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Operator: Ladies and gentlemen, welcome to Tims China's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. At this time, I would like to turn the call over to Gemma Bakx, who heads Tims China Investor Relations efforts for prepared remarks and introductions. Please go ahead, Gemma. Gemma Bakx: Thank you, Desmond, and hello, everyone. Thank you for joining us on today's call. My name is Gemma Bakx, Head of Investor Relations for Tims China, and Tims announced its third quarter 2025 financial results earlier today. The press release as well as an accompanying presentation, which contains operational and financial highlights are now available on the company's IR website at ir.timschina.com. Today, you will hear from Yongchen Lu, our CEO and Director; and Albert Li, our CFO. After the company's prepared remarks, the management team will conduct a question-and-answer session. You can find the slide presentation and the webcast of today's earnings call on our IR website. Before we get started, I'd like to remind you that our earnings presentation and investor materials contain forward-looking statements, which are subject to future events and uncertainties. Statements that are not historical facts, including, but not limited to, statements about the company's beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and our actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and risk factors included in our filings with the SEC. This presentation also includes certain non-GAAP financial measures, which we believe can be helpful in evaluating our performance; however, those measures should not be considered substitutes for the comparable GAAP measures. The accompanying reconciliation information related to those non-GAAP and GAAP measures can be found in our earnings press release issued earlier today. With that said, I would now like to turn it over to Yongchen Lu, our CEO and Director. Please go ahead, Yongchen. Yongchen Lu: Thank you, Gemma. Good morning and good evening, everyone. In Q3, we returned to positive net new store openings and continued our strong momentum in system sales, achieving a 12.8% year-over-year growth. With our successful Light & Fit Lunch Box platform products launched in Q2, we further enhanced our differentiated Coffee Plus Freshly Prepared Food strategy, driving a positive 3.3% same-store sales growth for company-owned and operated stores. As a result, food revenues increased by 24.2% year-over-year and food revenue contribution as a percentage of sales reached our historical high of 36.5%, an increase of [ 5 ] percentage points from 31.5% in the third quarter last year. We are also benefiting from the promotional offers from those delivery aggregators to take more market share, delivery revenues increased by 23.1% year-over-year. At the same time, our sub-franchisee and retail business maintained their steadily growing contributions to cash flow and profitability. Profits from other revenues achieved a year-over-year increase of 58.2% during the quarter. For the first 9 months of 2025, our adjusted company-owned and operated store contribution margin was 8.1%, same as that for the first 9 months of last year. Our adjusted corporate EBITDA and adjusted net loss, we continue to cut loss by 10.4% and 11.5%, respectively. These results underscore our team's resilience and discipline in execution. On store development, leveraging sub-franchisee partnerships, we expand our store footprint into 91 cities, including the city of Yanji in Jilin Province, Yangzhou in Jiangsu Province and Wuhu in Anhui Province that we entered in Q3, while maintaining capital efficiency and delivering value -- absolute convenience for our guests. Since we launched our individual franchise program in December 2023, we have received over 8,400 applications and successfully converted over [ 300 ] stores by the end of September, showcasing market confidence in our franchise model. We have attractive and desirable store unit economics for our subfranchisees with reasonable 2 to 3 years payback period on average. We are also focused on strategic channel development with 64 stores in locations such as high-speed train stations, airports, highway rest areas, hospitals, universities and schools at the end of September. As of the end of September 2025, our Registered Loyalty club members reached 27.9 million, reflecting a remarkable 22.3% year-over-year growth. The average number of members per store is now over 27,000, serving a strong catalyst for our future growth. Q3 represents the peak season for China's beverage market. This summer experienced record high temperatures, driving robust consumer demand for fresh prepared beverages, albeit a heightened price sensitivity. Compounding this dynamic, the coffee sector faced intensified competitive pressure from the rapidly expanding tea beverage categories, not only due to strong demand for non-coffee alternatives, but also because leading tea brands have begun entering the coffee space, further intensifying market competition. Our strategic initiatives, including a celebrity partnership during the Bagel Festival and enhanced summer beverage portfolio and target seasonal lunchtime operations enabled Tims China to return to positive same-store sales growth in Q3. We partnered with Lars Huang [indiscernible], a highly influential Gen Z celebrity to elevate brand awareness and drive engagement. The collaboration was integrated with compelling product angles to convert interest into purchases, supported by targeted promotions to encourage repeat visits. This holistic marketing approach delivered strong results. July marked our highest sales month of the year and the September Bagel Festival drove double-digit same-store sales growth, significantly outperforming the broader market. Building on the [ Cold Blue ] platform launched in Q2, we execute a series of monthly innovations throughout Q3 centered around refreshing some appropriate leverages. This was an intentional offensive strategy, leveraging a balanced portfolio of trended SKUs spanning coffee and non-coffee categories to capture incremental share in the summer beverage market, particularly among younger consumers whose preferences align closely with our endorsed audience. We anticipate competitive encroachment from key brands and responded decisively, reinforcing our coffee leadership through premium offerings like Cold Blue and Water Buffalo Milk [ lactase ] while deploying non-coffee SKUs to directly compete for tea drinkers wallet share. Notably, this dual check approach resonated strongly with our target demographic, contributing meaningfully to beverage sales growth. Following 6 months of focused launch time development, we proactively adapted our food strategy in Q3 to counter seasonal softness by introducing 6 new SKUs featuring chilled and [indiscernible] options to stimulate consumer interest and maintain meal relevance. In order to sustain momentum from our ongoing launch time expansion strategy, we also introduced seasonal cold food offerings tailored to evolving consumer preferences during hot weather. Additionally, we expanded our afternoon tea offerings with chilled variant of cakes and Smile Bagel of SKUs. The launch of the Smile Bagel series further reinforces our leadership in the bagel category and enhances our competitive differentiation. These initiatives have firmly helped cement Tims reputation as the go-to lunch destination in consumers' mindset. Thanks to our efforts over the past 3 quarters, more than half of all orders now include food and food sales make up over 1/3 of total revenues. At this time, I would like to turn it over to our CFO, Albert Li, to discuss our third quarter financial performance in more detail. Dong Li: Thank you, Yongchen. We remain focused on delivering high value for quality healthy products and thoughtful services to our ever-growing customer base. Our overall monthly average transacting customers reached 3.85 million in Q3 2025, a 16.7% increase from 3.3 million in the same quarter of 2024. Additionally, digital orders as a percentage of total orders rose from 86.6% in Q3 2024 to an all-time high of 91.0% in Q3 2025. We continue to enhance our digital capabilities to meet the growing demand from delivery and takeaway services. In Q3, our company-owned and operated store revenues dropped by 5.5% year-over-year, which was primarily due to the planned closure of certain underperforming stores, partially offset by a 3.3% increase in same-store sales growth for company-owned and operated stores. We have also achieved positive transaction growth in Q3, driven by strong momentum from food orders and delivery orders. In the meantime, revenues from our franchised business and retail business increased by 25.0% year-over-year. The number of our franchised stores increased from 382 as of September 30, 2024, to 479 as of September 30, 2025. Accordingly, our system sales increased by 12.8% year-over-year. Moving to cost and expenses for company-owned and operated stores since we offered higher discounts during the quarter, especially to others through those delivery platforms, food and packaging costs as a percentage of revenues from company-owned and operated stores increased by 1.6 percentage points year-over-year. Food and packaging costs accounted for 30.6% of our company-owned and operated store revenues during the quarter, and we maintained relatively stable labor cost, rental and property management fees and other store operating expenses as a percentage of revenues from company-owned and operated stores in Q3. Delivery costs as a percentage of revenues from company-owned and operated stores increased by 2.9 percentage points to 13.2% in the third quarter of 2025 compared to 10.3% in the same quarter of 2024, which was primarily due to the higher delivery revenue mix as a percentage of total revenues from company-owned and operated stores. The number of delivery orders from company-owned and operated stores increased by 20.9% year-over-year. Benefiting from our improved brand influence, marketing expenses as a percentage of total revenues accounted for approximately 4.4% during the quarter, representing a 0.7 percentage point decrease from 5.1% in the same quarter of 2024. Adjusted general and administrative expenses increased by 23.2% year-over-year, which was primarily due to an increase in outside service fees related to audit, IT and business travel, an increase in credit loss of accounts receivable, partially offset by a decrease in headquarter staff compensation costs and a decrease in depreciation and amortization. Adjusted general and administrative expenses as a percentage of total revenues increased from 10.7% in the third quarter of 2024 to 13.2% in the same quarter of 2025. As a result of the foregoing, adjusted corporate EBITDA margin was negative 4.2% in the third quarter of 2025 compared to positive 0.6% in the same quarter of 2024. Turning to liquidity. As of September 30, 2025, our total cash and cash equivalents, time deposits and restricted cash were RMB 159.3 million compared to RMB 184.2 million as of December 31, 2024. The change was primarily attributable to cash disbursements on the back of the expansion of our business, partially offset by the drawdown of additional bank borrowings. Looking ahead, with profitable growth always being front and center of everything we do, we are posed to further enhance our operational efficiencies such as supply chain capabilities and optimizations and rigorous cost controls to roll over our differentiating make-to-order fresh and healthy food preparation model to drive traffic, to optimize the overall store unit economics and to accelerate the expansion of our successful sub-franchising. I will now turn it over to Yongchen for concluding remarks followed by Q&A. Yongchen Lu: Yes. Thank you, Albert. Our third quarter performance reflects continuous improvement and the resiliency in our business and execution as well as both challenges and opportunities in this industry. We extend our heartfelt gratitude to our guests, team members, business partners, shareholders and everyone supporting our