional performance on both an actual and constant currency basis. There were 3 main drivers of the actual revenue growth of 0.8%. One, firstly, volume; secondly, price and mix; and thirdly, FX. The volume growth of 0.4% arose from contract and private label volume growth, combined with the Aerosols continued growth. And as I said earlier, that was offset by a reduction in the McBride branded volumes. The second impact was the price and mix impact with two elements at play. Firstly, there's been an element of pricing pressure, but this has predominantly been offset through product reengineering and ongoing margin management. Let me explain that further. In other words, whilst the selling price may be lower, the profitability is often similar to other products as these are often lower cost format products. Secondly, there were more sales of lower value products in the first half of the financial year compared to that of the prior financial year. The third and final impact was FX, mainly with the pound-euro exchange rate moving towards the EUR 1.15 to the pound. Next, the divisional review. So looking at Liquids. At a revenue of GBP 269 million, the Liquids division represents around 57% of the group. As mentioned earlier by Chris, there was a limited impact in November and December from the SAP S/4HANA go-live. Despite this, volumes grew 0.1% with most markets stable and only France displaying a slight decline. Margins were impacted by competitive pressures, inflation and some marginal raw material increases that couldn't be passed on to the customers given their small size. The division still delivered an adjusted operating profit of GBP 17.7 million, which represents a return on sales of 6.6%. We continue to invest in this business for the future. Now moving on to Unit Dosing. For the first half of the financial year, the Unit Dosing division delivered a revenue of GBP 116 million. On a revenue basis, the Unit Dosing represents circa 24% of the group. Whilst contract manufacturing volumes were weaker in the first half, the outlook is good for year-on-year overall volume growth in the second half of the financial year. The division delivered improved profitability in the period of GBP 12.5 million as a result of continued production efficiencies, the benefits of transformation and ongoing tight overhead cost control. At 10.8%, the division's return on sales is a pleasing step-up from the prior year. Finally, the Unit Dosing division through its Flexilence initiative and the range of its formats it can now offer -- for example, its soft pods portfolio -- continues to be well set to continue to gain business in future tenders. Moving on to Powders. At circa 9.5% of our overall revenue, the Powders division operates within an overall steadily declining market. Sales at GBP 44.9 million were lower than expected, impacted by slightly softer private label demand, primarily in the U.K., together with delayed launches of new contracts and product mix changes. Adjusted operating profit declined by GBP 1.1 million to GBP 3 million, mainly due to the aforementioned lower revenue. However, because of good cost control, operational efficiency and again, product cost engineering, the division continues to deliver a healthy return on sales, in line with our medium-term expectations. Finally, as with Unit Dosing, this business segment has a good pipeline for growth into the future. Now moving on to Aerosols and Asia Pacific. Between them, Aerosols and Asia Pacific represents circa 9.5% of the group's revenue. Over the last few years, our Aerosols division has been a huge success story. This was no different for the first half of 2026. Volumes grew by some 14.6%, whilst revenue grew by 18.1% to GBP 33.9 million, delivering an adjusted operating profit of GBP 2.1 million and closing in on our midterm return on sales ambitions. The growth is supported by significant contract wins in Germany, combined with personal care launches elsewhere in Europe. The first half of financial year 2026, also saw the continuation of the significant investments for capacity expansion at the Rosporden site in France. This investment is on course for completion in the second half of this financial year. Our smallest division, Asia Pacific, has been impacted by subdued private label demand in Southeast Asia, and has had to focus on cost management to preserve its profitability. That said, it has made good progress in private label household in Australia. Whilst currently being an incubator business, we still remain optimistic that there are significant opportunities, which will mean that we will be able to grow this business over the next couple of years. Now looking at costs. For the first half of the 2026 financial year, input costs remained flat, benign overall. But as you can see from the left-hand chart, they still remain significantly higher than in 2021. Inflation is still prevalent and some costs are still rising, albeit at slower rates than over the last few years. Hence, McBride's continuing focus on margin management has been key to the delivery of this solid set of results. This consistency of performance means that McBride as a group remains very well placed to sustain underlying profits in future years. As with most businesses, technology remains a key focus. And indeed, McBride has embraced new technology, believing that this will be a key positive differentiator going forward. Chris has indicated that the Wave 1 of the S/4HANA project has successfully gone live in the U.K., and we expect to complete the rollout of the project during the 2028 financial year, which is in line with what we indicated when we set sale on the project. We continue to invest into and benefit from our data analytics function. Real-life example of this capability is some of the market analysis information that you saw in Chris' earlier presentation. In terms of overheads, as you would expect, we continued our focus on cost optimization. Overhead costs have been tightly controlled with reductions in both distribution and administrative costs as a percentage of revenue. Moving on to other financials. Year-on-year interest remained broadly flat as did interest cover. Exceptional costs were GBP 2.4 million relating to the SAP S/4HANA implementation and an ongoing review of the group's strategic growth options. Regarding taxation, the effective tax rate in the first half was 30%, which compares to the first half in 2025 of 25%, but a full year rate of 32% in 2025. The actual tax paid in half 1 was GBP 1.8 million compared to GBP 7.1 million the previous year as the cash payments normalize for the payment of in-year liabilities only as opposed to FY '25 when there was an element of catch-up from the financial year 2024. At GBP 14.8 million, capital expenditure levels were up from GBP 12 million the previous year as the business continued to invest in the future. It is expected that the group will spend around GBP 30 million to GBP 33 million over the current full year and that the level of expenditure will continue at circa GBP 30 million for the following year before dropping off in line with the completion of the SAP project. Finally, on to net debt. As indicated at the start of my presentation, the business continues to generate strong cash flows and resulting in net debt control and a small increase to GBP 120.6 million. The business has strong core liquidity with around GBP 135 million of headroom and also has an unutilized EUR 75 million accordion facility, providing continued optionality for future capital allocation decisions. In conclusion, the business continues to be run well. The share buyback delivers good value for our shareholders. As a result of the successful SAP global template implementation, future implementation risk has been significantly reduced. And the business still has optionality through its balance sheet strength. Thank you, and I will now pass you back to Chris. Christopher Ian Smith: Thank you, Mark. As you've heard throughout the presentation, business momentum is good, and the first months of our second half have seen volumes in line with our estimates, with the start-up of new business wins still on track to meet the time lines required to meet our second half targets. As mentioned earlier, the private label market overall is expected to maintain its strong position of recent years with some potential for further growth if private label continues to grow share. We expect material costs to remain stable, possibly with some weakening of pressure for natural alcohol-based materials and recycled content plastics. Other inflation is being managed through tight overhead control and vigilance on allowing new costs to creep in. Our teams have delivered really well on all our transformation initiatives and the recent success of such a major milestone of the first SAP go-live gives confidence about the rollout of our global template to all other locations over the next 2 to 3 years. This should be seen as a big risk reduction point for investors, and the focus will turn to driving expected efficiencies, enhanced insights, and better decision support. At this stage, nearly 2 months into the second half, I'm pleased to confirm we expect to deliver full year results in line with analyst expectations. With our normalized funding position alongside ongoing high profitability levels, the reset resilient and stronger McBride is poised to consider a range of future value creation ideas to support our midterm ambitions to grow the group further and deliver still higher margins. Thank you. Now for questions. Unknown Executive: Yes. Thank you very much, gentlemen, very comprehensive and impressive performance continuing, which is good to see. Right. Plenty of questions already in. So let's dive in. First of all, about S/4HANA and the Wave 1. Can you comment a little bit more about what you've learned from the process, because no systems integration usually happens without some teething issues. And we have a related question, why did you choose to roll it out in Liquids first? Mark Strickland: Shall I pick that one? So we've learned an awful lot through the process, far, far too much to sort of go through in this 30, 40 minutes. The biggest one is testing in volume. It's the volume testing, particularly in warehousing. We had a very, very narrow issue within what's called a V&A, a pick and dispatch area. Third-party logistics worked well. Third-party warehousing worked well, but Middleton has a very specific need for putting product into and out of what's called very narrow aisles. And we didn't test the volume enough through that. Ultimately, it worked, but we became a little bit capacity constrained. So testing volume was a big learning. Training was a little bit last minute, possibly need to do a couple of weeks earlier, but we also know we don't want to do it too early. And we also concentrated on what's called the happy path. So when things go right, we probably, in hindsight, should have concentrated a little bit more on what's called the unhappy path. So how do you correct things when they go wrong. But overall, I've got to say I'm very pleased with the implementation. There's lots of peripheral learnings. There always are. But I think the way the whole team pulled together really displayed the McBride ethos and the McBride values, both the project team and the site team. It was a combined effort. Sorry, what was the second part? Unknown Executive: Why U.K.? Mark Strickland: Why the U.K. Essentially because we had two instances of SAP, one in the U.K. and one in Europe. And the U.K. only had 2 sites. So it was the simplest to move across on to new SAP. We would have had to move 12 sites and we would have ended up with 3 different instances of SAP, whereas moving the U.K., we only -- we kept 2 instances. So it's a bit of an easy decision really. Unknown Executive: Understood. Thank you. A number of questions about inorganic growth. And Chris, you referred to your low EV/EBITDA rating, although it is improving. We have a question, is that a hurdle for you to make larger acquisitions? Christopher Ian Smith: Well, yes, I think certainly, when it was down at 3 and a bit times as a multiple, it was a huge hurdle. I mean, look, the level of M&A that we might be looking at and in fact, the inorganic can also extend to contract manufacturing opportunities with where you might need capital. You may not need new sites. You just may need to fill your existing facilities with new capital. The ranges of values that we're talking about are all manageable with our debt facilities. Look, we look -- there's a lot of benchmarks in the industry at the moment around what people are paying for home care businesses with the Reckitt transaction with Advent recently. We also know there was one in Spain recently. So we have a -- I think the industry is kind of honing in on what that range of multiples need to be. And I guess having got the share price back up a little bit and got better value for shareholders with our rating today, we get closer to making it not so meaningfully difficult, if you like. Look, and I think in most cases, on the M&A side, the synergy benefits can be quick. And therefore, we look -- we'll also look at speed with which we get that multiple down post acquisition with synergies. So we're acutely aware of the challenge around multiples, but I think we've narrowed the gap, and I think we know what we need to pay. And I don't think shareholders will be -- we're not going to be out there paying 8x or 9x for anything. So people shouldn't worry. Unknown Executive: Okay. And looking at potential targets, could you say in a perfect world, which we definitely don't live in, which segments or which region would you most like to increase or find bolt-ons to add on to the current structure? Christopher Ian Smith: Yes. Look, we will absolutely align our M&A targets and contract manufacturing, frankly, with the key missions and the strategies of the company, right? So look, we're a European-focused business. So we're not going to be, I suspect, suddenly acquiring stuff in the U.S. or South America. Our focus is in Europe. There's a little bit of obviously, focus in Asia around how we develop that business, that incubated business that Mark talked about to make that more substantial, a little like we've done with Aerosols, right? We've got that business now to be credible and valuable to us. And we're on the same mission, of course, with Asia. But look, the bulk of it will be in Europe. And then we talk strongly about the bulk of our activities are going to be in the higher-margin, high capability categories where we're strong. So laundry, dish, that sort of area, probably the main focal areas. Unknown Executive: You've pre-empted a question here about contract manufacturing. Is that another part of the business quite competitive at the moment that you would still be looking to grow capacity and scale in? Christopher Ian Smith: Totally. Yes. I mean, we've said strongly, we want to get contract manufacturing to be 25% of the business. We don't want to do that by shrinking private label. We want to do by growing contract manufacturing. We believe that 25% is the right level for us to have a kind of core, core layer of solid long-term partnership relationships with some branders for categories and volumes that may not be efficient for them to manufacture. So yes, absolutely, that's a key part of our focus, and it's another potential use of capital to create long-term value. So absolutely. There's quite a lot going on in the industry at the moment. So we're quite busy with potential opportunities, nothing certain, but there's more at the moment perhaps than we've seen for some time potentially out there. Unknown Executive: Yes. This leads on to a question about capital allocation and perhaps an opportunity for you to say how, how long gestation period certain acquisitions can take to come to fruition. But the question submitted is, how do you look at the contrast between value in your own shares and doing more buybacks or allocating it in terms of nonorganic growth? Christopher Ian Smith: Well, we're constantly looking and reviewing this, of course. I think we like to think of -- we believe we've got a short-term need sometimes like with the share buyback right now and the acquisition of shares for EBT. We recognize that we have investors that like the dividend stream, and we think that the share and the equity is a mixed proposition on index re-rating as well as cash from things like dividends and other shareholder returns. But we also recognize we -- the industry and I would say the McBride platform needs to expand in the mid and long term, and we recognize in this industry that consolidation of the space for the benefit of retailers. I think the sustainability journey and regulatory environment is going to become tougher, and you need to be bigger and bigger in this industry to lead. And I think -- so we have all those at play, and we have active conversations. I guess the Board's call here is at each juncture, what is the right decision. But I think we'll -- we've demonstrated in this last period a fairly agile and what's the word variable, not variable is the wrong word, mixed approach. We're looking at all options. Unknown Executive: Yes. Well, that's the benefit of financial health and the balance sheet that allows flexibility to adapt to opportunities, I would think. Perhaps a couple of questions for you, Mark, on costs. Impressive progress. And the question is, you can't add infinitum cut costs as a percentage of revenues. So what do you think is a realistic target in the medium term as the transformation benefits all work their way through? Mark Strickland: Yes. So I think it's a very good point. At the end of the day, on occasions, it may actually be worthwhile putting extra cost into the business because the benefits you get back from that extra cost far outweigh the cost. So I don't have a particular target in mind because it depends on the different segments of the business. So the different segments will have different overhead needs. As we invest into technology, I would hope that a lot of the speed of decision-making comes down, but also the cost of that decision-making comes down. But also, let's not forget that the software companies also like to put up the license fees as well for utilizing that software. So it is a balance. I don't have a specific ratio or a specific cost in mind, but I always talk about cost optimization, not necessarily cost saving because we can't save ourselves rich. We do have to invest in this business, and we do have to grow the business. Saving will keep us in business, but I don't know anybody that's ever saved themselves, rich. Unknown Executive: Wise words, wise words. And specifically, on input costs, we've got a comment, which is very true that you're not involved in the supply of precious metals or rare earths that can make some businesses in a particularly painful position at the moment. But are there any concerns within the supply chain more about the cost of shipping or anything like that as you move some of the basic commodities around to your sites? Mark Strickland: So at the moment, being honest, it's pretty benign. It's relatively flat, okay? We've got underlying inflation, but we can recover that through efficiency. So at the moment, we don't foresee any particular headwinds. The only caution I would say is we don't know what Donald Trump may do next. So I guess -- but that's a concern for everybody. But everything else being equal, we see the raw material environment, the shipping environment as being pretty benign. Unknown Executive: Okay. And probably also for you, Mark, you've mentioned that in the half, there were more -- the mix saw more lower-value products. Is there any specific factor behind that? Or might we see that rolling into the second half as well? Mark Strickland: I shouldn't get overly concerned that it's a lower headline price because ultimately, we're interested in pound notes margin. And it will depend on which retailer, which product sets, what we've won, what we've lost -- sorry. So there will always be a natural ebb and flow in our mix going through. So no, I don't think there's anything -- there's certainly nothing concerning me about our mix at this stage. Unknown Executive: I suppose related, not necessarily a question from McBride, but someone has commented that is there an ongoing trend of end consumers effectively getting less volume in their product at a higher cost. I suppose that all weighs up in the battle for market share with brands. Christopher Ian Smith: Well, there's a trend a bit some sustainability driven even cost of transport and so forth to compaction. So I mean, it's even quite variable across Europe. If you buy a laundry liquid in Southern Spain, you might have to need weightlifting training to lift your 4-liter bottle home. The same number of washes in Germany or the U.K. will be in a 1-liter bottle. And there is a perception -- potential perception of value gap when you make that transition because what you're buying looks a lot smaller. So -- but I think it's the right thing to do, and we will continue to progress that on the grounds of sustainability and -- we got a lot more bottles of 1-liter laundry liquid in a lorry than 4-liter bottles, right, and value too. So I think the value position for consumers is perhaps more driven by quality of performance than it is around pure value position in price points on shelf because the reality is that the private label continues to outperform many of the brands in tests and wider and wider audiences are learning that. And I think understanding the value option does just as good a job, right? So I think we will continue to fly the flag for private label as a whole, not just for McBride, of course, around helping consumers understand the value. It's not just a product for expression for poor people. This is for smart people because why do you need to spend twice the price and have no improvement in your cleaning performance. And by the way, most of the things you buy, you put under the sink and never look at again. So it's not that you're buying something beautiful to look at. So I think the consumers are becoming more savvy and the retailers are supporting that with their proposition. Unknown Executive: Then perhaps just a couple of more strategic questions to finish with. Can you comment as much as you'd like to about what your various competitors in certain divisions are doing? And also the same question for contract manufacturing. Christopher Ian Smith: Look, I think the industry as a whole is relatively steady, I would say, in the private label space. I think we see quite an orderly setup at the moment. Look, we've all -- the private label industry -- the private label share chart I showed earlier, which went from around 31% up to 36%. You think that's only 5% or 6% growth. But actually, it's 5% or 6% on 30%, right? So the private label space, the majority of the big players in private label are still active in private label. They've all grown with that market, and I think we've all been going through that. And of course, it's helpful when you -- we're a manufacturing business, right, putting volumes through manufacturing plants is always helpful in terms of overhead costs and recoveries. So nothing particular to comment, I would say. The contract manufacturing space, there's obviously some publicity around the Reckitt's disposal of home essentials into private equity hands. That's going through a transition at the moment. That may create opportunity. And we are seeing on average across the European space, at least and some to Asia where there's optionality being considered on outsourcing more perhaps than we've seen for a while. So maybe I'll leave it at that, Andy. Unknown Executive: Okay. And then I think good notes on which to finish. You referred that consistently to very good progress against the Capital Markets Day targets that were set a couple of years ago. So there is a question is, given that rate of progress, might you be reassessing some of those targets and setting further medium-term objectives in the not-too-distant future. Christopher Ian Smith: Well, look, look, we look at strategy every year. We look at our targets every year. We're not going to reset them every year, of course, in the public domain. But we would, of course, look at some point to update that and refresh that. We haven't set a time on that at the moment. In fact, Mark and I were just talking about it yesterday as to when that might be. But look, we are -- I'm a big believer in being clear on the direction we're taking the business, the understanding of that within our teams and for our customers and suppliers, of course, is super important. And we remain vigilant on adapting, course correcting, filling in gaps that we think we've missed all the time. So we don't sit still with those ambitions and those strategic ambitions. Yes, there will be a point maybe in the next year where we will have to do that update and refresh. But look, we're very positive about the progress. We need to continue to progress our medium-term ambitions of getting revenues over GBP 1 billion and EBITDA up to 10%. And Mark and I've always said that we wanted to continue to move the EBITDA up double again, right? And -- but we will need a bigger train set probably to do that than we've got today. But we're also going to do that in the right judicious way when the time is right. Unknown Executive: Well said. Great. Well, can I thank our audience for their interest and the very interesting range of questions. You will receive a feedback format of this event, which the company would be delighted if you could share your thoughts over. As mentioned already, the deck use is on the McBride Investor Relations page, along with lots of other materials. In terms of looking forward, which the company can't be too specific about, there is, of course, a recent equity development research note after the interims with, I'm glad to say, an increased fair value of 245p per share that these 2 gentlemen are smiling at approvingly that I'd recommend you review for further detail. Last but not least, of course, many thanks to Chris and Mark, and congratulations not only to them, but the whole McBride team on many years now of very impressive progress, which we hope will continue through the second half and beyond. So thank you for your time, gentlemen. Christopher Ian Smith: Thank you, too. Thanks, everyone.

36天前Insight Analytics约5分钟阅读

XRN 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Chiron Real Estate Fourth Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Jamie Barber. Thank you. You may begin. Jamie Barber: Good morning, everyone, and welcome to Chiron Real Estate's Fourth Quarter 2025 Earnings Conference Call. My name is Jamie Barber, and I'm Chiron's General Counsel. On the call today are Mark Decker, Jr., Chief Executive Officer; Bob Kiernan, Chief Financial Officer; Juan de Leon, Chief Investment Officer; and Danica Holley, Chief Operating Officer. Statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested from any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. Additionally, on this call, the company may refer to certain non-GAAP financial measures. You can find a tabular reconciliation of these non-GAAP financial measures to the most current comparable GAAP numbers in the company's earnings release and in filings with the SEC. Additionally, information may be found on the Investor Relations page of the company's website at www.chironre.com. I would now like to turn the call over to Mark. Mark Decker: Good morning, everyone. I'm thrilled to welcome each of you to Chiron's inaugural earnings call. This quarter was a busy one with meaningful achievements across all verticals. Bob will discuss our fourth quarter performance in a moment. But before that, I'd like to use my time to summarize what we intend to achieve as an engaged and reinvigorated organization. Yesterday, we published a full investor presentation outlining how the Chiron team is building for the future. I'll walk us through a subset of those slides this morning, but encourage you to take a moment to review the full deck. We trust that you'll find it to be direct, transparent and thought. We'll start with a quick mythology note. In Greek lore, our namesake, the venerable centaur Chiron is the father of medicine and the architect of medical education. We like the imagery and believe his legend aligns well with our new mission statement of delivering value at the intersection of care, capital and real estate. Our team is well positioned to execute on this mission with strong leadership across operations, finance and investments. We have a deep bench of talent beyond the familiar names, and I believe that we can punch above our weight. Before looking at where we're going as Chiron, it's important to acknowledge what we've done as GMRE. From the date of our IPO, GMRE has meaningfully exceeded the total return profile of our closest MOB peers. That's a good thing, and we intend to keep outperforming. What's not good is that medical office has been in a bear market for years. This bear market has had more to do with interest rates than asset performance, but we need to be prepared for a world where 4% 10-year treasuries is the new normal and 2% to 3% rent growth may be sub-inflationary. So we've rewritten our playbook to prioritize earnings growth on top of our stable existing portfolio. We've already made an incredible amount of progress. This progress includes establishing a long-term strategy to guide our decision-making and hold ourselves accountable as well as a comprehensive review of our existing portfolio. Our findings have informed our decision to reimagine the way we approach asset management, leading to the appointment of Alex Wilburn as Portfolio Manager. Alex is one of our longest tenured team members, most recently serving as a senior investment professional. We're excited for him to apply his capital allocation and market-oriented mind to the portfolio management function and know that he will thrive in his new role. We also took time to think about how our existing portfolio stacks up against the field, drawing a few conclusions. First, it's important to acknowledge the overall return profile of medical office. Rent growth is incredibly consistent but modest due to our fixed rate escalators and long average lease term. This growth is partially offset by the capital and leasing costs. We found that our performance is in line with the sector generally. One key difference is entry price. We believe that if you're going to face limited growth, it's important to realize more yield going in. Second, we believe that the benefit of the health care sector is that you can find great investment opportunities outside of primary markets. When comparing the demographic profile of our assets to that of the United States at large, we found that we're biased towards higher prosperity markets. Third, the vast majority of our portfolio is owned fee simple, meaning that it's not encumbered by a ground lease. This is critical as outpatient medical owners often operate in an environment where their building tenant is their land lessor. This has the predictable effect of reducing your opportunity when negotiating renewals. When the ground owner is your health care system, they often have the ability to dictate leasing outcomes. Finally, rising construction costs and undeniable demographic shifts have given us an outstanding opportunity to push rents in the years to come. We think that an improved emphasis on driving portfolio performance, including a more proactive approach to pruning underperforming assets will put us in a great position to capitalize on this opportunity. Bob and his team have also been working hard in the capital markets to position our balance sheet for offense. I'm proud to share that we now have no debt maturing before 2028, a big change from where we were 6 months ago, and our current maturity schedule is well laddered and manageable. Looking toward the road ahead, it's our ambition to build an organization that can routinely deliver earnings growth in the upper quartile of the equity REIT universe. Doing that has historically meant growing cash flow by 6% per year. This will be a process requiring active management of the existing portfolio and investing more broadly across the health care sector. We've put a lot of thought towards how we're going to approach each of these considerations. Importantly, we are still firm believers in the economic and demographic tailwinds benefiting our existing portfolio. That said, we also believe that these same tailwinds benefit other subsets of health care real estate, namely active adult and seniors housing. Our entire team has spent considerable time thinking through whether we should pursue investments in the senior space, concluding that the answer is an enthusiastic yes. The silver tsunami is just building with the first baby boomers now just entering their 80s. More broadly, the population of Americans aged 70 or older will expand for decades to come. Existing supply is severely constrained and project deliveries are expected to be far short of what is needed to satisfy demand. Once we knew that we wanted to explore seniors, the next question was how. We believe there's an opportunity to assemble a differentiated portfolio of premium newly built active adult and shop investments in the public markets. There's a lot that went into that decision, but I'll highlight a few components. The lack of new supply through COVID and the GFC have led to an average age of 24 years for existing senior housing assets. These facilities were designed for a different generation of residents, and we think that newer assets with great operators will have a competitive advantage. This is especially true in the active adult segment where high-end amenities and programming are the defining component of the resident experience. Second, the cohort of highest income seniors is sizable and growing, providing us with the comfort that demand for premium facilities will prove resilient. And finally, our lack of incumbency and small size converge an advantage. We can focus solely on the products we want and relatively small transactions move the needle, enabling the potential for stronger growth. It's the early days of the silver tsunami, and there's lots of room on that wave. Our team has a sound understanding of the space and believe our boutique approach to partnership with operators and developers gives us a broad opportunity as we enter these verticals. Many existing owners, operators and developers of senior housing facilities are middle market in nature. So that decision of who to partner with on their business is a monumental one, and there are many considerations beyond who's willing to pay the most. This obvious value proposition has allowed us to build an attractive pipeline, each with strong return profile and opportunity to build a larger relationship. For now, we'll be thoughtful in limiting investments to those that we can fund through capital recycling, but we're ready for more when that changes. Our announced active adult investment in Minneapolis is a great example of the opportunity available to Chiron. We've taken a 49% interest in the development of a new community with an expected delivery of 2027 and a stabilized double-digit unlevered IRR. This investment was sourced off market through a relationship with an experienced luxury housing developer that we've transacted with in the past and known for a decade. We believe this relationship provides us with future pipeline of great communities. As mentioned earlier, we're being thoughtful about how we fund these acquisitions, given our current cost of capital. During the quarter, we sold an early vintage medical office for a sales price of $10 million, bearing our team the outsized execution risk and capital required to stabilize a poorly positioned building. We used these proceeds to repurchase stock in a leverage-neutral fashion, which we view to be a sound capital allocation decision. We'll be very conscious of debt levels as we execute our pipeline and have already identified approximately $250 million of prospective dispositions. These dispositions are likely to focus on assets that we believe will demonstrate the overall quality of our book, including a portfolio of IRF assets and the Beaumont Surgical Hospital. We've begun marketing efforts on each and believe that we will realize proceeds meaningfully above our basis, demonstrating our ability to make sound investments. Thank you for allowing me to take you through that. Bob, would you please walk us through some of our quarterly highlights? Robert Kiernan: Thanks, Mark. Our NAREIT-defined FFO per share and unit was $0.97 for the quarter. Core FFO, which we previously referred to as AFFO, was $1.16 per share and unit. Net debt to adjusted EBITDA REIT was 6.2x for the quarter, a reduction of 0.7x from the prior period, which was driven by our recent preferred equity issuance. Same-store cash NOI, which includes all assets owned by Chiron for at least 15 months, increased 5.4% on a year-over-year basis. Sequential performance was also strong at 2.9%. I'm pleased to share that Chiron will be transitioning to a monthly dividend with no change to the annual $3 per share rate. We believe that the dividend will provide our shareholders with a more frequent income stream while also reducing frictional costs for the company. I'm also pleased to share our initial 2026 core FFO guidance range of $4.30 to $4.45 per share and unit. This range includes $0.36 of anticipated headwinds due to the results of our balance sheet fortification efforts throughout the back half of last year. Notably, this guidance does not reflect any speculative acquisition or disposition activity. Mark, would you like to provide some closing thoughts? Mark Decker: Yes. If you're just joining the call, you need to know that it's been a busy quarter, and we've accomplished a lot, and we're well positioned in the care delivery universe and broadening our aperture to add growth from senior housing to our quality cash flows. The care universe has undeniable tailwinds that make a nimble player like Chiron well positioned to grow quickly through internal and external cash flows, and we're excited for our future and believe strongly in what we're doing. We wouldn't ask you to endorse a strategy that we ourselves are unwilling to invest in. And with that, we look forward to seeing some of you at Citi next week. And operator, we're ready to take questions. Operator: [Operator Instructions] Our first question comes from the line of Juan Sanabria with BMO Capital Markets. Juan Sanabria: Congratulations on laying out the new strategy and thesis. I guess the big question in my mind is just there's obviously a lot of enthusiasm around seniors housing and why do you think Chiron is positioned to execute over and above what some of your peers are doing. And the focus in seniors, is that more assisted independent living? How do you plan to pick the operators, the market focus? So if you could just give us a little sense of kind of what we should expect going forward in seniors and why Chiron is the platform to outexecute some of your peers? Mark Decker: Sure. Juan, thanks. Listen, it's a big universe out there, and operators have lots of options. I think the way that we'll have to compete is by delivering value, as we've articulated sort of as the main mission. But I mean, there's lots of considerations that go into who the real estate partner is going to be. And I think if I'm on the other side of the table, choice is good. And so we're one more choice. We'll have to win the business just like anyone else on the merits of our value proposition. And why do we think we can? I mean, we talk about this a lot around the water cooler. I mean there's a version of the universe where we're like the smallest, most relevant company in the space. And then there's the real world where we have an unsecured balance sheet and $100 million of EBITDA and a great team with good gray matter. And if I was describing that company to just a normal person that say, it sounds like a pretty good business. It is a good business. And it's possible the public market will appreciate that, and we can use that tool to our advantage or not. But either way, we're going to build a great business. Juan Sanabria: And the focus on seniors would be on what kind of product side, kind of putting active adults to one side, independent assistance of communities, markets, et cetera, what's the focus, I guess, day 1? Mark Decker: I mean we're really focusing on the operator and the real estate, and we're really looking at independent and assisted, some memory care stay away from skilled. Juan Sanabria: Okay. And then on the disposition side, the $250 million of assets that you're potentially looking to capital recycle, just you kind of put some yield targets for the investments, but how should we think about the yield associated with those potential sales? And if you could talk maybe about the timing of the selling versus buying and how we should think about kind of the cadence of recycling that capital? Mark Decker: Yes. Well, we can't force anything. So everything takes two good willing parties. But we have launched a JV. We like the inpatient rehab facility space. We'd like to express that like of that space by hoping to find a capital partner with us. We have a good track record and a decent sized portfolio in that niche, and we think we can do some interesting things and grow that. And we'd like to do it with a capital partner. So we're out in the market looking for a joint venture. It's possible someone comes and says, we've got to have this at a price that makes it a full sale, but that's not our objective. And I would imagine that happens in the second or third quarter. And then on the MOB sale, we are working with a buyer there, and I would expect we'd announce an LOI on that in the next, I don't know, 60 days and probably have that off the books by the third quarter. That asset has been a real strong contributor to our same store. So we kind of hate to see it go, but I mean, we just signed a 15-year lease with an A-rated credit, and it's a really good recycling candidate for that reason. Juan Sanabria: And then just the last question for me. On the White Rock bankruptcy, I guess, have they paid first quarter rents? Or how should we think about the impact to financials at this point in time? Mark Decker: Yes. They have paid -- they are currently -- current on what they've been paying us. I mean this is a situation where we have a great basis in that property. It's a 14-acre property just east of Dallas, kind of looking at the city and on a reservoir lake. We're in it for about $105. The operator there purchased that out of a bankruptcy in 2023 and took some pretty tough terms from their counterparty and the bankruptcy is really about trying to free up some of their financial capacity by eliminating some of the seller financing that they took. So we believe that they have a good chance to do that. We're supportive. We went down and met with them in December. This was on their menu of options, and we're working very hard to be a good collaborative partner. We would like to see them win. And if they can't win, then we'll make sure that we have a good alternative prepared. But it's an evolving situation. We're in close contact with them and monitoring it and doing everything we can to help them be successful. Operator: Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets Inc. Austin Wurschmidt: Mark, I was just hoping you could start by discussing when this strategy shift discussions with the executive team and the Board really started to come about. Mark Decker: Sure. We really started in August using a consultant that I've used in the past called [ RCLCO ]. We put together kind of the top 10 folks at the company and our Board, and we did a bit of a 360 evaluation where we had people who don't work here tell us what they thought about the business, and we all considered it. And we had really a multi-month process where we kind of beat up lots of different ideas and ultimately laid out a strategy for the Board in December, which they're supportive of and helped collaborate in. And so we've really been at it since August and feel great about where we are relative to our plan in that timeline. Austin Wurschmidt: Helpful. And then Bob had highlighted there's no real capital recycling that's assumed in guidance. But I guess, how are you just thinking through the near-term earnings impact from executing the strategy of selling some of these legacy [ OEM ] assets and then recycling into that development, which obviously tends to have some downtime from an earnings perspective as well as just being able to compete on the senior side and redeploy that capital at kind of minimizing that spread versus the sales? Mark Decker: Yes. I mean I think the truth is we'd like to get through that period as soon as possible, and we'd like the market to see what we can cook up. So I mean, hopefully, we can get through that sort of valley as fast as we possibly can. But again, we don't get to dictate all the timing. So in terms of earnings impact, I mean, as you can imagine, as we're trying to delever the business and we're selling assets, there definitely could be, there should be, there will be dilution there. But we're really thinking about it like it's our own money and imagining what the best business looks like. And frankly, the returns that are available in the housing space are superior to those in outpatient medical. So we're not, by any means, abandoning outpatient medical, but deals are going to compete on return. Austin Wurschmidt: And just one more for me. There's some efficiency and other savings that's outlined in the 2026 guidance. Can you discuss what that includes? And then also as you build out the senior side, I mean, how are you thinking about the asset management side of that business, given as you move along the higher acuity spectrum, the operating intensiveness of that business obviously picks up? So just curious some of the puts and takes from an overhead perspective. Mark Decker: Rob, do you want to? Robert Kiernan: Yes. I'll start out relative to the outlook and the efficiencies in the 2026 guidance. And the efficiencies are largely items that won't recur in 2026 as much as any 2025 items that won't recur in 2026. As Mark mentioned, the time we spent working through the strategy and some of the other one-off type items like that, that are -- that were in our 2025 numbers, that won't repeat in '26, is the primary driver. Mark Decker: And then to get to your question on sort of building out seniors, I mean, some of that will be a function of how fast we're able to make investments and it could go slower than we want, and we want to be mindful of how we're staffed. And as you know, the road is sort of littered with smart real estate people who didn't appreciate the operating intensity and leverage embedded in running a senior housing operating property. And we have a lot of respect for that. So I mean, it's really about picking great partners that we have confidence in and can learn from. And look, we're -- we don't have all the answers, and we'll learn and we'll make some mistakes. I think we'll make more good decisions than bad ones, but it will be a new business line for us. So we have a healthy respect for what that means, and we'll be very focused on mitigating our risk there really through choosing partners that we bet extensively. Operator: Our next question comes from the line of Wes Golladay with Baird. Wesley Golladay: I just want to build off Austin's last question. Maybe on the investment team, is that team for the senior side all built out now or mostly built out? Mark Decker: No. I mean, right now, we're using our investment team, Alfonzo is on the line here. He's dressed in the senior housing gear right now. But I would imagine we could add to that team as we progress. But we do have some relationships that are -- that reside here already, and we're working on those. Wesley Golladay: Okay. And then when you look at how you want to approach it, I know it's early innings, but do you have a sense of how many operators you want to work with? Are you going to be more regionally focused? Will you target mainly new, I guess, developments? Would there be any potential for redevelopments? Just trying to get a little bit better sense on how you're approaching it. Mark Decker: Yes. It's a great question. Right now, the operators we're focused with, I would call them kind of regional or single-market operators with good track record and generally speaking, newer assets. So as we said in our prepared remarks, we're focused on newer products. We believe that's a place where we can possibly differentiate. But right now, it's -- the answer to your question is as few and as good as possible. But obviously, if we can get some size, I mean, it would be great to have a stable of operators that we can share ideas with across and so forth. But that's ambition today. Operator: Our next question comes from the line of Gaurav Mehta with Alliance Global Partners. Gaurav Mehta: I wanted to ask you on the portfolio allocation as you build your [ SHOP ] active adult portfolio, how would the allocation look like between medical office and the housing part? Mark Decker: Yes, that's a great question. I mean some of that will be -- thanks for the question, Gaurav. A lot of that's going to be dictated by the opportunity set. So we don't have like a pie chart in mind that we're going to manage to. We're going to manage to the opportunities and be somewhat opportunistic there. But active adult, in particular, sort of "modern active adult", which has kind of really only been around for 10 years or so, is a relatively small niche, the hunting grounds in seniors, much larger. But we really like that active space. So we'll see. I mean I wouldn't hazard a guess, to be honest. Gaurav Mehta: Okay. And I guess for the acquisitions, should we expect primarily to be focused on [ SHOP ]? Or would you be open to medical office as well? Mark Decker: I mean, as we said earlier, like everything competes on return. And today, [ SHOP ] is winning that competition. Gaurav Mehta: Okay. And I guess what are cap rates like on [ SHOP ] versus medical office? Mark Decker: I think cap rates are actually pretty similar. It's the character of the forward-looking growth that's much different. So call it, plus or minus 6% on forward going in, but one has 2% to 3% growth and one has 4% to 8% and some really sustainable headwinds -- or excuse me, tailwinds. Operator: Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Juan Sanabria: Just curious on the active adult, I think one of the prior callers had a question with regards to how we should be thinking about your entry there. I mean development historically is a drag until the asset leases up, although I recognize the lease-up is a lot shorter than in seniors housing. But are you guys getting a preferred return on the capital you're investing to kind of bridge the gap until the asset can start to cash flow? Or just how are you thinking about that segment of the opportunity set with active adult? Mark Decker: Yes. Well, welcome back, Juan. We're glad to have you, and we love the curiosity. Yes. The answer to your specific question on this first opportunity in Minneapolis is no. We are not getting a preferred return. However, that would be our goal in the future. That situation was an interesting one. They were actually -- they were under construction already. So -- and they preferred a 50-50 scheme. So we went with it. It was a relatively low dollar amount. So did some of this at Centerspace where we had kind of a build core strategy, if you will, where we employed a preferred element, and we would endeavor to do that again here. So I would expect you'd see more of that. And obviously, we'll be mindful of sort of overall sizing of that loan book, if you will, and risk. Juan Sanabria: And then the medical office, there was a Steward bankruptcy last year and you took some vacancy that was an opportunity as you relet that space. So just curious on the update on kind of the opportunity there, and how much has been backfilled? And how that has contributed or could contribute to growth in the core business today? Mark Decker: Yes. The Steward piece is really resolved. It was really that -- what is now the [ Cruse-Two ] asset, the Beaumont asset that we talked about disposing of, I might one other small lease, but it is not material for any... Robert Kiernan: Yes, there are 2 other small leases, but nothing to... Mark Decker: And then we have Prospect, which is still going. So that -- our East Orange asset has been affected by that materially. So that's one we're still working out. Juan Sanabria: Okay... Mark Decker: I'm sorry, Juan, say that again, forgive me. Juan Sanabria: No, I'm sorry. I was going to ask the Prospect that upside is still to come if you are able to backfill that? Mark Decker: Correct. Yes, that would show up today as negative NOI. Juan Sanabria: Okay. And then last question for me. Anything on the watch list to call out over and above the White Rock? Mark Decker: No. No. I mean in the past, White Rock would have been the one when people asked us about watch list that was kind of top of mind. And again, we're -- that's a great entrepreneurial group. We're in good touch with them. We believe in their ability to be successful. But there's nothing past them that we're spending a lot of time on right now. Operator: And we have reached the end of the question-and-answer session. I'll now turn the call back over to CEO, Mark Decker, for closing comments. Mark Decker: Thanks very much. Well, thanks, everyone, for your time and attention, and we look forward to talking to you next quarter. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.

