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GNSS 2025 Q4 财报电话会议

Operator: Good day, everyone, and welcome to Genasys' Fourth Quarter and Fiscal Full Year-End Results Call. At this time, I would like to hand the call over to Mr. Clay Liolios. Please go ahead, sir. Clay Liolios: Good afternoon, everyone. Thank you for participating in today's conference call to discuss Genasys' fiscal fourth quarter and full year results ended September 30, 2025. My name is Clay Liolios and I'm with the Gateway Group, the company's third-party investor relations firm. Joining us on today's call are Genasys Chief Executive Officer, Richard Danforth; and Interim Chief Financial Officer, Cassandra Monteon. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets and negatives of these words and similar words or expressions. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. In addition, this call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. Additionally, a replay of the webcast will be available approximately 4 hours after the presentation through the conference call link on the Events and Presentations page of the company's website. With that, I would now like to turn the call over to Genasys CEO, Richard Danforth. Richard? Richard Danforth: Thank you, Clay, and welcome, everyone. We finished fiscal 2025 on a very strong note. For the first time in 7 quarters, we delivered both positive operating income and adjusted EBITDA. Additionally, we saw over 153% year-over-year revenue growth in the fourth quarter, underscored by a 50% gross margin. This success reflects the foundation we've built over the prior quarters, and we are now beginning to realize the benefits of all that work. Additionally, as of September 30, 2025, we had a backlog of more than $60 million. The close of our fiscal year was not only defined by executing on major backlog orders, but by replacing them with new customers and new projects. This quarter marked a turning point for Genasys, allowing us to shift our focus towards the future and position the company for sustained growth. From an operational perspective, we believe we have rightsized, efficient and strategically aligned to execute our existing backlog while simultaneously capturing new business opportunities. These two initiatives are also becoming increasingly synonymous. By this, I mean, as we deliver on these large projects, we earn meaningful credibility in the market, hence growing the pipeline and the brand. For example, over the past several months, we have been approached by multiple countries and government agencies expressing interest in Puerto Rico-like deployments for our technology. This strong inbound demand for similar large-scale projects not only represents a significant growth opportunity for us, but also underscores the quality of our technology and its implementation. This increased credibility is opening new opportunities, growing our pipeline and further establishing us as a leader in protective communications space. Moreover, our Hardware continues to display its utility in various end markets as illustrated by several of our last announcements, including the $1 million nuclear security follow-on order and the $1 million order for wildlife preservation. There are countless applications for our products, and we are committed to driving new business and expanding access to our critical communications technologies. On the Software side, we are seeing meaningful traction of build across both law enforcement and government agencies. Genasys Protect is best-in-class, and we are committed to expanding this technology as demand for advanced safety and communication solutions continues to grow. In a world confronted with frequent emergencies and large-scale disasters, the need for reliable, proven, protective technology has never been greater. Our solutions are recognized as industry-leading in helping agencies keep people safe, deliver clear communications, and manage critical events effectively. And as the government funding begins to ramp back up, we are confident that our software solutions will be a significant beneficiary, given the critical role it plays to ensure safety and operational efficiencies. Furthermore, to strengthen our reach and deepen our relationship with these agencies, we partnered with Julie Parker Communication, a leading expert in public safety communication strategy. This partnership enhances our ability to support agencies, broaden our awareness and position our software within key decision-making circles. We expect continued penetration of the software market, driven by our proprietary technology and growing customer relationships. I would now like to spend some time providing updates on our large projects, starting with Puerto Rico. As a reminder, the Puerto Rico project is a $75 million contract with PREPA and is fully funded by FEMA. The project covers 37 dams across the island, which all report into seven distinct groups. The Puerto Rico EWS project is beginning to hit its stride. In fiscal 2025, we recognized $13.2 million in revenue from this project. Looking at the next several phases, we expect the project to be completed in 2027 with the majority of the work taking place in 2026. We expect to complete group 5 and 6 this month and are actively working on group 3 and have been approved to proceed on group 1. Next, an update on the CROWS initiative. The CROWS-AHD effort, part of the tech refresh program of record, saw our initial funding in fiscal '22 and fiscal '23. The first production funding was included in the 2024 federal budget. And following the successful completion of the design, test and qualification of the LRAD 450XL-RT, the U.S. Army issued an RFQ in July of 2025. In late September, we announced that we won the $9 million order. This marks the first production contract for AHDs under the CROWS program following the qualification of the LRAD-RT model. We expect this contract to generate multiyear revenues while enhancing CROWS operators' ability to communicate with potential threats before employing lethal force. In summary, while fiscal 2025 presented its share of challenges, the fourth quarter marked a strong and encouraging step forward, reinforcing our momentum and setting the stage for an exciting year ahead. The progress we made in these final months position us to enter the new year with confidence and renewed energy. Before speaking on our 2026 outlook, I want to hand the call over to Cassandra to speak in more depth of the financials. Cassandra? Cassandra Hernandez-Monteon: Thank you, Richard, and good afternoon, everyone. We will start with the fiscal fourth quarter and then move into our full year results. In the fourth quarter of fiscal 2025, Genasys generated $17 million in revenue, up 73% sequentially and up 153% year-over-year. It is worth noting this is the largest revenue quarter in Genasys history. Gross profit margins for the quarter was 50.3%. The increase is primarily due to more favorable Hardware mix. We expect margins to normalize around 50% moving forward. Operating expenses for the quarter was $7.3 million in Q4, a 26% or $2.6 million decrease from the fourth quarter of 2024. The decrease in operating expenses are primarily due to a $1.2 million decrease in professional services and a $1 million employee tax credit. On a GAAP basis, operating income was $1.3 million compared to an operating loss of $7.1 million in prior-year period. This is largely due to our increased revenue, of which $7.6 million came from the Puerto Rico project and $2 million from the U.S. Navy. Adjusted EBITDA, which excludes noncash stock comp, was also positive, coming in at $2.4 million compared to an adjusted EBITDA loss of $6 million in the year-ago period. GAAP net loss in the fourth quarter was $1.4 million compared to a GAAP net loss of $11.4 million in the fourth quarter of 2024. The fourth quarter was a turning point for Genasys, we are beginning to see the hard work and efforts of our team materialize into our financial results, and we are excited to continue this positive progress into 2026. Now shifting to the full year results. In fiscal 2025, Genasys generated $40.8 million in revenue, up roughly 70% from 2024. Hardware revenues grew over 91% in fiscal 2024. This included $13.2 million in revenue related to the Puerto Rico project. Excluding Puerto Rico, revenues from our Hardware business also grew at over 12% this year, signaling a strength in our other core offerings. Our products are continually garnering interest from multiple customers across the world, and we expect to continue driving similar growth in our Hardware business into 2026. Total Software revenue in 2025 grew 21% compared to 2024. We believe our Software segments remain a large growth driver for Genasys and as government investments pick back up, we anticipate our Software programs will capture substantial upside. Gross profit margins for the year was 41.6% in fiscal 2025 compared to 42.4% in fiscal 2024. The slight decrease in gross margin was largely due to the percentage of completion accounting methodology applied to the Puerto Rico project in the first 2/3 of the year and was partially offset by a more favorable Hardware mix in the fourth quarter. As mentioned earlier, we do believe gross margin will stabilize at around 50% levels we witnessed in Q4. Operating expenses for the year were down roughly 8% or $3.1 million to $33.8 million in fiscal 2025. Genasys had a reduction of professional services for the year of $1.2 million, a $1 million tax credit and a reduction of travel and marketing expenses for $800,000. On a GAAP basis, operating loss in fiscal 2025 was a negative $16.8 million compared to an operating loss of $26.7 million in fiscal 2024. This improvement was largely due to the growth in both our Hardware and Software revenues and was propelled by cost-cutting initiatives we implemented throughout the year. Adjusted EBITDA, which excludes noncash stock compensation, was negative $12.4 million compared to a negative $22.1 million in fiscal 2024. GAAP net loss for the year was a negative $18.1 million compared to a negative $31.7 million in fiscal 2024. Before handing it back to Richard to speak more on the company's momentum and outlook, I did want to touch base on our balance sheet. As of September 30, 2025, cash, cash equivalents and marketable securities totaled $8 million as of September 30, 2025, compared with $13.1 million as of September 30, 2024. Based on our current cash forecasted receipts and disbursements, the company believes we have sufficient capital to serve the debt. While there is still more work and growth ahead, I am encouraged by the progress that we've made in 2025, and I am confident in our ability to deliver meaningful financial improvements in 2026. Richard, back to you. Richard Danforth: Thank you, Cassandra. The close of fiscal 2025 laid a strong foundation for Genasys, demonstrating our ability to execute on major projects and deliver results. This momentum positions the company to enter 2026 with confidence, setting the stage for growth and new opportunities. We expect to drive significant year-over-year revenue growth in both Hardware and Software businesses. Additionally, we expect to deliver margins of 50% throughout the year. As we all know, the world faces no shortage of natural disasters and emergencies that demand reliable protective communication systems. Our technologies save lives across the globe. Genasys' systems are making a real difference in protecting people during some of their most vulnerable moments. The need for our products is clear, and we will continue to deliver the solutions that agencies and communities depend on to keep their citizens safe. Overall, 2025 was a pivotal year for Genasys, finishing with a significant step in the right direction. Supported by current momentum, a strong backlog and a deep customer adoption, we will enter fiscal 2026 with real excitement and a clear commitment to improving our operational and financial results while delivering meaningful value to our shareholders. Before moving over to Q&A, I would like to take a second to thank all of our employees, partners, customers and shareholders for your support and trust. With that, we'd like to open up the call for Q&A. Operator? Operator: [Operator Instructions] We'll go first to Scott Searle from ROTH Capital. Scott Searle: Cassandra, maybe just to start, I'm not sure if I heard it, but what was Software mix in the quarter? And then, Richard, on the CROWS front, I'm wondering if we saw any contribution in the September quarter and what you're expecting in terms of linearity and follow-ons throughout the course of the year for CROWS. Richard Danforth: I'll answer that question first, Scott. CROWS will be -- likely be a second half revenue generator. So all of it will likely happen in Q3 and maybe a little in Q4, but Q3 is more likely. Cassandra Hernandez-Monteon: And in Q4, our Software revenue was roughly around $2.2 million. It was pretty flat compared to last quarter, but we would expect to see an increase in revenue going forward for Software. Scott Searle: Got you. And Richard, just to follow up on CROWS. I think it's expected to be part of a larger decade-long contract that could be $100 million to $150 million. This is the initial order. Are you seeing visibility to the follow-ons there? And then as it relates to the pipeline, I wonder if you could discuss it a little bit more in detail. Last quarter, there were a couple of larger contracts that you called out specifically related to flooding and tsunami opportunities in international markets. I wonder if you could just provide some color in terms of size, magnitude, timing of some of those opportunities. Richard Danforth: Well, we haven't put size or timing on those opportunities out in the public, Scott, but the -- none of what I mentioned last quarter from these larger opportunities has closed. One has reached a point where we submitted the proposal. One is a proposal to be submitted later this month and the third is further down than that. Relative to the CROWS question, CROWS-AHD is part of a program of record that has a line item in the defense budget. As you're well aware, the FY '25, there was no budget. It was a continuing resolution. So far in fiscal year '26, it remains another continuing resolution. The current one is expected to expire the end of January, as I recall. With that said, Scott, it's -- the visibility into the annual awards is part of that budgeting process. So as they conclude with that, we'll know precisely what will be in there. Scott Searle: Got you. Maybe two quick follow-ups then, Richard. And just in terms of government engagement and opportunities in general, given the shutdown, has momentum returned on that front in terms of other RFPs domestically? Are you seeing some momentum on that front? Or kind of how would you characterize it? And then also on the commercial front, the nuclear opportunity seems like it was a nice win. Are there other commercial or enterprise opportunities that you're starting to see build in the pipeline? Richard Danforth: Yes to everything you said. So from an LRAD hardware perspective, Scott, we had a very good bookings quarter. You mentioned the nuclear opportunities. There's more nuclear opportunities. If we look internationally, substantial increase in opportunities in the APAC region, we expect to close some of those here shortly. In the Middle East, which historically hasn't been a great market for us, our expectations are quite keen on some significant bookings in this fiscal year. And even Europe has shown more promise from an LRAD perspective. So no is the answer to your direct question, I haven't seen a significant decrease. In fact, I've seen an increase in demand for LRADs during these current times. Operator: The next question comes from Jarrod Cohen from JM Cohen & Company. Jarrod Cohen: Yes, I just have a few questions. Well, you mentioned -- I'll start off with different types of projects. Can you give us an idea of what type of projects might be in the pipeline? Beside -- are they like what you've done in Puerto Rico? Or can you just give... Richard Danforth: Very much so, Jarrod. Very much so. Puerto Rico, of course, as you know, is 37 dams or countries that don't actually have dams, but have large numbers of basins that tend to flood. And so it's the same principles of what we're doing in Puerto Rico, just a slightly different application. Jarrod Cohen: Okay. This is more financial related. You talked about -- could you give us an idea of what -- 2026, what you're looking in terms of revenue growth? And/or is it possible that on a total 2026, are you looking for the company to be on an operating basis profitable? Richard Danforth: We expect to be profitable in FY '26, yes. And from a revenue perspective, we don't comment on -- we don't give out forward-looking guidance, but I would point you to $60 million of addressable backlog -- 12-month addressable backlog without condition as we enter this fiscal year. Jarrod Cohen: Okay. So -- but on an operating basis, profitable, but even on a net income basis, even being profitable? Richard Danforth: Yes. Jarrod Cohen: Okay. And my last question, just related to the Software business, you have about over 50 million users or something like that. And the Software business, I know it takes a long time to grow, and it's been up and down over the last few years. And you mentioned this past quarter it was what, you did revenue of about, what, $2.2 million or $2.3 million. When do you think that business could be basically on a breakeven-type basis in terms of cash flow-wise? Richard Danforth: It's not going to be this year, Jarrod. As we exit the following fiscal year, I would think we have a shot to make it there. Our Pipeline has grown by more than 100% from the same period last year. We are prosecuting some large SaaS Software opportunities that we expect to close in this fiscal year. As you're well aware, fiscal '25 was disappointing from a SaaS bookings perspective, principally driven by the lack of funding in the grant process -- the review process for grants, which seems to be moving along now. So our expectations for SaaS bookings and resulting ARR are very high for fiscal '26. Operator: [Operator Instructions] Up next is Ed Woo, Ascendiant Capital. Edward Woo: Congratulations on all the progress. My question is, as you guys get more interest in your products, have you noticed any change in competition? Have you noticed any new entrants are -- you're competing with as you pitch out these projects? Richard Danforth: No, neither in Software or Hardware, Ed, or systems. Edward Woo: All right. Then my next question is, if you guys are kind of like the main player and as building these better reputation, do you see yourself having a better pricing power or being able to price higher? Richard Danforth: Within the government customer base, Ed, you -- although we don't provide any cost and pricing data, we are subject to -- we -- if we -- if our price goes up too much, then we're subject to having to justify the price growth. Now in some cases, we're able to justify it, and we do increase the price to be more reflective of not only the cost but improvements in profitability. But it's not like you can just charge them anything you want. Past practice is the barometer by which they determine whether they think the price is too high or not. Competitive solicitation, no cost and pricing, it's up to us to bid what we want, giving us -- keeping in mind we have to win. Edward Woo: That sounds good. And then my last question is on overall for Puerto Rico. The revenue number of about $75 million is about the same, has your cost or overall profitability on that project is expected to remain the same as well? Richard Danforth: Yes. Operator: The next question is from Stephen Wagner, Integrity Wealth Advisors. Stephen Wagner: Richard and Cassandra, good job. Good to see a lot of the very positive wording in the press release. It's music to our ears to see the profitability in the fourth quarter and particularly some of the positive comments on the debt service. My first question is regarding the debt service. And that is what expectations do investors have that the debt will be greatly reduced or eliminated over the course of this fiscal year that we're in, '26? And then beyond that, the other question that I have is a frustration with the -- it feels like there's been a lack of accolades given Genasys in light of the enormous amount of life that was saved in the historic and devastating L.A. fires. To have 31 people die is -- was a massive win for humanity. And yet it seems like all we've had to endure is negativity. Is there any -- is there any [ impetus? ] Is there any program on the part of the company to highlight how and why Genasys is able to save the lives that they did in L.A.? And a quick follow-on to that is what kind of outreach have you guys had in light of all of this? Because I'm sure other states, municipalities, fire departments, et cetera, counties, they know how well your software performed, and I'm sure they want it. So I'll stop there. Richard Danforth: All right. Well, I may not remember every question, but let me address the last one first. There was a lot of bad press put out regarding the L.A. fires across the board, negative press on Genasys, negative press on the county itself. The negative press on Genasys was walked back. There was third-party independent reviews of what happened out there. And they came to the same conclusion, Steve, that you just brought up. And the people that use the software, the people that are in that industry know quite well how well it performed. And it is leading to not only additional business to existing customers, but to new customers as well. And what was the first question you asked, Steve? Stephen Wagner: The first question was regarding the debt service... Richard Danforth: The debt. Cassandra said, we expect cash flow receipts and disbursements to support paying off the entire debt on time. Is there another question? Operator: And everyone, that does conclude our question-and-answer session. That also concludes our conference for today. We would like to thank you all for your participation. You may now disconnect.