endeavors and journey. Together, we have built over 1,000 stores in 91 cities, a robust community of nearly 28 million loyalty club members, a unique coffee plus freshly prepared food business model offering the best value for quality products, a unique advantage of offering franchise opportunity as an international coffee brand in China and refined store unit economics with attractive payback period within 2 to 3 years on average. With these milestones, we are steadfast in our commitment to sustainable profit growth and to generating long-term value for our shareholders. We're excited to announce the successful issuance of approximately USD 89.9 million senior secured convertible notes due September 2029. The restructuring of our unsecured convertible notes due 2027 and the repurchase of all outstanding amount due under our variable rate convertible senior notes due 2026. These strategic transactions enable us to focus on the development of our overall store network and the core Tim Hortons brand nationwide. I will now turn to the call over to Gemma for today's Q&A session. Gemma? Gemma Bakx: Thank you very much, Yongchen. We will turn it over to Q&A and open it up for registered questions. Let's begin with the first question. Go ahead, operator. Operator: [Operator Instructions] Our first question comes from the phone line of Steve Silver from Argus Research Corporation. Steven Silver: Congratulations on the system and same-store sales growth. With the closing of the new convertible notes transaction in Q3, I was hoping you could provide just the company's latest thinking on its liquidity status and its long-term financing plan. Dong Li: Okay. Sure. Thanks, Steve, for asking this question. I will take this one. Okay. So we -- with the successful issuance of the USD 89.9 million 2025 senior secured convertible notes, I think the company -- we have used the part of the proceeds to fully repurchase the entire remaining amount of our 2021 variable notes actually due 2026. And actually, in the meantime, we have also extended the due date of our 2024 unsecured convertible notes from 2027 to the same time line of September 2029. So actually, after the closing of the transactions, the company does not have any near-term offshore liabilities so that actually we can focus more on our daily operations. And we believe these financing would also help reduce our onshore leverage ratio actually quite significantly. So I think we will also benefit greatly to actually get more in terms of the onshore bank facilities in terms of the expansion and the renewal from the PRC commercial banks. And I think as we have also mentioned, so in order to take the advantage of the lower rent level at the current market environment, and also to roll out our attractive mid- to outer store model. So I think we are also working very hard in terms of securing additional alternative debt or equity financing in order to support the development of our company-owned and operated store network. And so lastly, I also want to mention with the further improvement of our store and corporate level margin. So we are expecting to generate positive operating cash inflows. So we will become more and more self-sustainable in terms of to support the long-term sustainable growth of our business. So hopefully, I have addressed your question, Steve. Steven Silver: Yes, that was helpful. So in Q3 specifically, it looks like there was some pressure on the store contribution margins. It sounds like gross margin and delivery costs were impacted a bit. Do you expect that trend to continue over the near term? And maybe what the company's thoughts about the margin profile moving forward? Yongchen Lu: Okay. Yes, Steve, I will take this one. Thank you for your question. Yes, the lower store contribution margin in Q3 was mostly because of higher delivery revenue mix led by the delivery war in China. Those platforms gave aggressive subsidies trying to taking market share from the competitors. We would think this would be temporary play in our view. So in the first 9 months of 2024 and 2025, our company-owned store contribution margins was consistent at 8.1%. And we aim to further expand that to mid- to high teens by enhancing gross margins and driving same-store sales and also the network optimization. Essentially, we continue to close some high rent loss-making stores and we open high-quality new stores. So we plan to further improve our gross margins through supply chain optimization, increased pricing on delivery platforms, high-margin new product launch and optimize the recipe of existing core products. So by doing so, we expect, okay, we'll achieve double-digit store level margin next year. Steven Silver: Great. And one last one, if I may. The company has discussed focusing on strategic special channel stores under the franchise model. Curious if there's any information about the performance of some of these stores. Yongchen Lu: Yes, sure. So I mean, as of the end of September, of 2025, we have over 60 stores in those special channels, including high-speed road stations, airports, highway rest areas, hospitals, et cetera. Those stores at the special channels performed very, very well, generating store contribution margin of mid and even high teens EBITDA margin and the payback is around 2 years. So I mean, we have gained a lot of interest from the [indiscernible] franchise, which have access to those special channels. In China, there are thousands -- tens of thousands such a special channel locations. So we have seen a great momentum in these channels, and we're expecting to open much more next year. Operator: [Operator Instructions] At this time, there are no further questions. So with that, that concludes today's question-and-answer session. I would like to hand the call back to Yongchen for closing remarks. Yongchen Lu: Yes. Thank you so much for your time. And we are very glad we returned the growth on system sales and also more important on the same-store sales. So we're expecting another progress towards the end of the year and much even better next year. Thank you. Dong Li: Thank you. Gemma Bakx: Thank you all very much. Operator: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Andreas Trösch: Hello, everyone. This is Andreas Trösch from Investor Relations. Also on behalf of my entire team, I wish you a very warm welcome to our conference call on the full year results '24-'25. With me in the room are our CEO, Miguel Lopez; and our CFO, Axel Hamann, plus my colleagues from the Investor Relations team. I have some housekeeping before I hand over to the CEO and CFO for the presentations. All the documents for this call are available in the IR section on the website. The call will be recorded, and a replay will be available shortly after the call. After the presentation, there will be the usual Q&A session for analysts. [Operator Instructions] And with that, I would like to hand over to our CEO, Miguel Lopez. Miguel Angel Lopez Borrego: Thank you, Andreas, and hello, everyone. Welcome to our conference call for fiscal year '24-'25. Please let me start with a recap from our key strategic milestones in the recent year. At last year's conference call, we proclaimed the year of decisions, and we have taken many. The presentation of our new strategic future model, ACES 2030 was one decisive step ahead. ACES 2030 provides the operating framework for our transformation, which we are already implementing with determination and at high speed. We also successfully listed TKMS by a spin-off on the stock exchange. Other businesses will follow as soon as we have put them in a profitable position that means ready for the capital market. We are, moreover, negotiating with Jindal Steel about the potential sale of our steel business. This is based on the industrial future concept developed by the Executive Board of Steel Europe, the road map for modern competitive and sustainable steel production. The collective restructuring agreement entered into with IG Metall in the past week is creating the required framework to implement this concept step by step. The milestones reached so far demonstrate that we are already in the middle of the year of execution and are driving the transformation with all our energy. Let's now take a look ahead. We have a clear vision for the future. We are realigning the group. The long-term goal is the gradual transition towards stand-alone businesses that are also open to third parties. We are jointly transforming thyssenkrupp into a financial holding company with strong independent entities under the umbrella of thyssenkrupp. The stand-alone solutions for the segments will significantly strengthen their entrepreneurial freedom and offer them new growth prospects, more decision-making power, greater flexibility to make investment and marketing decisions and individual access to the capital market. At the same time, the new structure offers increased accountability and more transparency for the businesses. These are both significant levers for improving performance. Overall, we build stand-alone structures for our segments, subject to their capital market readiness. This comprises not only a forward-looking strategy, but also a convincing performance. In those businesses where a stand-alone solution is not yet possible, we will continue to focus on performance and competitiveness. In this process, we are also realigning the corporate functions in the future headquarters with focus on the financial management of the entire portfolio. This realignment will probably take several years, and we approach it with determination and clear objectives as well as with sound judgment. Let's now look a little closer at TKMS, our actual first stand-alone business and what we already have achieved there in terms of value crystallization. We have completed the spin-off, unlocking significant value for our thyssenkrupp shareholders. Please let me remind you about some details of the spin-off. 49% of the TKMS shares were distributed to existing tkAG shareholders, while 51% remain with us as fully consolidated segment. Shareholders of thyssenkrupp received 1 TKMS share for every 20 tkAG shares. TKMS is now from October 20, listed on the Frankfurt Stock Exchange, posting capital market visibility in excess. And there are also good news from the last week, TKMS will be listed in the MDAX. Within just a few weeks, TKMS has managed to establish itself among the top 90 listed companies on the German Stock Exchange. Overall, this transaction delivered over 14% value creation for thyssenkrupp shareholders on the first day of TKMS trading. On top of the preceding tkAG share price increase of approximately 240% in fiscal year '24-'25. On our way towards the financial holding company, the TKMS spin-off might serve as a blueprint for the other segments. And now Axel, please go ahead with your financial section. Axel Hamann: Thanks, Miguel. So overall picture upfront. Persistent market headwinds more than offset by straight performance management. We basically saw pretty weak demand across most customer groups and regions throughout the year. In addition, geopolitical uncertainties persisted, for example, from global tariff developments. With regard to sales, we saw further market induced declines in the fourth quarter, minus 6% and consequently, over the entire fiscal year, around minus 6%, meaning EUR 2.2 billion sales decrease. On top of the minus 7% in the financial year '23-'24, that's even more proof of a solid performance considering a top line drop of almost EUR 5 billion in 2 years, while keeping our EBIT adjusted stable. Let's talk about EBIT adjusted. Despite the mentioned top line development, we saw a strong fourth quarter with EUR 274 million, leading to a financial year figure of EUR 640 million, an increase of EUR 72 million year-over-year. So the earnings increase is also an outcome of our rigid restructuring efforts. For example, FTE reduction of 4,800 year-to-date and thereof, you can attribute more or less 1,500 to Steel Europe. Regarding net income, we've ended in positive territory. Fourth quarter benefited significantly from the elevator valuation effects as expected and anticipated. That was EUR 