36天前Insight Analytics约5分钟阅读

SJM 2026 Q3 财报电话会议

Operator: Good morning, and welcome to The J. M. Smucker Company's Fiscal 2026 Third Quarter Earnings Question-and-Answer Session. This conference call is being recorded. [Operator Instructions] I will now turn the conference call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin. Crystal Beiting: Good morning, and thank you for joining our fiscal 2026 third quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we will use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chief Executive Officer, President and Chair of the Board; and Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen Handheld and Spreads and Sweet Baked Snacks. We will now open the call for questions. Operator, please queue up the first question. Operator: [Operator Instructions] Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Mark, I'm curious, maybe in your discussions thus far with Elliott, I'm curious where maybe you are seeing the most common ground and where maybe the biggest opportunities are going forward? Is it potentially in more aggressive portfolio optimization? Or maybe should we be thinking more on the cost side and sort of capital allocation front? Mark Smucker: Thanks, Andrew. The engagement with Elliott is recent and has actually been very constructive. We've had a number of meetings with the folks there. And largely, what they see is what many of you already know, we're a great company with strong brands. And there's really good alignment between what they're seeing and what we are seeing, focusing on continuing operating improvements, which will lead to profit restoration over time, continued portfolio management in the near term, focusing on organic growth, also disciplined capital allocation. And then lastly, governance. And as you know, we do and have continued a pretty consistent Board evolution over the last 5 years. And these 2 recent additions of Bruce Chung and David Singer will further that governance. And in particular, making sure that we have the right support in terms of how we're thinking about capital allocation and our financial priorities. So really feel very good about where we are in the conversations with Elliott and very confident that we have both the right Board and the right team to continue to drive our strategy and the growth of the company. Andrew Lazar: Great. And then you already discussed, I know some of the change in promotional strategy in Sweet Baked Snacks at CAGNY last week. But maybe I'd love to dig in just a little bit further on sort of what you're really trying to accomplish with this move and maybe what you're hoping to learn about the business through this action. Mark Smucker: Sure, Andrew. I mean, again, we are going to continue to focus on stabilizing the brand and return Hostess to growth over time. That includes strengthening the portfolio. As you know, we've done some SKU rationalization, really staying focused on the icon brands of cupcakes, Twinkies and Donettes. Continuing to, as I just mentioned, improve operations, which will ultimately lead to improved profitability. And then just taking a prudent approach to the investments in Sweet Baked Snacks to ensure that we're balancing both top and [indiscernible] top line stabilization and profit improvement. And of course, we did take an updated assumption of 2% growth trajectory going forward, but we are continuing at this time just to stabilize the business. Operator: Our next question comes from Peter Galbo of Bank of America. Peter Galbo: Mark, maybe just to dovetail off of that. I noted in the profile on Bruce specifically, just his background in M&A. So just the thought process there of his experience, whether that could maybe accelerate a more portfolio reshaping? And then just like how you would think about use of proceeds? I think in the past, again, we know that the debt paydown piece. But in the past, as you parted with businesses, you've been willing to kind of return that in the form of share repurchase and just how that whole framework is entering your minds. Mark Smucker: Sure. Yes. We've been in conversations with Bruce for some time and just feel very good about his financial acumen. And as it relates to the portfolio, as you know, we've been very consistent over the years in making sure that all of our shareholders understand that we always are reviewing our portfolio. We really like our portfolio because of the diversity, obviously, pet and coffee and then food and snacking. We have -- we play across multiple categories. So the diversity does give us optionality. And as we've been very disciplined over these past years in reshaping our portfolio, that's something that we will continue to think about as we move forward. Tucker Marshall: Peter, as it relates to use of proceeds, we would just acknowledge historically, we've used proceeds from divestiture activity to either pay down debt or to repurchase shares. As we continue on our path to 3x leverage or below by the end of next fiscal year, that enables the opportunity to consider share repurchases again. Peter Galbo: Great. And Tucker, maybe just to pivot to the business and coffee specifically. I think at CAGNY, you had some remarks about near-term margin improvement that was predicated on some of the deflation in green coffee costs. You have a peer who obviously participates in the space that kind of talked about a recovery in some of the profit metrics in like the second half of calendar '26. And I know your fiscal is a bit different, but maybe you could put some guardrails around how you're thinking about that coffee deflation entering the P&L from a calendar '26 perspective? Tucker Marshall: Sure. Peter, the outlook for our coffee portfolio is positive. It starts with the resilience and the strength of the category and also the performance of our brands. And we don't disclose our hedging or our cost position, but we do hedge for flexibility to support annual profit delivery. And we would just share that, as we mentioned at CAGNY, deflation benefits both the absolute profit dollar and the profit margin percentage. And additionally, we will be lapping the impact of tariffs. And so we would anticipate profit and margin improvement as we move forward. And in the fourth quarter of this fiscal year, we would expect a mid-20s segment profit margin. And so hopefully, this continues to inure to the benefit of the portfolio and the profitability of the portfolio. Operator: Our next question comes from Peter Grom of UBS. Peter Grom: Great. So I was hoping to get some perspective on the top line trajectory. Maybe first, as it relates to Sweet Baked Snacks, you touched on some of the drivers around the 4Q low double-digit decline. But I'd be curious how we should be thinking about fiscal '27 in the context of this exit rate. Would you anticipate some of the changes you're making to drive stronger growth? Or is this kind of low double-digit decline a fair run rate as we move into the first half of next year? Tucker Marshall: Yes, Peter, I certainly appreciate the question, particularly as it relates to the growth trajectory on Sweet Baked Snacks. I just share that it's early for us to lean into what the outlook is for FY '27. We have acknowledged that our fourth quarter will be a softer quarter for the portfolio, just as it relates to some of the category trends that it's navigating, but also as it overcomes a temporary disruption associated with a plant or manufacturing fire. And so I would just sort of think through that we continue to advance the stabilization efforts across that portfolio to improve our share of market performance. We've obviously worked through some of the SKU rationalization efforts. We'll continue to improve profitability across that portfolio. We'll begin to see the benefits of our recent plant closure, the Indianapolis facility, and we'll continue to look toward advancing growth over time. But this continues to be a journey as we navigate the stabilization of this portfolio. Peter Grom: Awesome. And then I guess just a follow-up on coffee. There was some commentary earlier this week from one of your peers on some retail inventory dynamics happening in pods that they are expecting to impact their growth in the first half of the year. So is this a dynamic that you are seeing or contemplating in your guidance? Mark Smucker: No, Peter. We haven't seen any abnormalities in terms of inventories on coffee. Our coffee business continues to perform very well and obviously delivered great growth on Bustelo, and we'll continue to do the right thing for our coffee business. Operator: Our next question comes from Robert Moskow with TD Cowen. Robert Moskow: I was hoping to drill down even further into the coffee pricing strategy and maybe ask you to delineate between ground coffee and the single-serve pods. As your costs come down, would it be fair to say that the giveback on pricing would be more on the ground coffee than it would be on the pods just because of how it plays out on a percentage of cost of goods? Tucker Marshall: Yes, Rob, I think it's early for us to talk about sort of the magnitude of deflation and its implication to pricing. But as you know, roast and ground is a greater percentage of coffee in the can as compared to in a single-serve K-Cup. And so we'll continue to navigate the level of deflation and how we address deflation in our portfolio as we move forward. But I guess I would just leave it there. Mark Smucker: Rob, it's Mark. The only thing I would maybe just build is that we've been pretty consistent over the years, highlighting that the profitability and the margins across the coffee portfolio are generally similar. Robert Moskow: Okay. And can I ask a follow-up on Hostess and Sweet Baked Snacks in general? Since you bought the business, a lot of the management team and probably the next layer level down has left the business. And I'm just wondering, like do you think that you need to make a bigger investment in talent or capabilities in order to stabilize the business? And has that -- have those departures, do you think contributed to some of the weakness in the division? Mark Smucker: No, Rob. I'm very confident that we have the right team in place on Hostess, some of the best and brightest. I think what we're navigating is both the category dynamic and then just, as Tucker mentioned, just some operational challenges that we've had. We are through the Indie closure, which, as you know, was a bit more costly than we had anticipated, but that is largely behind us. And so our focus now is to maintain and improve the operating efficiencies and then to continue to make prudent investments on those parts of the branded Hostess portfolio that are truly going to help to stabilize the business and then ultimately get us back to some growth. Operator: Our next question comes from Thomas Palmer of JPMorgan. Thomas Palmer: I think my questions are not going to be totally different than the 2 topics we've addressed so far. But just first on Sweet Baked Snacks. I think a quarter ago, the message was that the earnings pressures would be greatest in the second quarter, and then we'd see sequential improvement. So what really -- I know there's the plant fire in 4Q, but what really were the incremental items to think about in 3Q that drove the weakness? I know you've mentioned the plant closure. Was that it? Or were there other items to really consider? Because I'm trying to think through the ultimate recovery here and kind of how much is simply volumes need to reverse versus you have kind of a clear line of sight operationally. Tucker Marshall: Yes. Tom, what we would offer in our third quarter is top line did come in below our expectations, largely due to category trends, some of our own execution. And then I would also share that our bakery network costs came in much higher than we anticipated. And those 2 things really worked against the profit expectation of sequential improvement as we move through this fiscal year. And I would just say that our fourth quarter should be better, but it will absorb the impact of the fire in the month of February, both at top line and bottom line. Thomas Palmer: And on coffee, and I apologize if I missed this, you have been providing some kind of clear guidance over the expected coffee impact in fiscal '26. I think last time, it was -- and even last week, you were discussing a $0.50 unmitigated tariff headwind. And then coming out of the second quarter, the coffee elasticity was expected to be a $0.40 headwind. Just any update on these items expected impact now as we think about fiscal '26? And especially when it comes to the tariff headwind, is that an item we should essentially think about reversing in full as we look at next year, given it's unmitigated? Tucker Marshall: Yes, Tom. So a couple of parts to break down there. Let's begin with tariffs. So we did call out a $75 million unmitigated tariff impact that was affecting this fiscal year that we would be lapping next fiscal year. So you can add that back to exit segment profit for this fiscal year. Then we would also just acknowledge while we didn't update our elasticity impact in this call, we would just say that elasticities came in better than anticipated in our third quarter, and we continue to take a prudent approach to forecasting elasticities, excuse me, in our fourth quarter. Operator: Our next question comes from Chris Carey of Wells Fargo Securities. Christopher Carey: I do want to ask one follow-up on the Sweet Baked Snacks segment, and I promise my other question will be something else. But I think the organic sales in the quarter were pretty substantially below consumption, at least on our data. Why was that? What drove the gap between consumption and what you reported? And I just wonder if we should expect that going forward? And then just connected, when you talk about fiscal '27 being on algorithm or potentially better, within that statement, how are you ring-fencing the Sweet Baked Snacks segment? Because back to Tom's point, obviously, a quarter ago, there were different expectations than what played out. So just trying to understand the cushion in that fiscal '27 statement as it pertains to Sweet Baked. Tucker Marshall: Yes. So Chris, -- to your first question on Sweet Baked Snacks, I think we saw some timing around operational efficiencies and consumption just as we've navigated sort of the resetting of the bakery network. We've also reset promotional activity in the back half on that business, where we've pulled promotional activity largely in support of them putting it back in to make sure that we're getting the most efficiency out of that spend. And then as you step into next fiscal year, I think it's hard for us to sort of communicate at this time the trajectory of the top line of the business. But we should begin to build back profitability because we're at such a low watermark at this point in time. Christopher Carey: Okay. In the Pet segment for the quarter, you were lapping some headwinds from the year ago period in the top line. How should we think about the performance for Pet in the quarter? I think it came in a bit light of expectations. Perhaps those expectations were a function of that compare in the base period. So I wonder if you could just maybe contextualize how you all felt about delivery in the quarter and whether there were any shortfalls relative to your own expectations? Mark Smucker: Sure, Chris. It's Mark. Overall, very pleased with the Pet performance. I think Meow Mix continues its growth trajectory, still the #1 leader in dry, solid consumption, 5% top line growth in the quarter. Innovation is performing well. The Gravy Bursts platform that we've launched has done well, and we're actually expanding that with some new items. Milk-Bone specifically did start to grow again in the quarter, which is what we wanted to see. It was supported by base biscuits. We did see some decent growth in base biscuits, which is important. And then the innovation there with the Peanut Buttery Bites platform, and we talked about a new iteration of that innovation at CAGNY. That innovation continues to perform well. The tail of the pet business, which is Pup-Peroni and Canine Carry Outs continues to be soft, largely driven by competition and private label. But we have begun a brand refresh on Pup and continue to invest in marketing to support the business, and we do see strong loyalty there. So we think that will take time. But just keeping in mind that our focus on dog snacks will continue to be on Milk-Bone and in that brand specifically playing across multiple segments, both premium to value and different need states for dogs. So Milk-Bone will continue to be sort of the crown jewel, and we'll continue to focus there and continue to drive growth as we seek to stabilize the Pup-Peroni business. Operator: Our next question comes from the line of Max Gumport of BNP Paribas. Please proceed. Max Andrew Gumport: I've got one more on Sweet Baked Snacks to throw in, and it's on the profit side. So I recognize that this year has been impacted by a number of discrete items and also that you brought down the long-term sales growth target for the business. But I felt like you had a clear path to returning to a 20% segment profit margin for Sweet Baked Snacks, if not in 4Q, then sometime soon. So not asking you to put a time line on it. I'm just curious if you have any color you can provide on what you view now as a reasonable normalized segment profit margin for Sweet Baked Snacks whenever you get back to that abnormal period. Tucker Marshall: Max, I certainly understand the question. And obviously, profitability is below our expectations, in particular in our third quarter. We should see an improvement into our fourth quarter from a profit standpoint. And then as we get to our fourth quarter earnings call, we'll be able to kind of lay out how we see the profit trajectory of the business and also maybe a revised profit margin target to your question. I just think right now, the team still continues to advance its stabilization journey around improving profits, and that's really going to come through how we continue to navigate our bakery environment and manage overall costs. Max Andrew Gumport: Great. And then on Uncrustables, so it was good to see that the total company business for Uncrustables is growing 10%. I think retail was a bit slower at 6%. I recognize that doesn't have the C-store business being booked under it. But just curious for an update on how you view these trends for Uncrustables and how you're thinking about that business as you are getting close to the $1 billion target for revenue? Mark Smucker: Max. Uncrustables still feeling great about, of course. Obviously, you highlighted the numbers. It will continue to be a key growth driver for the company. Our distribution gains most recently in Away From Home and C-store having tripled our C-store sales and continuing to add new households on the order of like 3.5 million new households. So the expansion of the brand supported by strong in-store merchandising, consistent marketing, share of voice and then innovation, we believe will continue to drive growth there. And so as the category has expanded, right, and you are starting to see some store brands fill out the section, we remain the leader. And so our job is to continue to bring insights to customers so that we can collectively grow the category and specifically the Uncrustables brand. Operator: Our next question comes from Megan Clapp of Morgan Stanley. Megan Christine Alexander: A couple of quick ones from me. On the EPS guide, you kept the guide. It's still quite wide, I think, for this point in the year. I think historically, you've narrowed it a bit with one quarter left. So you narrowed the top line. Can you just talk about the decision to keep the EPS range where it is and whether you're tracking towards one end or the other at this point? Tucker Marshall: Sure. I think we're just continuing to maintain prudence throughout our fiscal year as we deliver against the midpoint of that guidance range. We feel very confident in achieving the $9 midpoint. And any upside would largely come through your coffee portfolio. But candidly, the coffee portfolio is covering softness that we're experiencing in our Sweet Baked Snacks portfolio. But the balance of the businesses continue in line with expectations. So that was really the reason. We remain confident in the range. We remain most confident at the midpoint. Megan Christine Alexander: Okay. Great. That's helpful. And then just on the SG&A, I think it's now you're expecting flat to slightly down versus flat prior. Can you just unpack a little bit more what changed there? Is that just efficiencies coming in better than you expected? Or are you pulling back in any certain areas that maybe would need to come back next year? Tucker Marshall: Yes, Megan, and they're largely driven by efficiencies and just prudent management of spend. Operator: Our next question comes from Alexia Howard of Bernstein. Alexia Howard: Can I just follow up on Megan's question just there about the SG&A line? I think in the prepared remarks, you commented that you had lower marketing and distribution spending this quarter, but higher selling expenses. Is that a signal of a continuation of that kind of trend going forward out into next quarter and perhaps out into fiscal '27? Or should we expect some normalization of that? Tucker Marshall: No, we just had some savings and timing in our third quarter. Again, that supported the overdelivery in EPS. We've essentially locked that into our earnings guidance for the year, but we have some top line softness coming through associated with the Emporia, Kansas fire. And so that's kind of muting some of the savings from a bottom line standpoint. But there's nothing substantial to report in additional savings that will come through our fourth quarter. Alexia Howard: And then on the pace of innovation, have you quantified recently where you're at in terms of new products as a percent of sales and where you would hope to get to over time? Are you where you want to be on the innovation front now? Mark Smucker: Alexia, I'm not 100% sure I understood the question. Let me try to answer it and then please come back. It's Mark, of course. Innovation is actually performing very well. We've gotten, as we always do, listening to the consumer, making sure that we understand what their needs are and trying to meet them as quickly as possible. I mentioned some of the pet innovation. Even on Hostess, despite some of the challenges we've had on that business, the innovation there has actually performed well. That's also true in Bustelo, Uncrustables. And a lot of the innovation that we've -- that has been successful is generally closer in innovation as opposed to big bet innovation, and that has really driven growth and helped to support the top line. Alexia Howard: That's helpful. And the overall pace, the proportion of sales that are coming from new products, is that where you want it to be now? Mark Smucker: Yes, it's in line, for sure. Operator: Our next question comes from Scott Marks of Jefferies. Scott Marks: First thing I wanted to ask about just on the dog snack side of the business. You made a comment in the prepared remarks about the category as a whole rebounding. And just wondering if you can kind of help us understand a little bit about what's going on there and what's changed relative to some prior quarters where you've called out some discretionary spending pressure on the consumer. Mark Smucker: Sure. Scott, it's Mark. Yes, both of the categories that we participate in pet are doing very well. And in particular, dog snacks has continued to grow. A lot of that growth has been driven by the humanization and premiumization trends in pet. So to the extent, as I mentioned in Alexia's last question, the innovation that has been delivering is delivering against that premiumization concept. In addition, as I mentioned earlier, we have been pleased with the base biscuit performance, which is the more affordable, more value-oriented part of the portfolio. So we -- our strategy is to continue to make sure that we're winning in the different segments within that category and continue to follow both consumer needs and where the growth is. Scott Marks: Appreciate the color there. Last one for me would just be regarding the Uncrustables business. You made some comments in the prepared remarks just about distribution runway in some of the Away From Home channels, talked about convenience channel. Maybe how should we be thinking about kind of the, I guess, more traditional channels just in terms of distribution runway left versus maybe innovations on shelf? Just trying to contextualize how we should be thinking about maybe velocity improvements versus innovation in some of the larger or more mature channels for that business. Mark Smucker: Yes. In the traditional U.S. retail channels like grocery and mass, our distribution has expanded over the last year as we've actually gained more freezer space as new capacity came on at our facilities, that enabled our ability to deliver more innovation and meet demand. So at the same time, we were ramping up manufacturing, we were also turning on marketing. So that did drive distribution. I would say, generally, we are everywhere with Uncrustables. And our continued growth is going to be driven largely by innovation, obviously, like these new high-protein sandwiches are doing very well and then continuing to drive household penetration where we still feel there is some runway. Operator: Next question comes from Steve Powers of Deutsche Bank. Stephen Robert Powers: Most of my questions, I think, have been addressed. It's been a nice complement today to what you said at CAGNY. So thank you for that. I did have one, I guess, more technical question though on Sweet Baked Snacks. That's probably for Tucker. Specifically, I just want to ask around the decision to start regularly amortizing the Hostess trademark beginning in the fourth quarter. Just maybe you could talk a little bit about the trigger for that. And I guess, over what period of time you're now assuming that brand will, I guess, effectively depreciate. Tucker Marshall: Yes. So as we have looked across the portfolio and as we continue to evaluate the direction of the Sweet Baked Goods category and our brands and brands in that category, we have slowed the growth rate from our original expectations at the time of acquisition. And now we have a long-term growth rate of 2%. As we've reduced that growth rate, and Mark shared in his comments and also in Q&A, we want to continue to take a prudent approach to how we invest behind that business and those brands and how we allocate resources not only to that aspect of our portfolio, but how we allocate resources toward our broader portfolio. It just came to us that we should begin amortizing that brand over a longer period of time versus it being an indefinite live one. And that's really what we were trying to signal in my prepared remarks here today. So hopefully, Steve, that just provides some additional context. Stephen Robert Powers: It does. Maybe it will be in the queue, but is there a life -- just a rate, I guess, a time span of depreciation or amortization that we should be thinking about? Tucker Marshall: Yes. So our outlook for amortization for the full year is now $210 million. That includes the step-up in amortization that begins in the fourth quarter by putting that brand on a life, and we will continue to provide updates as it relates to that amortization as we move forward. Operator: There are no further questions. I'll pass the call back over to management for any closing remarks. Mark Smucker: Well, thank you for your time and for joining the call this morning. It was great seeing many of you at CAGNY last week, where we outlined our objectives focused on continuing to advance our long-term growth strategy and furthering momentum of our portfolio of leading brands, improving profitability and earnings growth and continuing a disciplined capital deployment scheme. Our results demonstrate our strategy is working, and we continue to take deliberate actions to advance these objectives. I'm confident that we have the right strategy and leaders in place to create value for our shareholders. And none of this would be possible without our dedicated employees for their unwavering commitment and outstanding talent and contributions. And I would like to thank them for their continued hard work and dedication to our company. Have a great day, everyone. Operator: Everyone, this concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