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LAKE 2026 Q3 财报电话会议

Operator: Good day, and welcome to the Lakeland Fire and Safety Third Quarter 202 Financial Results Conference Call. [Operator Instructions] During today's call, we may make statements relating to our goals and objectives for future operations, financial and business trends, business prospects and management expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management expectations based upon currently available information and are not guarantees of the future performance and involve certain risks and uncertainties that are more fully described in our SEC filings. Our actual results, performance or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with the U.S. GAAP, including adjusted EBITDA, excluding FX and adjusted EBITDA, excluding FX margin, organic sales, adjusted gross profit, adjusted organic gross margin and adjusted operating expenses. A reconciliation of each of the non-GAAP measures discussed in this call to the most directly comparable GAAP measure is presented in our earnings release and/or supplemental slides filed with our earnings release. A press release detailing these results was issued this afternoon and is available in the Investor Relations section of the company website, ir@lakeland.com. At this time, I would like to introduce you to our host for this call, Lakeland Fire in Safety's President, Chief Executive Officer and Executive Chairman; Jim Jenkins; Vice President, Finance, Calven Swinea; Chief Revenue Officer, Barry Phillips; and Chief Commercial Officer, Cameron Stokes. Mr. Jenkins, the floor is yours. James Jenkins: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss the results of our fiscal 2026 3rd quarter ended October 31, 2025. We continued revenue momentum in the third quarter of 2026 despite a challenging tariff and macroeconomic environment as we focused on recent acquisition synergies, increasing our market share within the fragmented $2 billion fire protection sector in the largest global markets and growing our industrial products business. Calven will go over the financials in more detail shortly, so I'll provide you with a brief overview. We achieved net sales of $47.6 million, representing a 4% year-over-year increase, driven by a 31% increase in fire services products. In the U.S., our sales increased 25% year-over-year to $15.2 million. We continue to anticipate growth in our fire services, both organically and through our acquisitions, as well as in our industrial segments in the months and years ahead. Adjusted EBITDA, excluding FX, was $200,000, a decrease of $4.5 million were 95% compared with $4.7 million for the comparable year ago period. Sequentially, our adjusted EBITDA decreased $4.8 million or 96%. Adjusted gross profit as a percentage of net sales in the third quarter was 31.3% versus 41.7% in the comparable year ago period and decreased 612 basis points sequentially from 37.4% in the second quarter. Our adjusted gross margin percentage decreased in the second quarter of fiscal 2026 compared to the same period last year, primarily due to lower acquired company gross margins, increased material and freight costs and tariffs. Margins in the acquired businesses were impacted by increased material costs. This shortfall is meaningful, and it's important to emphasize that the EBITDA impact this quarter was driven by both revenue and gross margin shortfalls. The 2 are inseparable. The revenue misses directly reduced gross profit dollars, removing the operating leverage we depend on to convert volume into earnings. Even if margins had held the lower revenue base would have pressured EBITDA. Conversely, the margin compression amplified the effect. EBITDA underperformance reflects the combined impact of lower volume and reduced margin per dollar of revenue, not margin deterioration alone. SG&A remained disciplined and broadly in line with expectations. The quarter broke on revenue and gross profit dollars, not on expense growth. Several factors contributed to the margin compression. Freight in and tariffs ran above forecast. Through throughput and mix in efficiencies affected COGS, labor and our mix shifted from higher-margin categories. Moving on, the strategic acquisitions of California PPE and Arizona PPE expanded our global fire footprint into the U.S. personal protective equipment, decontamination, repair and rental markets and added approximately $5 million of annual recurring revenue. Arizona PPE is the leading UL-certified independent service provider for performing advanced decontamination, inspection and repairs on fire finance for the Arizona market. California PPE is a leading and rapidly expanding UL-certified ISP in the California firefighting services market, one of the largest fire markets in the United States. From these 2 outstanding companies, we intend to continue growing the North American service segment of the global fire services market by leveraging the combined strengths and experience of Lakeland's LHD service offerings in Asia and Australia with the outstanding teams from Arizona PPE and California PPE to develop a strong North American platform. Lakeland LHD was awarded an approximately USD 5.6 million 3-year contract to provide advanced decontamination, managed care and maintenance services for the Hong Kong fire services departments, firefighter protective gear, one of the largest emergency response organizations in Asia. A contract running through 2028 covers advanced decontamination services as well as comprehensive care and maintenance of an estimated 14,500 firefighter ensembles each year. This award underscores our strong presence in the Asia Pacific market and reinforces the trust placed in our services by one of the region's most respected fire services organizations. Additionally, we completed a $6.1 million sale and partial leaseback of our Decatur, Alabama warehouse property to an unrelated party in connection with capital reallocation initiatives, resulting in a gain of $4.3 million, as well as strengthening the balance sheet and providing financial flexibility for future growth. The third quarter reflected the impact of tariff uncertainty, inflation effects and the associated mitigation strategies we have employed since the election. Beyond tariffs, we also faced raw material inflation and rising supply chain costs that also contributed to the impact on both revenue and gross margin. Revenue softness was visible across our portfolio in the U.S., Canada, Latin America and parts of EMEA. North America faced challenges with revenue down quarter-over-quarter, and Latin America came in below our plan due to macroeconomic conditions impacted by political uncertainty. Our acquired businesses also came in below our plan due to timing, certification delays and material flow issues rather than underlying demand. As we step back, it's important to acknowledge that this softness is not isolated to Lakeland, nearly all of our peers are reporting similar challenges: tariffs, freight, raw material inflation and rising supply chain costs. This is not an excuse, but it is the reality of the environment we are operating in, and it reinforces that the pressure on margins is broad-based, not to us. At the end of Q3, inventory was $87.9 million, down from $90.2 million at the end of Q2 fiscal year 2026. We have recently initiated a series of targeted actions to optimize inventory levels across our entire organization. Looking ahead, we are highly focused on the upcoming tender cycle, which will position us for stronger execution and building momentum heading into calendar year 2026. Renewed tender activity is expected to increase demand for fire services in the U.S. and internationally and contribute to improved performance at Eagle and LHD Germany. We have approximately $178 million of global tender opportunities, including $38 million over $100,000 in value with high probabilities of success. These opportunities are positioning us for expanded operating leverage with expense reductions and expanded margins as tenders deliver margins above normalized profile. We are now starting to see tender wins for calendar 2026 across our entire product portfolio. Taken together, this past quarter was unacceptable. We missed our targets across multiple areas. And as CEO, I take full responsibility for that performance. Our forecasting has not been reliable and the gap between our internal expectations and actual results has grown too large. Because of this, we will be withdrawing formal guidance. Instead, we are shifting to a more disciplined operating model focused on measurable execution, cash generation and transparency. To help lead us forward, we have also realigned our finance team with the appointment of Calven Swinea as interim CFO effective January 1. You'll be hearing from Calven in a moment. At the same time, it is important to recognize that this quarter occurred against a backdrop of unprecedented headwinds across virtually all of our global operations. These challenges affected not just Lakeland but our peers as well, many of whom have publicly acknowledged similar pressures. Despite this environment, our long-term fundamentals remain intact and our strategic condition has not changed. We remain extremely optimistic about the underlying demand signals we are seeing a robust and global fire tender pipeline. The necessary U.S. refinery shutdown cycle ahead. Our disciplined sales process and clear signs of pent-up demand across nearly every region. We expect these headwinds to begin to ease as we move into calendar year 2026, and we continue to believe strongly in the long-term potential of both our fire and industrial strategies. This is not about lowering ambition. It's about rebuilding trust results or projections. We will provide regular updates on key operational milestones, inventory reduction progress, margin improvements and ERP and integration time lines. When our forecasting accuracy, sales cadence and operational visibility improve to an acceptable standard, we will revisit reinstating guidance. For now, our full focus is on running the core business with rigor, improving forecast accuracy and delivering sustainable, predictable performance. With that, I'd like to pass the call to Barry to provide an update on fire services. Barry Phillips: Thank you, Jim. Looking at our fire services. Revenue underperformed primarily because certification cycles and tender time lines extended longer than anticipated across multiple regions. These are timing delays rather than structural demand issues. The opportunities remain in the pipeline, the majority have not been lost. They've simply shifted later than expected. We continue to believe that we have a high probability of success in securing $38 million of these opportunities within our total pipeline of $178 million. Our tender activity remains strong globally, Current delays reflect regulatory timing and administrative bottlenecks. And as Jim mentioned, competitors have cited similar headwinds. The underlying demand environment for fire services and protected gear remains intact. We remain highly confident in our major tenders currently in the late stages. Feedback from end users and procurement teams remain positive. Delays have been driven by certification cycles and administrative timing not competitive losses, and our confidence remains high. Though we are not assigning timing commitments to these opportunities, except to say majority of the $38 million of opportunities we believe will hit in FY '27. Fire service margins remain structurally sound. The temporary compression came from the volume timing and low absorption during the delays. As volume normalizes and tenders convert margins are expected to recover without requiring broad pricing actions. For our sales team, the priority is to build a dependable base of monthly sales that is not dependent on large tenders or seasonal cycles. This means expanding distributor engagement tightening forecast accuracy, strengthening bid coverage across brands and accelerating new product commercialization. Our global fire strategy remains intact heading into next fiscal year. The product portfolio is broader and stronger at any time in the company's history. The Jolly NFPA launch is progressing, LHD Europe is stabilizing and we're positioning the entire fire platform across the upcoming global cycle. I'll now pass the call to Cameron to cover our industrial and chemical critical environment sectors. Cameron Stokes: Thanks, Barry. During the third quarter, industrial demand softened across several industrial channels faster than expected. Distributors reduced inventory, certain customers deferred purchases and competitive pricing tightened in pockets of the market. Our forecasting did not capture these shifts quickly enough, creating the variance between expected and actual performance. We are seeing cyclical adjustments in certain channels, not long-term erosion. Several customer segments and geographies show stabilization signals and we expect run rate predictability to improve as customer inventories normalize. In response, forecasting has been unified into a consistent process across all industrial regions with more rigorous mid-month accuracy checks and tighter reconciliation with distributor data. We've shifted to channel-level segmentation, so forecasting reflects real behavior inside customer groups rather than broad regional assumptions. Looking to our competitors, share movement has been limited and localized. Pricing pressure has increased in spots where certain competitors have short-term tariffs or sourcing advantages. We are addressing this with selective incentives aimed at volume stability while managing overall margin discipline. Our sales strategy requires rebuilding distributor run rates reengaging customers who deferred purchases, tightening CRM and channel discipline and stabilizing the chemical and critical environment segment. These actions create a predictable foundation of volume. When delayed tenders, certifications and turnaround activity return, that volume becomes upside that drops directly to operating leverage. The goal is stable, predictable growth driven by improved forecasting accuracy, stronger distributor engagement, recovery and delayed chemical and critical environment orders, disciplined channel management. We are focused on building consistency rather than volatility. With that, I'd like to pass the call to Calven to cover our financial results. J. Calven Swinea: Thank you, Cameron, and hello, everyone. I'll provide a quick overview of our fiscal 2026 3rd quarter financials before diving into the details. Revenue for the quarter grew $1.8 million year-over-year to $47.6 million, an increase of 4% compared to the third quarter of fiscal 2025. Consolidated gross margin decreased to 29.7% from 40.6% for the third quarter of fiscal 2025 and while our adjusted gross margin decreased to 31.3% as compared to 41.7% in the year-ago period. Adjusted operating expenses increased by $0.4 million from $14.3 million in Q3 of last year to $14.7 million in the third quarter of fiscal 2026 primarily due to inorganic growth. Net loss was $16 million or $1.64 per basic and diluted earnings per share for the third quarter of fiscal 2016 and compared to net income of $100,000 or $0.01 per basic and diluted earnings per share for the third quarter of fiscal 2025. Adjusted EBITDA, excluding FX, was $0.2 million for the quarter, a decrease of $4.5 million or 95% compared with $4.7 million for the third quarter of fiscal year 2025. Adjusted EBITDA, excluding FX margin in the third quarter of fiscal 2026 was 5.5%, a decrease of 988 basis points from 10.3% and in the third quarter of fiscal 2025 and a decrease of 918 basis points from 9.6% in the second quarter of fiscal 2026. Cash and cash equivalents were $17.2 million on October 31, 2025 compared to $17.5 million on January 31, 2025. On a consolidated basis, for the third quarter of fiscal 2026, domestic sales were $19.2 million representing 40% of total revenues, and international sales were $28.4 million, accounting for 60% of total revenues as our recent Veridian acquisition contributed to increased U.S. revenue. This compares with domestic sales of $15.4 million or 34% of the total and international sales of $30.4 million or 66% in the third quarter of fiscal 2025. Looking at our third quarter of fiscal 2026, our quarterly revenue faced challenges globally. Sales from recent acquisitions accounted for $10.1 million, while organic sales were $37.5 million. Sales of the fire services product line increased by $6 million year-over-year, driven by $3.4 million in sales from Veridian as well as organic fire services growth of $3 million. Adjusted gross profit for the third quarter of fiscal 2026 was $14.9 million, a decrease of $4.2 million or 22% compared to $19.1 million for the third quarter of fiscal 2025 due to lower sales, higher product costs and tariffs and impacted U.S. gross profit by $3.2 million versus Q2. Adjusted gross profit as a percentage of net sales decreased to 31.3% and the third quarter of fiscal 2026 from 41.7% for the third quarter of fiscal 2025. On an adjusted basis, operating expenses, excluding foreign exchange, were $14.7 million in the fiscal third quarter, more accurately showcasing the decreases in both our organic and inorganic segments resulting from the new cost reduction initiatives. On a sequential basis, adjusted operating expenses were stable and increasing by $1 million or 1% due to focused cost control measures and the previously mentioned initiatives. Adjusted EBITDA, excluding FX, was $200,000 for the fiscal third quarter, a decrease of $4.5 million or 95% compared with $4.7 million for the third quarter of fiscal 2025 and a decrease of $4.8 million or 98% compared with $5.1 million for the second quarter of fiscal 2026. The significant decrease was a result of lower performance in North and South America. Adjusted EBITDA FX margin was 0.5% for the most recent quarter, a decrease of 988 basis points from 10.3% in the third quarter of fiscal 2025 and a decrease of 918 basis points from 9.6% in the second quarter of fiscal 2026. Revenue for the trailing 12 months ended October 31, 2025 was $193.5 million, an increase of $41.7 million or 27% and versus the Q3 fiscal 2025 trailing 12 months revenue of $151.8 million with our recent fire service acquisition supporting Lakeland's continued revenue growth. Trailing 12 months adjusted EBITDA, excluding the impact of FX, was $9.3 million compared to $11.7 million for the prior quarter's trailing 12 months. The decrease was driven by lower margin revenue mix increased material and freight costs and tariffs. Considering we completed 4 acquisitions in the past 12 months, the full integration and implementation, which requires some time, we believe the resulting synergies and efficiencies will begin to translate into stronger financial performance in the coming quarters. Adjusted gross margin percentage decreased in the third quarter of fiscal 2026 to 31.3% compared to 41.7% in the same period last year due to lower acquired company gross margins. increased material supply chain costs and tariffs. Margins in the acquired businesses were impacted by increased material costs. Adjusted EBITDA, excluding FX, was $0.2 million for the fiscal third quarter a decrease of $4.5 million or 95% compared with $4.7 million in the third quarter of fiscal 2025. The decline was driven primarily by significant revenue shortfalls in Latin America, our highest margin region and lower-than-expected sales in the U.S. fire and industrials. Veridian, LHD and Eagle were also impacted by NFPA certification delays and slower tender conversion globally. These factors more than offset the reductions achieved in operating expenses. We are currently implementing an additional $1.3 million of cost reductions for the fourth quarter. Reviewing our performance for the third quarter, our most recent acquisition of Veridian contributed $3.4 million in revenue during the quarter, and LHD added $6 million across 3 subsidiaries, Germany, Australia and Hong Kong. We expect sales from our fire services to accelerate as we fulfill open orders, capitalize on cross-selling opportunities and execute on our sales and tender pipeline. Looking at our organic business. Our U.S. revenue decreased 3% to $15 million from $15.4 million, driven by declines in our industrial business due to tariff uncertainty. Our European revenue, including Eagle Jolly and our recently acquired LHD business, increased 6% to $15.2 million. We continue to see very good sales opportunities in Europe and are committed to its growth trajectory. Our Latin American operations experienced a $0.8 million decrease in sales from $5 million in the year ago period to $4.2 million in the current quarter, primarily due to ongoing delayed purchase decisions resulting from political uncertainty. In Asia, sales decreased 19% year-over-year from $3.6 million to $2.9 million. Regarding product mix for fiscal year-to-date 2026, our fire services businesses grew to 49% of revenues versus 39% for fiscal year 2025 driven by a full 