902 million in the fourth quarter, therefore, leading to a quarterly net income of EUR 653 million. As a reminder, we also saw a negative tax effects of more or less EUR 150 million in the third quarter, resulting from the Marine spin-off in addition to the unfortunately usual overall impairments of approximately EUR 800 million in our financial year '24-'25. Of that EUR 800 million, approximately EUR 600 million are attributed to Steel Europe. Let's talk about free cash flow before M&A, third year in a row positive with EUR 363 million. That's an increase of EUR 253 million year-over-year, supported by a strong fourth quarter with, let's say, the usual net working capital seasonality pattern and also benefiting from a Marine Systems prepayment that already happened in the first quarter. So please keep also in mind the financial year '24-'25 free cash flow before M&A also includes the cash out for restructuring of approximately EUR 250 million. Talking about our net cash position, that's almost EUR 5 billion following the positive cash flow development and for example, the proceeds from the sale of our Electrical Steel India business. So that's a sound basis for all the portfolio topics to achieve the target picture of a financial holding company in the future. So overall, we've met our updated guidance for sales and EBIT adjusted and net income and free cash flow before M&A came in even slightly better. So let's talk about sales and EBIT adjusted development. As already mentioned, sales decline of more than EUR 2 billion have been offset in EBIT adjusted. This is again a pretty clear proof of our increasing underlying resilience. That means we tackle what can be tackled by ourselves. With regard to sales, we saw a decline across almost all segments, except Marine Systems. I'm sure you've heard about that yesterday in the investor call. Lower demand, especially from the automotive sector weighed in on automotive technology, but also on steel and materials in addition to some unfavorable pricing. EBIT adjusted, lower part of the chart, it's a mixed picture for the different segments, some declines, but also some increases. For example, Decarbon Technologies, that's up by EUR 126 million, also considering negative onetime effects in the prior year. Steel Europe also benefited from a mix of, for example, lower D&A, but also decreased raw material prices as well as some additional restructuring efforts. Let's come to Automotive Technology. Overall, soft demand, pretty tough market environment that led to declining sales, down by 7% year-over-year. Highlight, obviously, we saw growth at Bilstein, fueled by aftermarket activities. EBIT adjusted market headwinds mitigated to a large extent on the back of internal performance efforts such as restructuring and efficiency initiatives. EBIT adjusted came in at EUR 187 million, down by minus EUR 58 million year-over-year. So also here, we saw a decline in personnel expenses following our restructuring efforts that was outweighed, unfortunately by lower volumes, underutilization in project businesses as well as some negative onetime effects. Cash flow ended in positive territory at Automotive. Year-over-year decline, however, in the financial -- in the entire year, mainly driven by our restructuring cash outs. Let's talk about Decarbon Technologies. Overall, there, we saw an ongoing hesitant market environment with some project deferrals or postponements from our customers. So that translated into a weak order intake and therefore, also declining sales of minus 10% over the entire year, especially that's the case in the new build business and at chemicals and cement plants. So considering the sale of tk Industries India in the previous year, the organic sales decline was only down by minus 4%. Coming to EBIT adjusted, strong increase of EUR 126 million to EUR 71 million over the entire year '24-'25, almost all businesses with increased contributions, for example, also supported by performance measures and efficiency gains. In addition, prior year was negatively affected by significant a periodic higher costs in the range of a high 2-digit million euro amount at the cement business. Business cash flow, we saw a pleasant increase of EUR 192 million over the entire financial year. That's due to higher earnings as well as positive cash profiles in the project businesses. Let's continue with Materials. Also there, we saw challenging market conditions in Europe. Demand and price levels remain pretty weak across our key product groups. And as a result, sales fell by 6% with shipment volumes significantly lower, primarily due to weakness in the direct-to-customer business. However, North America showed some resilience. That's why we saw some slight growth in the North American distribution business that helped partially offset the downturn in Europe. Talking about EBIT adjusted, all business units remained profitable despite market headwinds and Supply Chain Solutions contributing here the highest share of our earnings. Overall, EBIT adjusted came in at Materials at EUR 132 million, down by EUR 71 million year-over-year. Business cash flow also down year-over-year, and that's mainly due to the lower net working capital release compared to the previous year. So let's continue with Steel Europe. Market conditions in Europe remain challenging with both demand and pricing. Consequently, sales decreased at steel by 9% and shipments fell by 6%, especially the European automotive industry and the industrial businesses remained quite weak. Higher volumes were seen at packaging and electrical steel, but those could only partly compensate the decrease. EBIT adjusted. So actually, due to the lower top line and despite the lower top line, EBIT adjusted increased to EUR 330 million. That was mainly driven by several positive effects, including restructuring efforts and also some more favorable raw materials prices. With regard to business cash flow, business cash flow was increased year-over-year, and that's mainly driven by a higher earnings base, as mentioned, the EUR 337 million EBIT adjusted as well as a higher net working capital release at the end of the year. Marine Systems, global markets show unchanged strong demand for defense products, including submarines and surface vessels as well as electronics, all three of our business units. As a consequence, the backlog of our Marine Systems business stands at a record level of EUR 18.2 billion, including new equipment orders as well as a very new service contract. So let me also briefly comment on Marine Systems as a segment of thyssenkrupp. As mentioned, I hope you've all been part of the investor call and the reporting of TKMS yesterday, all relevant KPIs, including sales, EBIT adjusted business cash flow are up and developing in the right direction. One highlight for sure, the strong increase in business cash flow on the back of the new submarine orders from Germany in the first quarter. So let's talk about our known EBIT adjusted bridge to net income bridge. Here, you can see that we are also in a transition period, especially in terms of special items. That's quite obvious. We see a mix of several effects, such as impairments, mainly in steel, some necessary restructuring, mainly automotive, but also some positive effects resulting, for example, from the sale of our Electrical Steel India business. Looking at our equity results. As of end of the fiscal year '25, we've changed the valuation approach of our elevator stake from equity towards a fair value approach. And that led to a positive valuation effect of around about EUR 900 million, which is included also in finance and others. With regard to taxes, we've talked about that in Q3, that position includes a devaluation of deferred tax assets resulting from our Marine Systems spin-off of more or less EUR 150 million. Overall, we're coming in at a positive net income of EUR 532 million. Next chart is the reconciliation from net income to free cash flow before M&A. That means basically the -- from the sale of Electrical Steel India that is not included and therefore, adjusted. We see the usual reconciliation elements to the operating cash flow, mainly including D&A, reversal effects from the mentioned elevator valuation and some positive net working capital effects also on the back of our known efficiency improvements as part of APEX. Let me make one general comment on the investments. Approximately 50% referred to Steel Europe. That is also in connection with the construction of the DRI plant in Duisburg. Overall, we saw a positive free cash flow before M&A the amount of EUR 363 million. Let me now come to the outlook for the running financial year '25-'26. Overall, that year will be a year of implementation with continued focus on performance and restructuring, while markets remain quite uncertain. We see ongoing tough market environment, especially in auto, with some slight hopes of first order intake coming from defense and infrastructure governmental programs, but not yet really certain or visible at the moment. Therefore, we do see a slight sales increase of around about 1% -- up to 1%. With regard to EBIT adjusted, depending on the top line development, as mentioned before, we see an EBIT adjusted of up to EUR 900 million. Like in the past year, ongoing restructuring efforts will be quite visible in free cash flow before M&A. And considering that our planned restructuring cash out amount to EUR 350 million, we expect free cash flow before M&A to come out in the range of minus EUR 600 million to EUR 300 million after 3 positive years that we just reported today. So as a reminder, driven by the typical cash flow pattern you've also seen in the last years and from today's perspective, Q1 is to be expected significantly negative from a free cash flow perspective, might even be a negative 4-digit figure, but that would, as in the last years, then reverse in the course of the following quarters. The recently agreed upon restructuring program at Steel and the corresponding restructuring provisions are obviously visible in our net income guidance for the actual financial year. And we estimate that in a range of minus EUR 800 million to minus EUR 400 million for the entire group. On a pro forma basis, considering the restructuring effects mainly at Steel Europe, the net income would end up around breakeven. Let's also take a look beyond the financial year '25-'26. Our midterm targets are clear and confirmed and remain valid. We are striving for an EBIT adjusted margin of 4% to 6% that will also lead to a significant positive free cash flow before M&A as well as reliable dividend payments. We will step-by-step bring the performance up by executing our agenda. One recent example that I also want to highlight against this background, at the end of November '25, we initiated the sale of Automation Engineering, a part of Automotive Technology. That's one of the three business units that are no longer part of our core automotive business. And with the signing of this agreement, our segment Automotive has taken an important step in its transformation process that will ultimately also boost performance. And with that, Miguel, back to you. Miguel Angel Lopez Borrego: Thank you, Axel. Before we come to our Q&A, I would like to share a few reflections and outline the way forward. A year of decisions is behind us, a year in which we bravely embarked on new paths and set the course for the future. We are developing thyssenkrupp into a financial holding company and thus strengthening the independence of our segments. This will then increase their accountability, entrepreneurial freedom, encourage innovation and unlock new growth prospects. In the current fiscal year, we are already in the middle of the execution phase, having reached first milestones by the successful stock market listing of TKMS and the signing of the collective restructuring agreement at Steel Europe. For the transformation of thyssenkrupp, we are pursuing an individual approach for each segment and ensure that we create the conditions for sustainable success, either by finding a stand-alone solution or initially by boosting competitiveness. Moreover, leveraging