36天前Insight Analytics约5分钟阅读

AMBP 2025 Q4 财报电话会议

Operator: Welcome to the Ardagh Metal Packaging S.A. Quarterly Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Stephen Lyons, Head of Investor Relations. Please go ahead. Stephen Lyons: Thank you, operator, and welcome, everybody. Thank you for joining today for Ardagh Metal Packaging's Fourth Quarter 2025 Earnings Call, which follows the earlier publication of AMP's earnings release for the fourth quarter and the full year. I'm joined today by Oliver Graham, AMP's Chief Executive Officer; and Stefan Schellinger, AMP's Chief Financial Officer. Before moving to your questions, we will first provide some introductory remarks around AMP's performance and outlook. AMP's earnings release and related materials for the fourth quarter can be found on AMP's website at ardaghmetalpackaging.com/investors. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from such statements. Please review the details of AMP's forward-looking statements disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings release. I will now turn the call over to Oliver Graham. Oliver Graham: Thanks, Stephen. 2025 was another year of strong performance for AMP, underpinned by shipments growth of over 3%, a favorable product mix and solid operational delivery. Our performance drove year-over-year adjusted EBITDA growth of 10%, which significantly exceeded our initial guidance. Our tight focus on cost control generated meaningful operational and overhead cost savings in the year. Our teams navigated the complexity of evolving demand patterns, both in terms of category mix and can sizes to position our capacity to support our customers' growth. From a balance sheet perspective, we ended the year in a robust position with nearly $1 billion of liquidity. In the fourth quarter, we successfully raised $1.3 billion of green bonds, which Stefan will talk about in further detail later. Our strong performance in the Americas was driven by significant growth in North America volumes of 6% for the full year and favorable mix through the high-growth energy drinks category, which more than offset the impact of softness in the Brazilian beer industry. In terms of European performance, operations and overhead cost savings as well as shipment growth in carbonated soft drinks and other growing categories offset the anticipated metal input cost headwind. In each of our regions, the beverage can continues to take share from other packaging substrates, advantaged by the cans convenience, branding potential, total cost of ownership and sustainability credentials. This supports a continued positive outlook for global industry growth. Turning to AMP's Q4 results by segment. In Europe, fourth quarter revenue decreased by 1% to $539 million or by 6% on a constant currency basis compared with the same period in 2024, principally due to the impact of a negative IFRS 15 contract asset, partly offset by favorable volume mix effects and the pass-through of higher input cost to customers. Shipments grew by 1% for the quarter with good growth in carbonated soft drinks and across our diverse range of growing categories as well as in the energy category. This was offset by a decline in beer shipments, which reflected a weaker industry backdrop as well as strong shipments in the prior year. For the full year, Europe shipments grew by 2% with growth in nonalcoholic beverages offsetting a flat performance in beer shipments. Indeed, the broad-based gains across growing categories such as ready-to-drink teas and coffees, canned wines, water and juices is testament to the ongoing innovation in the European beverage can market and to AMP's success in supporting this growth. We expect this growth to continue, helping to further diversify AMP's portfolio. Fourth quarter adjusted EBITDA in Europe increased by 14% versus the prior year to $64 million, ahead of expectations. On a constant currency basis, adjusted EBITDA increased by 8%, principally due to higher input cost recovery, which included a positive benefit from metal timing effects and favorable volume mix, partly offset by higher operations and overhead costs. Full year adjusted EBITDA of $272 million further underlines the region's improving profitability. In 2026, we expect to grow volumes by around 3% in Europe, broadly in line with industry growth. Capacity remains tight in the region, and we are therefore optimizing our network to better serve higher demand can sizes for faster-growing category. We continue to review opportunities to support our customer growth, and we are progressing plans to add additional capacity in the attractive markets of Spain and the U.K. on a measured basis over the coming years. Both projects will add capacity into existing facilities with the related moderate increase in capital expenditure to be spread across financial years. These projects are underpinned by our favorable market positions and our confidence in Europe's growth outlook, supported by the cans low penetration rate, its attractive sustainability credentials and the previously mentioned innovation trends. Beverage packaging scanner data across each of the markets in which we operate highlighted several percentage points of share gain in 2025 for the beverage can versus glass in the beer category and versus plastic in carbonated soft drink. In the Americas, revenue in the fourth quarter increased by 24% to $807 million, which reflected the pass-through of higher input cost to customers, including the impact of the higher Midwest premium in North America as well as shipments growth. Americas adjusted EBITDA for the quarter was ahead of expectations with a 6% decrease versus the prior year to $102 million due to higher operations and overhead costs and lower input cost recovery, partly offset by favorable volume mix effects. In North America, shipments increased by 9% for the quarter despite the company having to navigate some supply chain disruption. For the full year, AMP shipments grew by 6%. AMP's strong growth and outperformance in the year versus the market reflects our favorable customer and category portfolio mix weighted towards nonalcoholic beverages and in particular, our exposure to the high-growth energy category that represented 16% of our North America sales last year. Sparkling water is another notable category that performed well, which represented 11% of our portfolio. By contrast, beer represented only a mid-single-digit percentage of our portfolio. Looking into 2026, we expect industry growth of a low single-digit percentage. As previously indicated on our third quarter results conference call, we expect some softness in North America for AMP following some contract resets largely related to specific footprint situations. We anticipate 2026 being a transition year with a small volume decline before we expect to return to growth in 2027, at least in line with the industry on the back of additional contracted filling locations and our attractive portfolio. Retail scanner data so far this year is encouraging for continued beverage can industry growth into 2026. We would note that during the first quarter, some of AMPs in our customers' operations were negatively impacted by extreme adverse weather, which we assume we recover during the quarter. We also continue to manage a tight metal supply situation after disruptions in one of our major suppliers' rolling mill facilities. This is causing operational challenges, and we incurred additional costs in Q4, which we anticipate will persist through the first half of the year, ahead of the restoration of capacity as well as the ramp-up of new domestic supply. In Brazil, fourth quarter beverage can shipments decreased by 4%, which represented a sequential improvement versus the third quarter but lagged the improvement in industry performance due to customer mix. Full year shipments declined by 2%, in line with the weak overall industry volume, reflecting consumer weakness and adverse weather during the winter months. Encouragingly, industry data confirms that the beverage can gained an additional couple of percentage points of share in the beer packaging mix in 2025, in line with long-term trends. Looking into 2026, we expect industry growth of a low to mid-single-digit percentage and for AMP's volumes to broadly track the market. I'll hand over now to Stefan to talk you through our financial position for the quarter before finishing with some concluding remarks. Stefan Schellinger: Thanks, Ollie. We ended the year with a robust liquidity position of $964 million and net leverage of 5.3x net debt to adjusted EBITDA. The expected increase in the net leverage metric reflects the impact of the successful $1.3 billion equivalent green bond financing, which we closed in December. As a reminder, the proceeds of the financing were used to repay $600 million of notes due in June 2027, to repay the senior secured term loan of EUR 269 million and to redeem the preferred shares of EUR 250 million. The headline leverage metric has increased as a result of the financing and the redemption of the preferred shares with debt. This refinancing has provided several benefits, including the lengthening of AMP's debt maturities with no bonds now maturing before September 2028, simplification of the capital structure, and an annual cash savings of approximately $10 million as the higher annual cash interest is more than offset by savings related to the previous annual preferred share dividend payments of approximately $25 million. We generated adjusted free cash flow for 2025 of $172 million, which was ahead of our guidance. During the quarter, both S&P and Fitch took positive credit rating action, which reflects AMP's strong operation and financial performance. In terms of 2026, we approximately expect the following for the various components of free cash flow. total CapEx of slightly above $200 million, including growth investments, lease principal repayments of approximately $150 million, cash interest of circa $220 million, cash tax of a little bit over $30 million and a small outflow in working capital. Finally, today, we have announced our unchanged quarterly ordinary dividend of $0.10 per share. With that, I'll hand it back to Ollie. Oliver Graham: Thanks, Stefan. Just before moving to take your questions, I'll just recap on AMP's performance and some key messages. So firstly, adjusted EBITDA of $166 million in the fourth quarter exceeded our guidance range of $147 million to $162 million, with both segments performing ahead of expectations. Secondly, full year adjusted EBITDA of $739 million was significantly ahead of our initially projected $675 million to $695 million range, and this was largely driven by strong volume performance and favorable customer mix in North America as well as favorable currency movements. And finally, the beverage can continues to outperform other soft drinks in our customers' packaging mix, supporting our growth. For 2026, we are guiding adjusted EBITDA in a range of $750 million to $775 million. Adjusted EBITDA growth is expected to be driven by operational efficiencies and cost savings, shipments growth in line with industry growth in Europe and Brazil and improved category mix. We view 2026 as a transition year in North America for volumes ahead of an expected return to growth, at least in line with the industry in 2027. In terms of guidance for the first quarter, adjusted EBITDA is expected to be in the range of $160 million to $170 million, ahead of the prior year quarter of $160 million on a constant currency basis. Having made these opening remarks, we'll now proceed to take any questions that you may have. Operator: [Operator Instructions] We'll take our first question from Matt Roberts with Raymond James. Matthew Roberts: Ollie, Stefan, the first question, maybe on the 1Q guide, can you just talk about some of the volume trends by region that underpin that, what you've seen in the first 2 months of the year? Any impacts you've seen from weather in the U.S., either in regard to facility outages or natural gas effects or volume impacts at customers? Oliver Graham: Sure. Matt. So yes, we take it region by region. I think North America has had a very good start to the year in our portfolio with some key customers. But it is true that January suffered, particularly in the last week with the weather effects in the south of the country where we saw some of our facilities and some of our customer facilities unable to ship product. So we did see some reduction in what we expected for January. February and March are looking like they're tracking in line or even slightly better, though we are, as we mentioned, navigating this quite challenging metal supply chain situation. So I think we're in line and scanner trends look good. The energy category is still very strong, and we're certainly seeing that in our portfolio. So that's obviously very beneficial for mix, again, within our profit performance. Brazil, the market started in good shape. So I think 2% to 3% in January for the industry. That followed a 4% Q4 performance for the industry. So a good recovery actually as we came into the summer season after the weakness in the middle of last year. And we're currently tracking ahead of that with some good customer mix. So yes, we're very positive about Q1 performance in Brazil. And then Europe is exactly where we saw it. So I think the industry is growing broadly where we saw it. We're in line with our forecast. We had a very strong Q1 last year. So we see our growth being a bit second half weighted in Europe this year. But again, we see the industry exactly where we expected it. And if you take that all in the round, I think some very positive trends. We see no negative signs of the higher aluminum costs at the moment, which I know has been commented on quite broadly, but we certainly don't see that in our numbers or in the industry numbers at the moment. So all very positive from our point of view. Matthew Roberts: I appreciate that. Maybe on the capacity as you discussed in Europe, I seem like Spain, I think we previously discussed that last call, it seemed like U.K. might be incremental. But any additional color you could provide on the timing of when that capacity is expected to start to ramp? Any start-up costs and the related CapEx expected in '26 or '27, pending the timing there? And in Europe more broadly, I mean, some others seem to be adding in similar regions. So it seems like demand is still humming along there, but how does all the capacity inform your supply-demand, [ Oliver ? ] Oliver Graham: Yes. Look, it feels very tight. The market at the moment. I think we think it's running potentially even in the high 90s utilization as an industry. You've seen our peers' volume performance at the back end of last year and for the full year. And we also had a decent year despite some weakness in our beer portfolio. So I think that the industry backdrop is highly constructive and you're talking about a market now of nearly 100 billion cans. So if it grows 3% to 5%, it's a couple of can plants a year that are needed. And we certainly see shortages on specific sizes right across the continent and in certain regional pockets. So I think the backdrop is very constructive. We have a strong position. We particularly have strong positions in those markets, and we have customers who are looking to grow and who need our support. So I think it's broadly in line with our share position that we're adding this kind of capacity with a line in each of those facilities. It's over the next 2 years or so, some possibly into the third year with the CapEx spread across that period. And I think we signaled a moderate increase to our overall capital guide for this year. So you can think of that as around 10% as an increase. So not very material, to be honest, as we already have some of the growth CapEx in this year. So yes, we regard these as very good projects in a very constructive market environment. Operator: We'll go next to Josh Spector with UBS. Anojja Shah: It's Anojja Shah speaking in for Josh, that you reported some pretty good pickup in Brazil there. What are you thinking around World Cup for this year? And what kind of pickup, if any, and when exactly you think it might hit? Oliver Graham: Yes. I mean I think once we're in a low to mid guide, then I think we see that as broadly incorporating the World Cup effect and maybe it pushes more towards the mid. Obviously, Brazil can move very fast across the growth trajectory. We've seen it over the last few years. And so obviously, if Brazil go deep into the tournament and the weather is reasonable, then we could see some pickup. But I think we're comfortable with the sort of 3% to 5% guide for the market and that we're in line with that. But I think that should be constructive in -- obviously, in the winter season, which is helpful. So we should see some good comps versus what was a pretty weak winter season last year. And then when you get it, yes, you get it in the months running into the tournament. So obviously, there'll be some inventory build, and then we'd expect to see some sell-through as the tournament goes. So you'd expect to see it in Q2 pretty much. Anojja Shah: Right. Okay. And then you also -- in North America, I think you did have a comment in the press release about lower input cost recovery in North America. What is that exactly? Is it stuff besides aluminum and tariffs and things that are an immediate pass-through like is it a PPI sort of index where it's a once a year pass-through? And any outlook on that... Stefan Schellinger: Yes. So I think we referred to some supply chain challenges and operational challenges relative to the metal situation. So that then triggers some operational actions. We need to do shorter runs. We need to move volume within our manufacturing network. Some of the freight lanes get suboptimal. So it's a little bit of nonrecovered freight and a little bit of nonrecovered costs associated with those -- so let's say, a knock-on effect of those supply chain metal disruption causing operational disruption. Anojja Shah: So it does sound like that might persist through the first half then of this year. Is that right? Stefan Schellinger: Yes. I think that's a fair assumption. Operator: We'll go next to Stefan Diaz with Morgan Stanley. Stefan Diaz: Maybe just piggybacking off that last question. At the same time, you also noted in the release some operational efficiencies and other savings that you expect in 2026. Can you just give some details on the potential sizing and benefits and whether these improvements are in any specific regions or if these improvements are just maybe some of these operational challenges kind of just falling off? Oliver Graham: No, I think that every year, we obviously make operational improvements and savings right across our network, all regions. So the normal things lightweighting the can, improving -- reducing spoilage, implementing our production system across our plants to drive best practice and lean activity. So I think we're just citing the fact that those savings are being delivered. We have set some challenging targets this year, but we expect to be able to deliver them. And obviously, that offsets some of the slight volume weakness we have in the North American business. So I think it's more a general comment right across the business. Stefan Diaz: Okay. Great. That's helpful. And then it's been a few months since the Ardagh Group restructuring. Do you have any updates for us there? I know in the release, you said no changes to capital allocation, but any potential changes in strategy just given that? Oliver Graham: No, absolutely not. I think AMP has got a good strategy. It's been working. You've seen the delivery in 2024 and '25 and the guidance we're giving for '26. And you've seen our outperformance in various markets and the drop-through into our profitability last year relative to our volume growth. So I certainly don't think anyone wants us to change strategy. And at the minute, as we've signaled in our capital allocation policy not changing either. So I don't think there's anything to see here in terms of changes since the restructuring transaction. Operator: We'll go next to Anthony Pettinari with Citi. Bryan Burgmeier: This is actually Bryan Burgmeier filling in for Anthony. I appreciate the detail on Slide 8 on the share gain in Europe that the can has realized over the last year. Are you able to maybe provide a sense of how penetrated the can is in Europe and maybe beer and soft drinks relative to North America just as we kind of think about kind of the room to run for future share gain in Europe? Oliver Graham: Yes, much less penetrated, right? So I mean, I think that's one of the arguments why there is a long way to run. I think we think the can is 40%, 50% penetrated in North America. U.K. is the most penetrated European market sort of approaches those levels a bit less. But Germany is 1/4 of that. So we've got a long way to run. The German situation was very specific with a very poor poorly designed deposit scheme implemented in 2003 with no return path for the can. Can was essentially delisted out of retail overnight and has been on a long recovery ever since. And the German can market can grow 10% in the year. And for example, last year, there was a 20% growth number for German soft drinks in cans. So pretty dramatic numbers for a staple packaging product. So yes, we see the U.K. very strong last year, showing many of the similar trends as the U.S. with a lot of innovation going into the can and pretty strong antiplastic sentiment. And obviously, glasses had difficulties in the last few years with the high energy costs. And then the can also really demonstrating a lot of sustainability credentials with very high recycling rates, high recycled content and a pathway to a significant decarbonization through the measures the industry is taking right through the value chain. So I think you add all those things together and you get a strong set of prospects and the penetration rate just illustrates one of them. And then I think if you look at the growth rates, we and our peers have posted for the last few years and the projections we're all giving, it's clearly a very constructive backdrop for the European can market. Bryan Burgmeier: Yes. Got it. Appreciate that. And then just last question for me, and I can turn it over is I'm not sure if we're expecting any more kind of incremental headwinds in Europe from the aluminum conversion costs or maybe any PPI pass-throughs. And if we are, can you maybe provide a little detail if those are going to be better or worse on a year-over-year basis compared to last year? Stefan Schellinger: Yes. No, I think we are through that. I think that was really predominantly a 2025 issue though we don't expect a material headwind in that regard. Operator: We'll go next to Mike Roxland with Truist Securities. Michael Roxland: Ollie, you mentioned a couple of times, this is a transition year for the company, especially in North America. It seems like you lost a little bit of share to peers, but then you're gaining some new filling locations in 2027. To the extent you can comment on this form, what end markets are those new filling locations occurring in? Are they with existing customers? Are they with new customers? And how -- can you give us a sense also how you're contracted roughly for 2028? Oliver Graham: Sure. Yes, Mike. So look, I think those filling locations are broadly aligned with our portfolio. So weighted more towards the soft drink side of the house like our portfolio. So those are principally those. There is some in beer, but then in specialty sizes, which I think is obviously where we want to be. And yes, entirely with existing customers. So these are very long-term relationships where the quality of the customer service and the relationship is driving those gains. So -- and I think it is only a transition year really in North America. I think Europe and Brazil pretty straightforwardly, just tracking alongside the market. Michael Roxland: Got it. And then just for 2028, any early read just in terms of what you think from items? Oliver Graham: Yes. So I think, I mean, we and our peers have commented on this, but we went through sort of significant contractual events in some of the big customers in '24, '25. So we're very heavily contracted now through the next few years into the end of the decade. And I think that's been commonly commented on in the industry. Michael Roxland: Got it. That's very helpful. And then just one more quick one. Last quarter, and you may have mentioned this before, if you did, I apologize. But last quarter, you mentioned being tight in certain specialty sizes in Europe, close to some growth last year. You started doing some -- you intend to do some projects 4Q into 1Q that give you additional capabilities for specialty. So where do those projects stand right now? And do you know that where does the project stand? And can you remind us what capital is involved in doing that? And are you in a position where you're not going to lose additional share because you have the functionality now in specialty to meet your customer needs? Oliver Graham: Thanks, Mike. Yes, good question. So yes, the projects in our plant in France has gone very well, ramping up again ahead of expectations, giving us more specialty capability and different specialty capability and more regional -- better regional alignment of supply to also reduce freight, reduce out-of-pattern freight. So I think that's going well. And yes, we'd be hopeful that, that positions us well for the coming season. It's clear those trends are continuing in Europe, a bit like North America with the specialty sizes growing. So we think, yes, that puts us in a better position for this year for sure. Michael Roxland: Good luck in '26. Oliver Graham: Thanks a lot. Operator: We'll go next to Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: Congrats on a strong '25 and an outlook for '26. So I guess just on the outlook. So it sounds like there are some customer mix issues that would maybe push you to the lower end versus industry growth. And also, would you highlight anything else there? Are you pretty much sold out as well as maybe some of your competitors are? And then I guess also -- I'll start with that. Oliver Graham: Yes. No, if we managed to convey that message, that's a misunderstanding. We definitely have no mix issues. We have mix gains, I think it's only North America, but I think we signaled it at the Q3 call that there were some contract resets that meant we have an overall volume reduction, actually not really in specialty sizes, mostly, largely linked to some footprint changes in the market. That's footprint on the side of our customers who were rationalizing filling locations, but also footprint as a result of new can plants that were built post-COVID and also footprint from contracts that we had entered into in the expectation of building additional capacity that when the growth came off in 2022, '23, we didn't build. So when you added all that up, there were some logical resets in terms of facilities that were closer to the new customer footprint. So that was an overall volume effect, only North America, nothing to do with Europe or Brazil. And I think what we were trying to signal in the remarks and in the release is that we see positive mix effects in '26 to offset some of that. Arun Viswanathan: Okay. And then just a question on the metal side. So obviously, the Midwest premium is up significantly. Do you see that as potentially impacting can demand? I know there's been some substrate shift away from other substrates, including glass, as you noted. But is there -- are we approaching maybe a ceiling on that, just given some of this increase in the Midwest premium? And do you see that kind of changing or maybe even reversing at any time in the future given volatile tariff dynamics? Oliver Graham: Yes. We certainly hope it changes because it's very extreme and it doesn't make any sense in terms of obviously, the aluminum supply chain. But -- so yes, we certainly hope that it comes back into normal ranges at some point in the future. Yes, I mean, I think that I mentioned it at the top of the call, we're not seeing any change at this point. And obviously, customers and ourselves have hedges. So we don't know exactly when people entered into hedges and when they roll off. So we wouldn't be able to sensibly rule out any impact from this. But at the minute, we don't see it. And again, there are some strong trends that are driving the growth in terms of the way innovation has gone into the can, the sort of retail shelf sets that have been put in place to accommodate that, the consumer reaction to cans versus plastics, some of the energy cost issues that we see and the overall cost issues we see on the glass side. So I think there's some big trends behind the growth of the can as well. And obviously, there may be some headwind at some point from the high aluminum costs, but we're not seeing it in the data. We're not seeing it in the market data, and we're not seeing it in our sales at this point. Arun Viswanathan: And if I can just ask on Europe. You mentioned growing your capacity in the U.K. and Spain. What's kind of the time line? And what kind of impact should we expect that, that could contribute to your overall growth? Oliver Graham: Yes. I mean we said, look, over the next few years, we'll -- like we always do, those projects tend to cross a couple of calendar years and so does the CapEx. And look, we're very tight. So all we're really doing there is giving ourselves the capability to grow with the market or maybe a tick ahead but broadly with the market. So again, I think you've heard pretty consistent commentary that the European market broadly is in a 3% to 4%. I think some of our peers would say 3% to 5%. It depends a bit on geographic mix, category mix. But if you're in that sort of range, and we expect to be, then we need to be adding this kind of capacity on a reasonably regular basis. Operator: [Operator Instructions] we'll go next to Gabe Hajde with Wells Fargo Securities. Gabe Hajde: I may have misheard you, Ollie and I apologize. Did you mention Q4 EBITDA in Europe was, in fact, better than planned on metal timing effects. And again, if I misheard you, I apologize. Does any of that carry over into the first half? And then the supply disruptions, just to be clear, it's basically isolated to some of the rolling mill issues that we're having. And if you're willing to quantify maybe the hit that you had in Q4 '25, what you're embedding in for the first half of '26, by our math, it would be maybe $5 million to $8 in the first half of '26? And then a couple of follow-ons. Oliver Graham: Yes. I mean, Gabe, I'll let Stefan comment too, but I think that's reasonable and the lower end of that range is sort of broadly where we saw Q4, I think. So that's fair, I think. And obviously, we've given guidance, including these sorts of thinking. Yes. And then Europe, I think it was an aspect of Q4. But again, I'll let Stefan comment on that one on the metal timing. Stefan Schellinger: Yes, I think that's exactly right. We would benefit from it, but it was not the entire EBITDA growth that was a result of metal timing. Oliver Graham: And I don't think it's a particular impact in H1 this year, right, which is the other Gabe question. Stefan Schellinger: Yes, I think it is. Yes. Oliver Graham: Yes. Gabe Hajde: Okay. So no carryover effect from metal timing in Europe that was just isolated to Q4? Stefan Schellinger: There's no material expectation. Oliver Graham: Yes, I mean it does depend, Gabe, as you know, a bit on what happens with LME and Midwest. So obviously, we can't be absolutely certain because it depends a bit what happens, but there's nothing material in the plan. Gabe Hajde: Okay. And then I guess maybe to put a finer point, I mean, it sounds like we're talking about two additional lines, one in each plant in U.K., Spain and traditional yield out of those is still something 1 billion to 1.2 billion units? Oliver Graham: Yes. I think -- I mean, we may start slightly shy of that as first phase. But again, you know the lines are pretty modular now. So you can go up in a couple of steps from slightly below 1 billion. But yes, these are the kinds of ranges we'll be in. Gabe Hajde: Okay. And then one clarification or a point on cash flow. Stefan, I think you mentioned lease principal payments 150 this year. I think that's up pretty materially from $111 million in 2025. Is that sort of at a steady state at this point? Or does that go up again maybe in '26, '27? Stefan Schellinger: So no, to be clear, I said $115 million, $115 million, so apologies if that wasn't clear, but it's $115 million. So it's a $5 million higher than what we've seen in 2025. And that should be a number that should be relatively steady going forward. Operator: At this time, there are no further questions. I will now turn the call back to Oliver Graham for additional or closing remarks. Oliver Graham: Thanks, [ Jennifer. ] So just to recap, in 2025, we reported global shipments growth of over 3% and adjusted EBITDA growth of 10%. We finished the year strongly as fourth quarter adjusted EBITDA exceeded our guidance with both segments performing ahead of our expectations. We're looking forward to a good performance again in 2026 and are guiding for adjusted EBITDA in the range of $750 million to $775 million. Thanks for your time today, and we look forward to talking to you again at our Q1 results. Operator: This does conclude today's conference. We thank you for your participation.