9 months of region sales and organic gains in the U.S. For our industrial product line, disposables accounted for 26% of the year-to-date revenue, while chemicals accounted for 11%. The remainder of our industrial products, including high performance and high vis accounted for 14% of sales. Now turning to the balance sheet. Lakeland ended the quarter with cash and cash equivalents of approximately $17 million and long-term debt of $37.1 million. This compares to $17.5 million in cash and $16.4 million in long-term debt as of January 31, 2025. As of October 31, 2025, our long-term debt of $37.1 million included borrowings of $33.2 million outstanding under the revolving credit facility with an additional $6.8 million of available credit under the loan agreement. We were in compliance with all our credit facility covenants. In August, we sold our Decatur, Alabama property for $6.1 million less customary commissions and closing fees and applied 100% of the net proceeds to repay our revolving credit facility. Net cash used in operating activities was $17.6 million in the 9 months ended October 31, 2025 compared to $12.5 million in the 9 months ended October 31, 2024. The increase was driven by a decline in profitability previously discussed, ERP implementation costs and an increase in working capital of $7.9 million. Capital expenditures totaled $0.8 million for the 9 months ended October 31, 2025, primarily related to replacement equipment for our manufacturing sites and develop technology projects. We anticipate FY '26 capital expenditures to be approximately $1.2 million. Lastly, given near-term headwinds and in order to prudently manage our cash, the company has made the decision to suspend its quarterly cash dividend on our common stock. We believe reinvesting profits into growth opportunities such as acquisitions, our market expansion is a better return for shareholders in the future. The payment of any future dividends will be at the discretion of the Board and will depend on the company's financial conditions, results of operations, capital requirements and any other factors deemed relevant by the Board. At the end of Q3, inventory was $87.9 million, down from $90.2 million at the end of Q2 fiscal year 2026. We have recently initiated a series of targeted actions to optimize inventory levels across specific categories. Our immediate priorities include U.S. industrial, Jolly, LHD and Veridian, where we see the greatest opportunity to align balances with demand and improve efficiency. Inventory of acquired companies totaled $14.3 million versus $7 million last year. $6 million of the acquired companies increase came from the Veridian acquisition and LHD's inventory increased by $1.3 million versus last year. Year-over-year, we saw an increase in our organic inventory of $7.9 million versus the quarter ended October 31, 2024. Organic finished goods were $38.8 million in the third quarter of fiscal 2016, up $5.6 million year-over-year and down $0.5 million quarter-over-quarter. Organic raw materials were $33 million in the third quarter of fiscal 2026, up $2.1 million year-over-year and down $0.4 million quarter-over-quarter. With that overview, I'd like to turn the call back over to Jim before we begin taking questions. James Jenkins: Thank you, Calven. In conclusion, we continue to demonstrate net sales growth, reflecting the strength of our underlying business. This growth is further supported by a 31% year-over-year increase in our fire services. Our robust pipeline of approximately $178 million, includes approximately $38 million in near-term high-probability opportunities, providing momentum heading into fiscal year '27. We are now starting to see tender wins for calendar Q1 2026 across the entire product portfolio. These opportunities are positioning us for expanded operating leverage with expense reductions and expanded margins as tenders deliver margins above normalized profile. Our near-term strategy is focused on navigating the continued challenges from the evolving macro environment while expanding top line revenue in our fire services and industrial verticals. By maintaining a focus on operating and manufacturing efficiencies, we believe we are well positioned to deliver higher margins and improve free cash flow all against the backdrop of ongoing macro uncertainties. Looking long term, our strategy remains to grow both our fire services and industrial PPE verticals through our strategically located company-owned capital-light model. By maintaining a focus on operating and manufacturing efficiencies, we believe we are positioned to grow faster than the markets we serve. Our acquisition pipeline also remains robust with active discussions underway in line with our overall growth strategy. Although challenges have affected our forecasting ability and we have withdrawn our formal guidance, we expect top line revenue growth in the high single-digit revenue growth across global operations over the next 3 quarters. We are targeting 10% to 12% adjusted EBITDA margins with incremental growth in EBITDA margins over the next 3 quarters. Looking further ahead, we expect 15% to 17% adjusted EBITDA margins over the next 3 years through cost discipline operational consolidation and targeted commercial investments. As we look forward to the future, we are confident that our continued focus on targeted acquisitions will serve as key growth drivers over the next 3 to 4 years. We are actively engaging in discussions aligned with our decontamination rental and services growth strategy. We look forward to sharing upcoming milestones in the weeks and months ahead. With that, we will now open the call for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Gerry Sweeney with ROTH Capital Partners. Gerard Sweeney: I wanted to talk about the fire service tenders, $38 million high probability. What makes you think they're high probability? And then the follow-on of that was would be that $178 million total, is there an opportunity for that to expand further, especially with some of the NFPA determinations coming out in the next couple -- hopefully, in the next month or 2? James Jenkins: Yes, Gerry. So Yes. So I'm going to -- I'm glad Barry is here. It's one of the reasons why I wanted to have Barry and Cameron here was to talk about some of these opportunities. And Barry, I'll let you sort of answer that because I know there's a number of buckets that those fall into those high probabilities. Barry Phillips: Yes. Thanks, Jim. There are places there's 4 buckets to position ourselves in a high probability position is, are we the incumbent, so do we already have the business with that core relationship with that end department. Next would be is the competitor that's incumbent struggling in some manner. Additionally, we are also looking at where we can come in with multiple brand strategy. And with some of our portfolio that we have overlaps in year, for example, we can have more bids involved in the process. And lastly, if we're positioned well with the department and we're written into the specifications. James Jenkins: So Gerry, that $38 million is where all of those sort of 4 buckets fall for us. So that's why we view them as high probabilities. And then that $178 million, look, we had all the high probabilities, and we'll win some of the others in $178 million. But I think if you talk to any of our competitors, they'll say the same thing. Once these certifications and standards are adopted, sort of the floodgates should open over a period of time. And again, I think what we're trying to caution is it's not going to -- it's going to happen, and it's going to happen during fiscal '27, but it's going to happen over a period of time during that fiscal year. I look at certifications and standards and they appear over a very long period of time, there's a 10-year sort of window for these standards. And kind of like the cicadas, they show up every 17 years, these standards kind of show up. And when they do, there's a bit of a loggerhead here that kind of gets kind of slows it down on the decision-making front. I talked about this in prior calls about the '25 year automobile model versus the '26 and waiting. And this is exactly what's happened I think in the tender cycle that we're seeing is that these tenders, particularly in the U.S. and in areas where NFPA is becoming more rapidly accepted, those tenders have slowed. And so we'll see those pick up as soon as those standards are issued. But recently, we believe the standards were going to come into play in March '25. They were then extended to September of '25 and ultimately extend it to March of '26. We have no reason to believe. And in fact, what we're hearing is that, that will be the date, the '26 should be to date, March '26 should be the date. So that's why we're feeling very bullish about where we're driving our fire opportunities. Gerard Sweeney: Got it. And then on the margin front, if I heard you correctly, Obviously, there's a lot more costs, tariffs, raw materials, logistics, et cetera. But it sounded also -- that sounds as though you could recover those costs to just higher absorption or higher production levels and absorbing some of the overhead? Did I hear that correctly? Or could you walk through that? James Jenkins: That is correct. It's a function of getting ourselves at full capacity at a certain dollar amount where that operating leverage kicks in. So that's a critical component to it. The other is while you're waiting for tenders you're selling goods and gloves and boots and frankly, lower margin products to your captive customers who have those needs, and occasionally replacing turnout gear, but it's not 500 suits or 1,000 suits, it's 50. Cameron Stokes: So yes, it's actually a reflection of product mix. So typically, we'd be having a high range or more than 2/3 of our fire sales would be in custom-made turnout gear and the remainder being the commodity products, now we're in the higher range in the commodities while we're waiting for the turnout of your business to come back into -- with the new standard. James Jenkins: You kind of couple that in a perfect storm with what's transpired in Latin America, where we've had a significant reliance on Argentina, whether that was true or not, it was just the case. And you dropped that high margin and you dropped the high margin, you see some softness in the high-margin areas in Canada, and that generates sort of a perfect storm when you've got the industrials that have a geopolitical component and then we have a tender delay. I'm not suggesting those are excuses. Those are just -- we need to work our way around those excuses or those issues, and we are. And we're driving similar opportunities in industrial, and I can certainly have Cameron address that. Gerard Sweeney: Got you. One more question. Obviously, multiple international acquisitions, global footprint. How important is getting the ERP system up and running to really give you visibility on those mechanics? James Jenkins: The ERP system, so there's a couple of places internationally where the ERP -- the systems you have are pretty solid. China has got a good system for Asia. We've got a nice system in Argentina for Latin America. And so those are -- we look at those as lower priorities. Veridian has a very solid ERP system as well. So the prioritization of this right now is North America, which we're driving towards a June, July rollout for our SAP implementation. And then the next phases are, frankly, to look at some of the acquisitions and folding some of those in. And then it's Vietnam and some other areas. So it's going to take a prolonged period of time but getting the first step in place, which is North America, which is the sort of the brains of the organization, so to speak, the rest of the world is sort of the heart, having the brands of the organization with a solid system in place is going to service us mightily. Would you agree, Cameron? Cameron Stokes: Yes. Yes. Operator: And our next question comes from the line of Mark Smith with Lake Street Capital. Mark Smith: I just wanted to ask about kind of certification delays. Can you give us an update on anything that changed on that since the end of the quarter? James Jenkins: Yes. So the certification -- the delays in certification, we knew that, that certification was coming in March of '26. We also know that all of our products are in the queue for certification with all of our competitors. And I don't believe there's any exceptions at this point, Barry. So I'll ask you -- I mean, to the extent that we don't expect any further delays on that front. Barry Phillips: The one thing that is different in this cycle amongst my crew in this space. So this is actually the combination of 4 standards that were brought together as opposed to having a specific certification standard for firefighting gear. It now was grouped together where it includes firefighting gear, it includes SCA, PASS or Personal Alert Safety Systems as well as tactical peril, all under one standard. So that's forced now all the manufacturers to hustle in and go to the same sort of in agencies to address all these products that now need to be recertified. So there's quite a backlog at the certification agencies, which has been causing some of this delay for all of us. Mark Smith: Okay. And then if you think about kind of mitigate and offer to improve gross profit margin, can you just talk about headwinds and this one maybe you expect to normalize? James Jenkins: Look, I think on the headwind front, sort of the tariffs, I mean, you've got we got to see with the tariffs. We're addressing that as best we can with sort of programs with our suppliers, we're simplifying the product line and sort of shifting production towards the higher-margin categories as those certifications come online, which is a certification component. And the idea here obviously is to do that do an SKU rationalization, which we're in the middle of. We're rationalizing -- I mean we've got in on the past from a legacy perspective. We've had thousands of SKUs that Helena and her team are rationalizing now down to a much more manageable number. And of course, we've got the targeted inventory reductions and we're about 1/3 of the way there towards year-end of about $6 million, and we're hopeful we can get a little bit north of that. So go ahead, Barry. Barry Phillips: Yes. Additionally, we are bringing third-party manufactured products into our own factories, in particular, with our turnover production. Mark Smith: Okay. And then lastly for me, thinking about tariffs, pipeline cost, raw material cost, can you just talk about pricing opportunities? James Jenkins: Are you talking about pricing increases? Mark Smith: Yes. James Jenkins: Okay. So yes, so we have our annual pricing increases that have been -- are being communicated in fire and in industrial. We've got a different -- obviously, there are different businesses. So we're addressing them differently. It's not going to be a one-size-fits-all. We have pivoted a little bit in the tariff range because we have seen competitive pressures on pricing in that regard. We still are sitting on a significant amount of inventory in the CE space, the critical environment space that we're looking to move on that is not is not tariff driven because we've got it in the states now. So we are increasing cases. We're not going to do them across the board. We're going to do them strategically. We've done it in fire, and we're doing it in industrial, and those are driving some additional decisions. Cameron's got an inventory reduction program that he can certainly speak to that is driving decisions because our year-end is February 1, and a lot of our channel partners have new budgets starting January 1. So we're introducing some programs here to help drive some inventory towards the end of this fiscal year. with customers that beginning January 1, we'll have new money to utilize for that. Operator: And our next question comes from the line of Mike Shlisky with DA Davidson. Michael Shlisky: Just to start with, I want to maybe ask for a quick NFPA 101 here. As far as I could tell, you're paying member or paying a paying customer of this organization, people on the board on the committee that approve all these products. And now their action or their lack of action is now causing your business to struggle and other parts of the industry as well. I get that they need time to make sure that firefighter safety is obviously the most important priority. But do you know what they're doing at the NFPA to increase their approval throughput. It just seems like at this point, they're now affecting business activity among their members, and that sounds like a real issue. Barry Phillips: NFPA is a standard writing body. They are not the certification agencies that certify the product. And the NFPA standard writing process, it involves a combination of end users, manufacturers and third-party experts that build up that committee and build up and write the standards that then go through the process and are reviewed on a 5-year cycle. So once the standard is written peer reviewed and approved and in process, then becomes the timing of -- from a manufacturing perspective is building to that standard, submitting to that standard of third-party agency and then basically waiting for the third-party agency to commit the approval or provide whatever actions well, generally UL has now all of our competitors and our products sitting there and they've got limited resources. Michael Shlisky: Okay. So now let's go the next question. They're a public company at this point. And their lack of action is now causing your business to suffer. So have you heard anything from those folks about how fast they're going to increased the throughput of approvals? James Jenkins: They are working with the resources that they have available to them and working through the process. We have -- there are options to go to other certification agencies and we use different certification agencies around the world, but we find the same level of performance to wrap. We are committed to push through as rapidly as possible and we'll continue to do so. It is a third-party agency and it's outside of our control. Michael Shlisky: Okay. Maybe last one on this topic. Who's paying the bill the NPA or Lakeland for the UL and other agency testing? James Jenkins: Each manufacturer pays for their certification activities. Michael Shlisky: Okay. SP1 Thank you for all the information. Moving on, on the Hong Kong deal in Malaysia, do you think those are going to provide an is margin benefit given the size and the footprint you have there? Should we expect to see some really good margins I guess, starting in fiscal '27 from those 2 contracts? James Jenkins: Yes. The Malaysia contract, certainly, that's a high-margin opportunity, long-term opportunity for us. Hong Kong continues to generate really decent margins for us. The tragedy that occurred in Hong Kong, exactly when you operate a business like this, strategies end up generating, frankly, opportunities. And in Hong Kong, our team set hours and hours and hours over time, helping that Hong Kong team as they thought those fires in those 4 buildings and people lost their lives. They're going to need a lot of -- they're going to need a lot of new turnout gear as a result of that. And we've been on the phone periodically with our friends in Hong Kong driving that business. and they're suggesting to us that we'll see a bump in business there probably in the first quarter of fiscal '27. Michael Shlisky: Okay. Great. Sounds good. And then I guess, given this data, there's some -- quite a few contracts in the pipeline on the fire side. But given the status of -- you mentioned there are some customers or some competitors that were struggling, are you concerned at all in the pricing environment for what's being bid on today and some of the other folks out there might get a little bit of rationale if they're in a bit of a pickle financially? James Jenkins: Well, struggling can be at various different batches. Sometimes it's struggling just to perform and support and provide the equipment in a timely manner. One of the things the standard is also providing is there are requirements -- varied requirements in the fabrics that are being used in the products. So it's changing the buildup of those products, which is going to change the price point actually at a higher level in the marketplace because of the needs to incorporate the more advanced fabrics into the year. Operator: Thank you. And with that, there are no further questions, I'd like to turn the call back over to Mr. Jenkins for closing remarks. James Jenkins: Thank you, operator. Thank you all for joining us for today's call, and thank you to our customers and distributor partners worldwide for trusting us with your lives and safety. Lakeland continues to be well positioned for long-term growth. If we were unable to answer any of your questions today, please reach out to our IR firm, MZ Group, who will be more than happy to assist. Operator: Thank you. And with that, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful day.