opportunities from the green transformation and making necessary restructuring investments will be crucial for positioning thyssenkrupp for future success. And with that, we wrap up today's presentation. Thank you all for your continued interest and trust. We are now ready to take your questions. Andreas, over to you. Andreas Trösch: [Operator Instructions] The first question today comes from Boris Bourdet. Can you hear us, Boris? Boris Bourdet: Sorry, mute was locked. I have 3 questions. The first is on the guidance and especially on the Steel Europe business. You are guiding for an EBIT adjusted that should be between EUR 225 million and EUR 325 million, which compares to EUR 337 million this year. So I'm curious to know the reasons for this cautiousness. Can you tell us how much is positive one-offs that won't recur next year? And what's the scenario in steel, having in mind that there will be a support from the European Commission and CBAM? That's the first question. Axel Hamann: Okay. Thank you, Boris. So guidance still for the next year, and you've mentioned positive effects for this year. First of all, the somewhat higher EBIT adjusted in the previous year was also on the back of some positive effects that we're not going to see in this year. That is why you see instead of the EUR 337 million, you see the EUR 325 million to EUR 325 million. And you've mentioned CBAM, that is something we would see as an opportunity beyond what we've guided. Boris Bourdet: Okay. And then can you quantify the one-offs last year? Axel Hamann: The one-offs last year, I'd quantify them between EUR 100 million and EUR 150 million. Boris Bourdet: Then my second question would be on the negotiations with Jindal. What would you say are the key topics of negotiations and the main obstacles you might be having to face in the negotiations? And how confident are you? And what would be the time frame for an agreement with Jindal? Miguel Angel Lopez Borrego: Yes. Thank you very much, Boris. Of course, during M&A processes, it is always very difficult to really get a timing precisely. The only thing that I can now state here is we are in the due diligence phase. The due diligence is running as expected. And we need to take it from here. So everything is positive, no major roadblocks. So we take it from here. Boris Bourdet: And then my last question is on HKM. There have been some headlines recently mentioning that Salzgitter was ready to operate HKM on its own on a reduced -- with a reduced scope and that thyssenkrupp, yourself and Vallourec might be required to provide some funds to help them adjust the business. So is this pure fantasy? Or is it likely a scenario in your view? Miguel Angel Lopez Borrego: Well, the statement we made is that in future, we don't need the capacity of HKM, and we are very positive about the fact that Salzgitter is looking at the future of HKM production on its own. And of course, we are prepared for positive and constructive talks and also negotiations. So we are happy that they see the future for HKM and we are looking forward to their further offerings. Boris Bourdet: Okay. Will that be already included in your provision for restructuring that you booked? Miguel Angel Lopez Borrego: That's correct. Boris Bourdet: Okay, so there is no risk from negotiations with Salzgitter of you having to add new provisions or new investments in the future of HKM? Miguel Angel Lopez Borrego: Not at this time. Andreas Trösch: And the next question comes from Bastian Synagowitz. Bastian Synagowitz: Hopefully, you can hear me now? Andreas Trösch: Yes. Bastian Synagowitz: So just starting off maybe on the portfolio side and actually with automotive engineering. And that's been a business which, from memory, I think thyssenkrupp really struggled to handle and basically sell over almost like probably more than 10 years. So it's really good to see that you're basically making progress here. Could you maybe give us any color on how far this business has been contributing? Any losses to your 2025 numbers? And then also maybe related to this and also related to, I guess, all of the other moving parts, are there any other one-off items we should be keeping in mind for the first quarter already across the different businesses? This is my first question. Axel Hamann: So with regard to -- Bastian, with regard to your first question, AE, Automation Engineering, the fact that this is part of the three business units that we kind of separated or do not account for our core business anymore gives you an indication that this may not be -- not have been the most profitable business in the past. And that is why we are divesting now a substantial part of Automation Engineering. With regard to one-offs in the first quarter for the entire, let's say, financial year, I think we've touched upon in our presentation that we are foreseeing some provisions for restructuring. And that is basically the reason why you also would see the -- in our guidance, the negative net income. And if you ask me for one-offs, that is probably the one you should pay attention most. We're going to see due to the fact that we're entering into a year of implementation, we're going to see quite a lot of restructuring provisions. Bastian Synagowitz: Okay. Understood. I was also referring -- so first of all, I wanted to check whether there's maybe even like a loss contribution number you could give us for automotive because I guess, if you're selling it, that's actually very positive because you can basically cut off those losses. So just if you have that number. And then maybe in terms of one-offs, I guess there were also a couple of articles suggesting that there were some issues around, for example, the hot rolling line. So is there anything on the operational side, maybe we should be keeping in mind for the first quarter as a starting point? Axel Hamann: Yes. As mentioned, the fact that we are divesting the business is an indicator that this may have not been the greatest, let's say, performance contributor. And with regard to steel, we need to take that quarter-by-quarter, whether we would need to account for additional impairments or not. Let's see once we get there. Bastian Synagowitz: Okay. Sounds good. Fair enough. Then my next question is on [ D Tech ]. And here, I was wondering whether you could maybe give us an update on the trends you're currently seeing in your different subunits? Do you see maybe any signs of demand picking up in either road or the plant engineering units where last year has been obviously a little bit more difficult. I guess, quite frankly, it's not been a great year to take big investment decisions. But do you see whether anything is changing? Or do you think 2026 will be mostly driven by your big efforts here on cost cutting? Miguel Angel Lopez Borrego: In general, we still see that FID decisions on customer side are taken with great analysis and resilience. And so the pipeline is really quite full of projects that need to be then decided on. And so my expectation really is here that we will see some realization of FIDs in the next 12 to 24 months. So it is still, again, many, many regulations to be still decided upon, fixed by many governments out there. And that's the reason why, again, the pipeline is full. And we are preparing ourselves for being, as mentioned many times, for being really competitive. And as soon as FIDs are coming to be there and execute in the best manner. So this is my summary from today's perspective. Bastian Synagowitz: Okay. Great. And then maybe my last question, coming back also to the Jindal transaction within the scope of what you can say versus what you can't say. But could you maybe give us an update here? As it stands, would you lean to possibly retain a minority stake in the business? I guess there were a couple of headlines from your press conference earlier suggesting that. And has the targeted shareholder structure changed versus, I guess, the earlier starting point of the indicative bid? And then also here related to that and on the financing of the steel unit, which you announced together, I guess, with the successful finalization of the restructuring agreement with the unions, how is the financing structured? Have you basically have you injected a certain amount of capital, which the business now needs to run with? Or have you guaranteed any financing requirements until, I guess, the 2030 time line, which was mentioned in how is this financing structured basically? That would be my question. Miguel Angel Lopez Borrego: Thank you. So the discussions with Jindal are clearly focused on them taking a majority. And let's see how the majority will finally look like. This is a topic that obviously will be regarded at the end of the negotiations in much more detail. But the clear orientation is to get them a majority. Around the financing discussions, you know that we have been agreeing with the unions around the collective prepayment agreement that the financing is secured. And we won't provide any further detail around that. I hope you understand it. Andreas Trösch: [Operator Instructions] And the next question right now comes from Tommaso Castello. Tommaso Castello: I have two. The first one is on your free cash flow generation before M&A. You're guiding for negative values despite only a small increase in investments and EUR 350 million from restructuring, but you had EUR 250 million this year. So if you could spend some words, give us some color on what are the other drags there? Axel Hamann: Sure. Thanks, Tommaso. You're right. Our negative free cash flow is mainly burdened by restructuring cash outs. And the question in terms of difference year-over-year, maybe two aspects. We saw a significant milestone payment from Marine last year that we would not foresee to the extent this year. Tommaso Castello: And then maybe if I can go back to your Steel Europe division. Do you expect any further impairments next year? Axel Hamann: Yes, cannot be excluded. Let's see how the restructuring efforts kick in. But you're probably aware that we need first some data points on the improvements before we can exclude potential impairments. So at this point in time, short answer is, cannot be excluded. Andreas Trösch: Thank you very much for your question. There seems to be no more questions at this time. So thank you very much, everyone, for joining us here at the call. If you have more questions during the day, then please let us know at the Investor Relations team. Thank you so much, and have a great day.