36天前Insight Analytics约5分钟阅读

BSY 2025 Q4 财报电话会议

Operator: Good morning and thank you for joining Bentley Systems Q4 and Full Year 2025 Results and 2026 financial outlook. I'm Eric Boyer, Bentley Systems Investor Relations Officer. On the webcast today, we have Bentley Systems Executive Chair, Greg Bentley; Chief Executive Officer, Nicholas Cumins; and Chief Financial Officer, Werner Andre. This webcast includes forward-looking statements made as of February 26, 2026, regarding the future results of operations and financial position, business strategy and objectives for future operations of Bentley Systems, Incorporated. All such statements made in or contained during this webcast other than statements of historical fact are forward-looking statements. This webcast will be available for replay on Bentley Systems Investor Relations website at investors.bentley.com on February 26, 2026. After our presentation, we'll conclude with Q&A. And with that, let me introduce the Executive Chair of Bentley Systems, Greg Bentley. Gregory Bentley: Thanks to each of you for your interest and attention. Nicholas will review the factors behind our stalwart 2025 operating results, and Werner will then provide our consistent 2026 outlook. So I'll take a longer-term perspective. First, as I hope we'll be welcoming some new investors, I'll begin with an update on Bentley Systems' financial fundamentals. With 2025 results, I can extend my previous review of our first 5 years as a public company to now focus on the years since pandemic disruptions. Our business model prioritizes durability and visibility. Our key metric, annual constant currency ARR growth has been reliably sustained in the low-double digits since 2022. This business performance measure excludes the ARR onboarded with our major platform acquisitions, Seequent and Power Line Systems. In 2025, the portion of this growth from smaller programmatic acquisitions was at a low of under 40 basis points. During the earlier of these years, rates of inflation as shown here for the U.S. were significantly higher. So in ex inflation real terms, our ARR growth has been more than maintained. Reflecting our standing commitment to annually improve profitability as we gain efficiencies, especially from our 94% direct sales motion, our adjusted operating income grows faster than revenue. As we regard stock-based compensation as fungible with cash, our key profit measure is AOI less SBC. Having institutionalized annual improvement of about 100 basis points in margin, since 2022, we have compounded AOS (sic) [ AOI ] less SBC dollars at over 16% per year. Our straightforward revenue recognition primarily ratable and almost never for multiple years and annually prepaid subscriptions make free cash flow also predictable though subject to variations in working capital, taxes and interest. With such factors having been favorable in 2025, our free cash flow margin reached 35%. However, cash flow isn't truly free to the extent it must be allocated to offset share dilution from stock-based compensation. Our truly free cash flow margin, that is less SBC, reached 30% in 2025. For valuation benchmarking, one must reckon per share. Our fully diluted share count has been substantially constant including punitive dilution from the convertible debt that funded our platform acquisitions. But last month, we retired the maturing 2026 convertible debt as will presumably occur again next year, reducing our fully diluted share count by about 3%. And having reached a satisfactory target range of about 2x, we have completed delevering since the platform acquisitions and can now allocate more of our cash flow generation towards scaled up programmatic acquisitions. The consistent 2026 financial outlook Werner will present, reflects our confidence in both our robust end markets and in sustaining our execution fundamentals. But market perceived risks of AI interloping seem to have discounted our value thereafter to nearly terminal. In fact, for Bentley Systems, AI is not a risk to be countered but an unprecedented opportunity. Distinctive fundamentals of infrastructure engineering serve substantially in our favor. As the industry's established and trusted digital quartermaster, we are best positioned to catalyze with infrastructure engineering organizations, the value to be realized by taking full advantage of AI's potential to transform the substance of their work. Over 42 years, our key advantage has been providing continuity across technology generations, something highly valued for long-lived infrastructure projects, assets and engineering careers. Based on our actual experience over these decades, enabling and then encouraging progress from CAD to BIM to digital twins, the faster AI and its integration improves, the better for Bentley Systems. The deliberate pace of technology adoption in infrastructure and engineering is rooted in legitimate prudence. Each of our lives and much of their quality depends on vital infrastructure, meeting standards for safety, resilience and fitness for purpose. This is why specific to public infrastructure, regulatory regimes variously require a licensed professional engineer to personally seal project deliverables, vouching under penalty of law and of liability that they supervise the work. This requirement cannot be met by casually adopted unproven AI tools. Institutionally and contractually, project collaborators across engineering disciplines must adhere to formally structured interactions and data formats. Owner operators and engineering enterprises mandate strictly approved tool sets for interoperability and quality assurance. In this world, do-it-yourself AI tools without years of vetting would confine and engineer to trivial work at their own risk. From a practical standpoint, the nature of our applications is unlike the administrative software now suspected to be vulnerable to AI replacement. Like other professionals, infrastructure engineers do use administrative software but not from Bentley Systems. Our applications are virtually devoid of the forms, transactions and text that characterize administrative work. The screen capture as you see here, include, by the way, a data center site as typically construction modeled by DPR construction, a world leader in virtual design and construction. Infrastructure engineering is performed through immersive, interactive, 3D geospatial modeling experiences like these with almost all projects juxtaposed within real-world brownfield environments. Their design requires all context all the time while orchestrating complex algorithms and simulations. And while engineering is a creative profession, unlike other 3D creators, an engineer cannot be satisfied with the notional abstractions of mere visualization, often what can't be seen is most important. Precision is paramount with zero tolerance for approximation, let alone hallucination. Beyond the confidentiality required for physical and cybersecurity of essential infrastructure, their designs constitute the valuable intellectual property of engineering firms and their owner-operator clients as by far the long-standing primary system of record for infrastructure design, all data managed through project-wise within Bentley Infrastructure Cloud is strictly proprietary to the engineering organization. We responsibly steward this complex engineering data for their authorized use only, including for AI training. There is no such credential data publicly accessible to be script for such training. In any case, our users' economic incentives to seek alternatives are perhaps surprisingly mild. Though mission critical to produce, capture and deliver an engineer's work, our software costs on average per user day, only about 3% of that user's burdened daily labor cost. This low substitution rate of technology for labor compared to other industries is likely rooted in owner-operators archaic norm of paying by the hour and often based on low bid for engineering services, perversely disincenting advances in productivity. Spurred by now chronic shortages of engineering capacity, I believe that AI is poised to transform infrastructure engineering business models to finally compensate not for man-hour inputs, but for better quality outcomes. All votes will be raised, but especially software and computing spending per engineer with AI agents automating design optimization. Engineers could, of course, improve their designs without automation to the extent they would be allowed time to explore more iterations. But with the current technical norm of attended consumption, compounded by the current commercial norm of hourly billing, budgets rarely afford such repetitions. AI can break through this bottleneck by enabling an engineer's AI agents to automate the workflow of systematically permuting the engineer's initial design over a many-dimensional solution space, for instance, varying geometry, dimensions, materials, capacities, utilization and so forth. As a start for this, we are already providing Copilot AI for users to create from natural language, scripts that run against the APIs of some of our applications. Through many more APIs to be instrumented across our portfolio, these automation agents will headlessly invoke our proven modeling and simulation functionality and a heuristic search strategy to converge to qualified superior alternatives for the human-in-the-loop to subjectively assess. But consider that AI could extend design optimization even further. For example, to reuse proven components from past projects and to minimize construction effort, schedule and risk. The potential incremental value of such optimization can reach a very significant portion of infrastructure projects, total installed cost, which together is literally in the trillions of dollars annually. Owner operators will willingly pay more for designs accordingly AI optimized for quality. Project delivery teams finally will be able to expand beyond the current constraints of engineers' time and will compete to generate value by leveraging their IP in AI agents and in proprietary project and asset data. For our part, Bentley Systems will, in due course, incrementally monetize API consumption on a scale orders of magnitude greater than that of continuing attendant consumption. But a quite immediate opportunity already open for us is to apply AI and digital twins toward optimizing the operations and maintenance life cycle of assets. This is a committed priority of Bentley Systems' new management generation. Our comparatively small proportion of revenue from asset performance to date in relation to years of investment shows how slow this had been to significantly grow. But more recently, in conjunction with fast improving reality capture technologies ranging from drones through dash cams, AI has enabled instant on digital twins. Our asset analytics strategy accelerated by year-end acquisitions reached the $50 million run rate milestone for asset consumption revenue in 2025. Our progenitor OpenTower iQ continues its leadership with ARR now in 8 figures. It exemplifies our winning strategy, uniquely combining market-leading digital twin creation with best-in-class engineering simulation. Blyncsy for roadway operations also had a breakthrough 2025 and is now being piloted by many departments of transportation. Hawaii announced a statewide commitment including providing dash cams to drivers to extend coverage. Alabama is using Blyncsy to improve decisions on maintenance and capital project spending. Our 2 acquisitions were strategically complementary. We acquired the assets of Pointivo, whose R&D and valuable patent portfolio, extend our asset analytics platform in new directions. Pointivo software has been broadly applied for advanced AI-based point cloud processing, automated measurement and condition analysis and inspection workflows. And we acquired Talon analytics, the leader in asset analytics for telecom and utilities, with capabilities proven at the level of 8-figure contracts. Talon originated drone capture for wireless structures and evolved its AI-based software to expedite construction completions and ongoing maintenance. Talon already relied on our iTwin Capture for engineering-grade digital twins. Recently, they collaborated with integrated grid utilities to pioneer AI-based digital twins for electrical distribution poles to automate the structural analysis for hundreds of thousands of poles we help Talon to implement API consumption of our SPIDA simulation software. To gauge the potential for this, the U.S. alone has 180 million distribution poles. And for each digital twin inspection and simulation, our Talon asset consumption revenue is in low-double digits. By law, distribution pole inspections are required only every 5 years, which is a reason that classification as ARR is not obvious. The best outcome is for digital twins and AI to make annual monitoring affordable and effective. The next opportunity for our expanded asset analytics platform is to leverage Power Line Systems simulation to improve resilience of electrical transmission tower capacity. That's the infrastructure most needed for AI computing to grow. For API consumption, we are now prioritizing propagation. But I consider that the progression we've just talked about from Talon's 7-figure API usage to our mid-8 figures of asset consumption revenue to be representative of our potential to monetize AI at scale. By virtue of Bentley Systems majority family ownership, our compass has always been set to benefit the long term. Our solid financial fundamentals and our directly relevant organizational experience equip us to tolerably bear the marginal risks and volatility inevitably associated with these increased AI investments and ambitions. My assessment is that AI transformation for infrastructure engineering augurs better times than ever for Bentley Systems. Here's to 2026 and beyond. And now over to Nicholas. Nicholas Cumins: Thank you, Greg. Building on the context you've provided for AI, I want to start today by outlining our strategy, the significant progress we made in 2025 and how we plan to execute on it going forward. Our approach is twofold. We are not only embedding our own AI capabilities into our products but also instrumenting our platforms, so our users and partners can build their own AI-driven workflows. We're investing in AI across our entire portfolio. But for this conversation, I want to focus on 3 key areas that are central to our business and represent a comprehensive and principal approach to infrastructure AI. First, in Bentley open applications, we're leveraging AI to enhance the work of engineers. This includes leveraging AI to automate interactions with our applications such as the python assistant for MicroStation, automate time-consuming design tasks like generating drawings annotations for OpenRoads and even optimize entire designs as seen with the site layout optimization in OpenSite+. Just as importantly, our applications serve as a critical environment where AI recommendations are not just tested but continuously optimized. This is not a single pass fail gate. It is an iterative process where software is used continuously improve the AI orchestrated design, ensuring it becomes progressively more sound. This process naturally drives greater consumption of our applications core engineering capabilities as they become central to the AI-driven design workflow. Second, Bentley Asset Analytics, which Greg spoke about, uses a 2-step process. It leverages AI, primarily computer vision, to process imagery and detect features on an asset. It then uses Bentley Open Applications to understand what those features mean from an engineering perspective. For example, can a tire safety take on more load. The output is actionable engineering intelligence that an AI workflow can then use, for example, to automatically trigger remediation work in a third-party EAM system, like IBM Maximo. Third, Bentley Infrastructure Cloud serves as the data foundation for AI. This is where the world's leading engineering firms manage the design files for their current and past projects, primarily using ProjectWise. Our iTwin technology provides the capability to access data from countless file formats and systems and map it to our base infrastructure schema, making it ready for AI. This unlocks tremendous potential. It allows engineers to search past project data using natural language. It will enable our users to fine-tune our AI models with their own proprietary data or even train entirely new custom models. We envision in not-so-distant future where Bentley copilots drawing on an organization's past projects stored in Bentley Infrastructure Cloud can proactively recommend the best design components. And crucially, as Bentley Infrastructure Cloud maintains a digital thread through operations, it will be able to surface invaluable performance data from the field. This will allow users to understand how designs created before have held up over time, providing a historical evidence-based foundation to inform and derisk the next generation of designs. But leveraging historical data is only the first step. The true power of our integrated platforms comes to life when Bentley copilot itself becomes an optimizer. Imagine it not only recommending that proven component, but then offering to reduce its carbon footprint using iTwin capabilities, refine its foundation with PLAXIS, optimize its structure with STAAD and ensure its constructability with SYNCHRO. That is the unique compiling power of a truly integrated platform for infrastructure AI. Finally, all of this is built on a principal approach to data. Data ownership is a critical topic in infrastructure. What makes us distinct is our unwavering commitment to data stewardship, a principle we first articulated in 2023. Our users and only our users decide if and when their data is used to train AI models. To enforce this, we provide a data agreement registry, where an account can formally correct or revoke its consent to have its data included in AI training sets, ensuring they remain in full control. I want to be clear about our commercial approach to AI as it is intentionally different across the portfolio. With Bentley Asset Analytics, AI is applied to mature operational needs where it delivers tangible ROI. Our focus there is rightly on driving revenue growth. For the foundational area of AI in design, however, we are playing a longer game. These are still early days for applying AI to mission-critical engineering. Therefore, our immediate priority is to lead the exploration for the highest value AI-powered workflows while at the same time, building the market and driving their adoption rather than focusing on direct monetization. As the infrastructure engineering software company, we believe it's our responsibility to lead this transition thoughtfully. This means actively engaging across the entire infrastructure ecosystem. From our deep collaborations with engineering firms and owner operators, to policy discussions with government bodies and partnerships with other technology leaders, we are helping to establish the standards and trust necessary for this technology to be adopted safely and effectively. Through these efforts, we are building the foundation of usage and trust first, confident that monetization will follow as these new AI powered workflows mature and prove their immense value. So that is a strategic foundation we are building for our next phase of growth. Now turning to our results from the fourth quarter. Our performance shows the continued strength of our established business today. We delivered a strong finish to the year, and that momentum gives us confidence in our 2026 outlook, where we aim to deliver another year of compounding results within our financial framework. I want to thank all of our colleagues for their dedication and hard work and our users for their continued trust. Q4 ARR increased 11.5% year-over-year, which was a solid increase from Q3 as we expected. Net revenue retention was stable at 109%. E365 performance remained steady, and we added 300 basis points of ARR growth from new logos once again, primarily within the SME segment. For the 16th consecutive quarter, we added at least 600 new SME logos through our line store, with retention in this segment remaining high. Turning to our total business by infrastructure sector. Resources was once again our fastest-growing sector. The standard growth of Seequent is expanding our addressable market into critical resources, a domain that includes mining as well as new energy sources and groundwater. The performance of Seequent, even during the recent mining slowdown, demonstrates the resilience of its business model, which is deeply embedded in operational workflows rather than cyclical capital projects. As market conditions in mining continue to improve, we are confident Seequent will remain a key growth engine for us in 2026 and beyond. Our largest sector, Public Works Utilities, delivered another quarter of strong growth, driven by sustained global infrastructure investment and the standout performance of Bentley Asset Analytics. Power Line Systems also continues to be a key growth driver, benefiting from global demand for grid resilience and increased power generation. Growth in the industrial sector was solid, while commercial facilities remain relatively flat. Turning to our total business by geographic region. Our largest region, the Americas, saw another quarter of strong growth. This was driven by a favorable macro backdrop for infrastructure investment that we expect to continue into 2026. The U.S. market remains healthy with stable public funding, ensuring that project backlogs remain large, and engineering services firms busy. We also see our accounts already at capacity, capitalizing on the large private sector investments in data centers, driven primarily by demand for AI computes. Even though the core design work is more akin to building design, the immense strain these projects place on the local infrastructure, in particular, the power grid and water network, creates a sustained tailwind for a broad portfolio of infrastructure engineering applications. Beyond infrastructure, the U.S. administration's announcement of Project Vault, a $12 billion investment to establish a strategic reserve for critical minerals, is a clear signal of a broader global trend, the imperative to secure domestic resources, which in turn drives the mining activity that benefits Seequent. Growth in EMEA was once again led by the Middle East. We expect this exceptional performance to continue in 2026 as investments there shift towards transportation, utilities and mining, playing to our strength even more. Europe delivered a strong quarter with infrastructure clearly remaining a top priority for the EU. This was evidenced by several policy initiatives published in Q4, targeting key strategic goals, energy transition, transport connectivity and supply chain security. The U.K. was softer in Q4, reflecting the tail end of project pauses from earlier in 2025. However, looking ahead into 2026, the pipeline for design and engineering work is improving significantly. For instance, we were very encouraged by last month's green light for Northern Powerhouse Rail. This adds another multibillion pound project to the design pipeline alongside massive engineering efforts now underway such as Sizewell C. In Asia Pacific, India delivered solid growth. The long-term outlook here remains strong. In addition to ongoing investments in transportation and the world infrastructure, the country's 2047 vision calls for a massive investment in grid modernization to provide power for all. With Power Line Systems as the industry standard for transmission engineering, we are uniquely positioned to help. China, which represents approximately 2% of ARR, continue to be impacted in the quarter by the economic and geopolitical headwinds, which are likely to remain through 2026. Growth in Australia is showing signs of recovery as headwinds from government changes and a pause in transportation projects subside. We expect stronger growth in 2026 driven by a resurgence in the mining sector and new infrastructure projects related to the Olympics. All in all, we are very pleased with the continued strength of our business, and we are well positioned with a great foundation and strategy to help the infrastructure ecosystem, leverage AI to deliver even better outcomes. And now for a detailed review of our financial results and outlook for 2026, over to you, Werner. Werner Andre: Thank you, Nicholas. We are pleased with our finish to a solid year of financial performance, which marks a strong close to 2025. We delivered strong financial results for both the fourth quarter and the full year. For the full year 2025, total revenues were $1.502 billion, growing 11% on a reported basis and 10% in constant currency. For the fourth quarter, total revenues were $392 million, an increase of 12% reported and 10% in constant currency. The primary driver of our growth continues to be our mainstay subscription revenues. For the full year, subscription revenues grew 13% reported and 12% in constant currency. This strong growth continues through year-end with fourth quarter subscription revenues also growing 13% reported and 11% in constant currency. Subscription revenues now represent 92% of our total revenues, up 2 percentage points from 2024. Our E365 and SMB initiatives remain solid contributors with E365 now comprising 45% of our subscription revenues, an increase from 42% in 2024. Our smaller and less predictable revenue streams performed as we signaled during the year. Perpetual license revenues were essentially flat for both the quarter and the full year. For services revenues, the full year decline of 6% reported and 7% in constant currency was consistent with expectations. The fourth quarter saw a modest increase of 4% reported and 2% in constant currency. Last 12 months recurring revenues increased by 12% year-over-year and represent 93% of our total revenues, up 2 percentage points year-over-year. Our last 12 months constant currency account retention rate remained strong and consistent at 99%. Our constant currency net revenue retention rate remains at a strong 109%. The combination of our high retention rates and new business momentum gives us confidence in the continued durability of our recurring revenue growth. Now turning to ARR. We ended Q4 with ARR of $1.462 billion at quarter end spot rates. On a constant currency basis, our ARR growth rate was 11.5% year-over-year. The sequential quarterly growth of 4% was in line with the expectations we set in Q3, reflecting our typical fourth quarter seasonality and the timing of anticipated asset analytics deals and programmatic acquisitions. For the full year, M&A contribution to our ARR growth was less than 40 basis points. Turning to profitability. Our GAAP operating income was $79 million for the fourth quarter and $363 million for the year. I've previously explained the impact on our GAAP operating results from deferred compensation plan liability revaluations and acquisition expenses. Adjusted operating income less stock-based compensation was $94 million for the quarter, with a margin of 24.1%. The strong quarterly margin expansion was in line with the OpEx seasonality we discussed in our last call. For the full year, adjusted operating income less stock-based compensation was $430 million, up 16% with a margin of 28.6%. This represents 110 basis points of margin improvement year-over-year, in line with our full year outlook. Our free cash flow generation for the year was very strong, totaling $520 million, up 24% year-over-year. The fourth quarter, in particular, significantly exceeded our expectations, driven by continued strong collections and effective working capital management. While we are pleased with this result, please note that Q4 is our largest renewal quarter, but the timing of collections can introduce variability across calendar years. We maintained our disciplined and balanced approach to capital allocation. In 2025, we invested $93 million in acquisitions, while strengthening our balance sheet by paying down $135 million in bank debt and repurchasing $10 million of convertible notes. We also delivered substantial returns of capital, deploying $157 million for share repurchases and $85 million for dividends. Our balance sheet provides significant strategic flexibility. At year-end, our $1.3 billion revolver remains undrawn with access to an additional $ 500 million accordion feature. And we reduced our net debt leverage to a healthy 2.1x, a 4-year low. Our current leverage range and cash generation affords capacity to fund dividends and ongoing share repurchases and up to $400 million in programmatic acquisitions annually. Subsequent to year-end, we retired our 2026 convertible notes at maturity, utilizing available cash on hand and approximately $600 million from our revolver. Retiring this convert reduced our fully diluted share count by approximately 3%. While this repayment shifts our debt profile, we continue to actively manage our interest rate exposure. We have safeguards in place, including the low fixed coupon on our remaining convertible notes and a $200 million interest rate swap expiring in 2030. In summary, we entered 2026 from a position of strong financial fundamentals. This provides the foundation for our outlook which builds on our long-term objectives of durable low-double-digit ARR growth, continued annual margin expansion and strong free cash flow generation. For 2026, we expect our total revenues constant currency growth to be in the range of 11% to 13%. At current exchange rates, this translates to total revenues in the range of $1.685 billion to $1.750 billion. Our mainstay subscription revenues which comprise 92% of our business are expected to grow between 11% and 13% in constant currency. In our smaller revenue streams, we expect a reacceleration in our service revenues with constant currency growth between 15% and 20%. This is attributable to increased scale of our Asset Analytics business as well as strong order book for our Cohesive Maximo business. We expect perpetual license revenues to remain relatively flat. Turning to our primary metric of business momentum. We are projecting constant currency ARR growth between 10.5% and 12.5%, reflecting momentum in our established business and that upside from our AI-powered Asset Analytics initiatives isn't necessarily annual recurring. Now turning to profitability. Our long-term financial framework includes a commitment to deliver approximately 100 basis points of operating margin improvement annually. Historically, our margin percentage has had a natural hedge against currency fluctuations. However, as our business mix has evolved primarily with the growth of Seequent, which builds globally in U.S. dollars, but has significant cost in other currencies, our exposure has shifted. While a weakening U.S. dollar can now create a headwind to our reported margin percentage, it also provides greater stability to our margin in absolute dollars. To reflect the shift towards increased stability of our absolute profit dollars, we will now provide our profitability outlook as a dollar range. Before I provide that range, I want to note one final refinement to our primary profitability metric. Going forward, our focus will be on adjusted operating income less operating stock-based compensation. This changes for consistency. Our metric has always excluded cash-settled acquisition-related stay bonuses, and this refinement simply aligns the treatment for equity-settled stay bonuses, which could become more significant. This removes M&A-related volatility from a key operational metric and results in an approximate 50 basis point increase in the calculated margin compared to the prior definition. For 2026, we expect adjusted operating income less operating stock-based compensation expense to be in the range of $495 million to $510 million. This incorporates our annual improvement commitment of approximately 100 basis points in constant currency, applied to the new baseline and offset by the 50 basis point FX headwind at current rates versus 2025. We expect our effective tax rate for 2026 to be approximately 21%, consistent with 2025. Finally, turning to free cash flow. For 2026, we are projecting a range of approximately $500 million to $570 million. The wider range directly reflects the timing variability of collections in our large fourth quarter. The midpoint of this range continues to represent very strong operational cash generation. However, the year-over-year growth is moderated as a direct result of repaying our 2026 notes, which will result in an approximate $30 million cash interest outflow compared to a negligible amount in 2025. We expect that approximately 45% to 50% of our free cash flow will be generated during the first half of 2026. To help with your modeling, we expect our quarter-over-quarter ARR growth rate to be similar to 2025, which will cause year-over-year ARR growth rates to be relatively stable throughout the year. Similarly, we expect our revenue seasonality to be comparable to 2025, while operating expenses we plan to invest earlier this year, which will result in spend being more weighted towards the first half and less concentrated in the fourth quarter. I also include here on this slide additional expectations on CapEx, interest expense and cash interest, cash taxes, total and operating stock-based compensation, operating depreciation and amortization, outstanding shares and our unchanged dividend. And with that, over to Eric to moderate Q&A. Eric Boyer: Thanks, Werner. Before we begin, I want to point out for your modeling purposes, we have included the historical adjusted operating income less operating SBC reconciliation on Page 47 and 48 of our Q4 presentation, which you can find on our IR website. [Operator Instructions] Our first question comes from Matt Hedberg of RBC. Matthew Hedberg: Congrats on the year, and it seems like there's a lot to be optimistic for in your 2026 growth outlook. I'm curious -- and I appreciate the -- all of the focus on AI at the start of the call, it's obviously topical for every investor in terms of how AI could potentially drive upside to growth. And it really does feel like you guys are well positioned there. Taking a step back, and realizing you did some smaller acquisitions to end 2025. What do you see as the most important elements that could push constant currency ARR growth closer to that higher end of the range? It feels like there's a number of opportunities. And is AI one of those? Gregory Bentley: Well, AI is contributing now in the form of asset analytics and faster growth in asset analytics than elsewhere. The caveat is it isn't necessarily growth in ARR because we don't yet classify it as annual recurring in all cases. That's simply because the inspections for many types of infrastructure assets are not done every year and regulatory requirement is not annual. We want to make it annual with the favorable economics of automated AI-based asset analytics. But that's a process over time. So AI will goose our asset analytics revenues, it takes time for that to come into ARR per se. Eric Boyer: The next question comes from Jason Celino from KeyBanc. Jason Celino: All right. Thank you. Sorry, it looks like I froze a little bit. Gregory Bentley: I can hear you though, Jason. Jason Celino: So Interesting comments on kind of leverage and M&A potentially, it looks like leverage is down to more optimal level. And I think you said annually, you're open to $400 million of programmatic acquisitions. Is that $400 million consistent with what you've been open to in the past? I know you've closed much lower amounts based on your cash flow statement. So are you messaging that we could see like a pickup in tuck-ins going forward? Gregory Bentley: Well, over the past several years, while we've had higher leverage, we've been particular to focus on asset analytics opportunities. And there we're fussy, but we've closed the ones we've cared most about. There are others of those. But now with leverage down to where it is, we are expanding our -- where we're open in M&A to beyond asset analytics potentially. And it's not that we're necessarily trying to do $400 million in annual acquisitions. But even if we did as much as $400 million, it wouldn't increase our leverage from where we are now. Eric Boyer: Next question comes from Joe Vruwink from Robert W. Baird. Joseph Vruwink: Okay. Thanks for the time today. Digital twins seem to be coming up more and more just even within the last 6 months. I know this has never been a buzzword frequently, it's a practical application and you talked today about how there's data and applications around the strategy when it comes to you. But I'm wondering if all the attention this is now seeing in digital twins as kind of a foundation for physical AI projects. Is that opening up pipeline? Or are you finding it's becoming easier to fund digital twin projects at the type of account that may be hesitated in the past just now that they're getting inundated with this messaging and you're certainly bringing tangible use cases that can be referenced back to them? Nicholas Cumins: We're making the investments into digital twins as easy as possible because our products themselves are leveraging the digital twin technology, meaning processes that before were powered simply by files are now powered by digital twins. So if you're going to do a design review right now, the technology to actually enable the design review to be able to combine perspectives from different engineering practices is actually the digital twin. If you're going to do a 4D model of the construction project, then the technology you're going to use to do that is also a digital twin. And then if you're going to do an inspection of an existing asset, the technology that enables to do that is also digital twin. So it's basically happening without the accounts necessarily being aware of it, because it is a technology which is underlying our products across our portfolio now. Eric Boyer: The next question comes from Siti Panigrahi from Mizuho. Sitikantha Panigrahi: Great. I want to ask about the macro, mostly demand environment and infrastructure and budgets. So what have you assumed in your guidance in terms of macro? You talked about some of the trends. But the last few years, we have seen some kind of slowdown in the construction. Are you seeing any kind of changes in infrastructure owner operator budgets right now or any kind of delayed projects or elongated sales cycle? And if I may, can you clarify any kind of revenue contribution from those 2 acquisitions in Q4 or in '26? Nicholas Cumins: In the macro environment, we are assuming for 2026 is remarkably consistent with what we've seen in 2025, yes. So look, on our side, the only area where we've seen a slowdown over the past few years was really the sector of facilities and commercial facilities, basically buildings, but all the other sectors have been -- have grown very well. So resources, which goes beyond infrastructure, was again our fastest-growing sector in Q4. But Public Works Utilities, which is the biggest sector we have, again, strong growth in Q4 and even industrial was solid. So that's why we're actually assuming for the rest of the year for 2026, which is a consistent demand environment. Gregory Bentley: Something that's different is China, quite apart from the geopolitical aspects is slowing down. And to your second question, we don't ever break out revenue from acquisitions. We do show the -- because it's easy to capture the onboarded ARR from platform acquisitions, but not the revenues. Eric Boyer: The next question comes from Kristen Owen from Oppenheimer. Kristen Owen: Thank you for the question. I wanted to ask about your assumptions on the services revenue recovery in your 2026 guide. How much of that is being driven by some of the unique aspects of this asset analytics sort of early revenue stage versus a recovery in some of that core Maximo related business? Just help us understand your drivers there. Nicholas Cumins: Yes. We've seen definitely an improvement of our services business related to IBM Maximo. And that is the bulk of our services revenue. So it's really good that the investments in upgrading actually to the newest version of Maximo MAS, MAS 8 and 9, has definitely resumed. And that started, let's say, towards the middle of 2025 and then carried over. And that's what we expect also for 2026. Gregory Bentley: The Asset Analytics acquisitions do bring us some data acquisition services but minimal. And our intention is further to minimize that. Eric Boyer: The next question comes from Jay Vleeschhouwer from Griffin Securities. Jay Vleeschhouwer: Nicholas, I'd like to follow up on something we talked about a quarter ago on the subject of your product development and product releases and the sequel question is at Amsterdam at the conference, you talked about new packaging that would be forthcoming, presumably this year. Could you talk about that and whether the new packaging is it all baked into your guidance for 2026? Nicholas Cumins: It definitely baked in because the new packaging was actually released in Q4. It is related to the announcements we made at our annual conference of Connect as the entry point to Bentley Infrastructure Cloud. And behind the introduction of Connect, there was a repackaging of ProjectWise in particular, to simpler, easier to understand and consume tiers. Now the -- we're getting a lot of positive feedback, and we got it already in Q4 about the new packaging because of its simplicity. Connect itself is getting very quickly adopted. Some of Connect comes from an older product we had called ProjectWise 365 and about 50% of the active projects in ProjectWise 365 have already been migrated to Connect. So it's really picking up quite a bit of momentum, which is fantastic. But the packaging of -- and the new packaging of ProjectWise, in particular, is really resonating with accounts because now they have a much easier access to advanced capabilities such as design review or constructibility review or clash detection. And it's made available to a much larger user base on our side. And our thinking is this is going to translate into higher consumption of those capabilities and is going to support our growth going forward. Eric Boyer: Next question comes from Faith Brunner from William Blair. Faith Brunner: I wanted to ask about the future of AI on the design side. You guys talked about you're playing the long game here. So maybe talk to us about how you're leveraging your network and customer base to really start designing this road map. Nicholas Cumins: We definitely are not designing a road map in an ivory tower. We're doing it in conjunction with our accounts. Whether they are engineering services firms or owner operators, and we make sure that these accounts that we're engaging with are as representative as possible of our markets. And we are building. And I will say, 42 years of trust. Greg is using this expression of digital quarterback. That is 42 years of us being the digital quarterback of infrastructure where we've helped engineering spaces firms and owner operators successfully navigate through multiple paradigm shifts from CAD to 3D, from 3D to 4D and digital twins and now with AI. So when we gave an update on the road map at our annual conference, we also announced a co-innovation initiative called infrastructure.ai. And in the context of this initiative, we are talking with our accounts on how we need to evolve. The most fundamental part of our portfolio are engineering applications, both technically and commercially in order to support AI-driven workflows. We have very strong engagement, a lot of excitement, and this helps prioritize actually which are the first APIs beyond the ones we already have that we need to enable in order to support these workflows going forward. However, as we explained in the prepared remarks, we're very clear that indeed this is going to take a while because of the peculiarities of the infrastructure sector for this kind of technology to be taken up. And therefore, focus is very much on adoption, more than monetization at this point in time,. But we're absolutely sure that as that technology gets adopted and as value is really created and appreciated that we'll be able to capture the fair share of that value. Eric Boyer: The next question comes from Blair Abernethy from Rosenblatt Securities. Blair Abernethy: Nice quarter. Nice way to end the year. Just on the asset analytics business, with these new acquisitions as well and more to come as you're suggesting, what was the go-to-market approach here? Is it still -- is it really just Bentley driven? Or are there -- I think, Greg, you and I have talked in the past about engineering partnerships or working with the large global engineering firms to try and develop a service revenue for these guys -- recurring revenue for these guys. Is that still in the works? Or just maybe an update on how you see the go to market on asset analytics. Gregory Bentley: That is the outcome intended that we will through our asset analytics platform, if you like, white label that engineering firms who will bundle it with substance of engineering services in their own IP-driven AI so that when a problem is detected, the remediation is part of their own know-how and their own recurring services. We think that's something we share an objective with the engineering firms in doing that. But in the meantime, there's such a opportunity on the ground floor to get established from one asset type to another, as we mentioned, distribution poles and next transmission towers are going to be strong for us this year, and we are tending to get ourselves established there directly to start with. Eric Boyer: Next question comes from Alexei Gogolev from JPMorgan. Alexei Gogolev: Greg, are you seeing the long-term ownership debate being impacted by the AI disruption dynamics? What I mean is, has it become incrementally more tricky to do a deal in light of this current uncertainty? Gregory Bentley: By deals, do you mean M&A deals? Alexei Gogolev: More kind of your deals with large corporates, large customers. I'm guessing not from the ARR growth dynamics that you are posting. And it seems like the market has overreacted for a lot of stocks, including Bentley, but what are you seeing on the ground? Gregory Bentley: Well, you've heard me before, measure carefully the annual escalation baked into multiyear cap and floor extensions. And that hasn't shown any proclivity to worry about AI displacement. The engineering firms would -- are glad to budget spending more for technology. I think they are as poised as we are to benefit from the transformation in business model when the owner operators pay more for intellectual property through AI than for the powers of execution. And that inflection still lies ahead. But in the meantime, there's no lack of confidence as measured by our visibility into the out years of the floor and ceiling brackets that I carefully monitor. Nicholas Cumins: We understand, we are, again, very early stage with respect to AI, especially when it comes to design. Asset Analytics, that's different. But when it comes to design. And I will say AI is a source of a lot of excitement and exciting conversation with our accounts. So what I can say is that it is helping us actually. For example, our commitment to data stewardship makes us quite distinct from other players out there. And for engineering services firms and also on operators to understand that if they're going to use our platform that their data remains their data always. And we're not going to use it to train our own AI without their explicit ask actually, is really resonating, right? So it's -- AI is an opportunity to have a longer-term strategic conversation with accounts and for them to understand. And I appreciate that indeed, they are -- they have the right partner in Bentley Systems. Eric Boyer: The next question comes from Daniel Jester from BMO. Daniel Jester: Great. It's on Seequent. You highlighted fourth quarter improvement there. And if I go back, it looks like 2025, you saw pretty consistent improvement there. Maybe stepping back, if you look historically in the business, so we've got into an up cycle in minerals, metals and mining and the like, how has that in the past affected performance of the business? And if we do see this continued cyclical improvement, what are the levers to drive sort of maybe incremental revenue or opportunities for you? Nicholas Cumins: Of course. So what we've seen is starting a couple of years ago, actually, a slowdown in big capital investments for the exploration of new mines or for major expansions to existing line. And this was related more to the overall financial environment in which mining companies have been operating with inflation rate high, with interest rates high, basically making it quite expensive to raise capital. And this has improved through 2025. And that's why we're very -- I would say, cautiously optimistic about mining in 2026 and beyond. There is clearly an upward trend here. Now what has been remarkable with our Seequent business is that even during this slowdown of mining over the past few years, it continues to grow faster than the rest of the company. And that speaks a lot to the resilience of their business model. It's not so dependent on capital investments because their software is used in day-to-day operations of mines, also of energy plants if we can -- if you want to talk about geothermal. Now with cyclicality, you may be also referring to what's going on with the price of minerals. And that's a pretty complex topic. There are many reasons that explain why the price of gold, like any other commodity actually is going up or down, yes. But this is pretty disconnected from where the Seequent software is used, which is actually on the supply, the production side. Even with gold, by the way, you can see that the production, the volume of production of gold continues to go up and its decorrelated with what's going on with the price of gold. And that's again because the -- regardless of what's happening with the price, mining companies need to continue to understand the subsurface. They need to continue to derisk. They need to continue to be as efficient as possible and therefore, use Seequent software. Gregory Bentley: And an increasing portion of Seequent is for the foundation in civil engineering products -- civil engineering projects because the source of -- principal source of risk is subsurface and that has now been viewed in project risk approaches, the modeling with leapfrog of the subsurface. Eric Boyer: Next question comes from Joshua Tilton from Wolfe Research. Joshua Tilton: Can you hear me? Nicholas Cumins: Yes. Joshua Tilton: Greg, I very much appreciate the masterclass and why Bentley is well positioned to be an AI winner. I think if I listen to kind of the questions from my peers on the call, though, what investors are trying to figure out or hoping to get a little bit more clarity on, at least from my perspective, is just out of all of the opportunities that you discussed, whether it's asset analytics or more design, which of those opportunities do you see being a reality sooner? And is that a 2026 phenomenon, 2027 phenomenon? And exactly how -- I think you touched on a little bit -- consumption, like exactly how are we going to see that monetization show up in the model. Does that make sense? Gregory Bentley: Well, asset analytics is immediate. But what's interesting is that with Talon, we started with API consumption. We negotiated what wound up being a 7-figure annual consumption of the engineering simulations based on the digital twins they captured with our iTwin Capture models. And generally, the API opportunity will massively expand the consumption and the computing for our modeling and simulation across the board. But in our experience, as we mentioned, going from CAD to BIM to digital twins, the obstacle and for reasons that I got into the institutional impediments, it's take-up that is the biggest challenge. And so we're focusing on helping users identify the APIs for which they'll create AI agents. This year, we've made it as simple that they can do it now from a natural language and start to be running many more iterations and see the benefit of that. You can, in many cases, quantify how much better the design outcome will be. In future years, it will be more so reuse of existing components and constructability and so forth that we mentioned. But it's pretty immediate to work with accounts to identify how API consumption can help them now, and we'll be working out how we monetize that with them as their digital quartermaster during the year. Eric Boyer: The last question will be from Koji Ikeda from Bank of America. Koji Ikeda: Yes, guys, can you hear me okay? Gregory Bentley: Yes. Koji Ikeda: Yes. So I was wondering as we think about design software and the data that's embedded in there, how do we think about the pace of monetization potential of this data, either within Bentley itself or other vendors within the ecosystem that work with systems like Bentley to plug into your data, access that data and for Bentley to monetize that data. Is this an opportunity that could happen sometime in the next 12 months? Or do you think this is something that could happen potentially over the next several years? Gregory Bentley: Well, first, I will say that ProjectWise and Bentley Infrastructure Cloud, you can see on our distribution of ARR that, that is the largest of any individual product we have in terms of ARR. So we're already monetizing the compounding of semantically addressable project data that becomes more valuable now with the opportunity for our accounts to use it themselves to -- in the ways we've described, including training their own AI models and for optimization to occur within our modeling and simulation products, but under their own AI agents, exploring that outcome space. So we are monetizing that in that respect and have been. And now over to Nicholas to talk about the future. Nicholas Cumins: Yes. And to make it super clear, when we say we're monetizing it now. So this is not about using the data from one infrastructure organization and then monetizing it with all the infrastructure organization. No, no, not at all. What we're monetizing is the ability for infrastricture organizations to surface data from their own files in the context of ProjectWise and Bentley Infrastructure Cloud and then use it for their own purposes. Their data is their data, full stop. But there could be actually some additional data -- true data monetization opportunities for us going forward. I'm just thinking, for example, of Cesium that we are like deploying across our portfolio and Cesium itself opens up an ecosystem of third-party data that can be brought into the design environment of infrastructure engineers so they can design in full context. I'm thinking, for example, of the Google 3D photorealistic tiles or some additional terrain data or all the data sets that could be offered. And I will say in the longer run, it is fairly possible that all of these engineering insights that are being created with our software in the context of operation and maintenance also becomes context for the infrastructure engineers to design, for example, extension of existing assets or do some remediation work on existing assets. And some of these insights can be created from third-party data and can be monetized as such as well. So I will say, in the longer run, an exciting opportunity, monetizing potentially third-party data as well. Gregory Bentley: And it is Cesium's stock-in-trade to become -- to have become that geospatial platform for such immersion in the world at large. Eric Boyer: Great. That was the last question. So that concludes our call today. We thank you for your interest and time in Bentley Systems. Please feel free to reach out to Investor Relations with further questions and follow-up. And we look forward to updating you on our performance in coming quarters. Thanks. Nicholas Cumins: Thank you. Gregory Bentley: Thank you.