58天前Insight Analytics约5分钟阅读

MEDCL.PA 2026 Q2 财报电话会议

David Heuzé: Hi, everyone, and thank you for joining us today for this conference following the release of our half-year results, which were published earlier today. The press release is available on our website. Today, I'm joined by Christophe Douat, our CEO. Hi, Christophe. Christophe Douat: Hi, David. David Heuzé: Dr. Richard Malamut, our CMO. Hi, Richard. Richard Malamut: Hi, David. David Heuzé: And by Stephane Postic, our CFO. Hi, Stephane. Stephane Postic: Hi, David. Hi, everyone. David Heuzé: Before we start, I invite you to review the forward-looking statements disclaimer at the beginning of the presentation available on our website. This webcast will last 45 minutes max. We'll start with a presentation and a Q&A session if we receive questions. [Operator Instructions] But now I leave the floor to you, Christophe. Christophe Douat: Thank you, David. Hello, everybody. We are delighted to have you join us and celebrate the filing of Olanzapine LAI. It's a major event for the company. So lots of emotions and excitation at MedinCell today. Last June, I told you that MedinCell was entering the most transformative years of its history, mostly thanks to Olanzapine. And here we are. Our partner, Teva, filed the Olanzapine LAI at the FDA today. And so the clock will start clicking since FDA has 10 months to get back to Teva with a potential approval sometime in Q4 of '26 for a product that is a major product, a priority at our partner and of course, a priority at MedinCell. So let me remind you of our strategy shift to growth. You can see that UZEDY, and we'll come back to UZEDY in a second, is the first engine of growth of MedinCell. Olanzapine will accelerate growth. And then the third engine is made out of the pipeline, with AbbVie #1 leading the way. Let's step back a bit and look at our strategy in schizophrenia. On the left, you have Risperidone. On the right, Olanzapine. Risperidone was a drug of Johnson & Johnson; Olanzapine, Eli Lilly. Both were significant blockbusters for both companies, respectively. Both companies follow the same strategy, life cycle management with long-acting injectables. You can see on the left that Johnson & Johnson was highly successful, building a franchise, which is now $4.8 billion a year. But you can see on the right that there is no big green box. Eli Lilly failed commercially with the long-acting injectable. Richard will tell us why in a couple of minutes. And we, at MedinCell, gave our partner, Teva, the keys to grab some of that potential, a real, appropriate long-acting injectable of Olanzapine. Let me remind you of the metrics that we have on both products. We are eligible to mid- to high single-digit royalties, eligible for a $4 million milestone at approval of Olanzapine LAI, plus $105 million of commercial milestones for UZEDY and $105 million for Olanzapine LAI. Richard, could you tell us why Olanzapine, on a medical standpoint, has such a large potential, why Eli Lilly failed and why Tiny MedinCell in the south of France succeeded? Richard Malamut: I could do all of that, Christophe, and I will. So first, a reminder that oral Olanzapine is the most prescribed oral antipsychotic, and that's mostly because it's currently used for the more severe patients with schizophrenia, the patients who are refractory, which can be up to 30% of patients. But unlike the Risperidone franchise, there is only one approved product in -- one approved long-acting injectable olanzapine product, and it's not being used for reasons that we'll talk about. So the unmet need is very, very high here to have something in a long-acting injectable form to improve compliance for patients who are exactly the patient you don't wish to have stopped their medications. And so for these reasons, the unmet need is quite high. Now on the next slide, a reminder of the safety finding that has limited the use of the Lilly drug, and that's post-injection delirium and sedation syndrome, PDSS, not very common, seen in less than 0.1% of injections, but is severe enough that the FDA put rather onerous monitoring requirements on the label, including a REMS program, which U.S. psychiatrists are not used to following. And most impactful, every patient on every injection has to be monitored in the clinic for 3 hours. So that's not happening and is largely the reason why the product is not being used. Now PDSS is thought to be due to a burst of Olanzapine in the blood. And on the next slide, you can see how MedinCell formulated our LAI Olanzapine to eliminate that risk of burst and therefore, PDSS. And so what you can see here is that on the top, the Lilly product, when injected directly into human plasma almost completely releases within the first 24 hours. You can imagine that, that would correlate with a burst and then PDSS. But on the bottom, the MedinCell product, subcutaneous, where there are very few blood vessels, but even if injected directly in the human plasma, does not release right away, thereby eliminating the risk of PDSS. And our partner, Teva, did negotiate with the FDA the number of injections needed to fully explore the risk of PDSS. That number was 3,600. And as you can see, Teva has conducted more than 4,000 injections in the clinical program with no cases of PDSS. Here, zero is a really good number and bodes well for not meeting those onerous monitoring requirements that really limited the use of Lilly drug. So on the next slide, you can see the safety data for the Phase III study that Teva conducted in using LAI olanzapine. This was released in September of this year. And the key point is that there were no cases of PDSS and no unexpected or surprising adverse events and always comparable to the oral and LAI formulation of Olanzapine. So based on this, as you heard, the exciting news that Teva has filed the NDA today, we should expect a 10-month review time, bringing approval sometime in the fourth quarter of next year, with commercial launch before the end of 2026. and that's to be followed by submission in Europe, as Teva has already announced. Christophe Douat: So let's go back to our growth engines. And so we've discussed Olanzapine, and I think you can all understand now why it is such a strategic significant product. But let's go back to our Risperidone LAI, which is important both because it is bringing us revenue, but also it is a proof of concept of Teva's ability to get a product to market, which bodes well for olanzapine as well. So you can see that prescriptions keep growing and growing in a very nice regular fashion. This translates into sales. And you can see on the next slide that Teva confirmed their guidance of $190 million to $200 million for 2025, which is the second full commercial year. You can notice as well that Q3 had lower sales as Q2. Teva explained that this was a onetime adjustment of Medicaid gross to net. And now maybe, Richard, you could explain to us why UZEDY is doing so well and why it is such a great drug both for patients and clinicians? Richard Malamut: Yes, I'd be happy to do that. So a reminder that when we formulated UZEDY, long-acting injectable Risperidone, we were looking to address some of the challenges faced by patients, clinicians and even payers with the Johnson & Johnson portfolio of Risperidone and Paliperidone products. So first of all, UZEDY is subcutaneous, smaller needle, more comfortable for the patients; whereas the Johnson & Johnson products are intramuscular, more painful, larger needle. UZEDY reaches therapeutic levels within the first 24 hours after injection, making it easy to transition from oral risperidone; whereas the Johnson & Johnson products require either oral supplementation or titrating injections over several weeks before they reach therapeutic levels. UZEDY comes in prefilled syringes, 4 different doses on a monthly, 4 different doses on every other monthly, which correspond to the 4 used doses of Risperidone in schizophrenia, 2, 3, 4 and 5; whereas the Johnson & Johnson products are converted from -- converted to Paliperidone and require reconstitution in the office, which can be somewhat cumbersome for psychiatrists. And finally, Teva had asked U.S. psychiatrists, what one feature of a long-acting injectable product would they desire? And the #1 feature was flexibility to inject in different areas of the body. So in fact, UZEDY, whether it's injected in the arm, the abdomen or the thigh; has the same efficacy and safety, whereas the Johnson & Johnson product, intramuscular, so has variable exposure with different PK up to 30%. So for all these reasons, UZEDY has done very good and very quickly. So as you would expect, Teva has been collecting real-world data after the launch of UZEDY in May of 2023. Here, you can see on the left, a reaffirmation of the primary endpoint in the Phase III, which was relapse rate and time to relapse in that study compared to placebo. But here on the left, showing significant differences between UZEDY and a second-generation oral antipsychotic on relapse rate and time to relapse. But remember that in schizophrenia, 80% of those patients do not take their medicines. And when they don't take their medicines, they relapse and end up in the hospital. So part of the value here is to keep patients out of the hospital. And in fact, on the right side of the slide, you can see that there was an almost 50% reduction in hospitalization rate, a 50% reduction in time spent in hospital if they needed to be admitted and a correlation with a reduction in healthcare cost, which is of great interest to U.S. payers, of course. So on the next slide, we can see two additional pieces of news that Teva had announced this quarter. First of all, UZEDY has been approved for the treatment of bipolar I disorder in the United States. Bipolar I is much more common in the U.S. And while the adherence rate is better than the 80% nonadherence rate with schizophrenia, still 50% to 60% of those patients are noncompliant. And we know that over 300,000 U.S. patients are already taking a Risperidone product for their bipolar I. And the second bit of news is that Teva has announced approval of long-acting injectable Risperidone in South Korea and in Canada, more to come, but those are the 2 countries that Teva has announced. Christophe Douat: Thank you, Richard. Quite exciting on the UZEDY side as well. Just to give you some numbers, Teva estimates the cumulative peak sales of UZEDY and Olanzapine to be between $1.5 billion and $2 billion. MedinCell sales analysts are above $3 billion. Of course, it could be higher, future will tell. And we are looking forward to getting olanzapine out there as well. Now let's discuss the third engine. UZEDY was engine #1, Olanzapine engine #2. And the leading program of the third engine is the first program we do with AbbVie. There is some piece of news today as we are happy to announce that it will be ready to launch into Phase I in 2026. Very strategic program for both companies. Lead formulation was chosen in September '24. We did -- MedinCell did all pre-IND activities. AbbVie will conduct clinical development. And we are eligible to $315 million of potential milestones with royalties that now get into the low double digit. But beyond AbbVie, we have a pipeline of product, Richard, that maybe you could tell us about. Richard Malamut: Sure. So we've talked about the 2 programs on the right, the partnered programs with Teva in psychiatry. But we also have another late-stage program. This is an Intraarticular Celecoxib to treat pain and inflammation in patients who have had total knee replacement surgery. We've been discussing with the FDA this year design of our next Phase III study as well as endpoints, and we look forward to starting that study in the coming year. And then moving to the left, you can see 2 other programs that we run internally. The first one is a 6-month subcutaneous contraceptive. To differentiate from existing shorter-term subcutaneous contraceptives, it is funded by the Gates Foundation, and we do plan to start Phase I sometime in 2026. And then we also have another global health program to prevent the spread of malaria through the use of ivermectin, which kills mosquitoes and is effective in preventing the spread of malaria in endemic areas, particularly in children who are most vulnerable. And some news on that. We've just announced that, that program is also funded by the Gates Foundation. And then we have one more global health program we've recently disclosed, and that's a program in tuberculosis using a novel molecule, which in long-acting injectable form will improve the adherence in these patients who don't tend to take their pills as many months as they need to and reduce the risk of drug resistance. So we're very excited about that program as well. And then we also have 10 to 15 or so additional programs, undisclosed. They're early in development, so we typically don't disclose until a little later. But these are both internal programs as well as programs that are already partnered. They can be already approved, but can also be NCEs, where you need a long-acting formulation to enable use. And again, we're agnostic to therapeutic area and are developing these in more than 5 separate therapeutic areas. David Heuzé: Thank you, Richard. Let's talk about financials. Stephane Postic: Yes, certainly, with pleasure. So I'm going to comment the financials for the half year that was closed on September 30, '25. So first slide -- next slide, please. So the first slide is on the revenue growth over the period. So very nice improvement in the revenues for the period, an increase of 50% compared to the same half year for the past fiscal year. Three main items are contributing to the revenues. First, obviously, the UZEDY royalties, which accounts for approximately 1/3 of the EUR million. I'll come back to that more in detail in a minute. Then we have half of it coming from the R&D partnerships. So obviously, we mentioned earlier the AbbVie First program, and that represents a big part of these R&D partnerships. And on top of that, we mentioned with Rick, the Gates Foundation program or the malaria program that were performed on behalf of foundations. And the third item falling into these R&D partnerships are the 10 to 15 boxes that we saw on the pipeline. Some of them are proof-of-feasibility studies that we are running for undisclosed partners at the moment, but they might be the future of the licensing deal that we will execute over time. So they are very important as well. And third item in this revenue, a 2.5 million research tax credit that we are benefiting from. And again, it is another proof of the maturity of the pipeline and of the different programs, and it explains why this amount has increased largely compared to the previous year. Next slide, please. You are not on the right, you went too quickly. On the royalties from UZEDY, so as Christophe mentioned, UZEDY is doing very well. You've seen the prescription curve, which is progressing very well. Teva has confirmed their guidance for 2025 to $190 million to $2 million of sales, despite a slightly weaker Q3 '25 than expected, the sales have increased by 65% in USD compared to what they were in the same period last year. Once converted in euro, the increase is a bit lower than the 65%. It's only 50%, but it's still very good. And it is very nice to have those EUR 4.2 million on our P&L. On the next slide, you have the operating expenses of the company. So 22% increase compared to last year. So I remind you, 50% of increase in revenues, only 22% of increase for operating expenses. What's important is that 2/3 of the operating expenses relate to R&D activities. And again, it is a proof and evidence that the pipeline is progressing and that the programs in the pipeline are getting more and more mature. So it is good news for the future. And I remind you that also most of the R&D costs are covered by partnerships and revenues. It is the case for the AbbVie First program, also for the Gates Foundations program and again, for the proof-of-feasibility studies. On the next slide, you have a view on the income statement. So if you combine the 50% increase in income with the 22% increase in operating expenses, you end up with an improved operating loss by 13% to EUR 6.6 million over the half year. It is good. It could have been even better without this negative impact of the U.S. dollar -- the weak U.S. dollar over the period, which has impacted us badly. And this -- if this situation with a weak USD was to persist over time, it might delay our return to profitability, which we plan for fiscal year '26, '27, but we have time to see how this evolves. Another comment on the income statement regarding the financial results. So we have again a noncash impact due to the change in the fair value of the EIB warrants. This impact represents EUR 6.8 million for the period. It is linked to the fact that the stock MedinCell stock price has performed very well over the period, plus 65% increase. Again, on that topic, we are -- negotiations are progressing, but too slowly compared to what we were expecting with the EIB, and we are hoping to find a definitive agreement with them that will enable us to waive the put option that exists with the EIB. So without this noncash adjustment to the fair value of the warrants, the net loss would have been drastically reduced to 9 million. And finally, a word on the cash position. So at the end of September, we had EUR 53 million in bank. That's a bit lower to what we had at the end of March, where it was just after the capital raise that we performed at the end of February. So it was probably a peak in our cash position. That said, it is a comfortable cash position that is sufficient to respect all the covenants that we have towards our banks and especially the EIB, and it gives us sufficient visibility for the next 2 years, at least because we obviously will be getting additional royalties on a quarterly basis from UZEDY and hopefully from Olanzapine at the end of '26, plus potentially commercial milestones as well. That's it for me. David Heuzé: Thank you. Thank you, Stephane. And now let's move on to the Q&A session. First question for you, Christophe, maybe what does progress beyond 2026 look like, number of approved products, revenue scale or global partnerships? And how do you plan to maintain technological leadership as competitors [ enter the AI ] space potentially, including big pharma? Christophe Douat: Okay. So on the first question, the best educated guess can be done by looking at the pipeline beyond. So '26 should be approval of Olanzapine. And then you can see in the pipeline, you have CWM potentially WWM, which has commercial potential; AbbVie #1, and then the rest of the pipeline in formulation. As far as technology leadership, that's a very good question. And I will give a bit of context here. 10 years ago, Johnson & Johnson was probably doing about $1 billion in schizophrenia. That became $5 billion worldwide 10 years later. So every single company now in schizophrenia, bipolar want to do a long-acting injectable of their drug. And we believe that the number of indications with long-acting injectable will increase in the next 10 years. Some analysts believe that the global long-acting injectable market will go from about $15 billion today to 50, 5-0, in 10 years, and we want to be best positioned to do that. And so to do that, I predict that at the end of the day, half of our innovation will come from internal innovation, half from external. We already have people scouting