Operator: Hello, and welcome to the Ashtead Group plc Q2 Results Analyst Call. I will shortly be handing you over to Brendan Horgan and Alex Pease, who will take you through today's presentation. [Operator Instructions] For now, over to Brendan Horgan at Ashtead Group plc. Brendan Horgan: Thank you, operator, and good morning. Thank you for joining, everyone, and welcome to the Ashtead Group Half 1 and Q2 Results Presentation. I'm joined this morning by Alex Pease and Kevin Powers, with Will Shaw on the line from London. Let's get into it, beginning as usual with safety on Slide 4. I'll begin by addressing our Sunbelt team members to specifically recognize their leadership in the health and safety of our people, our customers and the members of the communities we serve. Our total recordable incident rate and lost time rates that you see here continue to be best-in-class. However, despite these results and momentum behind our Engage for Life program, there are incidents that remind us there is never a finish line in safety, rather improvement milestones, nor is there room for complacency. With this said, I'll share with our team members that in 2026, we'll be taking on a significant effort to conduct Engage for Life culture and compliance assessments at every one of our branches. These third-party reviews will address local health and safety compliance, leadership engagement, along with a deep dive into the systems and programs our locations have in place to manage tasks that could potentially lead to a serious event, if not controlled properly. The safety of our team will always be the top priority at Sunbelt, and this will be one of the most important initiatives that we have in calendar year '26. So thank you for your dedication and engagement thus far and, in advance, for welcoming these assessments in the months to come as we continue to pursue perpetual improvement in our safety culture. Turning now to Slide 5. The key messages you'll hear from Alex and me today are the following: First, this is a solid set of results, in line with our expectations with group rental revenue growth at 2% for the first half and 1% in the second quarter despite a nonexistent hurricane season compared to an active period in the second quarter last year. On an underlying basis, growth in the second quarter was 3%, a sequential improvement from the first quarter. Second, the strength of free cash flow after CapEx investment in fleet and business expansion demonstrates the through-the-cycle free cash flow power of this business at our scale and margin, generating $1.1 billion of free cash flow, which is a 164% growth on last year. Third, while our key construction end markets remain mixed, we're seeing signs that the local nonresidential market is now an equilibrium in terms of completions and starts as well as continued positive momentum in many of our internal and external leading indicators. Mega project activity continues to be strong, and we're winning share across our regional and national strategic customers. Fourth, our strong free cash flow generation has enabled us to return over $1 billion to shareholders in the half through dividend payments and share buybacks. And we've announced today a new share buyback program of up to $1.5 billion that we intend to commence on March 2, which will follow on from the completion of the existing program and will coincide with our expected relisting date on the New York Stock Exchange. And finally, we are confident in reaffirming full year guidance for rental revenue growth, CapEx and free cash flow. Moving on to the financial highlights of the first half on Slide 6. Despite the quiet hurricane season, group rental revenues were up 2% in the first half, consistent with the 0% to 4% guidance we gave in September. The leading indicators, both internal and external that we track, have continued to trend positively. And therefore, we remain cautiously optimistic that these trends in our business will continue and are early signs of the local nonresidential portion of our end markets recovering. As when they do, we will experience accelerated momentum and improved results. Group adjusted EBITDA was $2.7 billion at a 46% margin. As we explained in the Q1 results, these margins reflect the mix effect of higher ancillary revenue, the proactive repositioning of our fleet to drive utilization, and unlock pockets of growth and increased repair costs as a larger portion of the fleet comes out of warranty coverage. From a capital allocation standpoint and in line with our Sunbelt 4.0 priorities, we invested $1.3 billion in CapEx focused on a mix of replacement and growth. Free cash flow in the 6 months was just over $1.1 billion, which is a record, demonstrating the resilience of our business while we continue to invest in growth. The strong free cash flow is supporting the current $1.5 billion buyback program, which we are on track to complete by the end of February '26, before commencing the new $1.5 billion program that I've just referred to. Moving on to our segmental performance on Slide 7. As I've already mentioned, performance in the second quarter was impacted by a very quiet hurricane season compared to Q2 last year, when we reported that hurricanes had contributed $55 million to $60 million in incremental revenue. Rental revenue on a billings per day basis for General Tool grew 2% in the second quarter and 1% in the first half, reflecting positive volume momentum and resilient rates in end markets, which continue to be mixed. As expected, we continue to be in a moderated local nonres construction market through the first half, offset in part by the ongoing strength of the mega project landscape and the broader nonconstruction markets. Specialty growth is more impacted by lower hurricane activity with growth in the quarter flat. Adjusting for the hurricane impact, underlying growth in Specialty was 5%. The strength in Specialty segments was broad-based, led by Power & HVAC, Temporary Fencing, Structures & Walls, and Trench Safety, all delivering strong growth in the half. On a constant currency basis, U.K. rental revenue was down 2% in the quarter, reflecting the ongoing challenges in the U.K. end markets. As a response to this and consistent with our 4.0 strategy, we're undertaking a series of onetime restructuring actions, including location consolidation, people transitions, exiting noncore lines, and G&A reductions. These actions will enable better service to our customers, unlock value, deliver sustainable double-digit return on investment, and produce consistent free cash flow, while continuing to lead as the premier rental platform in the U.K. Alex will cover the financial implications of these actions shortly. Slide 8 shows fleet on rent for North America over the last 4 years. You can clearly see that our efforts to drive growth with existing fleet has resulted in improved time utilization. This supports a more constructive rate environment and contributes to our strong ROI. It also demonstrates our disciplined and flexible capital allocation approach. Over the next couple of slides, we'll cover the activities and outlook for the North American construction end market. On Slide 9, we set out the main leading indicators for the construction sector, namely Dodge Starts, Dodge Momentum Index, the Architectural Billings Index and Fed Funds Rate. The outlook for construction growth continues to be underpinned by mega projects and infrastructure work, which remains strong, and in many cases, gaining further momentum. We made great progress in mega project wins in the first half with a growing funnel of future projects and advancing market share with our strategic customers, both regionally and nationally. Exercising the cross-selling power across the Specialty and General Tool businesses as well as the advantage of Sunbelt's significant breadth and depth of products, solutions and expertise is a strategic differentiator. Combine this with a technology suite that is second to none, creates a platform that can deliver world-class customer experience, efficiencies and value across a wide range of complex applications. As it relates to our local nonresidential end market, we remain in a moderated environment. However, as I flagged with the Q1 results, both our internal leading indicators such as quotations, reservations and continuing contract activity and key external indicators are encouraging. The Dodge Momentum Index, in particular, remains near record highs. Just to remind you, this index represents nonresidential projects, excluding manufacturing, that are below $500 million and entering the planning phase for the first time and is therefore representative of future velocity in what we refer to as the local nonresidential construction market. This clearly indicates ongoing strong planning activity across our nonres construction markets will lead to an increase in starts, likely within a period of 12 to 24 months. So while clearly positive leading indicators, it may take some time for this planning to translate into project starts. When it does, as we've said, we are poised to benefit. On Slide 10, you can see how these starts forecasts translate into the latest Dodge put in place forecast and the S&P forecast for the North American rental market. As we expected, Dodge's September report lowered their forecast for construction, excluding residential, by 2% for '25 and 3% for '26. Although we've not updated the mega project slide, which you can find in today's slides, Appendix #37, I can confirm that the outlook for ongoing growth in the mega project space is strong as new project plans are entering the funnel often. Further, the makeup of projects is broad in sector and geography. And finally, the team has done a great job year-to-date, winning more than our fair share and are very active in current RFPs. More details to come in this mega project landscape in March. Before I hand it over to Alex, I'll just touch on our Sunbelt 4.0 strategic plan on Slide 11. We're now 6 quarters into a 20-quarter plan. As I previously mentioned, our team has been laser-focused on advancing each of the 5 actionable components, which are customer, growth, performance, sustainability and investment. While I'm not going to give you a further detailed progress report today, I will say that our clarity and mission throughout the organization is certain and our momentum is building. We'll share more details as we progress through the year and, in particular, during our upcoming Investor Day this coming March. With that, I'll hand it over to Alex to cover the financials in more detail. Alex? Alexander Pease: Thanks, Brendan, and good morning to everybody. Starting with the second quarter results for the group on Slide 13. Group total revenue and rental revenue both increased 1% in the quarter, reflecting the impact of the quiet hurricane season that Brendan has already mentioned. Adjusting for the impact of the hurricane, underlying rental revenue growth in the quarter was around 3%. The EBITDA margin and EBITA margin continued to be strong at 47% and 27%, respectively. In line with the Q1 performance, the slight drop in margins primarily reflects the fact that top line growth is being driven by higher activity levels in both the mega project space and large strategic accounts as opposed to the more transactional business as well as a planned repositioning of fleet to drive both growth and utilization. Margins have also been impacted by a higher level of ancillary revenue associated with the growth in the nonconstruction markets, an increased level of internal repair costs with a greater portion of our fleet out of warranty coverage just as we expected, and lower gains on disposals of used equipment. Adjusted for depreciation at $592 million was up 1%, matching rental revenue growth as the challenges associated with the slight over-fleeting of the industry has abated. After interest expense of $133 million, reflecting lower average debt levels, adjusted pretax profit was 4% lower than last year at $656 million. As explained previously, we are adjusting for nonrecurring items associated with the move of the group's primary listing to the U.S. These costs amounted to $19 million in the quarter and $32 million in the first half. In addition, we've taken a onetime exceptional charge of $37 million in the quarter relating to the restructuring of the U.K. business that Brendan has already mentioned. The bulk of this charge is noncash in nature and the full scope of the actions taken in the year are expected to be cash accretive. Adjusted earnings per share were up at $1.168, reflecting the benefits of the ongoing share buyback program, and ROI on a trailing 12-month basis was a strong 14%. Slide 14 shows the first half results in a similar format. Rental revenue growth in the half was up 2%, and up 3% on an underlying basis, adjusting for the lack of hurricanes. The EBITDA margin and EBITA margin remained strong at 46% and 26%, respectively. Adjusted PBT was down 4% and adjusted EPS down 1% for the half. Slide 15 illustrates group revenue and EBITDA progression over the last 5 years and in the first half, highlighting significant track record of growth and margin strength over a range of economic conditions. Turning now to the individual segments. Slide 16 shows the performance for North American General Tool. Rental revenue for the first half grew by 1% to $3.2 billion, driven by improved volume, time utilization and stable rates. Excluding the hurricane-related impacts, rental revenue increased about 3% in the first half. As I explained previously, margins were impacted in the half, primarily by growth being driven by higher activity levels. EBITDA was $1.8 billion at a strong 54% margin. Operating margins were 33% and ROI was 20%. Turning now to North American Specialty on Slide 17. Rental