36天前Insight Analytics约5分钟阅读

OCDDY 2025 Q4 财报电话会议

Adam Warby: Good morning, everyone. Very good to be with you here today to talk about FY '25. And FY '25 was a year of real tangible growth for Ocado, but one that also saw the business mature in a number of important ways. And while we've seen robust growth in the business and good progress across most of our global operations, we also worked to help some partners address a number of key challenges in their early network decisions. This included constructive engagement with our partners in North America, as they made decisions to close sites in areas where demand has not evolved as initially expected. And in fact, last year, we reflected that a number of our partners were looking at a small number of sites, which required a different strategic approach. And while the decisions made in North America to close were difficult, it does reflect a mature approach with those partnerships and putting them on a stronger foundation for long-term and sustainable growth. With exclusivity now having ended in North America, we've begun the journey to reengage in many of the commercial opportunities available in that very large -- world's largest grocery market. And Tim will reflect on this and Ocado's approach to reentering the wider global opportunity as Ocado moves into this next phase of commercial growth. So I look forward to hearing more about that soon. I've now been Chair for just over a year. And during that period, I've spent a lot of time engaging closely with a range of stakeholders. And reflecting on what I've learned, I remain still very excited about the significant opportunity that remains in -- to solve a range of business issues across the omnichannel journeys of our retailers. And Ocado itself is still a business that has a huge breadth of talent, a unique and world-leading technology platform, a visionary leadership team and a scaled commercial relationship with many of the leading retail brands around the world. I've enjoyed getting under the skin of these issues over the past year. And while recognizing that executing in a competitive and ever-changing world is challenging, I do believe Ocado is well positioned to take advantage of the significant global opportunity, both with current and future partners. I particularly value the time spent with many of our Ocado partners, including counterparts at Coles, Ocado Retail, of course, Kroger and of course, our JV partner, M&S. This engagement gives a tremendous window into the strategic thinking of our partners and in particular, a depth of understanding on how some of the world's most successful retailers think about their own long-term success and growth. Today, you'll hear from Stephen and Tim about progress we're making towards the key priorities that we laid out at the half year. First of all, our core priority to turn cash flow positive later this year with full year cash generation in FY '27, the measures that we're taking to drive continued growth and greater efficiency with our partners, and lastly, how we're reconfiguring key parts of the business to make sure we're well set to take advantage of the renewed and significant global opportunity. So over to you, Stephen. Stephen Daintith: Thank you, Adam, and good morning, everybody. I hope you're all well. Thank you for joining us at today's full year '25 results. I'm going to take you through the financials. Next slide, please. Okay. Here are the headlines. So good financial progress across the board really. Revenue grew, group revenue by 12%. I'm going to take you through the logistics and the tech solutions growth shortly. We had strong adjusted EBITDA growth of GBP 66 million to GBP 178 million. The underlying cash flow, if you exclude the letter of credit, was a GBP 230 million outflow. But if you were to take that into account, underlying cash flow would be GBP 140 million -- GBP 130 million better, driven by that receipt from the letter of credit. I should say upfront, by the way, on the closure fees from the 4 site closures and on the letter of credit, the accounting is not straightforward. It mostly impacts fiscal '26 and future years, but we've included in the appendix a couple of charts that show you how it all works when it comes to do your modeling. So I just wanted to make that open upfront. The retail -- sorry, the underlying cash flow in terms of credit, I talked about that. Liquidity finished the year yet again with healthier liquidity of GBP 700 million or so of cash and the access to the revolving credit facility. This has been bolstered further by the GBP 279 million inflow that came in post the year-end. So we're sitting on very good cash balances today. It does mean, and I'll get into it when we look at our debt chart shortly, as we approach our debt maturities with the optionality there. Certainly, in the first instance, the GBP 350 million convertible bond that's due in January '27, we can pay out of cash, which you will see our gross debt numbers starting to come down, important factor for us, particularly when you see the trend in interest costs. Yet again, we achieved our guidance for revenue, margin and cash flow targets and hit all of those. There's probably nothing more I'll say here. I'll take you through the detail now of each business. Here's the statutory chart, getting you to your earnings before tax of GBP 403 million, a positive number, but benefiting, of course, from the big adjusting item of the valuation of Ocado Retail of the stake of our 50% in Ocado Retail when we deconsolidated the asset and M&S took over consolidation. As a consequence of that, we took our value that we put in at GBP 1.5 billion or so, half of that and then you adjust for the assets that are on our balance sheet to get to that adjusting items income. A couple of other callouts. Tech solutions revenue growth, I'll go through that. Logistics, 11%. I think it's probably worthwhile calling out the finance cost line, a GBP 48 million increase in our interest costs. As I've mentioned earlier, there are plans to address that debt and gradually reduce that gross debt level. I'll get to that shortly. So Ocado Group adjusting items. Here is the key item there at the top that I talked about, Jones Food, if you recall, went into administration last year. We wrote off those assets that were consolidated on our balance sheet. We were a consolidating company. The Kroger of lessor credit pre fiscal '25. So whilst the cash was received in early this year -- sorry, last year, in fact, there is an accounting recognition of the revenue related to prior periods, which is an adjusting item in the prior period. You'll see at the chart at the back how it works. It's not straightforward. The organizational restructure, that is not the cost of the restructuring that we're about to do. We did a small amount -- a relatively small amount of restructuring principally in G&A and in technology in the first half of this year. So there's a small amount in there. The rest is pretty straightforward. So tech solutions. Well, you know the business model, grow the average number of live modules on that point, and we'll come to it shortly. That's probably the key number in respect of becoming a cash flow positive business full year fiscal '27, turning cash flow positive in the second half of '26. 121 modules today, driven by -- the growth there is driven by new sites going live. We've got around 6 sites going live over the next couple of years, but also drawdowns in existing sites. Those are the 2 drivers of that growth in modules. The quicker we grow our utilization of those sites, fill their capacity, the more modules and CFCs that are ordered going forward. That's a key metric for us. Recurring revenues make up the bulk of that revenue, that GBP 444 million, growing by 7%. And as you'd expect, that's in line with the growth in average number of live modules, but also the fees that we get, as you'll see shortly, per module that are indexed every year to local inflation. The nonrecurring revenue, a material increase in nonmaterial revenue by GBP 41 million, but there's a lot of noise within that number. A lot of it that's in there is around the Morrisons fee that we got when we exited their 5 modules out of Erith. It's about -- I think about GBP 17 million or so there. And then there's about a GBP 15 million number in respect to the closure fees as well. So you'll see that detail later on in the pack in the appendix. Other than that, contribution margin for tech solutions, an improving contribution margin of 72%. Of course, the revenue does benefit from those items that I mentioned, but we've also included a potential decommissioning provision in there in respect of those site closures. So just to make sure that we balance it out that we haven't taken all of that benefit directly to contribution. There is some provision in there as well. These are the expense items of the technology spend and then support costs. That's the G&A costs that exist, but it's also the partner-facing teams as well. As you'll see shortly in the slide, it's sales team, but it's also G&A, corporate overhead type teams. Okay. left-hand chart showing the progression of average live modules. Now clearly, as we approach '26 and '27, we are going to be hindered in '26 by, of course, the sites that have closed in -- recently that were part of that 121 number. We make that up by the sites that go live. We also make it up by Ocado Retail drawing down on further modules as well, which they will do, self-evident given we're going to show you shortly where they are on their capacity, but as they're growing as strongly as they are another year of growth, 15% revenue growth. And that's driven by volume as well. That's a volume-driven growth. Better revenue per module, I talked about that, that progression, indexation playing a part there drives our recurring revenues. That's the math. So here you go, go live of CFCs and drawdowns to drive the growth following the resets. Here on the right-hand side, we call out the CFCs we expect to go live over the next couple of years. And again, there's some bullet points there that just reinforce my earlier comments around module drawdowns and the importance of those. We expect by fiscal '27 to be at at least 125, and we're targeting over 130. But for the purposes of the modeling of cash flow positive, this range does the job. We expect we can go further than that, but let's get there when we do. That's our ambition. Okay. Direct operating costs, we expect those to benefit further going forward, but you can see the progression here, continued efficiency in the operations. We do think we can get to these being below 25% and therefore, an over 75% contribution margin. Technology spend, you can see how it's declined in fiscal '25 to a total across CapEx and P&L costs of GBP 248 million. We will be seeing shortly in the guidance that we give for fiscal '27, again the cash flow positive. We are looking at around GBP 100 million or so reduction in that spend over the next 2 years. We have made it very clear for quite a while that the last 5 or 6 years has been a peak investment period for us. If you recall, we launched those reimagined innovations in January 2022, and now they're going into the market with our partners taking those, Ocado Retail in the U.K., Kroger in the U.S. and so on, ordering them and seeing the productivity gains that Ocado Retail is already benefiting from. So it's a natural part of our evolution as we expected for this technology spend to start to wind down. SG&A costs will reduce further as we focus on a leaner operating model. You'll see that in the mix there of SG&A costs that we've actually -- I know it's split in the first half, second half split, we'll show it a little later. We've actually put an extra GBP 6 million into partner-facing sales teams and G&A costs have come down by the same GBP 6 million. So whilst it's flat year-on-year, the mix has changed quite significantly, and we'll continue in that direction. Again, that number, we're expecting there to be about GBP 50 million lighter in '27 versus where it is currently today in fiscal '25. That gets you to your GBP 150 million of cost savings. Ocado Logistics, okay, 11% growth in revenue, orders, again, it's volume-driven growth, as you might expect. So what would I call out on this slide, pretty reliable EBITDA number that we're generating. EBITDA has grown a little year-over-year. A lot -- some of that, I should say, is down to TSAs that have rolled off that we provided to Ocado Retail that we're now charging for as those transition services agreements have concluded. So we're getting more profitability out of the business. Eaches is growth of 8%, orders per week up 10% in line with revenue growth. UPH, again, we're going to show -- we're going to see a chart in a while that shows that UPH progression, really important part of the business model and the investment case for Ocado, which is the productivity our technology can bring to warehouses, drive down labor count and drive down labor costs where labor is becoming more expensive and more scarce, a really important part of our investment case. And going through those metrics, there you go. You can see the progression in UPH. Luton has at a peak of 318 UPH recently, and we averaged 289 in fiscal '29 -- fiscal '25, sorry. And then DP8, pretty steady at around the 21 number, 21.5 this year. So just close to 22 drops per van per 8-hour shift. Ocado Retail. Another really strong year for Ocado Retail, revenue growth at 15%, strong growth in our customers and growing our market share in the online grocery market, 15% revenue growth, gross profit up by 14%. Across these cost lines, you can see the operational leverage coming through as well, with the revenue growth of 15%, CFC costs up just 7%. Service delivery, that's hit hard by U.K. labor inflation, but also by the national insurance changes that kicked in over the last year or so. Utility costs flat year-on-year. Support costs, you can see growing by just 8% and marketing costs growing by just 3%. So good operational leverage in the business model. What else? I think I've pretty much highlighted the key things there. The underlying EBITDA margin, if you were to add back the GBP 33 million of Hatfield fees is now a 3.8% number. We expect those Hatfield fees to reduce as Ocado Retail orders more modules. There is a credit system in place that as they place more -- order more modules, for every 3 ordered, roughly there's around a 2% reduction in the Hatfield fees number, which is a 13 module count for that business -- for that -- sorry, that warehouse. Ocado Retail, structural and volume-led sales growth, orders per week, so it's a volume-driven growth, not a price-driven growth, 13% growth in orders, average basket value up slightly at 1.3%, and I think you'll be familiar with these trends. Okay. Again, customer growth now comfortably over GBP 1.2 billion -- GBP 1.2 million, sorry, basket items stable and utilization. There's the chart, the important one for us. We like that chart because it means they're going to be ordering more modules and CFC shortly. Watch this space on that one. So our cash flow, when you put this all together, this is from an EBITDA basis down to a cash flow basis in fiscal '25, there's our EBITDA. The cash received into contract liabilities, we get -- that's the cash that actually came in. We deduct then, of course, the amount that was recognized through the P&L account, which is part of the EBITDA number and because that's the noncash item that we take that out. The working capital movements we benefit from. There's the interest payment line that I highlighted earlier, GBP 46 million increase in that cash outflow year-over-year. CapEx pretty much in line with last year. CapEx is principally the CFCs, of course, the MHE, but also our technology spend. OAI CapEx, that's related to McKesson. Lease liabilities, no movements there and nothing to write home about in the other line. And then finally, the proceeds from the letter of credit of GBP 113 million, getting you to that underlying cash flow of GBP 100 million. Net cash inflows. When we take into account the final receipt from AutoStore, from that settlement that we concluded, agreed with them around 3 or 4 years -- 3 years ago now. That's the final payment that's now come through. On our financing, we actually paid -- whilst we paid down less debt than the amount of debt that we've raised and benefiting with GBP 58 million on the balance sheet, which you see today. Other items, you may have read that we've sold our stake in Paneltex, which was a very small GBP 400,000 investment, and we've got back comfortably our money back from the valuation of that sale, which is around GBP 20 million sale or so. And we own 25% of the business. Okay. The outlook for the year ahead, for the next couple of years. This goes back to my earlier comments. We have guided for quite a while that we'd be heading towards 20% of recurring revenues. When you do the math, this is the GBP 250 million or so that we spent across CapEx and P&L spend in fiscal '25, declining by about GBP 100 million to GBP 150 million in fiscal '27. Tim will be talking more about that during his pack. Other than that, I will then move on. CapEx has been weighted to the Re:Imagined fees, as you can imagine. You can see the composition of the capital items in fiscal '25 in the pie chart at the top there. And then there's more commentary around the '26 and the '27 targets outlook. The cost that we are taking out of the business of GBP 150 million in aggregate, that will be an exercise that is commencing now. The key events will be in March and then later in the year as well, there'll be another event. We'll just have to see how that progresses over the course of the year. It will take place -- I should have said, it will conclude by the end of November. There'll be progressive reductions over the course of the next 6 months because a better way of framing it. Lowering and leveraging our SG&A cost remains a key focus for us. This GBP 50 million of costs come out of this area. You can see the trend has been a downwards trend. You can see the shift there between the blue and the green bars around partner-facing teams and corporate functions. I think I've pretty much commented on this dynamic already. There's the GBP 150 million, putting it all together, and just reinforcing that point. And summarizing the key building blocks to be cash flow positive for full year '27. Live modules of GBP 125 million to GBP 130 million plus, I'll explain the drivers of those. That will generate a contribution of around GBP 400 million with a cash contribution of circa GBP 3 million per module. Total tech spend and SG&A spend will be around GBP 250 million from around, you can see, the GBP 400 million in fiscal '25. That's the GBP 150 million saving. And then we get a variety of other net inflows, including upfront receipts from partners. We typically get about GBP 34 million a year from -- GBP 30 million to GBP 40 million a year from those. Logistics cash inflows, the business that generates cash for us, take off our lease costs and then whatever the movement is on working capital from year-to-year. Net interest costs are we've modeled GBP 80 million to GBP 100 million, but hopefully, there'll be opportunity there to reduce that given our strong liquidity. And as I said, when we look at our debt stack and options to address some of those maturities, some of those -- some of that debt. We've concluded here in the final bullet, there will be sufficient cash flow to be cash flow positive and to fund circa 10% module growth. So one could argue that if we did a 15% module growth in fiscal '28 versus '27, we wouldn't have the cash flow. We might not be cash flow positive because we're putting the CapEx in. That's a high-quality problem, I think. We'll cross that bridge when we get there. That would be the only reason why we wouldn't hit our target if we had some big orders for delivery in '28 and '29. But I think both Tim and I would actually welcome that. Okay. Managing our debt maturities, and I've talked about this. You can see here, by the way, the GBP 56 million convertible bond due December '25, we paid that off, if you recall, just after the year-end. The GBP 500 million has gone away. This is the one we'll be targeting out of cash, the GBP 350 million. And there may be opportunities as we look through with our cash balances to look at those other 3 debt gross items that we've got as well. So I think you can pretty comfortably expect our gross borrowings number to start to come down quite significantly, which will be good news. So summary guidance, tech solutions revenue of around GBP 500 million, and adjusted EBITDA margin of around 30%. Logistics, more of the same, no great surprises in there. We're going to be having somewhat perversely a GBP 200 million outflow in the year that we turn cash flow positive. A lot of that is driven around the timing of our cost reduction activities that I talked about, the sequencing over the year. You get the full year benefit in '27, but you then see a partial year benefit in fiscal '26, which explains a lot of this dynamic. CapEx will be around GBP 250 million, and those are all the key numbers of our guidance. And that concludes it, there you go. I'll just repeat those messages. Good management of our balance sheet. I think we've been pretty good and proactive there on debt management, strong financial performance in '25, cost and capital discipline becoming a key theme for the organization. And again, the core priority is to turn positive during the second half, but it's backed up by a very robust plan as well. Thank you very much. Tim, over to you. Tim Steiner: Thank you, Stephen. Thanks, everyone, for joining us today. All right. Let's move on. Right. So we've had a good year in a number of ways. So I think one of the key metrics is that first one is that's the international CFC volume growth of the 26%. So we just want to keep helping our clients to grow. We're helping them to grow more and more, and we want to see that number continue to grow, and the compounding effect of that will lead to more and more drawdowns of modules that are available in existing CFCs as well as demand for future CFCs. Just again, to give you some idea of scale, we shipped 72 million orders across the whole of the OSP platform last year with a 98 -- more than a 98% fulfillment rate, 0.7% of average OSP waste. And then we saw quite a lot of efficiency coming into the platform last year. We got across the platform to a 21 DP8 on a weighted average basis across all of our clients. We saw an average of a 10% improvement in CFC productivity across our clients. And as Stephen mentioned before, in the financial year, we achieved 318 UPH in Luton and since the end of the financial year have got into the 320s. The metrics keep getting better. And to put it into context that 318 UPH, that means that a 40-item order is fulfilled in less -- using less than 8 minutes of human endeavor compared to about 75 minutes to do the same thing in a manual operation picked in store. So as you know, we've been busy working with our partners on partner success. That's the one area that Stephen outlined where we've been spending more money, improving our partners. We thought we'd pick a couple of examples just to show you not just what the equipment is capable of doing, but how we help our partners and what kind of results we achieve. So this is one warehouse where we've been working closely with one of our partners. Again, because of partner confidentiality, I won't get into exactly who they are, please don't ask me. But this is an international warehouse. This is a combination of 2 things. This is a combination of new software and operational advice. In this particular first example, this is DP8, so this is deliveries coming out of that warehouse. And we helped over an 8-month period to get a 34% improvement in the number of drops per shift. To put it into context, actually, the top of that graph is 25 DP8. So actually, it's higher than the U.K. The U.K. is not a standout performer on DP8. We have achieved greater results in some of our international warehouses. And so this is not a question of somebody who is extremely poor becoming less extremely poor. These are actually quite impressive numbers and are significantly ahead of our partners' expectations. If we choose a UPH example, here is a UPH example, it's a 5-month period that we went in and helped a partner inside their warehouse. We improved their labor productivity by 1/3 in just 5 months. That is a combination of better operational processes. So we're helping partners in their planning and in their operations as well as a rollout of some of an early rollout of some of the reimagined kit into that building. But -- so quite meaningful results in short periods of time. We brought back in Lawrence Hene, who used to run a significant part of Ocado Retail for many years, and he's leading our partner success efforts, working alongside Nick de la Vega, who's come in to run our revenue sales and partner relationships. So significant progress in those areas. In terms of CFCs driving growth, here are some comments, which I won't read them out. I'll let you read them yourselves from some of our newer partners, Alcampo, Auchan Polska and Coles, who all have opened warehouses recently, who are all seeing strong growth in their sites ahead of the wider online markets that they operate in, are achieving incredible NPS scores from their customers. What we're seeing is if you take an existing geography where you have existing store-based operations and move them into a warehouse, you can see not only enormous pickups in NPS, customer satisfaction generally, but you can also see 30% to 50% growth beyond the market and beyond your baseline in a very short period of time from the better performance, better availability, better fulfillment, fresher goods that arrive from putting those volumes into the warehouses. I think, obviously, we've spoken a bit about the warehouses that have closed. You need to put volume through warehouses. These are examples of retailers that have got some volume from store-based operations and putting that volume into warehouses makes enormous sense. So historically, we built warehouses that were designed to largely do fulfillment from order today, deliver tomorrow. We've talked before, we talked at Re:Imagined about inventing new software that would enable these warehouses to be used for order today and deliver today. We have been rolling out that software during the course of the year. We are still in the early stages of rolling out that software. It is currently available for rollout with all of our partners, and we expect it to be in the vast majority of warehouses before the end of the year. It's currently deployed in 9 CFCs. We've seen the earliest deliveries from order to delivery of 73 minutes. Now 73 minutes is not an impressive number for speed of delivery of an online grocery order. You can do that in 10, 15, 20 minutes, but from micro sites with 1,000, 2,000, 3,000 SKUs in them, with efficiency levels that are really, really poor. This is an order processed in a large-scale Ocado CFC with extremely high productivity, as we spoke about before, with range of 200, 30,000, 40,000, 50,000 SKUs available to those customers. And it is not costing anything in productivity to achieve that. And that order is being delivered in a scheduled 8-hour route, but we are able to get the last from the customer ordering it to delivering it to as little as 73 minutes for a full basket order. We have seen in the first warehouse we rolled this out in days where we're achieving 40% same-day deliveries in an international CFC. We think this is a game changer, and we look forward to the rollout of this across the rest of the network and our partners continuing to work with it and increasing the amount of capacity that they have for same-day ordering, which largely addresses that large shopper universe of people who find -- want to shop online, but find it hard to plan where they'll be able to take advantage of the big ranges, the hypermarket prices and same-day delivery. We also spoke at the half year about aggregators. So we have now integrated aggregators into our platform for the first time in the past year, enabling customers who order groceries with our partners, but from wider platforms. So from aggregator platforms, those orders are going through and then those orders are processed either in Ocado CFCs or using Ocado in-store picking software in the client stores, making significant efficiency compared to having multiple apps and multiple pickers in those stores. And these changes really reflect the evolution of the online grocery market where in some markets, significant amounts of volume are going to aggregators who don't process orders themselves or don't have stores or warehouses themselves. But now our platform is flexible and those orders can get pushed through it. It has enabled Morrisons to increase their aggregator coverage in the U.K. to a further 100 geographies. It's enabled Monoprix to roll out to 22 further cities in France with one of the global aggregators that they work with. So let's just talk a little bit more about the evolution of the platform. If we went back to 2018, there's a little graphic here that described largely the platform that we sold to our early partners. We had a largely next-day service. Partners are expected to operate OSP web shops and take 100% of the orders across OSP, web and mobile. And they were processing those largely in warehouses at an average of a 6-module size for home delivery in vans, either directly or via spoke sites. It was a narrow but successful approach to the market that has served us extremely well here in the U.K. for a number of years. But the market has changed and the market continues to evolve. And today, shoppers expect to shop online with total flexibility across different platforms, lead times and shopping missions. And retailers need and want to meet those expectations without incurring the high costs associated with the traditional fulfillment. So where are we today? Today, our platform supports all different shopper lead times from sub 1 hour, 1 to 6 hours, remaining same-day and next-day deliveries. We support bringing orders into our platform through managed fulfillment where the clients run their own front ends through the OSP web shop that continues to evolve and deliver a market-leading experience as well as mentioned before, through aggregator sites as well. We can process those in in-store fulfillment over 1,000 stores live through our new store-based automation that can range from 4,000 to 5,000 square feet attached to a store up to about 17,000 square foot potentially unattached to a store. In 2 to 10 module sites, for large scheduled delivery businesses in micro fulfillment centers, as I said before, from about 4,000 to 17,000 square foot that do not need to be attached to a store if they don't want to, as well as in manual warehouses or third-party DCs, serving all the different customer missions and all of them with the best economics. And then in the last mile space, we're working today delivering customers to order -- delivering orders to customers using couriers, lockers, customers collecting it, home delivery and home delivery via spoke. It's an incredible amount of total and evolution of the platform to total flexibility for our existing global partners and future global partners. It is the product of a very large and busy R&D period for us as a business. But we've now deployed most of this evolved platform for our partners worldwide with strong results. And with our exclusivity rolling off in multiple markets, we're focused on bringing these benefits back to some of the world's most mature grocery markets for the first time in years. As we move into this new commercial phase, we're also taking steps to realign our business to better serve our global customer base and focus on new prospects opportunities with the biggest value. But I wanted to start by reflecting on the scale of some of our commercial footprint today as I think it's sometimes underestimated. Most of you are aware of our global grocery partnerships worldwide. They remain the core revenue driver for our technology solutions business and the partnerships where our technology is most fully deployed. However, our commercial footprint does extend more broadly into the wider logistics, CPG and retail sectors, primarily driven by our growing AMR business. Today, our technology is live in 127 warehouses and more than 1,000 stores worldwide with 70 commercial clients and partners. We've got more than 17,000 bots live on grids around the world as well as 431 on-grid picking arms, that number growing probably daily, more than 2,500 truck AMRs, and we're seeing keen interest in initial orders for our new case handling product, Porter case handling AMR. So as we move into a new commercial phase at Ocado, we're building on strong widespread relationships with many recognized and leading worldwide brands. We're also making changes to the structure of our technology solutions segment. Stephen has already talked through our progress towards reaching our steady-state cost base that we flagged over the last few years. We've made significant strides towards our full year '27 targets over the course of the last year, and we continue to track towards those targets as we move out of this peak development cycle and into a steady-state R&D phase. The structural changes that we're making support these goals and make sure our business is properly geared towards our priorities, namely a renewed and focused go-to-market strategy, a simpler operating model, investment concentrated where we see the clearest path to value creation. One of the first key steps is the consolidation of our commercial divisions, meaning Ocado Solutions and Ocado Intelligent Automation are now operating as a single point of sales and account management under the new leadership of Nick de la Vega, who joined us as Chief Revenue Officer at the end of last year. This change also reflects an overall shift in our approach to new commercial opportunities with a more targeted approach to the most valuable opportunities and primarily within sectors where our expertise is most needed. Taking the example here, which shows in the blue areas of the grocery supply chain where our technology has been traditionally deployed in the CFCs and delivery to homes. One of the key lessons we've learned from the market engagement of OIA has been that there's significant opportunity to go further up the grocery supply chain and the CPG supply chain. We see significant opportunities to expand into those areas, both case replenishment for stores and wider distribution networks, both where AMR products like Chuck and the new Porter solution can bring significant capital-light productivity improvements. Our AMR products are already deployed in upstream CPG supply chain environments, and we see a positive opportunity to build on this business supported by a single, more simple commercial structure. We believe that opportunities like this will bring significant added value and optionality to our core OSP business, enabling us to grow an attractive new revenue stream in our tech solutions business alongside our core automation and fulfillment assets. Our solutions are very deployable in the case pick market for store replenishment. We highlighted this next piece in the half year, but I think it's really important that we continue to focus on it, which is about bringing the right fulfillment for the right market. To be successful today, retailers need to do careful network planning to make sure they deploy the right solutions in the right places at the right time in their development of their e-commerce journey. But we have a full toolkit to address those different opportunities. It's a framework for future growth, and it underlines some of the decisions taken in recent months. We can do everything from low-density solutions where you use manual pick in store with world-leading efficiency using our software. We can do manual pick in dark stores. As we mentioned, store-based automation before, we're going to focus on that in a moment, micro fulfillment centers as well as the large automated CFCs. The critical lesson that we've learned is that you do not buy a large-scale CFC unless you have a business to put through it. They are not a profitable asset if you don't use them. But if you do use them, they're great. So moving on with a little bit of focus on a CFC to start with. So a CFC can range from about GBP 150 million of annualized sales to over GBP 500 million in capacity. GBP 500 million is approximately what we refer to as a 6-module CFC. So if we take a 6-module CFC as an online case study, it can do about GBP 480 million of annualized sales in a standard sales pattern with kind of similar metrics to an Ocado Retail business. Today, to build a 6 module CFC requires both upfront fees and retailer CapEx to put in things like fridges beyond a standard developer spec shed of about GBP 50 million of investment. The benefit of running that at GBP 480 million of sales compared to doing this in store is somewhere in the region of GBP 30 million to GBP 40 million a year, meaning it is a 1- to 2-year payoff asset. These buildings are amazing if you can use them. And that really is the key lesson. Some of the buildings in North America were not being used and those retailers working with us have made the decision to close them, where these buildings can be used when you have an existing business or you can rapidly grow into these buildings, they are significant improvements for the same volume going through them. As I mentioned before, they deliver a far superior customer service, driving up significant NPS, resulting in significant uplifts as well in sales. So if you go into a building where you've got, say, recent examples, we built some 3 module sites. We've launched a 3 module site recently. We've got another one in build at the moment. If you've got 1 or 1.5 modules of business from your store pick to go into that facility, by the time you go into it and see the uplift and you've got strong growth, you're in a very good position to drive to full capacity and see significantly quick retailer cash payback. These have been -- these principles have been a key in the engagement with all partners at the moment and are reflected in those new CFCs that we're building. And this kind of thing is reflected as well in some of the CFCs that have opened with Coles, for example, putting significant volume into their new CFCs in Melbourne and Sydney in the year that they've opened. And you saw the positive comments from Leah just before. If we move on now to the other end of the spectrum, which is store-based automation. Here's a nice little visual of our store-based automation sites with the external pickup ports, the same on grid -- the same robots operating on grid, the same on-grid robotic picking. The one new piece being the external ports, a small development that we are engaged in at the moment. Store-based automation is a phenomenal product if you have a lot of customer pickup direct from store because you can process these orders really quickly and really efficiently compared to in-store. It's a phenomenal product if you have a lot of gig-based direct-to-customer deliveries from drivers picking up 1, 2 or 3 orders. They can also interact from those ports and those products can also be picked incredibly quickly from order to delivery. It is even more important if you're doing ultra short lead time delivery because when you pick ultra short lead time orders in a grocery store, the effective pick rate drops by about 70% because you're no longer able to batch and pick in the zones. You have to run around and pick a smaller order across the whole geography of a store for a single customer. And the pickup to doing it in our machine will be comfortably into the double -- a number above double-digit percentages in