the world for new technologies in either academic setting, small companies, and we probably do alliances at some point. We are also working hard at developing the new generations of people. And that is a very significant effort to keep maintaining our lead. We've shown that in our space, we are the best positioned company. We could do things that Johnson & Johnson could not do, we could do things that Eli Lilly could not do. We were the first company that could maybe meet the dream of Melinda Gates. And so we want to maintain that lead for sure, and we'll keep investing in technology. David Heuzé: Thank you, Christophe. Stephane, next question, what are the revenues linked to the joint venture with Corbion for H1? Stephane Postic: So for H1, they are fairly limited, less than 100,000. And that's because when you understand the business model of the JV, at the moment, the orders that the JV is receiving from their different partners is not linear because we are at the beginning of the commercialization. So there can be big orders, one half year and smaller ones on the next one. So over time, it will increase and become more stable. But for the moment, it's limited. David Heuzé: Okay. Next question also for you, Stephane. OpEx has gone up quite notably, largely due to R&D spend. How should we anticipate this to look for the full year and in outer years? Stephane Postic: So indeed, it has increased for the first half year. As I mentioned, it is the evidence that we are gaining credibility and enriching the company portfolio, more programs, more mature programs. So I would say that it's a good news if we are continuing investing in this R&D cost because it is the future of MedinCell and the future licensing deals that is there. David Heuzé: Okay. Next question. The press release that we issued today states that MedinCell has decided to accelerate certain activities related to technological innovation to further extend its capabilities in terms of formulation. Is this perhaps related to peptide or protein capabilities? Christophe Douat: Yes, but not only. There's three directions we could work on. First is highly hydrophobic molecules. Second is the dose because sometimes we are limited by the dose because you don't want to have a depot, which is too big subcu. And then the highly hydrophilic, yes. David Heuzé: Thank you, Christophe. Next question. Last winter, you indicated the first AbbVie program was targeting IND in 18, 24 months. Where we are on that clock today, formulation, CMC readiness? Can you share more about the timeline? When do you expect IND filing and clinical start? And what remaining getting [ attempts ] could push IND beyond mid-'26? Christophe Douat: I think we answered that question during the presentation. As we stated that, yes, we were expecting the start of clinical activities during 2026, which means that all other pre-IND activities, including CMC, are on track. David Heuzé: Thank you, Christophe. Next question. You frame the deal has up to 6 programs, so deal with AbbVie, okay? Have AbbVie and MedinCell already done selected a second and third candidate? And if so, what's the [ growth rate ] for CMC preclinical starts across '26, '27? And are the candidates adjacent category of therapeutic areas are differentiated? Christophe Douat: So as I said, I think, in our French presentation, I can't comment on the status of our discussion with AbbVie. And so I'll go back to the first product, which is on track to go into a clinical stage in '26. David Heuzé: Yes. We just can add that we stated when we announced the collaboration that it can be in different therapeutic areas. That's only what we can say today. Next question. The Board of Directors of MedinCell has been strengthened with additional appointments of prominent industry leaders. Do you see partnership arising from operations tied to these individuals potentially, including Intra-Cellular or Novartis? Christophe Douat: Obviously, we selected -- we select Board members for their competencies, experience, and the 2 new Board members have incredible experience and competencies. If they can help us, like other Board members, using their networks, we would love to use that capability. David Heuzé: Next question for you, Richard. Is it feasible for both mdc-STM and mdc-CWM to enter clinical development in 2026? Or are you prioritizing one of the programs? Richard Malamut: Yes. So we expect all our programs to succeed. And the timelines are based on the data accumulation on the programs. And so as of today, we're looking for the WWM to enter Phase I sometime towards the end of 2026. STM, we think maybe a little later. David Heuzé: Thank you, Richard. Next question, Stephane. Outside of the $4 million for the potential approval of olanzapine next year, are there any other milestones to anticipate for 2026? Stephane Postic: So I'm not sure I can disclose much on that, but we hope, indeed, to have more milestones in '26, '27. And you know that we are eligible to several types of development and commercial milestones from Teva on one side, also from AbbVie. So there are different sources of milestones that can be achieved in '26, '27, and it's -- there's a probability to it. David Heuzé: Next question and last question. You've indicated that you currently have multiple collaborations, deals ongoing. Could you please comment on the pace for future partnerships that might materialize and get announced in the next 5 years? Christophe Douat: Okay. So obviously, I can't comment on the current collaborations, but I can comment on what we are building here. And the image I will take is a string of pearls, pearls meaning blockbuster potential drugs. So we have UZEDY, then Olanzapine, AbbVie #1. And now all our focus and efforts are trying to work on the next pearls after those programs. David Heuzé: Thank you, Christophe, and thank you all for your questions. It was a very good discussion. Before we leave, Christophe, I... Christophe Douat: Thank you for being with us tonight and sharing this amazing news. You can see that it's quite emotional. We've been working on olanzapine LAI for over 10 years against all odds, our team here really knew we could solve it, and we did, but we also convinced Teva that we could. Teva has been a formidable partner on this, taking the product through clinicals. And here we are with a major, major first-in-class product that could be launched in about a year. So exciting news. As I said in our French meeting just earlier today, here, we will be drinking champagne tonight to celebrate this news. And we are looking forward to our next discussions and following all the progress. You see that even beyond Olanzapine, UZEDY is progressing well and the rest of the pipeline as well. And the three engines are really performing well. Thank you. David Heuzé: Thank you, guys. Thank you, everybody, for joining us today. We truly appreciate your trust and your interest in MedinCell and hope to see you soon. Thank you. Bye.

58天前Insight Analytics约5分钟阅读

PLAY 2025 Q3 财报电话会议

Operator: Good day, ladies and gentlemen, and welcome to the Dave & Buster's Q3 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Cory Hatton, Head of Entertainment Finance, Investor Relations and Treasurer. Cory Hatton: Thank you, Jamie, and welcome to everyone online. Joining me in the room on today's call are Tarun Lal, our Chief Executive Officer; and Darin Harper, our Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment, Inc. and is copyrighted. Before we begin the discussion on our company's third quarter 2025 results, I'd like to call your attention to the fact that in our prepared remarks and responses to questions, certain items may be discussed, which are not entirely based on historical fact. Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on these risks and uncertainties have been published in our filings with the SEC, which are available on our website. In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings release this afternoon. And with that, let me turn the call over to Tarun. Tarun Lal: Thank you, Cory. Good evening, everyone, and thank you for joining our call today. I'm pleased to report we are making substantive progress on our Back to Basics plan. We've been hard at working our marketing engine, strengthening our food and beverage offering, improving our operations, refreshing our games offering and revamping our remodels. This work bore fruits over the course of the third quarter as we saw sequential improvement in same-store sales each month with the final month of the quarter down only roughly 1%. We are also quite pleased with our Back to Basics new menu launch, which helped contribute to positive same-store sales for food and beverage during the quarter. We are laser-focused on executing our Back to Basics plan, strengthening our culture, elevating the guest experience and fully realizing the significant potential of our unique and iconic brand. After being here for about 5 months and fully immersing myself in the business, I am even more confident in our ability to dramatically improve operating results and drive meaningful value creation for our guests and our shareholders. I'll now provide an update on each of the pillars of Back to Basics, which, as I mentioned, is already driving measurable improvements across the business. First, we have reconstructed our marketing strategy with a clearer, more disciplined approach to planning and execution. We have created a simplified marketing and promo calendar, which effectively communicates the attractiveness of our offerings such as the Eat & Play combo, which highlights our offerings across both food and beverage and games. We continue to improve and optimize, leveraging data, our media mix and the flighting of our investment between television and digital. Organizational enhancements are empowering our marketing to function as a growth engine, driving both guest acquisition and sales performance. We have built out a comprehensive revenue management team, which, among other things, test games, promotions, creative, marketing messages and other strategic components well ahead of the major launches. This process ensures that we make data-driven decisions, which has led to smoother execution and strong results, which we expect to continue in the remainder of 2025 and beyond. Second, we have made significant progress implementing our new food and beverage offerings. As we have discussed previously, the percentage of people who came into our stores to play games and then also eat food was significantly lower than in the past, and it has been our goal to return that number to historical levels. Earlier this year, we made certain changes to the presentation of our existing menu, while in parallel testing a new menu, which included significantly more items and brought back numerous fan favorites. As previously discussed, the new menu test performed extremely well, and we launched the new menu in October. It has delivered strong results and accelerated momentum in our food and beverage performance. This new menu as well as a number of other food initiatives is driving higher average checks through an improved product mix and stronger volumes in its first month, creating additional momentum in Q4. We are pleased that during the quarter, traffic in our dining rooms was up meaningfully up year-over-year with October same-store food sales being the best month of the year, a trend that has only further improved in November. As we discussed, earlier this year, we brought back the Eat & Play combo, and we continue to see positive momentum from this promotion, which we believe provides a highly compelling value to our guests. We have continued to improve this offering throughout the year and guest attached to EPC has improved significantly to a double-digit percentage of our guests since the beginning of the year, demonstrating the attractiveness of the offering. We are continuing to optimize dayparts and experiences such as refining our lunch offerings and enhancing mobile and kiosk ordering to ensure our guests enjoy both convenience and craveable quality on every visit. Third, we are reinvigorating our field operations with comprehensive training programs designed to empower our teams to deliver exceptional guest experiences. By fostering a collaborative culture that receives strong support from our shared service center, we are reducing turnover, enhancing engagement and creating an environment where our people and our brand can truly thrive. We have high confidence that these initiatives are working as our guests are staying longer in our stores and spending more while continuing to provide high guest satisfaction. Fourth, regarding our games offering, we are focused on tightly aligning our marketing campaigns with high-impact IP-driven game launches. While we aren't ready to make an announcement, we are highly confident that our upcoming 2026 lineup has highly relevant cultural IPs, which will maximize awareness, engagement and traffic. As previously discussed, we have renewed our focus on regularly introducing exciting new games, which we were able to do in 2025, but which we will be able to do even more effectively in 2026. We have significantly improved our process and plan to introduce 10 new games throughout the year. We are confident based on tests that are in the market that the games are highly marketable and will resonate well with our customers. We expect these games to drive significant repeat visitation based on data from robust customer tests. Additionally, we expect the rollout of Human Crane to all remaining locations, along with its debut in main event to deliver an immediate and proven lift in sales in the coming months. Beyond our in-house innovations, we are exploring powerful partnerships at the intersection of media, sports, technology, embracing the growing potential of location-based entertainment to create experiences that are truly unmatched in our category. Finally, we have commenced our revamped remodel program. As mentioned last quarter, we've been focused on optimizing the remodel prototype to modernize and refresh the look and feel of the units at an appropriate cost. We have high confidence we have found the right layout to increase traffic and overall productively and will generate highly attractive ROIs at reasonable cost. We have 3 new remodels under construction and plan to open 6 new remodels in the next 5 months. To further accelerate our momentum and our execution of all pillars of the Back to Basics strategy, we are elevating our culture and people capabilities across the organization to strengthen our foundation for growth and success. With the recent addition of key new executives to our leadership team, including our Chief Strategy Officer, Aldo; our Chief Growth and Partnership Officer, Putnam Shin; and our Chief People Officer, Devesh Sinha, we have significantly enhanced the depth and expertise of our leadership team. Aldo, Putnam and Devesh are highly quality -- high-quality executives who have tremendous capability and experience, and they're joining our teams highlight the power of D&B as an employer of choice. Aldo joins us from McKinsey, Putnam has experience with both Walt Disney and Merlin, and Devesh comes from Yum! Restaurants. As we build our support center capabilities, we are equally committed to our field. From launching industry-leading GM incentives, investing in training programs to simplifying tasks and initiatives for our team members, we are sending a message to the field that our success is closely tied to our execution and to our guest experience. By fostering a culture that is fun, collaborative and supported by the shared service center, we're reducing turnover, enhancing engagement and creating an environment where our people and our brand can truly thrive. With that, I would like to turn the call over to Darin to walk through the financial results of our third quarter. Darin? Darin Harper: Thank you, Tarun, and good evening, everyone. Our financial foundation remains strong, supported by a business model that consistently generates high returns, healthy unit level performance, disciplined cost management and meaningful free cash flow. Both leadership and the Board remain sharply focused on executing our priorities to drive same-store sales growth and generate significant cash flow. We have clear operational levers at our disposal, and we are confident in our ability to further enhance performance and deliver long-term shareholder value. Turning to a more detailed review of our financials. In our third quarter of fiscal 2025, comparable store sales decreased 4% versus the prior year period. We are encouraged by the improving monthly trend throughout the third quarter with relative strength in the final month of October, down approximately 1% versus the prior year period. We are also encouraged by a continuation of these improved trends throughout November. During the third quarter, we generated revenue of $448 million, a net loss of $42 million or $1.22 per diluted share, adjusted net loss of $39 million or $1.14 per diluted share and adjusted EBITDA of $59 million, resulting in an adjusted EBITDA margin of 13%. As a reminder, reconciliations of all non-GAAP financial measures can be found in today's press release. We generated $58 million in operating cash flow during the third quarter, ending the quarter with $14 million in cash and $442 million in total liquidity, combined with the availability under our $650 million revolving credit facility, net of $14 million in outstanding letters of credit. On the expense side, we see meaningful opportunities to further optimize our cost structure. In recent weeks, we have focused on enhancing our internal cost management processes, and we have also launched a comprehensive initiative to identify material efficiencies across the business. We are confident these efforts will support continued margin expansion, and we look forward to sharing updates on our progress in future quarters. Year-to-date, in 2025, we have invested a total of $268 million in capital additions on a gross basis or approximately $155 million on a net basis when factoring in payments from landlords. Details of this can be found in the table in our 10-Q filing. We are making increasing progress converting our strong operating cash flow to free cash flow through more strict management on capital spending by eliminating inefficient spend. As a reminder, we are committed to demonstrating our ability to generate free cash flow while continuing to invest in double-digit new store growth, new games, other high ROI initiatives and a more diligent remodel program. Our new store development continues to deliver strong returns, and we have a solid pipeline of upcoming store openings. In the third quarter, we opened 1 domestic D&B store in Spokane, Washington and 3 new domestic Main Event stores in Taylor, Michigan, Norman, Oklahoma and Greenville, North Carolina. This takes our new store openings year-to-date to 9 on our path to 11 new domestic store openings and 1 relocation in fiscal 2025, in line with our previously communicated expectations for the year. With the opening of our third international franchise location in the Manila, Philippines in October, we expect 4 more international openings over the next 6 months. As a reminder, we have secured agreements for over 35 additional stores in the coming years. We see international franchising as a driver of highly efficient incremental growth, monetizing our brand around the world with minimal investment and risk. As