revenue was 2% higher than the first half of last year at $1.8 billion as the nonconstruction market continues to be strong, particularly in Power & HVAC, Climate Control and Flooring Solutions. On an underlying basis, adjusting for hurricanes, rental revenues were up around 5% in the half. Margins in Specialty were broadly flat with EBITDA margin of 48% and an operating margin of 33%. ROI was 31%, again, clearly illustrating the higher returns achievable in the Specialty businesses. Turning now to the U.K. on Slide 18, and please note, all of these numbers are in U.S. dollars. U.K. rental revenue was 3% higher than a year ago at $422 million, benefiting from favorable FX movements. The U.K. business delivered an EBITDA margin of 26% and generated an operating profit of $35 million at a 7% margin. ROI was 5%. As Brendan has already mentioned, during the quarter, we commenced a restructuring of the U.K. business, better positioning it for the future and aimed at delivering improved margins and returns at a sustainable level, while positively impacting the customer experience. This involves aligning the network of locations to current business needs, rightsizing the staff and disposing of noncore fleet and business lines, including the sale of the U.K. hoist business in October for $16 million. Slide 19 illustrates the flexibility, resilience and agility of our capital allocation model. When markets are experiencing transitory headwinds we have experienced over the last few quarters, we remain disciplined in our deployment of capital to support strong utilization and rate discipline. When markets are growing more rapidly, we accelerate capital spending to capture opportunities and market share. In all cases, we generate significant free cash flow in excess of our investments, which we return to shareholders in the form of dividends, debt repayment and share buybacks. You see this clearly in the fiscal years 2021 and 2025, and we have started this year strongly with $1.1 billion generated in the first half, a record and significantly ahead of the comparable period of last year. We are well on track to deliver record free cash flow generation for the full year. Slide 20 updates our debt and leverage position at the end of October. This again clearly demonstrates the strong cash-generative characteristic of the business as we have lowered net borrowings by over $500 million in the last year to $7.6 million (sic) [ billion ]. This is despite the fact that we returned over $1 billion to shareholders in the half through share buybacks and dividends, invested $1.3 billion in CapEx, and invested $143 million on 7 bolt-on acquisitions. In addition to that, we opened 22 greenfields in North America, of which 12 were in General Tool and 10 were in Specialty, with a clear line of sight to achieving around 60 greenfields in the full year. As a result, excluding lease liabilities, leverage was 1.6x net debt-to-EBITDA, well within our stated range of between 1x to 2x net debt-to-EBITDA. We expect to be in the 1.5x to 1.6x range at the end of April, including the impact from the share buyback activity, but not including any potential impact of additional M&A activity. On the M&A front, we have a robust pipeline, which we continue to develop and pursue opportunistically as long as it is accretive to growth and generates margins and returns in line with our capital allocation expectations. Turning now to Slide 21 and our latest guidance for revenue, capital expenditure and free cash flow for fiscal year 2026. We're pleased to reaffirm the guidance that we gave in September. Our guidance for group rental revenue growth is between flat and plus 4%. The plan for growth capital expenditure is in the range of $1.8 billion to $2.2 billion. And finally, we expect free cash flow to be between $2.2 billion and $2.5 billion. And with that, I'll turn it back to Brendan to close this out. Brendan Horgan: Thanks, Alex. Turning to Slide 22. I think you'll agree, Alex and I have covered all of these capital allocation elements as part of the presentation this morning. All of this is consistent with our long-held policy, and we will continue to allocate capital on this basis throughout 4.0. To conclude, let's turn to Slide 23. In summary, I'll leave you with a few takeaways one should gather from our update today. One, recognizing the impact of hurricanes, the half resulted in exactly what we expected in revenue growth, improving utilization, free cash flow and advancing our 4.0 strategic plan, leading us to reiterate our guidance for revenue, CapEx and free cash flow. Two, we're continuing to see positive leading indicators in our business activity levels and in our pipeline, coupled with an encouraging indication of market demand statistics. And three, when you piece this all together, you should clearly see the secular progression in our business and in our industry. This demonstrates ever so clearly, in particular, during this modest growth environment, we continue to maintain discipline in pricing, investment and strategic focus, all while delivering record free cash flows, which we've used across all our allocation priorities. This business and balance sheet is stronger than ever and puts us in an incredibly powerful position, giving us great flexibility and optionality as opportunities unfold. And finally, just a comment, you should have received a save the date for our March 26 Investor Day in New York City, where we'll update you not only on our 4.0 progress, but showcases our ever-growing capabilities, and we certainly hope to see all of you there. And with that, operator, we will turn the call over to Q&A. Operator: [Operator Instructions] Our first question is from Lush Mahendrarajah from JPMorgan. Lushanthan Mahendrarajah: I've got 2. The first is just on rental rates and how we think about the combination of that and margins as we go through the second half. Clearly, some of those things are mix related, et cetera, and repositioning related. I mean, is that something that you want to start to offset and push rental rates a bit more? Or are you sort of happy with the status quo and sort of those things will sort of iron themselves out over time? So that's the first question. And the second is just on local and you've indicated, I think, there on the document sort of the 12- to 24-month lead time, but also interesting to hear, I think you said quotations and reservations for yourselves is trending upwards. I mean is it typical to see a lead time of 12, 24 months for those as well? I'd imagine those are short, just to get an idea of exactly what you're seeing there and what that actually means labeling into revenue? Brendan Horgan: Sure. Thanks, Lush. Rental rates, as we've said, so much so, in particular during this moderated level of growth that we've talked about, the resilience of. Our rates are strong, make no mistake. Your question specifically talks about what is our anticipation of where rates go in the second half. I can probably obviously always say to you that we prefer rates to be a bit higher as we move. I feel good about. We feel good about the momentum that we have. We have a number of initiatives underway to further progress the mechanized progress, if you will, of pricing. So we'll certainly be talking about that a bit in the Investor Day. I think the key thing is this when it comes to pricing. We believe at this stage that we've reached a good fleet balance in the industry. It's well known that for a period of time, the industry was a bit over-fleeted. We think that, that has largely corrected itself. And therefore, that leads to even more momentum and really expectation around pricing. But there are also a number of moving parts between some of that local nonres we've talked about and also our national and strategic customers that we're growing so significantly. But overall, our expectations on rates are positive, and we do expect rate progression to be a feature of our growth for the years to come. Second question around the momentum that we're seeing, particularly in the internal indicators and, of course, in areas like that Dodge Momentum Index. Yes, internally, what we're seeing really now as compared to what we would have seen a year ago, we're seeing more normal rhythms in the business. And by that, I mean rhythms as it relates to seasonality where we had actually seen a decoupling of that at prior points. And in that, that's supportive of what we would have said in our prepared remarks. We feel as though both in terms of the actual data and then just a feel on the ground that when you look at completions versus starts, we've reached equilibrium. And if you think about that local nonres market, really for about 2 years' time, completions, in essence, were outpacing starts. We feel as though we've reached neutrality in that, and that gives us even more confidence in what we're seeing in some of these forecasts. That being said, and you sort of answered it in your question, Lush, that lead time from planning to actually progressing to start is 12 to 24 months, depending on what it may be. Some of your smaller retail might be 12 months, offices and lodging might be 18 months, larger projects beneath that $500 million may be more like the 24 months. So when that comes? Time will tell. We're seeing positive signs for that. And as we've said so many times, we are positioned well to take advantage of that when not if that returns. Operator: The next question is from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: Two questions, please. So just on the U.K. restructuring charges. So you've mentioned closing branches and some headcount. So do you expect that, that business will be materially smaller going forward? And if you could talk a little bit about what has prompted that? And as part of that, you mentioned double-digit returns on those investments. So over what kind of time frame could we see that come through? And then secondly, just coming back to some of those green shoots on leading indicators. Is there anything incrementally different relative to the last time we spoke in September with regards to the type of customers or projects that you're seeing that across, or any particular drivers you're hearing in your conversations with customers such as rates, et cetera? Any color there? Alexander Pease: Great. Thanks for question, Annelies. I'll take the first part, and then I'll turn it over to Brendan to talk a little bit more about the green shoots that you mentioned. So the U.K. structuring, this is activity that we're undertaking to really sort of improve the performance of that business. We mentioned $37 million of nonrecurring charges. That's a onetime charge, mostly noncash in the quarter. Important to say that all of that will be cash accretive in the year. We pointed to the sale of the Hoist business for about $16 million. There's a little bit of severance in there, but it will all be cash accretive for the year. And largely, those actions are already behind us. So there's really not a whole lot more to be done. In terms of your question, will that be a materially smaller business? No. This is really about sort of optimizing the footprint, divesting some of the businesses where we weren't really competitively advantaged, closing locations where we didn't have scale. So it's really, I would say, just basic hygiene about how we drive improved performance in that business. In terms of what's our trajectory to more sustainable returns, obviously, it's a bit of a tricky question to answer, because it depends on how top line performance evolves as the market recovers. But we would expect all of these actions, like I say, to be accretive in the year and to be delivering positive returns as we look out into the next fiscal year. And so with that, I'll turn it over to Brendan to talk more about the green shoots that we're seeing in the marketplace. Brendan Horgan: Great. Thanks, Alex. And Annelies, your question really was, is there anything different really from Q1 when we first talked about what we're seeing internally and some of the forecast externally. And I think the biggest is, we've had 3 prints now of DMI that have maintained