terms of efficiency improvement. Now if you take some markets, if we take a market like the U.S., for example, 8 years ago, the average store was doing $1 million to $2 million of sales. These machines wouldn't work sensibly to do $1 million to $2 million of sales, but markets have grown dramatically. And so here's an example of the sites that we've been talking to retailers about in the last few weeks that we've been able to speak to retailers in the North American market. And we're seeing significant enthusiasm for this product across every conversation that we've had with retailers in that market. Typically, sales in store could be anywhere from $5 million to $40 million online. I know the $40 million sounds like a large number. There are people who are interested in sites of those size. That's also a particularly relevant size for the French market, which is a 90-plus percent pickup market. But if we take a case study of a store with $12 million of sales, that's a fairly common size. That's 10% to 15% of a store that does $80 million to $120 million of store-based sales, now doing 10% to 15% online. The full retailer upfront fees to us and CapEx would amount to about $2 million upfront, we estimate, with a greater than $1 million a year operational improvement. This ignores the improvements in NPS. This ignores the benefits of increased capacity, which is suffering in a number of the larger stores and busier stores in these retailer networks. This is just pure labor savings, predominantly labor savings in these facilities, meaning that retailer cash paybacks of 2 years are quite possible in this space across all of the stores, across markets that are doing $8 million, $10 million, $12 million, $15 million, $20 million, $25 million, which in many markets now is the kind of average. If we look at the U.S., for example, when we entered into our exclusivity arrangements with Kroger 8 years ago, the U.S. grocery market was $30 billion in size. Next year, we're not ready to roll out store-based automation in mass scale at the moment. We're looking to do a couple -- a few handfuls of sites at the moment to prove all the different points around the costs and the execution. But by 2027, when we would look to roll out in scale, the U.S. grocery market is estimated to be 8x the size it was in 2018. This is why when people rolled out what they believed were micro sites 8 years ago, they tried to roll out one site to cover 5 to 10 supermarkets worth of volume. It created incredible complexity that doesn't exist today because today, each of those sites now needs $8 million, $10 million, $12 million e-com sales from the singular site. But also the difference today is that we can build these things in a fraction of the space that was being used with a fraction of the labor that was being used because of advances like our incredible AI-powered pixels to action on-grid robotic pick, which today is doing more than 50% of the picks in Luton across a 45,000 SKU range. Globally, since we entered into a number of exclusivity arrangements, the global market has more than doubled. And so we are super excited about reentering a number of markets where we're having some very interesting conversations with a large number of grocers and keeping Nick in his new role very busy. So in summary, we're reentering markets, with a tech solutions business with a simpler operating model, with a focused commercial operations and a strong R&D base. We're seeing strong interest in a massively evolved solution set with massively more flexibility, a wider fulfillment tool set and world-leading shopper outcomes. Our partners are seeing robust underlying growth, strong year-on-year improvements in operational performance, and we have learned important lessons. We now have stronger foundations of our key partnerships and clear pathways to deliver disciplined, sustainable growth worldwide. And on that, we'll start taking questions. Tim Steiner: Tintin knows I can't handle as many as 2 at once because I forget what they were. Tintin Stormont: Absolutely. Tintin Stormont from Deutsche Numis. Two questions. If we look at that graphic that you showed, the manual pick in store, manual pick in dark stores, and you look at the level of activity in terms of pipeline and trying to speak to customers, where is it sort of kind of busiest? Where is all the activity happening? And Stephen, for you, for those types of potentially new sales, how should we think about the revenue models? Is it more upfront fees? Or are we still thinking about the recurring fee as a percent of the capacity? That was actually one question. The second question was just a modeling one on Hatfield fees just in terms of how do we anticipate that GBP 33 million to come down over the next couple of years to 2027. Tim Steiner: Let me just try, and I might answer yours as well. Stephen Daintith: Go ahead I thought you might. Tim Steiner: The first initial interest from retailers in SBA is actually around their biggest sites, their busiest sites, where a number of retailers have maxed out capacity. So the kind of first focus is, oh, wow, can you do something that gives me more capacity in those locations? The brilliant thing about that is if you do that, it's going to simultaneously show them how much economically better they are and what better experience they deliver to shoppers. So when you look at the estate, there's an amount of the estate that is just something needed because they're maxing out capacity. And then there's the vast majority of the estate where once you realize what these things are capable of doing, you'll realize you've got a 2-year payoff. But most retailers won't turn down a product with a 2-year payoff that also gives them increased customer shopper outcomes and increased capacity. So there's a lot of interest. Markets are evolving and growing fast. And the more it moves to the shorter lead times, the more attractive the product is versus the manual alternative. I've tried to explain that before with the pick speeds. Globally, 180, 200 type pick speeds, if you're aggregating orders and segmenting pick walks and stuff like that, those drop to like 60 if you're running around frantically trying to get something ready for a courier in 5 minutes. In our store-based automation products, those will be picked over 1,000 -- a human pick endeavor will be over 1,000 UPH because the humans will be doing half over 500, okay? So just massive increases in efficiency. In terms of the fees on those sites, largely, we don't expect to have any significant outlay if we roll out that product. So the upfront fees should cover the majority of our investment into those sites, meaning that for a retailer, they're likely to have as a percentage of sales, a higher upfront outlay. But as it's a much more phased because you roll out store by store where you need it. So as a function where you need it, as we showed before, it's got a 2-year payback. So attractive on both sides. Our ongoing fees are likely to be slightly lower than our ongoing fees on the OSP product because we're not amortizing and financing as much equipment. And we'd aim to make a similar percentage of sales contribution to our R&D, SG&A profitability. The Hatfield fees have got a split that's about -- that's just about 60-40. So 60% of those fees will amortize over time as the equivalent amount of volume is taken down in new sites and 40% of those fees will remain until the end of the Hatfield lease. Marcus Diebel: Marcus Diebel from JPMorgan. Maybe just on the rollouts and ramps for your partners. We've seen some delays in Korea and Japan. Can you just talk a little bit more sort of like what's going on? Obviously, you don't want to like split hairs, but obviously, we had delays with Kroger and then a different outcome than we maybe thought. So if you just can tell us a bit more what actually happens there. Yes, that's the first question. Tim Steiner: So look, they're slightly different scenarios. One is Japan. Japan, we're opening 3 warehouses in a contiguous geography. So in fact, so long as there are a sufficient number of live modules, the exact timing of when the third site goes live is not hugely important because the volume is being done in site 1 and site 2. The site 3 isn't needed from a volume basis on that date, but it's about our clients building programs and about the time lines that they give us. We can get in and build very quickly. I think we speak about the fact that we built a warehouse from scratch and went live in 12 months this year from a greenfield site. So it's really just about when those handovers to us come. Sometimes those programs are set up and for whatever reason it is, it can be an internal reason that our client or it can be an external reason to do with zoning or commissioning or something like that. Those projects sometimes, we can't be sure at this point exactly when they're going to go live. In Korea, it's actually the first site is in Busan. The second site is in Seoul. Seoul is a bigger, more developed market. So we'd like to see that site live as early as possible, but we think it's a chance it's going to roll into next year. So we'd rather be transparent about that. We are with the client in store pick, and we are now seeing good growth on that platform and excited about the first launch later this year in Busan. Marcus Diebel: Yes. And the second question is just on sort of like we talked about it before. And what is your sense in regards to the sort of like urgency at your client base because we live in times of the technology evolves quickly, both software and hardware. So why is it now really the time to go the next step or to wait? I think previously, you commented on the analogy of an iPhone, at some point, you just have to buy it. But I obviously hear this a lot more at stage. So what is sort of like the kind of like situation where clients are in? Tim Steiner: Look, I think with most of our clients, they say they're seeing significant online growth. We saw 26% through the sites. And capacity is an issue at places outperforming their competitors in terms of shopper experience and efficiency and cost structures. And we keep coming back to the same kind of point. If you've got GBP 50 million of business and it's scheduled delivery and it's spread across a 3-hour catchment area, the best way to do that is in-store, right? There isn't an automated product that will help you to do that well. If you've got GBP 150 million of business or GBP 500 million of business in a 3-hour catchment, then the rightsized warehouse is the best way to do that. And the warehouses we would build today are half the size and 75% more productive than one we would have built 3 years ago, right? And so they're an ever-increasing attractive option. If you're doing -- if you've got a wide geography with not enough density to do that or you've got more immediacy business and pickup business, if you've got $2 million, $3 million at a single site, don't build store-based automation. It's not going to have a return yet. If you've got $5 million to $8 million annual growing, it's time to start considering building it. If it works as well as we expect it to work and can be built in the size and at the price we expect it to, that mean the economics work well for us and work well for -- even better for our partners. That's what we have to show in the next 12 to 18 months. But it is a question of people aren't wanting to invest in big J curves at this point. People aren't wanting to speculatively say, I think there's going to be a giant market in this place. I have nothing. I'm going to go and build a $0.5 billion capacity facility in this small city. When we're talking about something like, as you mentioned before, in Japan, this is not a small city. We're building facilities in Tokyo, okay, which is something like 40 million people living in the geography of those cities. So that's just an enormous market. But the likes of Calgary, people aren't going to speculatively build a 6-module site in the Calgary going forward unless they're already doing 3 or 4 modules worth of business in their store pick operations. Sarah Roberts: Sarah Roberts from Barclays. So just my first question, the Kroger and Sobeys sites that were closed seem to be in the underperforming category of CFCs that I think you've spoken about before. Just wanted to understand across the wider network, not having to give any details on specific partners, but how many CFCs are still in that kind of underperforming bucket? Or have those now moved to a level where you're both happy with the utilization. Just wanted to get a sense of any potential further downside across the existing network. Tim Steiner: I would say it's very limited downside at this point. I don't want to say there's 0, but there's very limited downside at this point. Sarah Roberts: Okay. Helpful. And then on the side of store and automation side, obviously, it's a little bit more of a competitive market versus potentially the full CFC model where you are the only player that can do that level of automation. So I just wanted to understand how you're seeing yourself positioned in the kind of micro fulfillment area, a bit of the warehouse automation market, why you deserve to win and how you're thinking of playing there, that would be really helpful. Tim Steiner: Absolutely. Look, I think the key things to make these work and what hasn't been understood before and where people have failed when they've rolled some out and not had the success they wanted for clients is based on a few things. One is just actually their understanding of handling grocery and the variation in grocery, the interaction with stores. And there, we obviously are in 1,000 stores today as well as delivering whatever, we think, we said 72 million orders last year across our platform. So we've got enormous knowledge that a number of these players just have got next to none. When we see people bragging that in the last 8 years, they've had this much volume go through a platform. And when we look at it, we've done that volume in the last 1.5 weeks, right? So we've got a depth of knowledge, number one. Number two is retailers want to do this in the smallest possible sites. And cubic storage is the densest storage for the products that you need to store, number one. And we have the solution, and we've spoken about this before, that can get the highest throughput from a square meter of grid, a square meter of processing because our bots are faster, accelerate faster, deaccelerate faster and our control algorithms allow them to work in greater density, and our single space bot patent means that nobody else can achieve the density that we can achieve. So in terms of using the least amount of space to generate the highest potential throughput, we are in the best place. That is significantly more relevant when you're trying to carve out a corner of a busy store in a city than that is when you're trying to put something in a massive warehouse outside of city. Our on-grid robotic pick is completely unique and one of the most advanced cases of AI being used in the physical world today. And by having at least 50%, we're at 50% already in sites in Luton, for example, by having more than 50% picked on the grid at the top of the grid, which is sharing the same air space as our moving robots, it's an immensely complex technical challenge. It removes the need to put human pick stations downstairs or to put robotic pick stations downstairs, which then take up twice as much space as the human ones did. But by removing that space, we're able to build these incredibly dense sites. So where we have spoken to retailers who have recently built or have been exploring building alternative sites to address the challenge of capacity, we are capable of building similar capacities that they've been talking to in less than half the space and with significantly higher range capabilities. And so we cannot see anything that has the capabilities that we have in this space. James Lockyer: It's James Lockyer from Peel Hunt. Two questions as well. First one, last time you spoke about how you managed to get Detroit up capacity by 50% because of some upgrades you've been doing. I think at the time, you said you think the entire estate could benefit from 30% over time. It would be good to understand how that's been going during the period and how you're seeing that benefit your own CapEx and OpEx efficiencies. Tim Steiner: So James, yes, look, we are over the design capacity in Detroit. We are over the design capacity in all of the -- everywhere other than Erith, in Dordon, the 2 oldest CFCs in the U.K., all the other ones are operating above design capacity. Continue to believe that we'll see at least the numbers that we outlined to you before. We are starting to achieve those. They are baked in as part of the plan for U.K. expansion over the next couple of years. And it's kind of what does it mean to a new warehouse? It's part of why a new warehouse can be only 50% of the size of what we built when we built those warehouses. So we're not able to get the full 100% uplift that you theoretically could today if you took the building again and built into it, but we are looking close to 50% in most of those sites in terms of their incremental capacity that they're going to be able to achieve. And the enhanced productivity, which is separately beneficial in terms of reduced labor also then means that if you can pick half of it with robots and you are picking 50% more, you are actually using less pickers than your original design, which means the outside of the building in the car park still works for you. You need to save some of those spaces for the extra drivers that you're going to have and now driving that increased volume. So there's a lot of considerations in making those changes. The one site that's most complicated in for us in the U.K. is Luton because we've got a third-party automated freezer in it. And that's the expensive part of building. Otherwise, it's very capital efficient for us and for Ocado Retail to achieve its next step of growth. And going forward for clients, their CapEx in a building that's half the size is materially lower, their ongoing rent rates and services are materially lower. The availability of sites is materially easier closer to customers when you start to be able to build these things in smaller buildings. Our space efficiency versus some others is just extraordinary. So we were talking to a retailer recently, and they said they weren't interested in big warehouses, and we said, no, of course, in their market, it wasn't relevant, store-based automation. I said, yes, that is what we're interested in, and we're looking at some sites already. And then they gave us the size that they were looking at. That to us was a warehouse. To them, it was store-based automation, but it was between 50,000 and 100,000 square foot. And for the volumes that they wanted, we'd have been looking at 10,000 to 15,000 square foot. So we're space efficient. James Lockyer: And then the second question was on the case study you gave around, I think it was the 25 DP8 on there, which is significantly better than the U.K. you mentioned at the time. Why do you think the reasons are specifically that, that was better? Was it density? Was it urgency from the clients? Was it just more savvy users? Why do you think it was better than the U.K.? Tim Steiner: We have some U.K. sites that we operate out of that are between 25 and 30 today. So it's like if you carve out -- that particular site has a geography that more reflects some of the sites that we've got in the U.K. as it's got a small radius around a warehouse doing a lot of volume, doing the full volume of the warehouse, you can do turnaround routes. So one of the challenges is you fill the van up, let's say, in the U.K., you can fill a van with 22, 23, 24 orders, there's -- it's then hard to go above that. So where we do 28 or so, it's because we have vans that are not working a single 8-hour shift on one route. So you have to do things like having 6 -- so in the U.K. in one of our sites, we do a lot of 6-hour and 10-hour routes. So we do -- the drivers alternate 3 of 1 and 2 of the other each other week. They do 38 hours, 42 hours, 38 hours rather than 40, 40, 40, and then we can offload a whole van in 6 hours or almost 2 vans in 10 hours. In some geographies, that's hard because the stem times are not there. And we are working on some longer-term quite complex and clever solutions to that to enable us to break through those numbers. But basket size and proximity and density and things like that come into it. Giles Thorne: Yes. Giles Thorne from Jefferies. Tim, there's been a lot of public discussion about Ocado and Kroger and Sobeys. And to my reading, a lot of it has ultimately been quite gentle on Ocado and most of the blame that people are looking to apportion blame has been put at the feet of Sobeys and Kroger. But nonetheless, it would be useful to hear your reflections with hindsight on things that you could have done differently that would have led to a more orderly outcome or a different outcome. And then the second question -- go ahead, Tim. Tim Steiner: No, no, go ahead. Giles Thorne: Second question is on -- I'd like to hear you talk about some of the compromises you've had to make on your innovation pipeline as a result of the cost efficiency program. Are there any bells and whistles that you wanted to build that have been put back up on the shelf and we'll have to wait for another time? Tim Steiner: Sure. Look, on the Kroger and Sobeys one, would I like to have built the warehouses that Sobeys wants to build in a different sequence so that instead of the third warehouse being in Calgary, would -- should I try to influence management to build it somewhere with a bigger population opportunity with more density that they already had in their network or something? Did we just accept the orders? Yes. Is that in hindsight, a bit naive? Yes. Could we have -- we know this because we've been working on it for the last 8 years, but could we build warehouses where a client could build a 3-module warehouse where a client could turn it on with 1 module and where we're -- economically that is a good warehouse for us even if that client never grows beyond 1 module? We're there today. We weren't there 8 years ago. So 8 years ago, we built 4s and 6s and 8s and 10s or 7s and 10s. And we insisted on clients opening them with 3 modules or 4 modules, which economically, we needed them to do because of the CapEx that we have put into those sites, and we even needed them to grow. But it was a big outlay. It was a big ongoing cost for the clients if they didn't fill them. We didn't have a strong enough sense they weren't going to fill them, and they haven't filled them. And so hence, they're a drag and a burden. Today, we've got 3 module sites going live, as I say, with 1 module down where the client is already doing 1 module before we put the spade in the ground in their store pick operations, expect to be at, let's say, 1.5 modules the day the site goes live, and we're allowing them to grow them in quarter module increments as opposed to having to grow them in 1 module increments. So we've been aware of the challenges of our early business model, and we've been working on that for the last 8 years. We obviously still have to live with the consequences of those early sites and those early decisions. So we need something that is economic for us and our partners at smaller size. We have it today. We need something that our partners can start with the smallest volume and the lowest kind of fixed outlays, and then can they grow it? And we're talking to clients about doing this in a more flexible way in terms of their charging and how that works with their growth that are massively useful for them and still work for us. So we're learning these lessons. Ideally, we might have built 2 warehouses -- might have signed 2 warehouses in 2018 and 3 warehouses in 2019. If we could have built the warehouses that we've got in a slightly more linear way rather than kind of pushed upfront, then maybe we could have learned some of these lessons earlier and helped our clients. And maybe if some of those 7 module warehouses where they were paying us for 3 modules had only been a 3-module warehouse and they've been paying us for 1, maybe there would have been a growth path to see that filling up and those would still be open. We're not blameless as such. But again, it's not our -- there are -- our partners are the ones that need to drive the acquisition of -- we can help them, and we are helping a number of our partners to understand how to best do online marketing, how to best trade an online business, but we need our partners having made a commitment to a site to try and work very hard to put volume into that site. Giles Thorne: And what does Nick bring that you didn't have before? Tim Steiner: Nick's got a huge depth of experience working with technology partners, accounts, clients, just kind of a much greater focus than we've ever had in terms of experience of doing large complex technology implementations where how to work with those clients to influence them to create the behavior that means we're both successful. I think one of the kind of combined naiveites between ourselves and our partners would have been kind of their view of we bought this amazing stuff, and if we just turn it on, we'll have a successful business. And obviously, we've been saying for a while, that's not the case, but we still don't have that element of control where even where we realize it, some of our partners have still behaved a bit like that. And we're kind of like, he's very good at getting in there and talking through that challenge and trying to get those retailers to realize what they need to do to contribute towards making their business successful and not just a view that because we've written some clever code and we've got some [ dwizzy ] robots, that means they've got a business. Giles Thorne: And so then on the innovation puts and takes. Tim Steiner: Look, we have that combo at the moment of some of the biggest projects that we did rolling off, reimagined and the re-platforming, which you will have noticed as -- well, I don't know you personally, but a number of you will have noticed as U.K. customers, the kind of the move -- the migration to OSP. That e-com migration and mobile app migration that happened in the summer at Ocado Retail was Ocado Retail moving the last part of its business on to OSP. They were the last of the 13 partners, Morrisons in the U.K. had migrated before. So that kind of catch-up of all the tiny bits of things that drive acquisition, retention, frequency, margin, basket, et cetera, are all in OSP, and it's an onward journey from here, as well as having got live in 11 markets with payments and currencies and regulations and laws and all that kind of stuff. Together with the rollout of Re:Imagined and efficiencies that are coming through in -- with AI in terms of not just coding, but testing and various things that mean that our overall productivity per person is significantly improving. What's not on the list is hard to say, but it's the more speculative stuff is not on the list. The core things that we want to do to deliver store-based automation, to deliver the growth in existing facilities in the U.K., in particular, to do with supply chain, and we talked about this at Re:Imagined called Orbit, continued work on helping our clients attract and retain and make it easier for shoppers to shop, continued attention on making it easier to run the platform for our partners and the rollout of short lead time orders. All these things are still in there, right? Everything that we really, really need is in there. We are going a little bit slower on some of the other opportunities to deploy our kit in other logistics supply chain scenarios. We have got continued spend to enable it to move up the grocery supply chain, but we could go faster on some of those points. And we may choose to, in the future, if we start to do some significant contract wins in those areas. So there are some things that are like show and tell, like we're doing those a little bit slower, where we -- maybe if we did them a little bit faster, we could then show something and maybe win some business. But it's a very tough process. We're being very rigorous on it. But we expect to get a significant amount of innovation in terms of features and functionality coming, and probably '27 will be a record year for us in terms of innovation. '26, we've got some -- I wouldn't -- I think it would be naive to say we're going to have a record year in '26 because of the disruption of actually going through the reduction in size, but I expect by '27, we'll be back at a record level of innovation. And the amount of change in the platform that we have achieved with this -- with all these amazing people in the last few years is incredible. And I tried to outline that in that slide before, the flexibility of the platform. It's not just the flexibility, it's the intelligence of the platform and so many different things it can do today. We have done so much innovation in that time period. It's amazing. William Woods: William Woods from Bernstein. I suppose the first question, historically, you've been quite cautious on the ROI and the ROC from smaller sites. And I don't think that was just capacity. I think that was operational complexities around the ability to store certain levels of SKU breadth and depth, duplicative picking, decamp complexities, all that kind of stuff. Have you worked out those operational issues? And if it does work, why haven't you built a 1 module site, for example? And I'll come to my second question in a second. Tim Steiner: The first one is what we can build today compared to what anybody could build 5 years ago is dramatically different, okay? The lighter weight bots, the third-generation lightweight bot can be deployed in a different way to the older heavier bots in terms of safety and crash barriers and stuff. And then the space savings that might be 1 or 2 grid spaces in a huge site is not massively relevant when you make it a tiny site is massively relevant. The weight going through the grids as a result of the bots and that weight accelerating at the same speed and therefore, the forces that need to be offset and what you need to do in the floor space is relevant. So if we built these 3 or 4 years ago, we need to start piling underneath supermarket floors and stuff. So there's just differences like that. The on-grid robotic pick taking up at least 50% today and moving towards 70% or 80% of the picking, again, simplifies the whole process. The remote monitoring and operations of our grids and our on-grid robotic pick, which we centralized into facilities in Bulgaria, in Mexico and in Manila, mean that we can run multiple sites, the reliability of the robots and therefore, not needing to have like live on-site engineers at every site permanently. Just there's a whole host of these reasons why this is viable now and we couldn't have built with our infrastructure 5 years ago. Now the people that did try and build things with different infrastructure 5 years ago just didn't have the process knowledge, didn't have the automation with the right throughputs, too much capital, too much labor, too much space. And they didn't succeed at what people wanted. But I think it's important to understand 2 things have changed. That's the supply side has changed, what we're able to do. But if you think back because at one point, we were going to get killed by a company -- because there's been loads of companies over the years, everybody said we're going to get killed by. And one of them at one point was a company called TakeOff, and TakeOff was the micro sites company, and they went around to the person that we didn't sell our OSP to and sold every one of their competitors, 1, 2 or 3 of those sites and said they were going to sell them each 1,000. They did sell them 1, 2 or 3. They never sold them the 1,000 and they eventually went bankrupt. The sites were, as I say, from a supply side, they were too big, they weren't efficient enough and the process flows just weren't good enough. The output wasn't strong enough, et cetera. But the demand side was different, too, because the demand side at the time was to make this site viable, you need a $10 million site or $20 million site and you're doing $1 million or $2 million a store. So they were like a mini where -- they were trying to do a mini version of our centralization where you've got -- so they kind of didn't have the benefits of our centralization, and they didn't have the benefits of being where they needed to be because they were only actually where one store was, whereas because the U.S. as a market has grown -- will have grown by the next year ninefold in that time, those $1 million to $2 million sites are now $9 million to $18 million. And so now you can have one of these things at each location. So the offsetting disadvantage of taking a $600 million site and splitting it into 60 can be offset by the advantages of being in that local geography, leveraging existing assets of that retailer and being able to do pickup in 30 minutes or in 5 minutes in store and being able to do ultra short lead time deliveries and working with the gig economy drivers that for a whole variety of reasons are significantly cheaper in the U.S. than a unionized labor force driving your own vehicles. Does that -- William Woods: Do you not think there's an issue with kind of holding a certain number of SKUs? Could you hold the whole SKU range of a store and... Tim Steiner: Yes. So this is your second part of question. We probably ought to take this offline if you want to. But we have a lot of experience of moving product and understanding how this can work. We've come up with some very good ways of doing this where the majority of the -- significant majority of the velocity will be in the automation. There will be some stuff that is not in the automation, but we will not be -- but our automation allows you to do a robotic merge. So you're not doing one of these things where you've got some pick from here, some pick from there, some pick from there and then humans need to try and marry that up and then deliver it somehow to a customer because the whole thing will be merged by robotics in our machine. But also we do carry already multi-SKU totes in our machine, so we can carry extensive ranges. We can replenish those ranges alongside the store replenishment for things of volume. We can replenish those ranges through batch picking in the store, but not for the specific customer, like keeping a SKU of -- a single item of each SKU in the automation, but not through an optimized pick walk on a batch basis, and we can merge in the rotisserie chicken and the sushi at the point of handing it over to the customer. So we are working through all of the challenges that we are well aware that have been encountered in this space. Today, people want to look at merging prescriptions from other sources, merging general merchandise. Our grid and some of our patents around our grid process, ones that we didn't license to our competitors in the cross-licensing are very important here and enable us to do things that drive, we think, unparalleled efficiency. We need to deliver it all. There's nothing that we're trying to deliver that we see as rocket science, as in on-grid robotic pick is rocket science. Obviously, it's not Starlink or SpaceX or whatever, but it's very, very, very complex. We've done the heavy lifting because we have that technology. There's just stuff we need to do around building up those processes, leveraging other things that we do. Like we already do store pick, so we know about optimized store pick. We just need to bring some of those bits together in the next year, build the first few prototypes for our clients, hope and believe that they'll be successful as we want them to do and then believe that there's an opportunity for thousands and thousands of them. William Woods: Great. And then just the second one was just on that prototype. Have you got a prototype that's working today that's delivering the economics that you put on the slide? Or is this still a little bit theoretical? And when should we get to a point where we can see one? Tim Steiner: It's probably -- it's on a spectrum. So you're kind of outlining 2 things, something nobody has ever built and something that's live and working in the exact size and format with all the pieces of equipment. I don't have that, but I'm also not here. I'm here, okay? I've got grids and bins and robots. I've got on-grid roboting pick. I've got early prototypes working of dispatch ports. I've got the software that runs the robots around. I've got the software that does the store pick. I've got software that does consolidation. So we've got and can illustrate most of the components. We can show small sites that we built small sites, but they were 10,000 square foot. They weren't 4,000 square foot. We've got and built -- we've got robots now running around in freezers, right? So we've got robots in chill, robots in -- ambient robots in freezers. We've got and tested robots moving between temperature zones, which is an important part of this. And to come back to your other question, so we're kind of -- we're here. We want to be here before we -- I don't want to sell thousands of them into [indiscernible], right? Because I don't want to take the responsibility of delivering thousands of them that we might not be able to hit the price targets and therefore, we'll need more capital or we might have the returns or whatever it might be. And we want to clear up those process flows when we're dealing with a couple of dozen sites, not when we're dealing with 1,000 live sites, right? We don't want to be deploying 3 sites a day at the same time as trying to make the first one work, right? Your first question is why not a 1 module site? And there are people who are looking at sites that are not probably 2/3 of a module. There's a point where there's some things that you can do when you miniaturize that will only expand to a certain size. And then when they expand to a certain size, some of the costs double. So for example, if you can run a single grid with a single maintenance area and you can have a part of those robots running into a chilled area, you can eliminate a whole maintenance area. That works to a certain size and a certain size, it just isn't feasible anymore, and I need to have 2 grids. At that exact moment, I need 2 maintenance areas. I need 2 wireless controllers controlling my bot fleets. I need more grid barriers and stuff like that, right? There's a cost uplift. And so there is this kind of area between the biggest of the micro store-based automations and the other sites where you kind of get into an area where you can see an increase in cost, but it's not really worth it for the increase in volume. You'd rather have 2 of these than 1 there. And then you get to a point where, no, I'm going to take that. Does that make sense? It's kind of -- so we model an enormous amount of data around what is physically feasible to be built. And we are talking to retailers for stand-alone sites, attached sites, ranges from 10,000 to 50,000 in the grids, throughputs from $8 million to $50 million, sizes from 4,500 square feet to 17,000 square feet, different use cases, right, different peak hours, different amounts of customer interaction, courier interaction. We've designed lots of different examples, and we're very good at simulating them and understanding what throughput should be available out of them. We just hope to build a few that are good examples. One of the challenges at the moment is actually saying no to a few people who want something that we could build, but we don't think that's the thing that we need to have thousands of, and we'd like to build a few of the ones that ultimately we believe there will be thousands of to show that concept to the world in a real-live 100% operating environment. [indiscernible] Thanks very much.