Tarun mentioned, we kicked off construction of our latest remodel prototype at 3 D&B stores at the beginning of November that we are excited to launch in their respective markets in early 2026. We believe this new prototype will maximize the impactful elements of our successful store remodels while eliminating previously ineffective spend for a high-return outcome, and we look forward to updating you on the progress in this area. And with that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Eric Wold from Texas Capital Securities. Eric Wold: Just a couple of questions. I guess, first off, with the marketing messages that you've been kind of switching and kind of trialing recently, can you talk about what you found has been resonating with the consumer? Is it a consumer that's still primarily driven by promotional offers, discounting and the like? Or are you seeing one that can be motivated by more kind of top-of-mind awareness marketing? Tarun Lal: That's a great question, Eric. What is really working just now is like smart value offers. And these are not necessarily discounts, but just packages that are put as a combo offer that allows our guests to appreciate and enjoy both our games and our games entertainment and our food and beverage offering. And if that is seen as compelling value, that's attractive to them. So as I mentioned, one of the things that we have done differently in this quarter, and we will institutionalize as a process going forward is that we test everything with consumers and this value messaging resonated with them. And so we kind of launched this in November, and we are seeing a lot of traction for this message. Eric Wold: Perfect. And then just a follow-up question on that. You're marketing obviously a combo food and beverage and game. You talked about the food and beverage comps have been positive again for kind of the second consecutive quarter, at least. Maybe talk about kind of what you're seeing as those consumers go into the midway. Are you seeing more or less time from what you can monitor spent in the midway or more or less being spent per consumer? Any kind of trends there you can talk to? Tarun Lal: Yes, Eric, I've kind of spent now like 5 months in the company and have spent a lot of time in our midway. I think one of the things that we acknowledged in the last call was that we hadn't invested in the right level of innovation in the games area, in our Arcade, and that's something that we're beginning to do. We've launched a bunch of games in 2025. And moving into 2026, actually, we already have a pipeline of more than 10 games that are associated with strong IPs. And we've tested all of them. So they are kind of lined up for launches in 2026. So I am really excited about the next year as far as our games business is concerned. In addition, we are seeing a lot of interest and excitement around the Human Crane. And these are now in about 70% of our Dave & Buster's stores. By the end of this year, we'll complete rollout across the system, and then they'll be launched in main event in the first quarter of next year. And as I said, these are incredible games. People absolutely love them. There's a strong TikTok or Instagram value to them, and we are seeing like less than a year kind of return on investment on these games. So yes, that would be kind of my response. Darin Harper: And I'll add one thing to that. Just in terms of spend within the Midway, we're continuing to see very healthy spend. And in fact, our guests are spending a bit more, and they are spending more time in the Midway as well. So we continue to see very healthy spending from the consumer there. Operator: Our next question comes from Andrew Strelzik from BMO Capital Markets. Unknown Analyst: Dan, for Andrew. Given Dave & Buster's high brand awareness, are refinements to the marketing media mix enough to change consumer perception? Or are you evaluating increased marketing investment to broaden reach and reinforce the updated value in experiencing messaging? Tarun Lal: So Andrew, it's absolutely true that we have very strong brand awareness. I think again as far as the media planning and fighting is concerned, all we are saying is that it should be more data-driven and how do we invest in the right mix as far as linear television, connected television, and digital investments are concerned. And reach is going to be important, absolutely critical. But I think in addition to reach, I think our learning is that we need to invest equal amounts of money in converting those into real customers. So it's really kind of now using a high level of science and system and process to invest versus kind of more guesswork that -- and impulse as far as media investment is concerned. Unknown Analyst: Got it. That was helpful. And then one quick follow-up. You've mentioned a refined remodel prototype coming soon that should deliver stronger results at a reasonable cost. What have been the biggest learnings as you finalize that format? And is the aggregate remodel outperformance you've called out at roughly 700 basis points above the system still holding directionally? Tarun Lal: So both Darin and I can take this question. So first of all, yes, we're still seeing a 700 basis point kind of impact -- positive impact of remodels. I think our biggest learning is that remodels work, and that's kind of almost a fundamental kind of truth, right, that you need to refresh your assets to ensure that your guests have the right experience. Our learning was that we had kind of overinvested capital in areas that did not really impact guest experience and kind of -- it was kind of wasted investment. And through, again, consumer insight work, we have now found like the areas where there is a direct correlation between our investment in guest experience and therefore, a repeat visit, and we are focusing on that now. So we kind of -- we are saving a significant amount of capital now in our remodels. And as Darin said, that's kind of like a general message that we just will be far more responsible with our CapEx and general cost management. We will continue to invest. We have the capital to invest, but we'll use it purposefully and meaningfully. Operator: And our next question comes from Sharon Zackfia from William Blair. Sharon Zackfia: It sounds like the food is doing tremendously and is going to bolster trends. I'm curious, as you look throughout the October quarter, did you see entertainment comps as well improve as the quarter progressed? Darin Harper: We did -- hey, Sharon, we did see improvement on the entertainment line as well. And obviously, we believe we've got a lot more to leverage. We've been talking about our F&B and menu for a while for a few quarters now. And so we're really proud of the performance that we're seeing there. And so now that focus on the entertainment side is something that we anticipate seeing some good returns there as well. But we have -- we did see sequential improvement in that line. Sharon Zackfia: And then I know you mentioned continued improved trends in November. Should I think about that as being similar to October? Just curious on that. And then on unit level margins, I mean, there's been pressure there for a while. Obviously, the sales have been pressured. What kind of comp do you think you need to get expansion on that line? Darin Harper: Yes. So to your first question, yes, interpret that to say November has performed similar to October. Look, in terms of what type of same-store sales, look, we get to flat and positive same-store sales growth. We can manage and expand margins. It's -- while I think you'll see in Q3, we were able to manage our margins relatively well despite the 4% same-store sales decline. We believe there's a lot more opportunity to reiterate what I mentioned. We're very focused on a number of margin enhancement initiatives right now. But look, we can grow margins with comps flattish. And so that's obviously what we're focused on. Operator: [Operator Instructions] Our next question comes from Brian Vaccaro from Raymond James. Brian Vaccaro: So you noted the comps improved through the quarter, obviously. I wanted to ask just the 2-year stack, it does look like it decelerated sequentially versus the second quarter. So maybe you could just kind of elaborate on how you view the underlying trend? And then did I hear correctly, Darin, you said the November comp similar to October, so down around 1%. I just wanted to clarify that, that was the total comp. Darin Harper: Yes. Yes, that's right, Brian. Yes. No, you're absolutely right. From a 2-year stack perspective, I think it's -- that there was some deceleration. And that was largely driven by the softer start to the quarter relative to where we ended. But if you look at it from a 2-year or a 3-year perspective, you see a little deceleration on that front. But we continue to see those sequential trends in the areas that we're focused on, which really give us a lot of optimism around being focused on the areas that can really drive that same-store sales growth as we go through the quarter and into FY '26. Brian Vaccaro: Okay. And then just a quick follow-up. I'm curious just how the walk-in versus corporate events business performed in the third quarter. And just heading into the important holiday season, could you give us a sense of how holiday bookings look or just broadly how you expect the corporate piece to perform kind of thinking year-on-year through the fourth quarter? Darin Harper: Yes. So for the quarter, our special events was mid-single-digit growth year-over-year. And we're very pleased with the performance that the team has executed on there. As a reminder, we have effectively completed the rollout of in-store sales managers, which has really helped us drive even stronger performance in those locations. And as we look at pacing for the balance of the quarter, which is obviously an important time for us, we're pleased with where we are and anticipate continued year-over-year growth in Q4. So we feel good about where we're going to end the year. Operator: And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Tarun Lal for closing remarks. Tarun Lal: Thank you, operator, and thank you all for joining. In closing, Dave & Buster's is in the midst of an exciting chapter, one fueled by innovation, a renewed guest-first mindset and the passion of our incredible teams. We're sharpening execution and elevating every part of the experience from marketing and menu quality to operational excellence and games innovation. The results are already taking shape, reflecting the power of our iconic brand and the effectiveness of our Back to Basics strategy. With growing momentum and significant untapped potential, we are confidently positioning Dave & Buster's for sustained growth in same-store sales and cash flow and meaningful value creation for our guests and our shareholders. I look forward to speaking with you again soon. Have a great evening. Thank you. Operator: And with that, we'll conclude today's conference call. Thank you for attending today's presentation. You may now disconnect your lines.

58天前Insight Analytics约5分钟阅读

CBRL 2026 Q1 财报电话会议

Operator: Good day, and welcome to the Cracker Barrel Fiscal 2026 First Quarter Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead. Adam Hannon: Thank you. Good afternoon, and welcome to Cracker Barrel's First Quarter Fiscal 2026 Conference Call and Webcast. This afternoon, we issued a press release announcing our first quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the first quarter ended October 31, 2025. Please refer to the footnotes in our press release for further details about these metrics. The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials. On the call with me are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business financials and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnished to the SEC. Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie? Julie Masino: Good afternoon, and thank you for joining us. As you are all aware, the past few months have been difficult for Cracker Barrel and for our 70,000 team members around the country. And while many of our guests are enjoying our improved food and guest experience, we certainly have more work to do to regain the trust and confidence of others who have been slower to return. This will take time, but we are executing a plan and are confident we will get back to the trajectory we saw in fiscal '25. Turning to our Q1 performance. Our unique circumstances during the first quarter were exacerbated by a difficult macro and industry backdrop that saw choppy traffic patterns. Sales were down 5.7% compared to the first quarter of fiscal 2025 with adjusted EBITDA of $7.2 million. Our EBITDA was clearly impacted by our topline performance. But I also want to remind everyone that it included incremental costs related to advertising, marketing and our GM conference, which totaled approximately $14 million. Traffic was down 1% in the first half of August and was down approximately 9% for the remainder of the quarter. We are taking decisive actions to return our performance to a positive trajectory, which can be grouped into 3 areas, the first 2 areas are centered around our focus on our food and the guest experience and include evolving our operations and connecting with our guests through our menu, marketing and value proposition. The third area is pursuing cost savings to improve profitability. Starting with operations. We have 3 main areas of focus and activity. Optimizing our back-of-house initiatives, conducting extensive training and making key leadership changes. As you may know, our back-of-house initiative is a multi-phase program aimed at improving food quality and consistency, while also simplifying operations and contributing to cost savings. Q4 was the first full quarter in which Phase 1 had been rolled out. Although Phase 1 was delivering meaningful savings, it became clear during the quarter that the new processes at scale made consistent execution more challenging for our operators and impacted the consistency of our food. Given the importance of food and experience as well as the heightened scrutiny around our brand, we decided to change course and reinstated our prior processes. Based on these learnings, we're evolving Phase 2 of our back-of-house initiative and our store testing methodologies to better ensure that any changes we introduced will be easily executable across the system and help our operators deliver the consistent quality our guests expect. To the extent we have to sacrifice some planned cost savings to achieve this goal, we will do so, and we're confident we will recoup these savings elsewhere. To ensure that our back-of-house teams are best positioned to deliver consistently outstanding food and experiences, during the month of October, we successfully retrained all of our managers, kitchen production staff and grill cooks on core, classic Cracker Barrel recipes as well as our new holiday offerings. Finally, during the quarter, we also made key operational leadership changes to remove a layer of management, get closer to our guests and drive a relentless focus on food and hospitality. Doug Hisel previously Vice President, Field Operations, was promoted to Senior Vice President, Store Operations. Doug has been with Cracker Barrel for over 18 years and has held a variety of operational roles of increasing responsibility. He has a deep understanding of Cracker Barrel's people, processes and standards. Teams in the field at all levels are responding to his leadership. Since Doug assumed his new role, he has emphasized flawless food, operational precision and shared accountability among leaders and team members, and we've seen encouraging trends in guest metrics as a result. In recent months, our Google star rating, which is strongly correlated with traffic, has been running at its highest level since early 2020. Additionally, we've seen improvements in food taste, service, value and experience, all of which improved between 3% and 4% in October and even more in November versus prior year. These metrics are important leading indicators, and we expect they will translate into improved traffic over time. Turning now to our guests. We continue to work a multipronged plan to ensure we are connecting with them through our menu, our messaging and our loyalty program. This is the second area of focus I referenced earlier. With respect to our menu, we are returning dishes to the menu that our guests have told us they love and miss, like we did with Campfire Meals, Uncle Herschel's breakfast and Chicken n' Rice. We brought back 2 fan favorite dishes to our holiday menu this year, Country Fried Turkey and Cinnamon Swirl French Toast as well as the highly requested Turkey Sausage. We also introduced a new breakfast burger. This delicious burger is topped with our signature hashbrown casserole and is the ultimate combination of country cooking and a breakfast for dinner entree. Guest feedback on these new and old favorites has been positive. Going forward, we continue to leverage guest feedback and have quality improvement tests planned for signature items in the coming months. We are working to ensure our core menu remains craveable and includes favorites that guests have missed. I already mentioned some of the items we've brought back and next month, our guests will see even more favorites return to the menu, such as Hamburger Steak and Eggs in a Basket. To oversee this effort, I'm pleased to report that Thomas Yun has rejoined Cracker Barrel to lead our culinary teams. Thomas previously served in this role from 2022 to 2024 and was the driving force behind several of our most successful menu introductions, including Pot Roast and Hashbrown Casserole Shepherd's Pie. He also brought back the loved legacy classics like the return of Chicken n' Rice. His efforts to strengthen the heart of the menu will help us deliver the familiarity, quality and comfort our guests expect from Cracker Barrel. With respect to our messaging, our marketing teams are following a clear framework rooted in food, value, heritage and shared values, while reinforcing traditions. We are reassuring guests that the Cracker Barrel they love hasn't gone anywhere, while also driving shorter-term traffic in a way that is true to the brand and preserves our commitment to everyday value. We are also pleased that we've improved our ability to seek and receive feedback from guests as we leverage our Cracker Barrel Rewards Loyalty Program, which continues to grow at impressive rates. We are deepening our storytelling by showing up in the places and passions that matter most to our guests from NASCAR and College Football to Country Music, we are leaning into the cultural touch points that reflect who we are and who we serve. We are also strengthening our presence at the local level through expanded store marketing efforts designed to connect with new and existing guests directly in their neighborhoods, bringing our heritage, food, hospitality and storytelling to life where they live, gather and celebrate. We recently introduced the Our Country Friends series on social media, showing our commitment to scratch-cooked food made with care. Cracker Barrel suppliers include many of the company has partnered with for decades and we've been so proud to highlight these American businesses and the people behind them. A few that we featured include our sourdough bread maker, Bay's bread, based right here in Lebanon, Tennessee; and our coffee and tea maker, Royal Cup, based out of