really high levels. And the key to that is, it is indicating the demand in the marketplace. And as we see that maintain that quite wholesome level, we have increased confidence that we will see those progress to starts. And that actually, that question, brings up a good point I think I'll make to perhaps reiterate our conviction there. When you study over time, the correlation between DMI and starts, it is a remarkably strong correlation, about as strong as you can get, which one would expect. You have someone who has literally entered the planning phase and the correlation from entering planning to, therefore, actually becoming a start is remarkably high. So that gives us extra confidence. And again, what we're seeing there is it's just the demand. And that demand, just to emphasize, remember, that is specifically DMI pointed to projects that are below $500 million, nonmanufacturing. So it really gets to the core of that local nonres. Operator: Our next question is from Neil Tyler from Rothschild & Co Redburn. Neil Tyler: Two for me, please. You've increased the amount of M&A slightly. You mentioned a robust pipeline. Does this reflect a more attractive M&A landscape more broadly? Is that maybe tying into your comments about some of the industry being a little bit over-fleeted? Are there assets available that have got increased headroom to improve sort of utilization compared to, say, a year or 2 back? That's the first question. And then a similar topic, but on your own fleet utilization, how are you thinking about utilization rates as you shape up for the 2026 season? How much growth headroom in terms of utilization rates do you think exists in your current fleet before CapEx will need to kind of raise to move the fleet in sort of lockstep with demand growth? Does that make sense? Brendan Horgan: Yes. Sure, Neil. The first in terms of M&A, well, look, we did 2 in Q1, we did 5 in Q2, nice little bolt-ons mix between Specialty and General Tool. So really, it's a combination of density and a bit of expansion into some markets where we didn't have quite the presence that we would have wanted, all part and parcel of our 4.0 expansion plan. Nice little specialty businesses in the first half that we added, one around perimeters that really supports our events business, everyday events, and then, of course, magnify with events like LA28. From a pipeline standpoint, it's remarkably strong, and it's remarkably strong, particularly in the specialty space. So there are a handful of opportunities that are out there that both complement existing lines that we offer today, but also some nice adjacent lines. Your question about do we see this ability to extract, in essence, higher utilization because of the industry's fleet levels? I think, frankly, it's not so much that. We get that in almost every circumstance. So we buy a business in any town, North America, for instance, and they may be running at a utilization level of 60, let's just say, for conversation's sake. And as we fold that into our overall system, our overall apparatus, we can comfortably run that business at a higher level of time utilization, if for no other reason, then we have a deeper offering of whatever products we tend to bring in. So certainly, that's one of our overall hallmarks of this bolt-on M&A strategy that we have. And we take those customers that we acquire by way of the acquisition, and we offer them a far broader set of solutions. So it's really no different than what it has been. As we've said in all of our updates, the pipeline has remained robust. We're just in a really good position right now. And frankly, we would expect the momentum in terms of our allocating capital investment in this regard to strengthen over the course of the quarters to come. In terms of our own time utilization, to your second question, and what sort of headroom, I mentioned that similar to the end market from a local nonres standpoint, I think we're kind of at equilibrium now. When you look at our business today, as you've seen and you would have heard from Alex's remarks, Specialty is becoming a larger part of our overall business. So time utilization isn't quite what it was before. Take, for instance, as we grow our climate business or we grow our load banks business to the degree in which we are, you have different seasonality as it relates to time utilization. So really, the answer to your question is the devil is in the details. We have certain product categories that we do have a bit of headroom, but we also have, and I would put it this way, equally have product categories that are at quite high levels of time utilization and, therefore, that's where you'll see our growth CapEx invested not only in the second half, but as we complete our planning from a CapEx standpoint for next year, which we're right in the middle or right in the throes of our growth plans for next fiscal year. I hope that answers your questions, Neil. Neil Tyler: Yes, that you did. That's very helpful. Operator: Our next question is from Arnaud Lehmann from Bank of America. Arnaud Lehmann: Two questions from my side. Firstly, on margin trends, you highlighted, again, a little bit of margin erosion year-on-year, highlighting the repairs and repositioning of the rental fleet. Do you expect that to continue into the second half of the fiscal year, or the repositioning is largely done? Maybe something remains on the repair side. My second question is just a few follow-ups on the U.S. relisting. When are you expecting to transition to U.S. GAAP? Are you going to move to a December year-end for reporting? And what sort of incremental U.S. relisting costs should we expect into Q3 and Q4, please? Alexander Pease: Okay. So I'll take both of these. On the margin point, a couple of points that I think are really important to understand. First of all, this is largely driven by mix. And the mix is coming from a couple of things. First, we have a disproportionate growth in Specialty relative to General Tool. And remember, Specialty is a little bit narrower margin, although it's higher return, because it's less capital intense. So that should be somewhat intuitive from the numbers. Secondly, the growth, as Brendan would have mentioned in his results, the growth broadly is coming from mega projects and the large strategic accounts as opposed to that local nonres more transactional business. And so again, I think it should be intuitive that, that type of business mix would carry with it a bit more of a lower margin profile. And then lastly, we're really optimizing the fleet positioning to unlock these pockets of growth. And that higher level of activity, comes with it higher cost. So as Brendan says frequently, we're really just running the business as you would want. There's nothing sort of structurally changing in the underlying economics. In terms of as it looks towards the second half, I think we would continue to expect Specialty to have relatively stronger growth than General Tool. I think the other issue that we pointed to was the higher internal repair costs as a portion of the fleet comes off warranty. You would expect that to continue through the balance of the year. So I think largely, you should expect the second half to look and feel similar to what the first half looked like. As it relates to the U.S. relisting, we're on track for that to be delivered March 2. We've submitted the first round of comments to the SEC -- or first round of response to the SEC's comments. We expect to get a second round back here in the course of the next week or so. And so everything is going exactly as we would have hoped despite the government closure throwing a bit of a speed bump in it. In terms of your question as it relates to the December year-end, we will likely make that decision at some point in the future. That is not something that we would undertake sort of imminently as we need to get through this process first, but we would likely take that decision at some point in the future. And we will continue to see some incremental cost as we get through the balance. I think we're kind of targeting a total budget of around $90 million or so by the time this is all said and done, the majority of which will happen as we get into sort of the second half of the year, but there will be some residual cost as we get into next year, which will all be adjusted out of the adjusted GAAP numbers. And then obviously, once we start reporting on the SEC regime, we'll be reporting U.S. GAAP numbers, and we'll bridge that very clearly for you in the Investor Day. Operator: Our next question is from Rob Wertheimer from Melius. Robert Wertheimer: A question on just profitability and ROIC on the mega projects versus the rest. We've seen the fleet positioning cost. I wonder -- I'm not sure if I understood the last answer to indicate that the repositioning is a kind of phase or, I don't know, whether it continues with each mega project as they sort of bounce around the country, whether that's just a new cost of doing business. But does the profitability kind of curve up to average? Or is it lower given competition? And -- well, anyway, I'll stop there for now. Brendan Horgan: Rob, thanks for that. You heard Alex allude to that margin impact. And I just want to clarify that, and I think this will answer your question. That's in the early phases of those wins and of those build-ups. So as we've said many times in the past, not only does history tell us, but our expectations are, as you reach that sort of crest, which is quite long on these mega projects, we would say, at a minimum, those are parity to the margins for the overall business. And the same thing goes really with our national strategics. I mean when you think about these not just mega projects, but these national contractors, and you put all that together, these are more experienced operators. The conditions on these sites are better governed. The products themselves, in so many instances, move in many ways a bit less than they do on other projects, and the repair and maintenance, when it comes to upkeeping with those, you have this great opportunity to have field service technicians deployed that are on site and they spend most every single day on those projects, maintaining this equipment. So over time, we would expect for that to be at a minimum parity to the rest of the business. Robert Wertheimer: Perfect. That does answer. And then just out of curiosity, I guess, just as you slowed expansion appropriately with the industry, then the repair cost comes up as more of the fleets off warranty, I get that. Is that a 1-year effect and you kind of rebase, or if you didn't expand faster again, would that continue to be a margin headwind over the next year? I'll stop there. Brendan Horgan: Yes. I mean, it's really -- if you look at the fleet profile slide that we have in the appendix, you'll see 2 extraordinary years of growth where we extracted significant share gains and expanded our business. So it's really those 2 rather large tranches. So unless we were to go to those levels of CapEx, say, next year, I think we have another year of that sort of headwind and then we balance out as we ordinarily would. And then, of course, look, there'll be these periods where you have significantly low replacement CapEx for tranches 7, 8 years ago that were lower. But I would expect that same sort of headwind for another 6 quarters or so. Operator: Our next question is from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: Just one final follow-up from me, please. The U.K. restructuring program of $37 million, you mentioned it was cash positive, but can you maybe give us some color on what's the benefit on annualized SG&A costs for that region and, therefore, the benefit to margins on an annualized basis? Alexander Pease: Sure. So the bulk -- as I would have mentioned, the bulk of the restructuring would have been in sort of fixed assets, sale of underperforming businesses, consolidation of locations and those sorts of actions. So really where it hit -- and it's noncash, by the way, so where it typically would hit is more on the ROIC and the depreciation line than the sort of SG&A side. I don't have the exact number