36天前Insight Analytics约5分钟阅读

AYAAY 2025 Q4 财报电话会议

Joahnna Soriano: Good afternoon, everyone. Thank you for joining us today, and welcome to Ayala Land's Full Year 2025 briefing. Let me begin by introducing our panel, Meean Dy, President and CEO; Jed Quimpo, CFO and Treasurer; Mike Jugo, Head of the Premium Residential Business Group; Mariana Zobel De Ayala, Group Head for Leasing and Hospitality. We are also joined today by members of our management committee, Robert Lao, Head of Strategic Growth, New Ventures and Central Land acquisition; Darwin Salipsip, Group Head of Construction Management; Raquel Cruz, Head of the Core Residential Business Group; and Isa Sagun, Chief Human Resource Officer. We likewise acknowledge your presence of our broader management team. Please note that the press release and presentation materials are available on our Investor Relations website. For any questions that we may not be able to address during the briefing, we will respond via e-mail at the soonest possible time. At this point, I'd like to turn it over to our CFO, Jed Quimpo for his presentation. Jose Eduardo Quimpo: Thanks, Joe. Again, good afternoon to everyone, and thank you for joining us this afternoon for our full year 2025 analyst briefing. Allow me to present the key highlights of our 2025 financial and operating results, and then I will give the floor to our CEO. We are pleased to report that Ayala Land delivered total revenues of PHP 190.2 billion, up 5% versus prior year and net income of PHP 39.1 billion, up 39% versus prior year. Excluding gain from our sale of our 50% stake in Alabang Commercial Corporation and what we call as core revenues. Core revenues amounted to PHP 178.9 billion just 1% below prior year, and core net income reached PHP 30.6 billion, up 8% versus prior year. We invested in capital expenditures totaling PHP 92.9 billion, up 10% versus prior year with notable increase in our leasing and hospitality asset investments. Our balance sheet remains strong with net gearing ending at 0.78:1 within our guardrails on leverage. On portfolio segment revenues, despite market headwinds, Property Development revenues reached PHP 113.9 billion, plus 1% versus prior year following strong bookings of estate lots and offices for sale offsetting lower residential revenues. Leasing and Hospitality revenues reached PHP 48.7 billion, plus 7% driven by broad-based growth across all our segments, this despite ongoing renovations in key malls and hotels. Service revenues was down to PHP 11.8 billion, minus 34%, as a result of lower third-party contracts of our construction business and the absence of airline revenues, which we sold late 2024. Interest and other income was up PHP 15.8 billion primarily driven by gains from the sale of our stake in Alabang Commercial Corporation amounting to over PHP 11 billion. On our income statement, first, as mentioned, total revenues reached PHP 190.2 billion, plus 5% versus prior year. This is on the back of, number one, real estate revenues reaching PHP 174.5 billion, just slightly lower versus prior year as we saw stable property development revenues, improving leasing and hospitality revenues, but tempered by lower service revenues. Our interest and other income was up 275% primarily driven by the sale of Alabang Commercial Corporation. Total expenses reached PHP 134.1 billion, down 3%. We registered lower real estate expenses, PHP 104 billion, down 7% driven by the revenue mix where there was an increase in sales of estate lots an increase in share of leasing business in our overall mix and the absence of airline expenses. General and administrative expenses amounted to PHP 10 billion, up 9% and we registered a GAE ratio versus core revenues of 6%. Interest expense, financing and other charges amounted to PHP 20.1 billion, primarily driven by 2 factors. First, increase in total borrowings and increase in cost of debt; and number two, in 2024, we reversed provisions previously made for airline operations following its sale late 2024. Earnings before income tax came in at PHP 56.1 billion, registering EBIT margin of 40% and on a core EBIT margin basis 36%, 300 basis points better versus prior year. Provision for income tax was at PHP 10.5 billion with an effective tax rate similar to that of prior year. Noncontrolling interest increased by 7% to PHP 6.4 billion, mainly due to the higher net income of AREIT attributable to its own public shareholders. Consolidated net income climbed to PHP 39.1 billion, excluding the gain from the sale of Alabang Commercial Center core NIAT grew by 8% to PHP 30.6 billion, just shy of the 2x 2025 GDP growth. Turning to our detailed revenue breakdown. Property development was stable at PHP 113.9 billion despite market headwinds. Residential revenues hit PHP 91.4 billion, slightly lower by 4% versus prior year on strong core residential bookings, partially offsetting weakness in the premium residential bookings. Estate lots rose to PHP 17.7 billion, up 21% on strong bookings from Circuit Makati, Arca South in Taguig and Centralia in Pampanga. Office for sale increased to PHP 4.8 billion, up 40% on robust new bookings at One Vertis Plaza in Quezon City and the Genetic Corporate Plaza in Makati. On leasing and hospitality, broad-based growth across the entire portfolio, delivering revenues of PHP 48.7 billion. Despite ongoing reinventions in our flagship malls, shopping center revenues reached PHP 24.2 billion, 5% up versus prior year due to higher occupancy, lease rates and merchant sales. Offices reached PHP 12.2 billion, 5% higher on stable occupancy and higher average portfolio rental rates. On hospitality, it climbed to PHP 10.6 billion, up 9% on higher room rates and new capacity following our purchase of New World. Again, this despite renovations in key hotel assets for most of 2025. Industrials jumped to PHP 1.7 billion, up 37% versus prior year, on the contribution of industrial land, which we housed in AREIT and new cold storage facilities. Services was 34% lower year-on-year at PHP 11.8 billion. Construction stood at PHP 8.9 billion, 31% lower versus prior year, following our completion of third-party data center project in 2024. Property management and others dipped 42% to PHP 2.9 billion due to the absence of airline revenues. Property management by itself was stable, delivering PHP 1.9 billion. In terms of margins, most of our product gross margins and EBITDA margins are within our targets. For the Property Development business, Residential business registered 47% for horizontal products and 41% for our vertical products. Estate lots came in at 55%, primarily as a result of the product mix, and office for sale was steady at 48%. On our Leasing and Hospitality business, shopping centers delivered stable 64% EBITDA margin. Offices was likewise stable at 89%. Hospitality was at 22%, which we expect to improve with renovated room capacity now back online, which we brought back in 4Q 2025. Dry warehouses was stable at 78%. Cold storage was at 23%, which we similarly expect to trend up as we stabilize new capacity that we brought in. Services which is composed of construction and property management are at 5%, well within our expectations. Next, let me walk you through the operating performance highlights of our businesses, starting with Property Development. Total sales across our Property Development portfolio amounted to PHP 142.3 billion, basically flat versus prior year. Premium sales was slightly down at 3%, again, this despite market headwinds. Core was up 1% on our focused sales effort to move our inventory and stay ahead of the industry. Estate lots delivered PHP 17.1 billion in sales, up 16% as we saw robust interest in our various commercial, industrial and leisure lands. We launched a total of PHP 60.4 billion projects in 2025, notably 40% lower versus prior year, in line with our continued focus of capital efficiency. Deep diving on the residential products. Residential sales was sustained at PHP 125.2 billion, just 1% down versus prior year. By segment, our premium generated nearly PHP 80 billion in sales at PHP 78.6 billion. Our core market delivered positive year-on-year growth at PHP 46.6 billion. On an overall basis, our residential revenue as of end 2025 stood at 19 months, better than the 22 months as of end 2024. By product type, vertical sales was resilient at PHP 82.3 billion, up 2% year-on-year anchored by Laurean. Horizontal sales declined by 7% to PHP 42.9 billion as we saw buyers look at our estate lots as an alternative. We launched a total of PHP 46.6 billion in residential products last year, again, notably 42% lower versus prior year as we focus ourselves on selling existing inventory. Almost 3/4 of our buyers are local Filipinos and on a year-on-year basis was flat. Sales to overseas Filipinos stood at 17% which declined by 4% to PHP 20.7 billion, and sales to other nationalities was lower by 7% to PHP 12.8 billion, primarily attributable to sentiment headwinds or tighter terms and our shift to more premium segment products. Moving on to the op stats of our Leasing and Hospitality business. First, on shopping centers. We manage a total gross leasable area of 2.2 million square meters in 2025 and opened 29,000 square meters of gross leasable area during that year. With additional space in Ayala Malls Vermosa, and the opening of new malls in Evo City and Park Triangle. Lease-out was 1% higher year-on-year at 91%. We have a rolling pipeline of over 800,000 square meters of new mall space, 86% will be within our existing and our future estates. For 2026 alone, we will open over 200,000 in GLA, our largest annual incremental GLA to deal. This includes new malls at Arca South, Gatewalk in Cebu, an additional leasable area in Park Triangle, TriNoma, Nuvali, Evo City, and Greenville. On offices, our total GLA stood at 1.5 million square meters, and we opened 48,000 square meters with new assets in Nuvali and Atria in Iloilo. Portfolio average lease out is at 87%, 4% lower versus prior year, following completion of new facilities. Lease rate is up 2% despite continuing elevated supply in the market. Our 5-year expansion pipeline is over 300,000 square meters. Most of which will be concentrated in our key estate in Makati, BGC, Vertis North and Cebu. On hospitality, we ended the year with 4,658 rooms with net additional rooms of close to 400 primarily driven by the acquisition of New World last year. Hotel occupancy improved to 68%, plus 1% versus prior year, and resource occupancy was stable at 42%. Our updated pipeline involves the following, we look to open Mandarin Hotel this year, bringing in an additional 276 rooms, and in the next 5 years, build out and deliver over 1,500 additional keys. Finally, on our industrial real estate business, we ended the year with dry warehouse portfolio of over 380,000 square meters and cold storage pallet positions of 31,500. This boosted by acquisitions that we made in 2025. Our lease out on a dry warehouse is at 85%, following the addition of new capacity. On cold storage, it improved to 80% with new clients, sign-ups and robust demand from clients. We are looking to double our cold storage capacity in the next few years and have likewise secured sites for potential build-to-suit dry warehouses to expand our portfolio. For this year 2026, we are opening an additional 9,000 pallet positions of new cold storage capacity at Artico Consolacion in Cebu City. As mentioned, we invested a total of PHP 92.9 billion in CapEx, 10% higher versus prior year. Leasing and Hospitality was a major driver, doubling investment to PHP 27.1 billion and accounting for just under 30% of our total spend. Of this total spend for leasing and hospitality, 3/4 of which went to expansion CapEx, and 1/4 to reinvention initiatives. CapEx for residential was 38% of total primarily focusing on build-out of projects for delivery. Estates investments comprised 18% of total CapEx and the balance of 15% were for continuing land acquisition commitments. Our debt position continues to be well managed with 90% contracted into long tenures. Total gross debt as of end December 2025 stood at PHP 318 billion, up 13% versus prior year. We have kept our average maturity stable at 4.8 years. Our average borrowing cost was slightly up, ending at 5.5%. A bit over 70% of our debt is on a fixed basis and just other 30% is on a floating basis and of the floating component, almost 1/3 of that as an option to convert the fix. Our balance sheet remains strong, with net gearing ratio of 0.78:1. Cash and cash equivalents stood at PHP 19 billion. Our stockholders' equity grew by 7% to PHP 385 billion. Our current ratio is at 1.59:1, and our interest coverage ratio, just looking at core earnings is healthy at 4.9x. To summarize, Ayala Land delivered total revenues of PHP 190.2 billion and net income of PHP 39.1 billion, excluding gain from the sale of our 50% stake in Alabang Commercial Center, core revenues registered PHP 178.9 billion and core net income reached PHP 30.6 billion, up 8% versus prior year. Thank you. Joahnna Soriano: Thank you, Jed. We'll pass it onto our CEO for her message. Anna Maria Margarita Dy: Thank you, and good afternoon. Thank you for joining our full year 2025 analyst briefing. So I won't revisit the 2025 numbers in detail because Jed has already covered them thoroughly. Instead, let me step back and highlight what sits behind the results and how we're positioning the business for the next phase. Let's start with what 2025 demonstrated. Number one, capital efficiency is improving. We delivered roughly the same level of residential sales in 2025 as in 2024, but with 40% fewer launches. This tells us two things. First, our products are sustaining demand well beyond their initial launch cycles. And second, our sales organization is extracting more value from our existing inventory. A market like this, capital discipline matters, we are becoming more productive with every peso deployed. Number two, active portfolio management and shareholder returns. The sale of Alabang Town Center allowed us to recycle capital from a matured asset and fund higher return opportunities. This reflects the discipline we aim to consistently apply in managing and recycling capital. You've seen this, you've seen us take these steps when we sold AirSWIFT in 2024 and then repositioned by acquiring New World Hotel in 2025. At the same time, we continued to return significant capital to our stakeholders or to our shareholders, distributing 65% of prior year's income through dividends and share buybacks. We have concluded our share buyback program, and we'll be canceling the shares acquired under it supporting 10% EPS growth, all told, we delivered ROE of 12.5% in 2025. Even in a tight market, our ambition remains the same, to deliver earnings growth at the multiple of GDP growth. Number three, the leasing pivot is underway. We have been steadily repositioning to balance the portfolio with recurring income and that shift is becoming more visible in the numbers. Our leasing business delivered 7% year-on-year revenue growth. And excluding the reinvention related disruptions, growth would have been 11%. Renovated malls and hotels are being reopened. The New World acquisition has expanded our hospitality footprint. And going forward, leasing will account for a larger share of capital deployment. 38% of total full year CapEx from 29% in full year 2025. By 2027, we expect our EBITDA to roughly balance between leasing and development, strengthening our earnings profile and balancing profitability and growth. Number four, quality is a long-term differentiator. Quality is job #1 remains a work in progress, but we are seeing tangible proof points. Park Central Towers is now turning over and has been very well received by buyers and industry partners. Laurean Residences reflects our next generation of design thinking and deeper integration with our hospitality capabilities. The Heights Katipunan shows our focus on student residence with targeted amenities and enhanced security. Across our flagship malls, say the hotels and need the resorts, reinvestments are producing more contemporary, consumer-relevant and higher-yielding assets. These investments don't just translate into earnings overnight, but they strengthen pricing power, market position and secure long-term returns. Here are outlook and priorities for 2026. We are planning for another challenging year. The reality is that GDP growth is projected to stay below 5% and residential supply in Metro Manila remains elevated. But we are not waiting for this cycle to turn. We are leaning into the parts of the portfolio that grow more reliably while keeping our property development business stable and capital efficient. Number one, we will accelerate our leasing growth. The biggest driver of earnings growth in 2026 will be leasing. We will start with sweating existing assets, many of our renovated malls and hotels are now operational and the focus shifts to consumer delight and operational excellence. After completing the renovation of 5 key assets in 2025, our focus is now monetizing these upgrades, and we project a 10% to 20% room rate uplift from these newly renovated properties. The reinvention of our flagship malls will be completed by the end of June 2026. So by middle of this year with the reopening of Glorietta and Greenbelt and following the completion of Ayala Center Cebu and TriNoma in December 2025, we expect these renovations to generate a 15% to 20% uplift on rent. Alongside extracting value from recently completed assets, we will continue expanding the leasing platform. Leasing will account for a larger share of capital deployment as we scale malls, offices and hospitality within our states. In 2026, we will open over 200,000 square meters of new retail GLA, the largest single year addition in our history. We started with the opening of Arca South Mall last weekend and saw over 200,000 visitors in just the first weekend. We will open over 70,000 square meters of new office space in Evo City, Arca South and Gatewalk. In addition, we signed 3 new major leases with big multinational firms in Quezon City and Cebu totaling 82,000 square meters. The Mandarin Oriental will reopen in the fourth quarter, adding another 276 rooms to our hotel portfolio, but more importantly, this marks the return of 5-star hospitality to Makati after more than a decade. We are scaling our cold storage business thoughtfully, working towards doubling current capacity over the next few years. These represent meaningful steps in recurring income that will build over the next several years. Number two, keep residential stable, but more disciplined. On property development, despite market headwinds, our objective is to keep it stable as we lean in on the strength of our domestic and international sales team -- teams and by focusing on projects where we have high conviction on value proposition and sales momentum. This approach allows us to protect margins and ensure we maintain our market leadership. We have clear sight of PHP 30 billion of new launches firmly scheduled for 2026, and we have already launched pipeline that we can move on as we see market windows open. This gives us flexibility to scale quickly as the demand supply dynamics improve. We expect to deliver roughly the same level of residential sales as we did in 2025, and we will continue to be #1 in the residential space. Number three, continued disciplined capital returns. We are maintaining our 30% of prior year's net income dividend payout. We are also declaring a special dividend from part of the ATC or Alabang Town Center or Alabang Commercial Center proceeds, and we will continue to return excess capital to shareholders where appropriate. Four, protect the balance sheet and preserve flexibility. Historically, in periods like this, opportunities tend to surface, and we are beginning to see some of this emerge. Maintaining a strong balance sheet ensures we have the capacity to deploy capital quickly when these opportunities meet our return thresholds and strengthen our strategic position. For this reason, we will manage our existing businesses within their means and keep sufficient balance sheet headroom to act decisively when the right investments present themselves. So for 2026, we expect steady property development revenues and retaining our #1 position, a double-digit growth in leasing revenues with the biggest ever delivery of leasing GLA, continued margin improvement from operational excellence PHP 70 billion to PHP 80 billion in CapEx with a higher proportion going towards leasing and debt levels to be maintained well within our guardrails. Taken together, this positions us to generate earnings growth ahead of GDP and deliver higher return of capital via dividends to our shareholders. Thank you. Joahnna Soriano: [Operator Instructions] Rafael go ahead. Rafael Alfonso Javier: Rafe from BofA Securities. First of all, congrats on the good earnings result for the full year '25. My first question would be on the lot sales. I understand that I think there was a lot of catch-up that you did in the fourth quarter. I wanted to know how we -- how it's -- how it will look this year, I mean in terms of the quantum and the timing so that I mean, it will help us also with forecasting going forward. Yes. That's my first question. Anna Maria Margarita Dy: So maybe let me answer that first question first. So we always say that lot sales are about 15% of our -- that's how we look at it. 15% of our total pickup for the year. And for 2026, that's still what we're looking at. Now in terms of timing, that frankly is a little bit harder to predict because these are deals and I'm sure you noticed that on the third quarter, it was actually quite weak. So these were deals that were still being worked on, and they would just happen to close on the fourth quarter. So there is a level of, I guess, lumpiness when it comes to these transactions. But at least when we're looking at the full year, it's still about 15% of the pickup is what we're looking at for our lot sales. Rafael Alfonso Javier: Okay. And my next question is on land bank utilization. I understand it is also part of the mandate last year to really net utilize rather than acquire. How is the progress last year? Jose Eduardo Quimpo: So our total utilization, Rafael last year is over 800. So the more precise number is 879. Rafael Alfonso Javier: Okay. I think my last question is just a housekeeping one on the residential inventory level. How is it looking so far? Do you have a target to -- I mean, a target level that you want to achieve this year? Joseph Carmichael Jugo: Yes. So thank you for the question, Rafe. So we've actually improved the inventory levels by a month. We ended the year about 19 months coming from 20 months and our aspiration for this year is to be somewhere in the 17- to 18-month range. Joahnna Soriano: Jelline from JPMorgan also has a question. She's virtual attendee today. Sorry, there seems to be feedback. We have a question here from Niki Franco from Abacus Securities. He has a couple of questions. Number one, what's our outlook for borrowing costs this year? Jose Eduardo Quimpo: Yes, I'll take that one. So as you know, there are projected or there has already been a reduction on policy rates. And when we talk to the analysts, the projection is there could also be another one. So taking this in mind, the way we model 2026 is that we are expecting or we're targeting to keep our borrowing cost at similar levels. So we ended the year at 5.5% We aim to keep it at 5.5% . Joahnna Soriano: The second question is of the 1.5 million office leasing portfolio, what percent is leased to BPOs? Mariana Zobel De Ayala: 70%. Joahnna Soriano: Of the 200,000 retail GLA to be opened this year, how much of this new space versus reopen spaces? Mariana Zobel De Ayala: That's entirely new space. Joahnna Soriano: Okay. If there are no questions from the floor, we'll call in Jelline next -- sorry, Gilbert, go ahead. Gilbert Lopez: More granularity or discuss your dividend policy. Moving forward, now that to end here buyback. Anna Maria Margarita Dy: So I think even before the buyback, we were already doing about 30% of prior year's net income, which we intend to keep, so we're maintaining that. This year, in particular, we're doing a special dividend because of -- from the proceeds of the sale of Alabang Commercial Center. I think the 30% is probably what we are seeing something that's more stable for now. Going forward, it's really special dividends in the event that we have an asset monetization event. Gilbert Lopez: So thank you, Meean. So for the special this year, how much does that bring your payout to inclusive of the special? Jose Eduardo Quimpo: So it should drop here about 33% of prior year. Gilbert Lopez: So it's around 10% -- so from 30% becomes 33%. Anna Maria Margarita Dy: Of core net income. Joahnna Soriano: Go ahead, Jelline. Yes, if you can just type in the question, we'll move on to Joan. Sorry, I think we're having some technical difficulties. So we'll just wait for the investors to type in the questions. Okay. So this one is from Daniela Picacho AB Capital. On residential launches, just to clarify, PHP 30 billion is your base case target for 2026. If so, what would be the triggers to push that higher? Is it purely dependent and you bring in your inventory life to sub 17 to 18 months? Or would you have to consider overall or system-wide inventory you see 4 years worth of inventory life? Also, can you remind us of the inventory life for your premium is. Anna Maria Margarita Dy: We don't generally provide the breakdown, but let me answer the first question. So there are 2 figures. One is our inventory level, which may not necessarily be the only thing. The second is, what would be the competitive environment in that particular area. So I think the analysis would need to be more specific to the target market of the project. So for example, you're launching something in geography A, then we'll have to look at who else is playing in geography A? And what's the inventory going to be out there? . Joahnna Soriano: On malls, you guided for roughly 15% to 20% rental uplift from reinvented projects. Could you quantify how much of this uplift should realistically flow into 2026 revenues versus later years? And what portion of this is already locked through signed leases? Mariana Zobel De Ayala: So the 15% to 20% uplift should be seen immediately for 2026. The basket of merchant replacement program, Jelline, we talked about already took effect. Now Obviously, that also happens on a rolling basis because every year, we allocate a certain part of the GLA, which we refresh or reinvent. Joahnna Soriano: Thank you, Mariana. We also have a question here from [indiscernible] can you provide an overall outlook on the demand scenario in the residential segment both at the premium and core and in Makati and other provinces as well? Yes, this is for residential. Anna Maria Margarita Dy: I suppose for us, the demand outlook remains very positive. Our launches have actually been very well received, I think, Laurean, which we launched this year 37%. Joahnna Soriano: 37% Heights Katipunan at 17%. Anna Maria Margarita Dy: Yes, 17%. So if you ask us, actually, we believe that demand continues to be robust. Maybe where this question is coming from is why the relatively low level of launch for this year. So for us, it's not so much a demand issue. It's really more of a supply issue. And we'd like to make sure that, I guess, this industry-wide supplies first taken up before we push more supply out there. So I think that's really the concern. It's not that we are concerned about the demand. It's just we want the supply to be absorbed first before we launch full blast again. Joahnna Soriano: He also has a question here on the current level of cancellations in the residential segment. We're now at 7.7% as of full year 2025, which is slightly better than 7.9% in the 9 months 2025. Any other questions from the floor? Still waiting for two to type Go ahead, Carl. Carl Stanley Sy: This is Carl Sy of Regis Partners. I just have a few questions, mostly on the residential segment. So first, it looks like the reservation sales of the core segment fell in the fourth quarter, both on a year-on-year and quarter-on-quarter basis. From what I can tell, there were still promotions and discounts offered during that period. So while I understand there was, let's say, a flood control corruption scandal going on. Is that -- do you attribute the weakness mostly to that? Or is there some other -- something else? Also on the residential segment looking ahead, do you have some launch plans? Do you have a more positive outlook on core versus premium or Metro Manila versus provincial? Joseph Carmichael Jugo: I think quarter 4, as we all know, a lot of negative sentiment. So I think that we didn't heavily -- whether it's a premium or our core market. But what we are looking at is really specific performances of certain projects. I think the Heights project, when you launched it, it's now at 17%. And Laurean had a very, very good take-up. We are ending as of today, PHP 10.4 billion or it's 37%. So the demand is there, based on certain projects and locations. As our CEO mentioned, certain geographies is really more challenging because of the supply situation now. Anna Maria Margarita Dy: Maybe to add to that. So your second -- I'll try to answer. Second question is, are you more confident about certain segments. So horizontal, we remain very bullish, horizontal -- obviously, horizontal ex Metro Manila. In fact, most of our launches, except one will be horizontal this year, including some provincial horizontal launches outside Metro Manila. In terms of core, why did core decline in the fourth quarter, I think there's -- Katipunan got launched first quarter of this year. So I think there's a recovery in the first quarter. Carl Stanley Sy: When you see a horizontal launches predominantly in 2026, would it be fair to say that's mostly premium? Anna Maria Margarita Dy: No. Actually, we will be launching core horizontal as well this year. Carl Stanley Sy: Got it. And then I'll ask a little bit about the office segment. I think if I heard correctly, you signed about 80,000 square meters of space already for this year. And with some context here, a lot of investors are concerned about the BPO sector, particularly in light of artificial intelligence. I want to check if the 80,000 square meters is predominantly BPO? Mariana Zobel De Ayala: Yes, it is. I think we're still tracking -- I think IBPAP believes that from a revenue standpoint, BPO should grow 5% from a headcount standpoint, 2% to 3%. So we generally follow that guidance. That being said, our headquarter offices actually grew at a faster clip than BPO unsurprisingly. Joahnna Soriano: I think Jelline's questions were similar to Carl, but we have a couple of other questions from Consilium. Can you please provide clarity on your -- okay, sorry, Sangam, we don't provide the breakdown for inventory. And then they're also asking about the strong pickup in the lot sales. Does this indicate that improving sentiment to premium level. Anna Maria Margarita Dy: I think we achieved what we set out what we thought would achieve. I mean it's just that some of the sales we thought would have happened in the third quarter ended up happening on the fourth quarter. But I guess the same forecast last year as this year, about 15% of our sales, our total take-up will be coming from the lot sales. Joahnna Soriano: Correct. We have a question here from RJ Aguirre of UBS. He wants to ask about the rationale behind selling ATC. This is arguably one of the group sought after Millstone location. And on market market, it's up for rebidding, this is going to be a priority for the group. Jose Eduardo Quimpo: So yes. So let me take the question on Alabang Commercial Center. So just to frame it, if you look at the gross leasable area attributable to Alabang Town Center, that's actually less than 5% of our 2.2 million square meters. So I think from a portfolio management basis, it's not super impactful. If you use 5%, that's being a threshold of something that is impactful. Number two, if you run valuation, we are effectively sold at a cap rate of 3%, 3% cap rate. So as most of you know, when we transact something, for example, with AREIT, we turn out in the area of 6.5% to 6.8%. So having a buyer that's willing to pay a cap rate -- effective cap rate of 3% was a clear -- from a financial perspective, a clear value offer on the table. What allows -- what it allows us to do is actually be able to recycle a substantial amount of capital. So if you imagine if we can generate yields on our commercial leasing assets in the area of 10% to 12%, the money that you raise on a 3% cap rate and redeploy, you have sufficient capital to, number one, reinvest in very similar footprint and number two, have sufficient available balances to actually provide tangible returns on capital. So when I say returns of capital, it gives us an opportunity, for example, to give special dividends as what we're doing in 2026. Anna Maria Margarita Dy: Yes, it's really a straightforward, I guess, capital recycling story. We're getting returns from a very mature asset. Meanwhile, we're opening 200,000 square meters of mall space today. We have 600,000 square meters of malls under construction and under planning. So this is simply reallocating capital from an asset that is already matured to one where we believe there will be more upside. The second question had to do with market market. So I think it's also been disclosed by BCA that we are in discussion for the extension of market market on the portion of the property that they are thinking of bidding out. I think we are also seeing in the news some government assets that they would like to privatize and to dispose. And as I said earlier, we do want to keep headroom in our balance sheet because times like this opportunities seem to surface. Joahnna Soriano: We have a question from Niki of Abacus Securities. With major advances in artificial intelligence models announced in recent months, how concerned is management about the large exposure to BPOs, primarily in offices, but also the possible knock-on effects for residential? Mariana Zobel De Ayala: Maybe I'll take for the offices portion. I think in the short term, we actually feel it might help -- the technology might help leapfrog some of the challenges on education and training side. I think generally speaking, medium to longer term, we're focused on opportunities around low vacancy areas and high-traffic areas. So that would be Makati, BGC, Candon City and Cebu. So I guess that's to say that we do imagine that AI will take effect on the sector. Anna Maria Margarita Dy: I guess the second question was AI impact on... Joahnna Soriano: Knock-on effects to residential, if any, in relation to... Anna Maria Margarita Dy: I suppose it's -- the effect would be more macro in nature. If AI affects BPOs and BPOs affect the GDP or the economy and employment, then that's the more indirect but impactful negative effect on residential. But direct effect, I don't think we see anything. Joahnna Soriano: These are the questions of Joy Wang from HSBC. What is your precommitment occupancy for the 200,000 new space to be introduced this year, is a 15% to 20% increase in rent just under rental rate for the new space. Mariana Zobel De Ayala: Yes. So I think we've committed to keep our lease-up rate at 91%. So that will be, again, blended across the entire portfolio, taking into account that some of the newer malls will take a little more time to mature. In terms of the rental rate, so the 15% to 20% quoted was really on the merchant replacement program. So that's taking existing tenants and replacing them for higher-yielding tenants. Joahnna Soriano: This one is for Jed. How should we think about the special dividend policy? Would this be a percent increase of the investment gain during the year or the previous year? I think this was already answered earlier by Jed. So the dividend policy, 30% of prior year's income. We're increasing that to 33%. So it's effectively a 10% increase from our existing dividend policy. Jose Eduardo Quimpo: Yes. So we're tracking 33% of prior year's income. I'm sure you already saw the disclosure. So regular cash dividend stays at 30% of prior year's core net income, but we saw the opportunity to return capital. And so we're declaring an additional 10% of that by way of special dividends. Joahnna Soriano: She also has a follow-up question. Management mentioned about capital return to shareholders while keeping sufficient capital for investment, what is the right balance sheet capacity that management wants to keep? How much more capital can we expect management to return to shareholders? Jose Eduardo Quimpo: Yes. So on returns to capital, as I mentioned, we are tracking 30% plus an additional 3% regular and special dividends, that's for 2026. That's what we're planning on. In terms of leverage position, as mentioned, we are at 0.78x net debt to equity in terms of our balance sheet. From our perspective -- from management's perspective, we want to make sure that we don't reach one. So from our that room between 0.78:1 is actually the dry powder that we want to give. And the more we're able to expand that, the more it allows us to give room for key acquisition opportunities. Joahnna Soriano: We have questions now from Jelline with JPMorgan. On capital deployment, launches and CapEx budgets appear lower on a year-on-year basis, while management does not intend to increase the buyback program. How do you plan to deploy freed up capital? What will entail to commit to a higher minimum dividend payout? I guess from a regular standpoint? Jose Eduardo Quimpo: So I guess Jelline, the math, eventually, if you run all your models is that you'll probably see us taking on very little incremental debt for 2026. So from overall sources and uses of funds, the net change is really that you'll see Ayala Land aim to minimize incremental debt for 2026. Joahnna Soriano: She also asked for the RFO mix in 4Q 2025, that's 8%. In terms of inventory to be completed this year, we're looking at about PHP 6 billion or 3.5% of inventory. Any more questions from the floor? Unknown Analyst: I'm Paul from [indiscernible] first of all, congrats on your 4Q results. I have questions about the -- first about the mall performance. I'd like to ask for the occupancy rate of your newly opened malls like Park Triangle and Arca South. And what's the current tenant behavior regarding this -- on the newly opened malls? Mariana Zobel De Ayala: So for Arca, we're actually almost 90% leased out for the first phase that we opened. And for Park Triangle, we're 65% leased out. Unknown Analyst: Thanks Mariana. And another follow-up question is how much is Ayala Malls same mall sales growth for full year 2025 compared to 2024. Mariana Zobel De Ayala: Yes. Same mall revenue growth was 7%, and the overall sales growth was 10% year-on-year. Unknown Analyst: Excluding reinvention, how much is the... Mariana Zobel De Ayala: One moment, let me get that for you. Joahnna Soriano: Yes. Ex reinvention. Mariana Zobel De Ayala: Yes. Okay. Ex-reinvention. Those figures that I gave. Unknown Analyst: And another question about the RFO promos. Can you provide us a recap or a refresh on how the management is currently trying to reduce the current inventory there. That's what RFO promos are you offering? And how much discounts are usually available for buyers? Joseph Carmichael Jugo: So generally, the RFO promos are stretch payment schemes or fairly sizable cash discounts. But I also want to highlight that our RFO situation now is much, much lower. It only represents 4% of total inventory. So it's quite low. Joahnna Soriano: We have one final question from Daniela Picacho. Just a follow-up. Just a follow-up. You said resi cancellation rates have improved to about 7% to 8%. Could you share whether recent cancellations are concentrated in specific price segments, geographies or older vintages? I'm curious if newer bookings are showing better buyer quality. Joseph Carmichael Jugo: So on the better buyer quality, what we've done and that has also admittedly impacted sales as we've tightened up on some of the down payment requirements. So even some of our launches, we do require down payments, especially for the core market. So that should help future cancellations or prospective cancellations. Most of the cancellations are actually in certain areas. So it's not spread out throughout the -- all of the projects within the premium core products. Anna Maria Margarita Dy: Sorry just cancel it's a percent of revenue. It's very close to where we were already in 2019. I think we were 6%, if I'm not mistaken, we were about 6% in 2019 before the pandemic, about 6% of cancellation. 6% of revenues. Cancellations is equal to about 6% of revenue. So now we're at about 8%, which is a very big movement from where we started a few months -- a few years ago. Joahnna Soriano: Correct, yes. Okay. Last question from the floor. Okay. If no more questions, that concludes our briefing on Ayala Land's for 2025. If you have any further questions, please feel free to reach out to the team. A recording of this briefing will also be made available on our website. Once again, thank you for joining us this afternoon.