Birmingham, Alabama. Finally, we are emphasizing and expanding our long-standing commitment to the military community. Our military retail assortment has been a part of Cracker Barrel for decades, and guests have always responded to these assortments because it reflects the pride and patriotism that is core to Cracker Barrel. Our guests, many of them veterans, active service members and military families have asked us to do more and we have responded. Building on the success of last year, on Veterans Day, we offered a complementary Sunrise Pancake Special for military members, and we helped support 30 worthy veterans organizations throughout November. Most significantly, on November 12, we launched an ongoing 10% military discount available all day, every day in both restaurant and retail to show our continued gratitude to those who serve. The new discount is available through our rewards program, ensuring that all active military and veterans can easily receive this benefit with every visit. As you can imagine, these are long-term efforts. But we're also pursuing shorter-term initiatives that are aimed at driving traffic in a way that is authentically Cracker Barrel. We anticipate leaning into these even more heavily over the balance of the year. During Q1, we launched a series of highly promotional short-term offers such as BOGO Sunrise Pancake Special, BOGO Old Timer's Breakfast, Kids Eat Free, All-You-Can-Eat National Pancake Day and Pancake Blocktober. These promotions drove meaningful traffic lifts during the short windows in which they ran. Continuing these efforts this week, we will be leveraging our position as a beloved holiday destination by launching a limited-time promotion of a free toy with the purchase of a kids meal. This offer, which integrates both restaurant and retail is not only a great value, kids get to choose a free toy, up to $5 or receive $5 off a higher-priced toy. And it also taps into the nostalgia and tradition that gets associated so strongly with our brand. We are being very careful to deploy these shorter-term initiatives in a way that preserves our longer-term commitment to everyday value through abundant portions at a fair price and our strong loyalty program. We know these things remain incredibly important to our guests and are key to our business model. Recent guest research shows that our value proposition remains strong. This is particularly encouraging given the macroeconomic backdrop and heightened promotional activity in the industry. Cracker Barrel Rewards is another key vehicle for delivering value to our guests and staying connected to them. Since the last time we spoke, we've added another 1 million members and now have over 10 million members in the program. Members now account for 40% of tracked sales. This program continues to be a powerful tool to directly communicate with guests, whether to drive traffic or receive their input. In September, we launched front porch feedback, a program that gives loyalty members the opportunity to comment directly to our team on aspects of their visit. This feedback, in addition to extensive guest research we conducted during the quarter has been instrumental in guiding our action plan to improve food and experience and to reinforce guest perception of our strong value proposition. Finally, we are leveraging our differentiated retail platform to deliver value to guests. We're leaning into the holidays, and we have a thoughtfully curated collection of seasonal gifts, with many items available only at Cracker Barrel at great value across price points. As we work towards reaccelerating our traffic trajectory through our focus on food and experience, it is critical that we continue to pursue cost savings and adjust our expenses. We are doing both, but we will do so only in ways that protect food quality, the guest experience and our store-level operations. As part of our cost savings efforts, we have previously stated that our goal was to get G&A closer to historical levels as a percentage of sales. We started a corporate restructuring during Q1. We will be accelerating and expanding this initiative through a further restructuring of our corporate support center during the remainder of the second quarter. While this will be understandably difficult for some of our corporate team members, it is necessary to successfully navigate the current headwinds, streamline the focus of our corporate functions, protect our balance sheet and ensure we can invest in the food and guest experience. In summary, we are facing a unique set of challenges, which necessitates a long-term approach to drive improved performance and recover the momentum we had earlier in calendar 2025. Guiding all of this is the overarching priority of serving up delicious food and delivering experiences guests love. We have made key operational changes, we're connecting and reconnecting with our guests through our menu, messaging and continued commitment to value, and we're taking significant steps to improve profitability. These are the things we need to do to return the company to a position of strength and recover the momentum we had been generating. I'll now turn it over to Craig to review our results and discuss our outlook. Craig Pommells: Thank you, Julie, and good afternoon, everyone. For Q1, we reported total revenue of $797.2 million, which was down 5.7% from the prior year quarter. Restaurant revenue decreased 4.8% to $650.6 million. Comparable store restaurant sales decreased by 4.7%, which included a traffic decline of 7.3%. Pricing was 4.1%, and menu mix was negative 1.2%. And the negative menu mix was driven by the value promotions we paused during the quarter to support traffic as well as lower dinner traffic. Off-premise sales were 18.1% of restaurant sales. Total retail revenue decreased 9.4% to $146.6 million and comparable store retail sales decreased by 8.5%. This decrease was primarily driven by the decline in traffic as well as lower retail attachment rates and unfavorable retail mix. Moving on to our quarterly expenses. Total cost of goods sold in the quarter was 31.2% of total revenue versus 30.6% in the prior year. Restaurant cost of goods sold was 26.6% of restaurant sales versus 26.1% in the prior year. This 50 basis point increase was driven by higher waste related to product and process changes, increased discounts and commodity inflation, partially offset by menu pricing. Commodity inflation was approximately 2.1%, driven principally by higher pork, beef and egg prices, partially offset by lower poultry and produce prices. Retail cost of goods sold was 51.4% of retail sales versus 49.7% in the prior year. This 170 basis point increase was primarily driven by tariffs and higher discounts, partially offset by pricing. Quarter-end inventories were $209.1 million compared to $201.9 million in the prior year. Labor and related expenses were 37.8% of revenue compared to 36.4% in the prior year. This 140 basis point increase was primarily driven by sales deleverage and lower productivity, which was partially due to actions to support the guest experience. Wage inflation was approximately 1.5%. Other operating expenses were 28.7% of revenue compared to 25% in the prior year. This 370 basis point increase is primarily composed of the following: first, approximately 110 basis points from higher advertising expenses due to planned increases in marketing and sales deleverage; second, approximately 80 basis points due to planned expenses related to our General Managers Conference, which typically occurs every other year; and third, approximately 200 basis points related to store occupancy costs, driven by sales deleverage and higher maintenance expenses. The increase in maintenance is due to an updated accrual process associated with the implementation of a new tool, which is onetime in nature as well as increased spending. The increases were partially offset by higher vendor credits. Adjusted general and administrative expenses were 5.1% of revenue and exclude $1.4 million in expenses related to the proxy contest and a $6.2 million corporate restructuring charge that includes professional fees related to business model improvement work and severance related to the organizational and leadership structure changes. Compared to the prior year, adjusted general and administrative expenses improved 120 basis points, primarily driven by lower incentive compensation. Our GAAP financial results include approximately $3.1 million in expenses related to lease terminations associated with the Maple Street units that were closed during the quarter. Net interest expense was $3.7 million compared to net interest expense of $5.8 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. Our GAAP income taxes were an $11.9 million credit, adjusted income taxes were a $9.4 million credit. GAAP earnings per diluted share were negative $1.10 and adjusted earnings per diluted share were negative $0.74. Adjusted EBITDA was $7.2 million or 0.9% of total revenue compared to $45.8 million or 5.4% of total revenue in the prior year. Now turning to capital allocation and our balance sheet. We continue to have a strong balance sheet and ample liquidity, which gives us confidence that we can successfully navigate through the current headwinds. We ended the quarter with $550.3 million in debt compared to $527 million in the prior year. At quarter end, our total available liquidity was $485 million, and our consolidated total debt to adjusted EBITDA leverage ratio was 2.8x. In the first quarter, we invested $34.2 million in capital expenditures. Additionally, as announced in today's press release, the Board declared a quarterly dividend of $0.25 per share payable on February 11, 2026 to shareholders of record on January 16, 2026. Before providing our outlook, I want to touch on our recent trends. Quarter-to-date, traffic has declined approximately 11%. The traffic appears to have stabilized as weekly traffic has been relatively consistent in Q2, including the Thanksgiving week. Although Thanksgiving weak, the traffic comps were in line with the rest of the month, we were still pleased that millions of guests chose to dine with us that week, and we delivered notable improvements in guest experience metrics, while doing nearly $110 million in sales. Turning to our fiscal '26 outlook. Our outlook reflects our best estimate as of today. The rate and level of our traffic recovery as well as the level of investment required remain key drivers of our fiscal '26 EBITDA performance. As outlined in our press release, we anticipate the following for fiscal 2026. Total revenue of $3.2 billion to $3.3 billion. This reflects a slower recovery than we previously expected as well as a more challenged macro and industry backdrop compared to our prior outlook. Pricing of 3.5% to 4.5% versus 4% to 5% in our prior guidance. Additionally, we expect lower menu mix resulting from higher discounts and lower dinner traffic. Commodity inflation of 2.5% to 3.5% and hourly wage inflation of 3% to 4%, both of which are consistent with our prior guidance. We are implementing a number of cost savings actions, some of which were previously planned and some of which are new. These actions will bolster our financial performance and increase our operating leverage when traffic improves and are focused on non-guest-facing areas. They include the following. First, as Julie stated, we executed a restructuring for the corporate support center in Q1 and there will be a further restructuring of the corporate support center in Q2. We expect these combined actions will result in annualized G&A savings of approximately $20 million to $25 million. Second, we are reducing our planned advertising spend over the balance of the year and expect that our aggregate advertising expense in Q2 through Q4 will be approximately $12 million to $16 million lower compared to the same period in the prior year. Additionally, we continue to execute our ongoing cost savings program. However, we expect that the benefits from this program will be reinvested in the business, particularly in the menu as well as being offset by traffic deleverage, but we anticipate the G&A and the advertising savings I mentioned will flow through to the bottom line. Taking all of the above into account, we now anticipate full year adjusted EBITDA of approximately $70 million to $110 million. The low end of the range reflects lower traffic that is more consistent with recent performance, elevated discounts and lower retail attachment. The higher end of the range reflects gradually improving traffic in the second half of the fiscal year as well as more moderate discount levels and retail attachments. Finally, we are now planning for lower capital expenditures of $110 million to $125 million. This reduction is part of our comprehensive efforts to manage our cash flow and is in line with our baseline capital expenditures in years prior to the transformation. The largest category is for maintenance capital expenditures. And while we have reduced this area, we're being careful to maintain an appropriate level of spend here given our continued efforts to catch up on deferred maintenance. Additionally, this amount includes important strategic initiatives, such as replacing our point-of-sale system, which will be unsupported in approximately 1 year. With that, I'll now turn the call back over to Julie for her closing remarks. Julie Masino: Thanks, Craig. Before we go to Q&A, I want to thank all of our team members around the country for their ongoing dedication as well as their efforts in making sure our guests had a wonderful Thanksgiving. I speak for all of them when I say we're energized to deliver for our guests and drive results, both now and well into the future. Guests come to us for craveable, comforting dishes and warm, genuine hospitality. And we are focusing our energy there by further elevating food quality, executing consistently and doubling down on the country hospitality and service that makes people feel cared for. Now more than ever, Cracker Barrel remains a special and differentiated American brand, and we are focused on delivering that unique connection with our guests. Cracker Barrel is more than a restaurant or a retail store. It is the front porch of America, and the deep emotional connection guests feel is our greatest strength as we move ahead. We are confident that we can return to growth over time and create long-term value for all stakeholders. Operator: [Operator Instructions] The first question will come from Todd Brooks with The Benchmark Company. Todd Brooks: A couple of questions here. First, I wanted to ask Julie about the cut in the advertising spend for the year, that kind of pulled back in ad dollars. Is that more reflective of kind of Q2 spend during this peak holiday period and it's kind of reflective of just needing to stabilize first, before getting a little bit more aggressive with advertising dollars to draw customers back to the brand? Julie Masino: Todd, thanks for the question. Let me come at it a different way. Q2 marketing spend was -- sorry, Q1 marketing spend was a little bit elevated at 4.2% of sales. We had planned incremental spend in conjunction with the brand relaunch. But obviously, that didn't go as planned. But that was already committed. So there wasn't a lot that we could do there. We've looked at the advertising spend in the back half Q2 through Q4 to get it more in line with our current traffic levels and the imperative of reducing non-guest-facing costs. So that's what you're seeing. In aggregate, the spend will be about $12 million to $16 million below prior year over Q2 to Q4. Craig Pommells: Yes. The only thing I would add to that, Todd, this is Craig, we also have the loyalty program, and we now have over 40% of our sales running through that program. And that allows -- we're able to talk to those guests directly in a more cost-effective way. So we have that opportunity. And as always, we're always looking at the efficacy of our spend. And if there is -- it's performing really, really well, we can do more. But given where traffic is today, we thought we would be a little bit more conservative with the support of the loyalty program. Todd Brooks: Okay. Great. And then my second question, and I'll jump back in queue. If you look at the trends, and you talked about kind of a consistent trend traffic-wise, even through Thanksgiving week, Julie. This November, December window is obviously kind of your most important seasonal period during the year. Is there much incremental that you're trying to do? I mean you talked about the LTO with the $5 toy. Other incremental plans for that December window or kind of is the die cast for holiday and the performance will fall where it may, and then we'll see where we go going forward from that standpoint. I'm just trying to get a sense of, are we looking for any sign of inflection here kind of back half of fiscal Q2? Or is it more kind of if we see inflection, we're expecting that in the second half of the year? Julie Masino: Yes. Let me try to answer it again. Maybe a little bit differently, Todd. Maybe you and I are like crossing signals. I think -- look, this team is absolutely committed to getting back to a positive trajectory and regaining the traffic momentum that we had and getting back on our front foot here. So we wake up every single day thinking about how to drive traffic. What we are really focused on is doing that one guest at a time with great experiences in store, amazing food, great hospitality, attentive service. That's really the core focus. What we're trying to do on top of that is regain trust. Truly, we've got a little bit of a brand opportunity right now. There's some brand rebuilding and trust rebuilding that we need to do, and there's a sales opportunity. And so we are doing both of those things. When you really look at what we -- what the marketing team has been doing with the branding messaging, we're leaning into our legacy, our heritage and really messaging those emotional connections to remind people that we are the brands that they've known and loved all of these years, but that hasn't changed. That's why our holiday messaging is around holiday and driving people in for LTOs that they know and recognize, like Country Fried Turkey and Cinnamon Swirl French Toast. But we're also really looking at how do we activate traffic so that people can come in and see that we are the brand that they know and love and that we have great value. So the toy promotion, we're actually really pumped about that. It is uniquely Cracker Barrel. It activates both sides of our business. And unlike some LTOs that are so prescriptive, what I personally love about this is that you get to pick, go shopping. You want a toy that's under $5, great, it's free. You want to toy that's $15, we'll take $5 off of it. if you want something that's $50, we'll take $5 off of it. So it really lets consumer be the driver in a time where value is so important to them. And again, in a way that we can really create some emotional resonance with them in our restaurant and retail store. Craig Pommells: And maybe the only thing I would add within our guidance range as it relates to sales, they're in the upper end of that range, does assume that things get better and the lower end of the range is more consistent with where we are right now. And clearly, there are a number of actions that we have planned to change the momentum. There are the longer-term actions, which primarily relate to all of the work that we're doing around food and the guest experience, and