in front of me. I think it would be reasonable to expect 150 to 200 basis points of SG&A improvement on leverage. But again, the bulk of it is really focused on the asset footprint, if that helps. Operator: We'll now take our next question from Allen Wells from Jefferies. Allen Wells: A couple for me, please. Firstly, just on the margins. Sequentially, slightly worse, I think, down 140 bps versus 120 bps in Q1. The incremental decline there, is that all related to hurricane activity? Or were any of the other headwinds stronger in the quarter? And then maybe linked to that, I think kind of follows on from Rob's question on the repair costs. We should expect that obviously to be a continued headwind over the next few quarters. But when you look at that CapEx profile, the step-up between '22 and 2024, should we be thinking that the headwind from higher repair costs actually steps up over the next few quarters as well? So that's just those on the margin? And then secondly, just on the rate environment following on from a question earlier. Beyond the broader market conditions being slightly muted, are there any other factors that you would call out that are impacting rates? I'm particularly thinking about are there any particular smaller or midsized competitors being a bit more aggressive than you would typically expect on pricing or anything like that? Or is it just a broader market issue? Alexander Pease: Yes, I'll let Brendan take the rate question, but I'll hit the margin question quickly. So you sort of answered your own question. Yes, the hurricane activity -- the lack of hurricane activity, I should say, did have a dilutive impact on margins. You're also lapping a very strong period of margin expansion. So you sort of have a tougher comp that you're comparing against. So those are really the issues. As it relates to the higher repair costs, I think Brendan answered that. We do expect that to continue for the next, call it, 6 quarters as we're lapping those really 2 high CapEx years. So I think that would be more of a sustained headwind. And I'll let Brendan comment on the rate environment. Brendan Horgan: Yes. Allen, from a pricing standpoint, look, there will always be some competitor in some market somewhere who leads with price. That has been the realities of the business forever. The key to understanding pricing is, pricing in any business is dynamic. And the big takeaway would be, think about the structural change, the structural progression of this business and the secular outputs of that, and we're seeing those so clearly today. Secular outputs, particularly highlighted during this end market that we are working through today, that create larger TAMs, that create more resilience overall in the business, that deliver discipline when it comes to pricing. And largely speaking, that's exactly where we are. It's not different than most anywhere else. Pricing does have a momentum element. And at this particular juncture, it has proven to be remarkably resilient, and as we've said, pricing is still very much strong, and we look to take further advantage, if you will, of this structural output to progress pricing, as I've said, that we expect to be a feature of our growth for years to come. Allen Wells: And sorry, just a quick clarification, Alex. I appreciate you kind of confirmed that there'd be a sustained headwind in the higher repair cost. But I guess my question was, when I look at the CapEx profile, '23 was more CapEx than '22, '24 was more than '23. So is there any reason why that headwind shouldn't actually increase given that CapEx profile? Alexander Pease: Yes. I guess when we return to fueling larger growth capital investments, you would see that impact mitigate, because you'd be putting more capital on the balance sheet that's under warranty cost and the age of your fleet would come down slightly. So really, the higher warranty cost is entirely connected with the aging profile of the fleet. And Brendan is pulling up the slide in the appendix, which really shows the nature of how we've invested in the last couple of years. So you would expect that trend to continue as we lap those 2 years of $3 billion to $4 billion of investment. As those levels of CapEx get retired, you would expect it to come down to something a little bit more normal. Brendan Horgan: Yes. I think, Allen, to just add, let us not over-index on. I appreciate we may have put ourselves in that position because we call out the impact of higher repair costs as assets come out of warranty. Think about Sunbelt 4.0 and the actionable component of performance. Make no mistake, we have opportunities which are being actioned to drive margin improvement in this business just as we set out to do with 4.0. So whether it be the over '25 market logistics operations that we have employed year-over-year, growing from last year's 10 or 12 to today's over 25, which is more than 500 of our locations. We'll have more than 30 of these rolled out by April of our top 50 markets. Part and parcel of that MLO is a consolidated market field service approach. Furthermore, as you will see in full color on March 26 during our Investor Day is the new service platform that we've implemented throughout the business. So all of these improvements not only deliver exceptional customer experience, but they also will deliver, over time, improved operational processes and therefore, improved margins. So this is just a moment in time when we're going through those 2 years of extraordinary growth investment, which we all look forward to returning to. But make no mistake, the business is actioning significantly an improvement in the way that we operate, and that will translate into margins. I'll just talk to MLOs a bit more. We have reduced days to pick up for our assets. That creates opportunity for higher time utilization of an existing fleet. We have circa 15% better truck utilization in these markets. We reduced outside hauler spend in many cases, by 50% or more. And this whole measure we've looked at for so long, delivery cost recovery improves by 4% or 5%. So it's not all about just the warranty of the fleet, it's about how we continue to get better at our operations, and you've met the Brad Laws and [ Chais ] of our business. And that's what they're focused on every single day, and we have great momentum behind that. Operator: Our next question is from Karl Green from RBC. Karl Green: Just 2 questions. The first one, Brendan, given that we're seeing double-digit auction inventory builds in major equipment categories, I just wondered what gives you the confidence in the statement that the over-fleeting in the industry is being largely corrected? And then the second question, Alex, perhaps for you, just on depreciation. It looks like sequentially, adjusted depreciation went down between Q1 and Q2. So I just wanted to understand the moving parts of that. Was that partly due to accelerated write-offs in the U.K.? Or is there anything else going on there in terms of fleet mix that we should be aware of? And then just a final follow-up on that would be what would your expectation be for full year depreciation, please? Brendan Horgan: Sure, Karl. On the first, look, I think when you look at 2 things really, your question is about how we feel comfortable that we're reaching this sort of balance from a fleet versus demand standpoint in the industry? You're right, we do see some, and I want to say that very clearly, some product categories that are creating a bit of a backlog in that auction environment. As you know, there's some activities going on in the industry where some are taking the decision to rebalance fleet in some way, shape or form, more so when it comes to composition than when it comes to absolute levels. And you'll see that from time to time. I think you'll see that work through quite quickly. And you can see that also when it comes to secondhand values, which it's important to understand when you think about this business over the years rather than just quarter-by-quarter, you'll see oscillation when it comes to secondhand values. If we sort of collar what we get assets at least through the auction channel, you'll see peaks in the 42% to 45% of original equipment cost range down to extraordinary times like '08, '09, where you saw 25% or so relative to OEC. And today, we're in the kind of 32%, 33% range. So that also indicates a relative level of health in that space. But I think when we look at -- look, many of our OEMs are publicly traded, and you can understand what their volumes look like year-on-year or really over the last 18 months. So all of those line up to and indeed, our own time utilization, giving us this confidence that we are in a pretty good position overall from a fleet makeup in the industry. Alexander Pease: Yes. So a couple of points on depreciation. It would be the case that the majority of the decline would be tied to the U.K. Remember, that $37 million charge that I mentioned is largely accelerated depreciation. So that would be the case. If I look at rental depreciation in the quarter, it was for the first quarter that we had really in the last probably 6, rental depreciation was a good guide. So we've got back to a world where rental growth and depreciation are more in balance. You do have some other effects of depreciation going on with things like lease amortization, some of the greenfield investments before they come to scale, obviously, those would be headwinds to depreciation. But I think the headline number is the fact that this rental depreciation was more in line with rental growth, which is a good thing in the quarter. Does that help? Karl Green: That's helpful. Thank you. Operator: Our next question is from Neil Tyler from Rothschild. Neil Tyler: Just wanted to follow up actually on the answer to the previous question about the used equipment recovery rates. You said for some time that you have been trying to optimize the channels that you use. Can you give us any sort of update on that, thoughts on the current split and how far through that sort of optimization process you are? Brendan Horgan: Yes, Neil, I'm glad you asked that question because shame on me for not addressing that when I had the opportunity. Yes, I mean, we have, as you know, over the years of such significant growth and such organic investment in the business, we've relied primarily on 2 channels, one being trades to OEM, because when you're buying 3, 4 and even 5 to every 1 you're selling, it's a pretty optimal path. An asset lives a perfect life after its last day of rental. Once we deem it to be an asset to be replaced, it's sold nearly immediately, not taking any time away from the business or distraction to the business. And then secondarily was the path through auction. We have been working on standing up a strong retail and wholesale platform, which I would call 3 quarters through its build. And you will see in significance, beginning next year, more and more of our secondhand sales going into that retail and wholesale market. And of course, we think that overall will lead to better proceeds for our sales of used equipment. Operator: It appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Brendan for closing remarks. Thank you. Brendan Horgan: Great. Thank you, operator, and indeed, everyone, for joining this morning. I think we have gotten across -- or hope certainly clearly that over the half and indeed year-over-year, we have invested in growth in this business. We have been working vigilantly to improve our craft, to improve the service throughout our actionable components of 4.0. We have generated significant free cash flow, which we have returned in record levels to our shareholders. We paid down debt, and we've done all of this within our leverage range presently at 1.6x. And I'll just reiterate what I would have said in my prepared remarks, which is this business is in a remarkably strong position, and we are poised to benefit as we see things recover and this great industry continues to grow. So with that, we look forward to seeing all of you on the 26th of March. Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.
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