36天前Insight Analytics约5分钟阅读

QTCOM.HE 2025 Q4 财报电话会议

Heli Jamsa: Good afternoon, and welcome to Qt Group's Q4 2025 Results Presentation. My name is Heli Jamsa, IR Lead. And with me today are our CEO, Juha Varelius; and Interim CFO, Ann Zetterberg, to present the results. After the presentations, we will have Q&A first in the room. And if there's time left, move on to the questions from the lines. Without further ado, please, Juha, the floor is yours. Juha Varelius: Thank you. Thank you. Good afternoon, everyone. And we have a same agenda, as always. I go a bit through what happened on Q4, and then Ann is going to go through the numbers in more detail. I'll talk a bit about the future outlook and then questions. So the Q4, we had a growth of 12.6% or 18.6% comparable currencies. And of course, IAR acquisition, which we completed -- contributed in this development. And IAR was EUR 8.1 million on Q4, and our organic growth was 6.1%. So it was a -- compared to the very difficult year we had last year, it was a decent quarter, and we were happy on that. Our EBITA margin was 35.6% and the EUR 27.5 million, and that's -- there is a decrease compared to last year, but we did have a one-off cost on the acquisition that were burdening that. I'm going to talk more about the overall market environment. But of course, the -- even the year changed, the market environment hasn't changed that much. So we had quite a bit challenges last year which affected our customers in a way that we had tariffs and whatnot uncertainties. So the selling developer licenses last year was slow, if put it on one word. So the -- on the whole year, we ended up on EUR 216.3 million, which is a increase of 6.6% on comparable currencies. So we went pretty much in the middle of our guidance. The distribution license revenue grew very well last year. There were a lot of new things coming into the market, new programs started, which ended up on the 26.4% growth. And of course, the main growth drivers, industries for distribution licenses is the automotive, medical and industrial manufacturing. The whole year EBITA was EUR 51.8 million, and there was a decrease. EBITA margin was 24%. Our personnel increased end of the year to 1,100 out of which 215 are IAR employees. So -- but we did continue our own hiring as well. The one-off costs for IAR acquisition, EUR 5.8 million. We're going to talk that also a bit later, but the -- of course, we all know that the IAR profitability has been less than the Qt. So that affects the overall profitability of the group going forward this year. We haven't disclosed the ARR before. And on the ARR we had a growth of 8.3%. And there on the small print is that the -- it is Qt and the QA developer license base and it does not include the IAR licenses and distribution licenses. So that ARR is the Qt and QA business. We plan to give that ARR number now in the future also in the half year sequence. So you can see that because one of the questions affecting our revenue has always been the shift from 1 to 3-year licenses. Of course, last year, we did see the cautiousness in our customers. So the -- it was slowness in sales, but it was also people shifting from 3 year to 1 year. So now presenting this ARR, we don't have to -- you don't have to worry about the shift from 1 -- 3 year to 1 year because we can follow the ARR. And our plan is to give that number now next time after second quarter and so on. Obviously, it's a number that doesn't change that much. We might even go on a quarterly basis if that's needed. But the -- like I said, it's much slower moving -- slower moving measurement. Well, here are some of the product-related things we did in 2025. There are always questions about AI. Is AI going to eat our lunch in a way that the -- you know that there are a lot of predictions on AI that the -- no developers are needed and AI is going to do all the code. Well, at least as of now, we don't see that development. We do see that there are a lot of AI assistants being used like we are offering them in Qt and our design studios and on Squish. So on writing test scripts, for example, you can use AI and then the Squish does the actual testing. So they help on that. But do we see that the -- specifically on embedded world that the AI would become and replace the developers, that kind of a development, we don't see as of yet. At the same time, of course, it's good to realize that I think that the U.S. companies are planning to invest EUR 500 billion, EUR 600 billion next year. So obviously, they are expecting to get something out of it. But I have -- I don't see that developers would be going away next year or even in the coming years in that sense. On the partnering side, we -- on Axivion, we do have partnerships with NVIDIA CUDA. So the -- when you're doing CUDA code, you can -- or using CUDA, you can use the Axivion. On the R&D, on the defense sector, we did have the FACE certifications and working with Infineon over there, on the AI consumer power devices. And then we are expanding our ecosystem through the Qt bridges, which will enable more languages over there basically. These are just some of the highlights that we are working on the product development. So in general, our product has -- all our products have always been very good. We get a very good feedback. So this is just to show a few examples that we do continue our R&D and we do -- we are on the forefront of product development all the time, making sure that all the Qt products are very competitive in the market, and that seems to be the case on all the customer surveys from our users. With this, Ann, please. Some numbers. Ann Zetterberg: Yes. I am Ann Zetterberg. I am -- I have been the CFO of IAR for -- I'm on my fifth year now. And with the acquisition of IAR, I had the opportunity then to step up and become the interim CFO for Qt. And I'm going to tell you a little about the numbers then for this quarterly report. So delighted to meet you all. There will be a bit of a P&L first, maybe a little repeat on what Juha just mentioned. But we had -- in Q4, we had a growth of 12.6% and after exchange rate impact, it was 18.6% at comparable currencies and the organic growth with removal of IAR revenue, which was EUR 8.1 million, that was EUR 6.1 million. And we -- in -- for 2025, the growth was 3.5%. Exchange rate impact has been pretty bad, both for Q4 and for the full year, especially the dollar has behaved very, very badly for us. And the growth there for 2025 at comparable currencies was 6.6% and the organic growth was 2.6%. But as Juha also said, we plan to show the ARR as that shows better the yearly underlying growth for the company. It doesn't -- it's not affected from which contract length the customers chooses. As we recognize 95% of the contracts upfront, it depends -- it matters a lot if they choose a 5-year contract or a 1-year contract for revenue, but ARR illustrates the underlying growth very stably, and that is growing good for us. It was 8.3% of growth for the Qt part, excluding IAR during the year. And then looking at expenses, the personnel and year-on-year grew by 267 individuals. That's a growth of 31%. But of course, a lot of that relates to the IAR acquisitions, 215 people worked at IAR at the acquisition. And -- so that increased the headcount to 1,136, both on average for the year, but also at the year-end. And IAR contributed EUR 4.8 million in staff costs in the P&L. Under other OpEx, the IAR acquisition had some extra costs then, EUR 4.1 million in Q4 and EUR 5.8 million during the year. And also, I wanted to highlight, even though it's a very small cost, the capitalized asset as IAR has interpreted IAS 38 a bit differently than Qt has and has capitalized R&D assets in the balance sheet. Presently, there is EUR 5.4 million of capitalized unfinished assets in the balance sheet of IAR and those are expected to be finished under 2026. But this means that we will have a small positive effect on the P&L from these capitalizations, removing costs and putting it into the balance sheet. I don't expect any large amounts from this, but it is still good to understand that this is what it looks like now. Over time, there will be some harmonization within the group, so all companies look at this in the same way. And then, of course, the profitability, like Juha just mentioned, has gone down. The EBITA margins are lower both for Q4 and for the year. IAR has a lower profitability. So that contributes to that and as does the acquisition costs. But of course, when you join 2 companies, there are also opportunities for integration, efficiencies and cost reductions, which we are going to work with on starting this year. And this means that the earnings per share has gone down to EUR 0.73 for the quarter and EUR 1.25 for 2025. So then moving on to the balance sheet. A lot has happened to the balance sheet, obviously, from the acquisition of IAR. The preliminary PPA added EUR 204 million in net assets to the balance sheet. Of that, goodwill was EUR 122 million. And then there were identified other intangible assets of almost EUR 90 million. Those were customer relations, technology and trademarks. And those will be written off over 15 years. So the amortization yearly net of tax would be EUR 4.8 million. And also the PPA added, or the acquisition added other net assets of EUR 11.2 million in IAR. Some of those assets on the asset side of the balance sheet and some on the debt side sort of spread over, but the net of them all are EUR 11.2 million. Some of those assets were trade receivables then, which increased the trade receivable balance to EUR 58.7 million in the balance sheet. And there are also other receivables, which could be good to know, one booking of EUR 5.1 million as we have booked the full value, 100% of the shares to the balance sheet, as there is arbitration going on, and we are obligated to buy the rest of the shares. We are not showing any minorities under equity and so because it's only a matter of time until we own 100% of the shares. But that can also be good to know. And then the ending cash balance was EUR 40 million -- EUR 40.1 million, a little lower than compared to last year as we have made this large acquisition. And as the balance sheet has expanded, the equity ratio has gone down from 81% to 50% and also the interest-bearing debt has increased. The interest-bearing debt is EUR 143.2 million. And of those, EUR 134.4 million are debt relating to the acquisition of IAR. So we have paid off some of the debt already. It was EUR 150 million from -- to begin with. And also on the deferred tax on the debt side relating to those intangible assets that were EUR 90 million on the other side, there is also deferred tax booked on the other side which is EUR 18.5 million. So good to understand that also how the PPA affects the balance sheet. And on the short-term liabilities, there is a debt of EUR 5.1 million, which is the amount we expect to pay for the remaining shares of IAR after the arbitration is finalized. And then I can just, as a final note, say that operating cash flow then had gone down a bit, but mainly because of the profitability going down. So nothing strange about that. And with that, I suppose I'm done with the financials, and we will take questions afterwards, but I will then leave to you, Juha, to take the next of the slides. Juha Varelius: Thank you. So 2026. Well, I think the first big thing is that the -- during the next 3 years, as you know, the IAR has been on a perpetual model. And our -- during the next 3 years, we are -- our target is to shift that into subscription model. That's roughly the -- by the way, the same plan we did have the -- early on with Qt when we did this a few years back. And if this goes as planned, the IAR revenue will be going down this year. So it's going to be decreasing this year. And then depending on how aggressively that goes down this year, then the swing back will be bigger next year. So -- but it's the early phases. So we've started the journey. We have now a couple of months behind us. So it's to make -- exact predictions at this point is there is a bit of a room for that estimate still. The -- well, the -- I think it's -- the market has been uncertain so long, that the uncertainty will definitely continue. As we know, there are a lot of global tensions going on as we speak, and that's what we're looking this year. Some of our customers are in a challenging environment. The -- like in automotive, the Chinese automotive manufacturers are putting a pressure on the European manufacturers. And at the same time, there are tariffs that's obviously going to continue all this year. And so on and so forth. So I think that on the industries, the automotive will be in challenge, Medical will not so, and the industry automation seems to be doing pretty well. Defense is doing really well. So in -- if I now look at the 2 of our biggest industries, they are actually medical and defense at this point of time. So they've grown quite substantially over there where they've been. The long-term growth prospects, well, like I said on the AI, this software really defines the value of the products. Each product will have software going forward and the new versions of it we don't see on embedded, that the AI would be eating all that market away far out from that. But we do see AI improving our own products on many respects, and that's what we are implementing. So before we've given our estimates that -- we've given you a range, but we gave up on that range. So now we're saying that the -- our full year net sales will increase at least 10%. So we're saying that, that's the floor, but we are not giving a range. So we're not giving the upper part guidance. So that's a bit different. And we're saying that our operating profit margin will be at least 15%. So again, we're saying that, that's the floor. We're not giving the upper range. So we've -- we're not giving those ranges anymore. Going forward, we're going to start after Q1 or after Q1, we're going to start giving you more info on the -- on how the -- well, we'll start sharing this ARR, which will give you a better understanding. You don't have to worry about the shift on the 3 to 1-year licenses. And then we're looking at the -- we're going to give you more on the revenue per product, so you get a better understanding on the -- how the licenses -- distribution licenses are coming. So we're looking to open up that a bit. I don't know if it's going to make your life any easier because there is a lot of fluctuations. But at least you can then see that fluctuation. So the -- we've been listening -- what you've been asking and -- so that's the -- but more to come on that later. I think the ARR actually will help you more than seeing the license -- distribution license sales and whatnot, but the -- more than that. So do you have any questions? Okay. Matti Riikonen: It's Matti Riikonen, DNB Carnegie. A couple of questions. They are very simple. Do you expect the legacy Qt business to decline in 2026? Juha Varelius: Simple answer, no. Matti Riikonen: Okay. Do you have a rough estimate of how much IAR's revenue would decline in '26 versus '25, if you give a broad range? You say it's going to decline and you say that you don't know yet, but roughly where is -- where are your thoughts at the moment? Juha Varelius: Well, double-digit. Matti Riikonen: All right. Juha Varelius: Low double-digit. Matti Riikonen: And third question before I give the mic to somebody else. How will IAR's fixed cost base develop in 2026? Juha Varelius: Simple question, longer answer. The -- well, I mean, we're not looking to increase the IAR cost base. So what you're going to see now is that the IAR -- the revenue decline really depends on the -- how well can we go on a subscription, and we try to go as aggressive as possible. So the -- if I say low double-digit revenue decline, somewhere there, right? I don't know yet, but somewhere there. And then 2027, I do expect to see a double-digit -- high double-digit growth on the -- maybe close to 20-something, to give you an idea how it's roughly good work, right? On a cost level, when we see costs, obviously, we're not going to be increasing costs because the prices are increasing, right? But the -- we do have some R&D-related initiatives over there where we think that we're going to be increasing cost, and they are related into the fact that the IAR is very much on a functional safety critical environment in automotives and whatnot. We are looking for a product development that we can broaden that segment roughly, to put on a broad perspective. And then we have few places where we're going to -- mainly on sales, we're going to increase sales costs, but we're talking very modest cost increases on the IAR side. So if you look at the old IAR, I know you have the numbers from there, we're looking very -- we're looking some cost increases, but fairly modest over there. But still, if you model that -- the revenue development on IAR numbers with that revenue dip, you're going to be seeing that the EBITA contribution for the whole group this year is going to be pretty much breakeven or even slightly negative. So we're not looking for -- first of all, on the guidance, we are -- those are the bottom lines. They are the floors. They are not the -- we see that, that's the bottom, bottom, right? So we do expect a bigger numbers. And then the IAR negative contribution will be on this year, but when it swings next year, we don't -- there is no need to increase costs for that because it's basically a price increase. So it will swing the IAR EBITA. Well, it's a license sales. So everything that the revenue will be increasing will go directly to bottom line. So that's the implication. On Qt Group, we are -- well, you call it legacy group. So the time changes. But -- so we'll figure out the better name than legacy. Anyway, the old Qt, we're not expecting organic decline, and we're not expecting that the -- what we saw last year, the bottom line, we're not expecting there to see a declining EBITA that we had last year. So the -- and that's the bottom performance, right? So we expect that the bottom performance be last year level and higher from there. So that's kind of the overall picture. So it's maybe not that gloomy than you were first thinking. I don't know how gloomy you were, but that's my educated guess. But thank you for the simple questions. Matti Riikonen: That's all from me so far. Jaakko Tyrväinen: Jaakko Tyrvainen from SEB. On distribution licenses, what happened in the sales in Q4 since I recall that the commentary after the first 9 months performance was rather moderate also in this revenue stream? So I'm curious whether there were some customers filling up their inventories in terms of distribution licenses? And how should we look at the revenue stream for '26? Juha Varelius: Yes. Thanks. So well, maybe later on the first Q when we open up a more broad distribution, you're going to see -- But the distribution licenses is really hard to predict because the -- it's not like this -- I mean, quarter-on-quarter like last year, it went like -- well, first quarter, second quarter boom and then up again, and that changes every year. So the quarters are not alike. So you can't expect that what was last year and second quarter is going to be the same. And that makes it difficult. And as you know, the distribution licenses go that -- some customers buy them afterwards, telling that how much they [ chipped ] and some people buy a chunk on prebuy. And that's why it's hard to predict. On a general level, we can always see that we know that the -- some big new products, productions are coming into the market, then we know on a yearly level, what's going to happen. So last year was on that sense, very good. So if you look last year numbers and distribution licenses for this year, I would take them slightly down. That's my expectation for this year given the market volatility, given the -- what's the customer demand in Europe and whatnot. So the -- I mean, at the end of the day, our distribution license revenue comes from product, what the consumers are buying, right? So the -- that's in a general terms, it follows. And we do have -- we are in 70 industries. We are both on commercial devices like industrial automation, robots and whatnot, stuff that goes into hospitals, stuff that goes into factories, but also on consumer goods like auto, cars and whatnot. So that's where the fluctuation really comes. So I would not put on my model same growth this year than we had last year. This is going to be substantially lower. So same number or a bit below. That would be my best guess. And -- that's a guess. Jaakko Tyrväinen: Understand very well. And just to confirm, Q4 was strong in distribution license? Juha Varelius: Yes, yes, yes, I was a good. So last year, on distribution licenses, Q2 was very good. Q3 was very weak. Q4 was good. Q2 was, if I remember correctly, the best on distribution licenses last year and does not mean that, that's going to replicate. It really goes like this. Jaakko Tyrväinen: Good. Then on the ARR, thanks for sharing that to us and the growth of 8% there. Could you give some color on how much of this was pricing and how much was coming from the effect that customers changed from 3 year to 1 year, which obviously should have kind of positive pricing impact on the ARR number -- annualized ARR number? Juha Varelius: That -- Very good and detailed question that I -- those numbers I don't have. We can come back later, but those I don't have out of my head. But the -- on general level, I can say that there was some shift from 3 year to 1 year, if I look on a whole year number, but it's slowing down. That shift is slowing down. But definitely, what we saw through all the year was the fact that on renewals, the -- what people used to do is that they had something and then they renewed older licenses. Nowadays, customers are counting that how many developers we really have, how many licenses we really need. And in general, money has been very tight. I mean our customers are very -- they're very tight on money. So they are looking all the costs. And on many R&D budgets are such now that the R&D budgets are not growing, but the -- so if they do something additional, they need to stop doing something old. Jaakko Tyrväinen: Good. And then my final one on the possible AI disruption also in the embedded side, I heard what you said. But could you give us for -- kind of for a dummy explanation why the embedded world, what are the barrier entries for AI native solutions to break in? Juha Varelius: Well, as of today, what we see, first of all, that you have lots of safety critical, you have lots of functional safety type of things like car brakes and whatnot, you need certificates and there are -- there is a very tight regulation what you need in order to have software. So you can't just ask AI that do me a car brake system, thank you and implement it, right? The second is that the -- on embedded, the software goes into products, right? And in products if you need to do a product recall, that is really, really expensive. So you have to be fairly certain that what you're doing. The third is that the embedded is fairly slow moving. There are huge companies building these cars and all these devices, medical devices and whatnot. So the time of the change and how secure they need to be that if I'm building this medical device, that nothing really goes wrong. So they change relatively slowly, right? Whereas if you think that on a website that I want to do a mobile application, I do a mobile application, if it works, great. If it doesn't work, it doesn't matter so much. So the -- it's kind of a different environment. And then if you think about coding, just building the software is -- it's one part of the process. You need to define what you want. You need to discuss with people that what are we building, what this product is doing and on and on and on. And AI is definitely not ready for that yet, right? So the -- where it's really going to end, we'll see, but that's what we see as of today. So there are -- we see AI as assistance and the -- like if you're designing something, you can use AI to give you creative ideas because as people, we tend to start looking one-way street. AI can open up your creativity and whatnot, but yet you're still using tools. So my prediction is that the next phase you're going to see on SaaS environment and the products like ours is yet another pricing change. We're doing this just to mess you up, right? So -- but yet another pricing change. And the pricing change is going to be that -- the pricing, I think, is going to go more towards from that the -- what has been built, how much the tool has been used rather than a deficit, right? So that's where I see the AI is going. And I had a -- one breakfast discussion and the person pointed out that the -- remember a couple of years back -- this person said to me that remember a couple of years back, everybody in Finland were talking that the -- even grandmas need to learn coding because software is in every device and everybody needs to learn how to code so that we can use these products, and they were all kind of coding school starts and whatnot. That was 2 years ago. Now everybody is talking that developers are -- nobody needs developers anymore. So there is a bit of a hype on the speed of the change. I mean, over time, of course, AI is going to -- 10 years from now, AI has changed a lot how we work, but -- and live our lives. But in the near future, I don't see much of effect. Then on the -- and this is the Qt development, right? On the IAR compiler business where you need all the certificates and whatnot, there is no way you can use the AI for a long time. And then on our testing tools, well, whatever you do with AI, you need to test. So I see that there's going to be more and more software that needs to be tested because you can't rely on AI. So the testing business is going to grow substantially as a market. Felix Henriksson: Felix Henriksson, Nordea. Three questions. Firstly, on Q4. The revenue growth organically accelerated a little bit, and we discussed about the distribution licenses being strong, but was there anything else that improved? For example, the lack of large deals that we saw in earlier quarters, did that -- did those sort of come back at all? Juha Varelius: No. no. If I look on the regions, the -- I would say that the -- we're doing well in APAC. We're doing okay in Europe. We have room for improvement in Europe in some markets. And then in general, we have lots of room to improve in the U.S. So the majority of our softness has been in U.S. And then we come to the point that the -- if we talk about the AI or if we talk about that the -- is there a competing product or is there a price change? What I see in the market is that we're doing fine in APAC, we're doing fine in Europe and the main softness we have is in U.S. and even in U.S., we have some teams that are doing okay, but then some teams are really suffering in that respect. So that's why I'm fairly confident that it's not about AI eating our market because if it would be, it would be eating our market everywhere globally, right? And this is more a local softness we are having. Same thing for prices and competition because we have same type of -- in APAC, we have the same industries and same type of customers we have elsewhere. So our softness basically has come last year that we've been a bit soft, been a U.S. related, right? And I'm very confident that we can fix that and get the efficiencies over there on a better shape. Felix Henriksson: Right. And then on the guidance, you mentioned that you're no longer giving those ranges, upper end. Can you expand on that a little bit? What's changed with your guidance philosophy in a way that triggered that change? Juha Varelius: Yes. I wasn't very good at that last year. Felix Henriksson: Okay. So maybe more conservatism in that way? Juha Varelius: Yes, yes, absolutely. Yes. Well, hey, we gave 2 profit warnings was not on my plan. Felix Henriksson: Fair enough. And lastly, on distribution licenses, I mean, we've started to see memory prices going up and there are some supply constraints emerging that potentially are impacting your customers, I presume. Do you think that's a sort of potential headwind when you look ahead and what are your customers saying when it comes to this? Juha Varelius: No, that's a downwind because the -- that's where Qt really signs. The fact that if you use Qt, you can do more with less memory. So that's the -- I mean, that's been the basic promise since the beginning. So the -- with Qt, you can have the same performance with the lower-end hardware, and that's the main selling point we are having as of today. And so higher price is better for us because at the end of the day, our customers will have to build those products anyway. So then it's a question of that how -- what kind of performance they want, what kind of end user experience they want. And that's where we sign. And that's where like Android doesn't sign, right? You use Android and you need a lot more hardware than using Qt and so on and so forth. Same goes with Unity. So most of our competitors, they may be in some use cases like Unity, Unreal, they might be able to do a better 3D visualization or it looks better, but it consumes so much hardware that if we go on a lower-end hardware, we can beat them. And you can get good enough, you can get a fairly good performance and a lot lower hardware using Qt. So that works for our benefit. Antti Luiro: It's Antti Luiro from Inderes. One question. We know that the last year's growth was quite sluggish and there is still uncertainty around this year. So is that affecting your own investment plans? Or are you just keep on going with all the growth investments that you have planned before? Juha Varelius: Yes. I mean, yes, we will continue our investments, yes, for sure. That's the -- no doubt about that. And we do have these few areas where we see the -- well, first of all, I think that we wouldn't be here in the first place if our products wouldn't be so competitive. So we need to keep them in that way. And then, of course, we are exploring the opportunities that the AI is opening up, and we need to do product development to have AI agents in our own products and so on and so forth. And you're going to hear product releases as we go forward this year. So yes, definitely, we're going to do that. Then at the same token, like the -- Ann was saying over here that we just merged 2 companies. And of course, we are going through all the processes, we're going through the -- that where can we be more efficient. So we've grown very fast. We are 1,200 people. And the -- so we do have also the efficiency programs, if you like. But it's -- so it's not all more, more, more. It's also efficiencies at the same time, and that's very much on and stable as well. Waltteri Rossi: Waltteri Rossi from Danske Bank. A few questions about AI. Did I hear correctly that you said that you might change your pricing model in the future due to AI? Juha Varelius: Yes. I said that, that's probably going to be the first change that we see on AI that the SaaS models pricings will start changing more from based on the consume of the tool rather than the deficit. I did not say that we're going to do that change, and I did not say that we're going to do that change this year, but I said that, that's what I see that the -- how AI is going to be affecting SaaS companies in general that the pricing will change going forward. I don't see that AI will be taking over the tools business per se. Waltteri Rossi: Yes. I understand, but no time line for that? Juha Varelius: No, no, no, no, no. Waltteri Rossi: Okay. But that would imply in a way that there is at least a big threat on your developer license sales? Juha Varelius: No. No, I don't see it that way. I see it that the -- that's going to be the effect that the SaaS business will go more towards that, that the people are charged at how much you use the tool rather than the per deficit. I see that development coming. But no time line, definitely not this year, next year or so. No. Waltteri Rossi: Okay. Well, next one is still on AI. What would you say is basically Qt's value proposition for the customers because there's the argument that AI will make developers' work more efficient. So that's kind of eating up your -- one of your value propositions. So what else do you basically offer for the customers? Juha Varelius: Well, we offer a tool that they can build their graphical user interface or applications. And as we are here today, AI is not capable of that. So you need the human and you need the tool. And then it's debatable that when will AI be able to do that, if ever. And then we see that if you need certifications, you need -- like on defense, like in automotive, on many industries, on medical, there's a long list certifications you need to meet. So who's going to train an AI that will meet those certifications and make sure that AI does the things every time in that particular manner and everything is met. I mean, that's years away, if ever. Waltteri Rossi: Yes, yes. I agree. But still on that, actually, a follow-up. We know that programmers are already today using AI assistance. But are you saying that you don't see your customers yet using them? Juha Varelius: No. And you see a lot of developers using AI on the web technologies. So if you want to do a simple mobile application, you can do that or you want to do web pages, you want to do your own homepage, you can use AI for that. But of course, they are so simple that you can -- if you want to do your own web pages, you can have -- they are on a web already. So what AI does is that it takes a web page and then it produces a new web page, right, that you can do. But on embedded building on products, no. Waltteri Rossi: One last on AI. So can you please elaborate how Qt is currently using AI in the framework? Or do you have add-on or something? Juha Varelius: Yes, you can have add-ons. You can have assistance over there that helps you getting started. For example, on the -- on testing, you can use AI, that it helps you doing the testing script and these type of things. So it helps you kind of where you can think that it helps you building a bit of a story or text, but yet still you have to read it and modify it. That's what we see as of today. Waltteri Rossi: All right. Then one last question on the usual 1 to 3-year licenses. So do you have a number on how much that shift from 3-year licenses to 1-year licenses impacted last years? Juha Varelius: No, but we're going to give you the ARR, so you can start following that. Matti Riikonen: Matti Riikonen, Carnegie, a couple of questions more. They are even more simple. First of all, you discussed the capital -- capitalized cost policy so that you would basically go towards Qt's policy, which I read that you would not any longer capitalize some costs that IAR has. Should we expect that there would be none whatsoever on the capitalized costs in '26? Ann Zetterberg: Because we have unfinished assets in the IAR balance sheet, and we need to continue capitalizing on those according to IAS 38. So there will be some capitalization of R&D assets during 2026. But we expect that those will be finished under 2026 assets that are not finished. And after that, we will harmonize between the companies so we can find a common application of IAS 38... Juha Varelius: Because -- I want to come over here, so we have you in the camera as well. Ann Zetterberg: Yes, sorry. I apologize. Yes, about the capitalization since Qt and IAR has handled the IAS 38 application very differently. So IAR has been capitalizing R&D assets into the balance sheet, which increases the profitability and then you write off the assets over time. And after the acquisitions, we kind of cleaned out the balance sheet. But the assets that are not finished, they are still there, and we will have to follow IAS 38. We will have to continue to capitalize on those until they are finished. Otherwise, we don't follow the bookkeeping rules correctly, and we don't want to break them. So that will happen. And in that time, we will evaluate and harmonize between the companies so we can have a common approach to this. And then I expect that we will not capitalize anymore, but I cannot 100% tell you that, that will happen. But we will have to have a common approach anyway within the group on how we handle this adjoiner [indiscernible]. Matti Riikonen: What kind of magnitude of capitalizations do you think there would be in '26? Ann Zetterberg: It will not be a lot. Those assets are almost finished. They're EUR 5.4 million there now. So I don't expect there to be any huge capitalizations. As you saw during Q4 on those assets, we capitalized EUR 200,000. So it wasn't a lot. So you can -- then -- it can go up and it kind of go down a little depending on how much work the R&D department puts into various projects. But I don't expect it to be -- I mean, anything that affects the profitability much, but it can be good for an analyst to understand that this is a difference from how Qt has handled it before. Matti Riikonen: Right. That's helpful. Then second question is about the annual recurring revenue disclosure that you plan, which is an excellent idea. How long into the history will you bring that? So is it possible that you would bring maybe a couple of years' history so that we could start to track it already from there and not just from here on because, of course, in the ARR pattern, the history is what counts and current day is less interesting if you don't know the history? Juha Varelius: We already gave the last year number, right? Matti Riikonen: That's not a very long history. Juha Varelius: Well, it's the last year. Well, we'll look into that. Yes, great question. We didn't think it that way, but we'll look into it. And on capitalization, it's like Ann said, that there are a few projects we need to continue. But of course, in general, going forward, on a longer term, we're not looking to capitalize. So we rather implement the Qt policy going forward and not capitalize the development. Yes. It's a better way. Jaakko Tyrväinen: Jaakko Tyrvainen, SEB. A brief follow-up on the profitability dynamics and IAR part of that. Let's say, the revenue is down double-digit something, like you said, Juha, would this imply that IAR as a stand-alone would be at breakeven or even red numbers in '26? Juha Varelius: Red. Ann Zetterberg: This is... Waltteri Rossi: Sorry, one last one from me. You said you are going to continue... Juha Varelius: You were? Waltteri Rossi: Waltteri Rossi, Danske Bank. You said that you are going to continue recruiting this year. So could you elaborate a bit on where exactly are you going to recruit? Or you said invest, but... Juha Varelius: Regionally or by function. Waltteri Rossi: Say again, I didn't... Juha Varelius: I mean regionally. Well, I mean, I think that the -- we do have a few markets where we're going to be increasing personnel, probably the U.K. is one, and these are small numbers, but then they add up for our Italian business. More or less in Japan, we're going to be increasing the personnel, the China probably. And the -- so in particular markets, I think in the U.S., we're pretty much on a headcount we like to be at this point of time. On R&D, there are these new technologies like the one that interests you a lot, which is the AI. So of course, on these new technology areas, we -- instead of trying to learn them ourselves, we are hiring people. So we do have some of these new technology areas. If I look in general on the R&D, the Qt is very well staffed. The QA business function itself, it's still on the investment mode. So over there, you're going to see pretty much on each and every function. So a bit of marketing, a bit of sales, a bit of product management, a bit of the R&D. On IAR, we are strengthening some of the R&D functions over there. So IAR, I would say that the most personnel additions will be on the product R&D side and then some on sales. But when you have so many different locations, you add up and then you get the personnel increase, that's basically what we're looking for. Heli Jamsa: Thank you so much. I believe that concludes all the questions from the room. And as we are running out of time, I give it back to Juha for closing remarks. Juha Varelius: Okay. That came quick. So thank you very much for being here today. And the -- as we go into this year, like I said, the -- one -- the very big item for us this year is going to be the subscription change on IAR. So going from perpetual to subscription, that's the one of the core things we're doing. And of course, integrating IAR into the Qt family. So we're going to be a bigger, happy family. We are also looking forward this year that, yes, it's going to be a challenging year. I'd like to emphasize that the guidance we gave was not a range. So we just gave a bottom line that what is the floor level where we expect to be this year. Of course, we are expecting to be better on those numbers. And the -- on the profitability side, we're not looking on Q2 decrease on profitability nor on sales, but the IAR subscription change will affect our profitability this year. And so that's why the lower guidance. Where it's going to end up then that how aggressive can we be, remains to be seen. In any case, the 2027 for IAR will be a revenue growth year and a profitability year, then the question is that how steep is that curve over there. It's still very early phases to see that how rapidly we can drive this subscription change. I think with these words, thank you very much.

36天前Insight Analytics约5分钟阅读

EIC 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Eagle Point Income Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may begin. Darren Daugherty: Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the Fourth Quarter and Fiscal Year 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the SEC. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our full year 2025 audited financial statements and fourth quarter investor presentation with the SEC. These are also available in the Investor Relations section of the company's website, eaglepointincome.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom? Thomas Majewski: Thank you, Darren, and good morning, everyone. During 2025, the CLO market experienced challenging conditions, and the company was not immune to these broad market dynamics. While default rates in the loan market remain below long-term historic averages, the company's financial performance and total return for shareholders last year were adversely impacted by a number of key factors. These factors included the effect of reduced SOFR levels on CLO debt investment income, ongoing loan spread compression impacting our CLO equity portfolio and a broader negative general sentiment in the market towards credit. Throughout the year, we actively managed our portfolio within our investment mandate as the market evolved, seeking opportunities across both CLO debt and equity as well as certain other asset classes beyond CLOs. We believe our long-term distribution track record reflects the durability of our strategy across different interest rate cycles and credit environments. As we move into 2026, we believe healthy underlying borrower fundamentals and our disciplined approach will position us well. Looking at the company's results for the year, EIC generated a GAAP return on equity of negative 0.7% and a total return on our common stock of negative 15.2%, assuming reinvestment of distributions. We paid $1.98 per share in cash distributions to our common shareholders or 15% of our average stock price during the year. During 2025, the elevated level of CLO refinancings, resets and calls contributed to early repayments across our CLO debt portfolio. Paydowns within our CLO debt portfolio totaled $147 million during the year. Because many of these investments were purchased at discounts and were then repaid at par, the repayments did generate $0.12 a share of realized capital gains during the year. During the course of 2025, we participated in 10 resets and 6 refinancings across our CLO equity portfolio. Each reset extended the reinvestment period to 5 years and together with the refinancings resulted in average CLO debt cost savings of 46 basis points for those CLOs. Looking at the fourth quarter results from last year, the company generated net investment income less realized losses of $0.03 per share, which was comprised of $0.35 of net investment income and offset by $0.32 of realized losses. The realized losses were primarily attributable to portfolio repositioning, including rotating out of certain positions from underperforming CLO collateral managers. The fourth quarter net investment income of $0.35 per share compares to $0.39 of net investment income per share recognized in the prior quarter. The decline in net investment income was driven primarily by 2 factors; first, SOFR declined during the quarter, reflecting the continuation of Fed rate cuts in the second half of 2025. This directly impacted our CLO debt portfolio as the coupons on our CLO debt positions generally have a floating rate based on SOFR. Second, continued tightening in broadly syndicated loan spreads, which has outpaced the decline in CLO liability costs also reduced earnings from our CLO equity portfolio. We refer to this market dynamic as spread compression. Despite the decrease in net investment income, portfolio cash flows remain robust. Recurring cash flows for the fourth quarter totaled $19 million or $0.79 per share, and that compares to the prior quarter's $17 million or $0.67 per share, representing an approximate 18% increase quarter-over-quarter. The increase reflects the quality and diversification of the company's investment portfolio. And notably, fourth quarter recurring cash flows exceeded our regular common distributions and total expenses by about $0.15 per share. NAV decreased to $13.31 per share as of December 31, which is down from $14.21 per share at the end of September. This was largely driven by continued loan spread compression, which has caused CLO equity valuations to decline. Our GAAP return on equity for the fourth quarter was negative 4.2%. Our investment strategy allows us to deploy capital across CLO debt, CLO equity and other credit asset classes in both the primary and secondary markets. This flexibility enhances our ability to allocate capital where we find the most compelling relative value. During the fourth quarter, we deployed about $45 million into new investments. Of that amount, $26 million was invested in other credit asset classes such as infrastructure credit, asset-backed securities, portfolio debt securities and regulatory capital relief transactions with a weighted average effective yield of 21.6%. Importantly, our adviser has expertise in these other credit strategies and has been invested in them for some time for other funds and accounts that our adviser manages. We've also continued to actively optimize our capital structure seeking to reduce financing costs. During the fourth quarter, we completed the full redemption of our 7.75% Series B term preferred stock. We also entered into a new revolving credit facility with an attractive cost of capital and a 3-year maturity. And then earlier today, we announced our intention to fully redeem the company's 8% Series C term preferred stock, which at present represents our highest cost of capital. During the quarter, we also repurchased $19 million of common stock at an average discount to NAV of 18.2%, resulting in a NAV accretion of approximately $0.14 per share. In November 2025, we announced that our Board of Directors had increased our common share repurchase authorization to $60 million. These actions reflect our ongoing commitment to enhancing shareholder value, and we expect to opportunistically continue buying back shares when they are trading at material discounts to NAV. We believe our shares remain undervalued and repurchasing them represents a very attractive use of the company's capital. Last week, we declared 3 monthly distributions of $0.11 per share for the second quarter of 2026, which is in line with the distributions we declared for the first quarter. We believe the current monthly distribution level of $0.11 per share aligns with the company's near-term earning potential in today's lower interest rate environment. As a reminder, when setting the monthly distribution level, the company's Board of Directors considers numerous factors, including the cash flow generated from the company's investment portfolio, our GAAP earnings and the company's requirement to distribute substantially all of its taxable income. CLO debt is a floating rate asset, so it is expected that our earnings power will generally move in line with benchmark rates. That said, we continue to believe CLO junior debt offers compelling risk-adjusted returns compared to many other broader credit market opportunities. We believe the company's portfolio is well positioned to drive returns in any economic environment and rate cycle. The scale and experience of our adviser, Eagle Point, remain key advantages as we seek to capitalize on opportunities in a dynamic market environment. I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market. Daniel Ko: Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the fourth quarter. Loan market fundamentals remained largely stable through the year despite occasional bouts of volatility due to headlines concerning tariffs, interest rates and global geopolitical factors. Loan issuers continue to have positive growth in their revenues and EBITDA throughout the year, contributing to a relatively healthy credit market. The S&P UBS Global Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025. The trailing 12-month default rate decreased from 1.5% at the end of September to 1.2% as of December 31, still considerably below the long-term average of 2.6%. As of December 31, our portfolio's default exposure was 32 basis points. Continued rate declines should support a lower default rate environment as issuers save on interest costs. CLO new issuance rose slightly to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the 2024 record of $202 billion. Fourth quarter resets and refinancings were $54 billion and $20 billion, respectively. Combined full year CLO issuance, including resets and refinancings, hit $546 billion for 2025, exceeding last year's total volume of $511 billion. Tight loan spreads and increased supply of new issue CLOs were headwinds to CLO equity returns, causing some pressure on our results. At the same time, new issue loan activity is picking up with several large loan deals recently announced. This increase in supply could cause loan spreads to widen as the market absorbs higher loan volumes, leading to potentially higher equity cash flows in the future and creating a potential tailwind for CLO equity. CLO debt spreads have remained resilient despite the modest volatility that we observed in the fourth quarter. Our CLO BB positions, which are focused on the higher quality portion of the market, benefit from attractive yields and our subordination. As of December 31, we had $52 million of cash and undrawn revolver capacity available, providing ample liquidity to deploy into attractive investment opportunities or opportunistically repurchase our stock and deliver long-term value for our shareholders. With that, I'll hand the call over to our advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results. Lena Umnova: Thank you, Dan. During the fourth quarter, the company recorded net investment income or NII less realized losses from investments of $0.7 million or $0.03 per share. This compares to NII less realized losses of $0.26 per share in the prior quarter and NII and realized gains of $0.54 per share in the fourth quarter of the last year. Including unrealized investment portfolio losses, GAAP net loss was $15 million or $0.60 per share for the fourth quarter. This compares to GAAP net income of $0.43 per share for the third quarter. The company's fourth quarter net loss was comprised of investment income of $15 million, offset by net unrealized losses of investments of $16 million, net realized losses of $8 million and financing and operating expenses of $6 million. In addition, the company recorded an other comprehensive loss attributable to changes in the mark-to-market of the company's liabilities recorded at fair value of $1 million for the fourth quarter. We paid 3 monthly distributions of $0.13 per share during the fourth quarter of 2025. And last week, we declared monthly distributions of $0.11 per share for the second quarter of 2026, in line with the distributions for the first quarter of 2026. As of December month end, the company had outstanding preferred securities, which totaled 31% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions. As of December 31, the company's NAV was $312 million or $13.31 per share versus $14.21 per share as of September month end. During the fourth quarter, we repurchased over 1.6 million shares of our common stock for $19 million at an average discount to NAV of 18.2% per share that resulted in NAV accretion of $0.14 per share. Looking at our portfolio activity during the month end of January, the company received recurring cash flows from its investment portfolio of $14 million. To note, some of the company's investments are still expected to make payments later in the quarter. As of January month end, net of pending investment transactions and settlements, the company had $85 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of January month end was between $13.23 per share and $13.33 per share. I will now turn the call back to Tom to provide closing remarks before we take your questions. Thomas Majewski: Thanks, Lena. The fourth quarter reflected our continued focus on active portfolio management amid dynamic market conditions. Performance faced technical headwinds driven by spread compression in the leveraged loan market and the pace of repricings rather than deterioration in credit fundamentals. Throughout this environment, we have focused on relative value and disciplined capital allocation across CLO debt and selectively CLO equity and other asset classes in the credit market beyond CLOs. We continue to actively execute on our share repurchase program as we view our stock as undervalued and believe repurchasing shares at a discount represents an attractive use of capital. Looking ahead, we remain constructive on the CLO market fundamentals. We have a robust pipeline of refinancings and resets, which we believe will help lower the liability costs in our CLO equity portfolio. At the same time, increased new issue loan activity may help rebalance supply and demand in the loan market over time, which we also believe could be incrementally supportive for CLO equity. Overall, we believe the current market environment represents a compelling opportunity for patient, well-capitalized investors with a strong balance sheet, active portfolio management and a continued focus on relative value, we believe Eagle Point is well positioned to navigate the evolving market conditions and deliver solid risk-adjusted returns and long-term value for our shareholders. Thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator? Operator: [Operator Instructions] Our first questions come from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with just a follow-up on some of your comments, Tom, about the realized losses in the quarter being driven by rotating out of some underperforming managers. Wonder if you could just add a little more color to that on what particular measures or metrics were they kind of falling short of expectations? Just kind of curious if you can add something there. Daniel Ko: Erik, this is Dan. So I guess in terms of the underperforming collateral managers, these are some of the ones that had, I guess, more credit issues and kind of loan spread compression that we had kind of anticipated on the CLO equity side. Maybe there were a handful kind of on the CLO BB side as well that have kind of underperformed our expectations on credit. And so we just thought that it was best to exit and kind of rotate into both other CLOs, but also some of the asset classes away from CLOs that you've seen kind of grow kind of within your portfolio, whether it's collateralized fund obligations, asset-backed securities and then some other portfolio debt securities, which are all kind of asset classes that Eagle Point and other funds -- within Eagle Point are investing in. We just found kind of better relative value there. And so thought we would kind of enhance the yield of the portfolio as well as kind of add a little bit of diversity within the portfolio through those. Erik Zwick: That's great color. And then in terms of the announced redemption of the Series C term preferred stock, curious about your source of funds for redeeming that? Is it kind of a combination of cash on hand and maybe utilization of the new revolver? Or how do you plan to fund that? Daniel Ko: Yes, exactly. So there's -- it's definitely the revolver, new revolver that's in place. There's kind of cash on hand, but also just there continues to be a lot of refis and resets. So for our CLO debt, that means that we're getting paid off kind of at par stuff that we typically bought at a discount earlier. So we're achieving that convexity and then able to kind of get par back and use those proceeds to ultimately pay back the EICC. Erik Zwick: Got it. And then last one for me. In the press release, there's an indication that the weighted average expected yield on the CLO portfolio was 12.5% at the end of the quarter, and that was up from 11.6%. Curious the driver of that increase, was it kind of income related or more in the denominator, just the change in the fair market value of the portfolio? Daniel Ko: I think it's more just so that we -- it was a little bit, I guess, of the denominator, but it was also just kind of being able to redeploy into kind of wider yielding assets versus CLO BBs and CLO equity. So it's really that kind of non-CLO bucket that was accretive. Erik Zwick: Got it. That's preferred rather than a change in the denominator. Operator: Our next questions come from the line of Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Lena, were there any nonrecurring items in the earnings? Lena Umnova: No, there were none, this quarter. Christopher Nolan: Okay. And then I guess a follow-up on Erik's question on the refi. Should we expect the investment balance sheet investment portfolio to shrink in the first quarter and possibly into the second quarter as well relative to year-end? Daniel Ko: No. I mean, I guess we're obviously redeeming kind of the EICCs, but -- and we have been kind of opportunistically buying back our stock. That being said, we typically, over the long-term target a 25% to 35% leverage ratio. And we're -- I guess, with the EICCs being redeemed, we'll be kind of on the lower end of that. So I guess we have that target of 25% to 35%. And I guess that's really kind of all I can say for now. Christopher Nolan: Okay. And then I guess for the indication is you're going to be focusing less on CLO, more on alternative credit assets. Are these going to be assets which you have any sort of direct exposure you directly underwriting let say, a company? Or is it you're going to be buying packaged securities as before? Daniel Ko: Yes. No. So this is -- these are investments that are being made kind of across the Eagle Point platform and other funds or accounts that we manage. We have dedicated teams that are focusing on these investments. And then the EIC based on kind of the merits of the investment and based on kind of my decision as the portfolio manager can participate in these investments. And so relative to kind of the opportunities that we were seeing in CLOs, we found that these other non-CLO investments, I guess, provided a better relative value opportunity. So that could change tomorrow if we find kind of CLOs provide a better kind of relative value kind of attractive yield. But during the fourth quarter, we found better relative value within these kind of non-CLO asset classes. Operator: We have reached the end of our question-and-answer session. I would now like to hand the call back over to Tom Majewski for any closing comments. Thomas Majewski: Great. Thank you very much, everyone. We appreciate your time and interest in Eagle Point Income Company. Hopefully, we're giving some good color on the strategy for the portfolio as we move forward. Certainly, we'll remain in the foreseeable future to the focus on the core of a CLO BB portfolio, but with the goal of enhancing the return where we can just as we've added CLO equity from time to time, similarly introducing some other asset classes that we're investing in across Eagle Point's broader platform where we see opportunities on a relative basis to add incremental value. So we're excited about the company. Our #1 job is to be delivering strong returns to shareholders through credit products. And we believe as we continue to evolve the strategy of the portfolio consistent with broader developments here at our firm, we're excited for the future prospects for EIC. We appreciate your time and attention. Lena, Dan and I are around today if anyone has any follow-up questions. Thank you. Operator: Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

36天前Insight Analytics约5分钟阅读