we're pleased with the gains that we're seeing there, but those are longer term. Then there are shorter-term things that we're executing as well. Some of those -- they're not fully proven out. In other words, we haven't done them in prior years. So we're not completely certain how they're going to play out. But there are actions that should help to support that traffic improvement, but our guidance range contemplates that. The low end of the range is more steady states and the high end of the range is those things, the effectiveness of those are... Julie Masino: Gaining traction. Craig Pommells: Are gaining traction and helping us to improve. Operator: The next question will come from Jeff Farmer with Gordon Haskett. Jeffrey Farmer: I'll use that last question as a bit of a segue. So I think when we last heard from you, the 2026 traffic guidance was down 7% to down 4%. So correct me if I'm wrong on that. But the question is what are you thinking about as it relates to an updated guidance range for traffic for the year? Craig Pommells: Jeff, it's Craig. The -- yes, correct. Negative 4% to negative 7% was the guidance range we provided before, embedded in the $3.2 billion to $3.3 billion in sales that includes traffic that's about negative 8% to negative 10%. On top of that, the low end of the range includes a higher level of discounting and negative menu mix as well as a lower level of attachment with retail. All of that goes into the lower end of that range. So traffic negative 8% to negative 10%. The higher end of the range assumes that there is some recovery in traffic in the back half of the year as well as less discounting and some moderation in the attachment rates in retail. Jeffrey Farmer: Okay. That's helpful. Just 2 other quick ones. You pointed to a more challenged macro and industry backdrop, obviously, so maybe your peers have called this out as well. But anything specific to say there as it relates to what you're seeing in the macro backdrop? Craig Pommells: I think we're probably all seeing the same thing, which is relative to September, consumer sentiment has softened, the labor numbers are not as strong as they used to be. Again, nothing alarming or anything, but they are softer than they were. And we've seen the overall industry traffic ticked down a bit relative to the summer over the last couple of months. In terms of our consumers, one thing that's encouraging, our under $60,000 group underperforming a little bit, but relatively close to the over $60,000 or over $80,000 groups. So we're not seeing dramatic differences across those income cohorts. We're also not seeing dramatic differences across the age cohorts. We're seeing a little bit better performance with the over 55 and over 65 than the under 55, but within a fairly narrow range. Jeffrey Farmer: Okay. That's all very helpful. And last one, and thank you for bearing with me. But you mentioned that caught me a little bit off guard that when you -- you had some challenges with rolling out Phase 1 of your operations initiative. It sounds like you've sort of pivoted from that. But the question is, did those challenges, that you faced, have a material impact on either same-store sales or traffic in the quarter that you just reported? Julie Masino: Yes. Thanks for the question, Jeff. It's Julie. Let me start. Q4 was really the first full quarter in which we rolled out Phase 1. We talked about it on several of the calls. We rolled it in Q3, but it wasn't fully deployed at that point in time. What we really saw was that the teams struggled with the complexity of it at scale. It just what -- everything had to be perfected is really kind of what we learned as we rolled it out. And that's in our world just very difficult to control for. And given the scrutiny that the brand was under, given some of the feedback that we were getting on food, even though when it was executed properly, it worked really, really well, and there was low margin of error, we felt like it was the right thing to do to just pause the initiative right now. We made the decision to go back to the prior processes. We retrained the team on all of that. What I'm most optimistic about is that we can continue to improve the business model. We continue to look for ways to find efficiencies. We've learned a lot from rolling this out. We're reevaluating Phase 2. It's still in test in a couple of districts and really continuing to work with that. We've changed our in-store methodologies of testing, taking all of the learnings from this phase because more than ever, we have to remain committed to amazing food, great hospitality and that guest experience. And so anything that starts to compromise that we just -- we can't allow it, and that's why we rolled back. Operator: The next question will come from Jake Bartlett with Truist Securities. Jake Bartlett: Mine is a combination of some of the ones that have been asked before. But I'm wondering if you can try to disaggregate the macro pressures on sales versus the aftermath of the rebranding. And there's been a deceleration in the second quarter to date to negative 11% from negative 9%. Would you attribute that all to the macro -- incremental macro pressures? Or is it possible that maybe some of the macro pressures are even worse than that or maybe bigger headwind, but you're getting some recovery in terms of sentiment around -- post your rebranding. Trying to understand how the rebranding and trying to disaggregate the 2 forces at play, so we can understand maybe how you go forward. Craig Pommells: Jake, it's Craig. I'll start. First, I'll take -- let's talk about the change for Cracker Barrel in Q2 versus Q1. Our traffic has been pretty consistently between a negative 10% and negative 11% over the last couple of months. In Q1, some of what we saw there are -- some of the reason the results were a little bit better, and it appears that they may have decelerated is because the drop-off in traffic wasn't instant. It happened gradually over a period of weeks that's one. Also, some of the initiatives that we executed, for example, the Buy one, Get One and in particular, the All-You-Can-Eat Pancake, they were very, very short term in nature, but they did have a meaningful improvement for those short periods of time. They just weren't necessarily sustainable promotions. I don't know that we can necessarily break out the industry versus us, but you see all the industry results, and it's pretty clear that now relative to the summer, the industry has moved down. Jake Bartlett: Got it. Okay. And then as we think about the path forward and how to rebuild sales, you've talked about, I think, materially reducing your advertising expense that usually would be moving in the opposite direction, I think you -- there's an offset there with more local marketing, more of the loyalty program. But I just want to get a better sense as to what the positive things you're doing to change the trajectory here? And maybe within that, what is coming on the menu. A big part of the story for the last year has been some pretty positive menu innovation and good responses there. How confident are you in the pipeline of menu innovation and what's coming down the pike in the next 6 to 9 months. Anything else that you think is kind of something that you are doing that could really change the trajectory here? Julie Masino: Yes. Thanks, Jake. I'll start and then Craig can jump in. Again, we are doing -- I want to leave you with the fact that the focus of this organization is on food and the guest experience. We are very much focused, making sure that every single person who comes in has a great experience, their food is made the way they remember it, the way they wanted to taste and that they have hot food served by attentive servers with great hospitality. And that is the true focus of the organization in the way that we execute. We are absolutely also focused on getting people into the stores to experience that. So when you think about how the whole machine works together, and the marketing work is a little bit more nuanced, if you will. As I mentioned, I think it was Todd's question. We have a brand reputation issue that we are working through, and that takes rebuilding trust one guest at a time, and that's going to take some time. And that's why we're so focused on operations so that everybody who comes in has a great experience, and that will get that momentum all rolling in that direction. The toy promotion is a great way that we are showing our value, our uniqueness and getting people in to experience the brand. We did the military -- it's probably for next call, but the Veterans Day promotion for the free Sunrise Pancake special, we did that for the first time last year. We anniversaried that this year, even bigger turnout, guests really enjoyed that promotion. And that's really why we launched the military discount ongoing. That has been something that -- we've gotten lots of requests for over the years, and we wanted to make sure that we get executed in a way that was sustainable, measurable and that we could really market it and impact it correctly, right? So we tucked it into the loyalty program. So we know who those guests are. We know what they're buying, we know when they're coming. We know how to actually communicate with them and use that discount to our advantage to drive traffic for the future. So that's really why those 2 promotions have been launched literally in the last month. The other thing that's out there that we are working our way through is our meals for 2 program. We're really excited about this. It's an outstanding value. It tested well in our research around value and what guests need from us and the traffic driving ability for it. So it's 2 full entrees then your choice of a starter or a dessert, all for $19.99, which is, again, a great, great value for our guests. And you can still get in our loyalty program or your military discount and stack that on top of it. So we are really driving great value with these experiences at Cracker Barrel. Rewards continues to use the AI engine to drive traffic in so that people have those great experiences. And we, again, see those guests shopping on both sides of the business, especially during this important holiday time frame. So we are very much working on driving people and to have those great experiences and then reinforcing our legacy messaging around where the brand that you know, that you love. We've recently launched -- I talked about it a little bit in my prepared remarks a platform called Our Country Friends, where we highlight a lot of our suppliers or people who worked for us for a while or just processes that we have, whether that's around how we design our holiday items or what we do in the Decor warehouse to our sourdough bread supplier, our pancake mix supplier, the people who make our hams that have been doing that for decades, to really, again, reinforce the great traditions that we have here at Cracker Barrel and how that ends up on your plate and in your experience with the brand. I don't know, Craig, if there's anything you would add. Craig Pommells: I think the only thing I would add to that I think Julie covered a lot there, there is actually quite a bit going on. We didn't talk as much about that externally in Q1. I guess given everything, but there was new news. We had the Breakfast Burger as we mentioned. There were a couple of bring-backs as well. Julie Masino: He did ask about the menu. Yes. Craig Pommells: So those are all good. And we do have some promotions that we have slated for the early spring. We're not necessarily talking a lot about that now, and we have some new news as well. So there is news there. Jake, we're being -- we haven't seen some of these things in a sustainable way, really regain the momentum that we had before. So we're being careful with -- we're being careful with that, but we do have them. And underneath all of that, one of the things that we're really excited about is the gains that we're seeing in -- across a number of our service metrics, very significant gains that really accelerated through the quarter and have continued into the second quarter. So that gives us confidence in the midterm and the long term because those things do take a little bit longer. Julie Masino: Let me jump back in, sorry, Craig, you trigged that for me. I apologize, Jake, I didn't answer your menu question. There are quite a few things coming that we are excited about, passionate about. But specifically, there's been a lot of feedback through front porch feedback and some of our other channels on items that guests would like to see return to the menu. I mentioned Eggs in the Basket and Hamburger Steak that will rejoin the menu in January. Uncle Herschel's joined the menu this October, which has been a great bring back. We brought back Turkey sausage, which people -- I've been hearing about this Turkey Sausage since I walked in the door. We had to find somebody to make it for us. That's why it took a bit of a minute to get it back on the menu. But we're going to continue to do what we're calling Bring Back and really highlight those for guests so that they can see some of their favorites return. And look, I think that's what we did well with Campfire. That was bring back in Q4 when we had such great traffic that quarter. Craig mentioned, we do have innovation coming. The breakfast burger has been really well received. It's awesome. It's a burger with cheese and bacon and then our Hashbrown Casserole on top of it. And then an egg on top of it, I mean it is decadent, it's amazing. It's very Cracker Barrel though in a wonderful way. And we've got more innovation coming in the spring that feels -- I want to be really careful, innovation that feels very, very Cracker Barrel. Like what we've done with Pot Roast and Hashbrown Casserole, Shepherd's Pie, but it's newness to the menu that I know our guests will appreciate. One of the things we're bringing back in spring is like -- is a bring back, but sort of in an innovation space. So it's something that used to be on the menu that guests have asked us to bring back, and so that's coming back as well. So again, really taking that feedback, that focus on food and continuing to bring forward a menu that we know our guests will crave. Operator: The next question will come from Brian Mullan with Piper Sandler. Brian Mullan: Just a question on the retail business. Just any thoughts you could offer about the upcoming holiday season? How do you feel about the assortment, the team's ability to execute. And then maybe anything you could offer in terms of what we might be able to expect to see on retail gross margins here in fiscal 2Q? Just any puts and takes. That you could call out? Julie Masino: Brian, it's Julie. I'll start and then I'll let Craig jump in on the margin side of things. The team continues to execute the transformation of the retail business. We're looking at the assortment. We're looking at the shopping experience, making sure that people can get through. It could be a little tight in our stores, sometimes, especially when we're busy. So they continue to work those pieces of the plan. We're pleased with our ability to execute this holiday. If you think back, this has been a really tumultuous year for retail with the tariff stuff at the beginning of the year and then the way that, that's manifested and the back and forth as the year has come to bear. I think the team has done a really nice job of absorbing the impact of tariffs, but also using that to make the assortment stronger. We specifically held putting our Christmas on the floor until a little bit later than we did the prior year. The impact of that is that we actually have, I think, a better assortment right now on the floor. That's not as old, that's not a shopworn. And so we actually comparatively to kind of some of our competition, we have goods on the floor, which I think is a really nice place for us to be right now. We are in business with items at a great value price point. The team continues to do a nice job of making sure that we're bringing that value forward. And then where we need to when we're watching items, like, for example, our Ornament business right now is on markdown because we were a little heavy on that side of things and also just getting to the price point that the guests really requires on that right now. But team has done a nice job responding. I think the assortment looks really good. guests are responding to the assortment. Inventory is a little bit heavier than where we were last year, but some of that is also the way that we brought in the goods given the tariff situation earlier in the year. Craig Pommells: Brian, on margins, margins are being impacted in large part by tariffs. Our plan for tariffs all along was in the first year to address the dollar impact of tariffs. So we always expected that our percent margins would go down, and our work really focused on mitigating the dollar impact. And I think we had a lot of success with that. What we're seeing, I think, with maybe somewhat related, someone unrelated, there's also a mix shift that's happening where guests are kind of trading down in some ways in the retail space. And then this is a general environment for retail, we're seeing a bit of a lower attach. That will kind of naturally result in a little bit more markdowns. But our expectation, even before our recent change was that our margins would be lower this year for -- the marginal rates would be lower, even though we would expect that we would have been neutral, relatively speaking, on a margin dollar perspective. Brian Mullan: Okay. And then just a follow-up, a clarification on G&A. Can you give a sense of what you're assuming for either adjusted G&A dollars for the full year now? Or if not that, maybe just a good quarterly run rate to think about starting in fiscal 3Q after you're fully done with the restructuring actions? Craig Pommells: I don't want to get too prescriptive on that one. What I would say is we have a $20 million to $25 million range on an annualized basis, and we expect to have that fully -- well, almost fully executed, almost fully executed by the end of Q2. So just that by itself would convert into an impact in Q3 and Q4. We did start some of that work, and we got some of the benefit into Q1 and we have some more in Q2. But the vast majority of that will occur in -- by the end of Q2. Operator: The next question will come from Sara Senatore with Bank of America. Isiah Austin: Isiah Austin on for Sarah. Just after everything that's been covered. Just a quick question. You guys noted earlier that your Google star rating is correlated with your traffic. Any idea of how far ahead you guys lead that or how to think about, I guess, the spread on that? Craig Pommells: It's Craig. I'll start. We have done a lot of work on the Google star rating, we're pleased with the improvements we're seeing there. The analysis approach that we use is a longer -- a bit of a longer tail. Just keep in mind, our typical guess comes in twice per year. So we look at this over about a year. So it's not like a light switch. It's something that happens more gradually. But bear in mind, the frequency of our guests. Julie Masino: Yes. When we launched the metrics that matter about 2 years ago at this point in time, we looked at the things that were most highly correlated with same-store sales growth and Google star was at the top of that. So we've recently checked that correlation, given everything that's going on, and I can tell you that it is still valid. So we haven't given sort of your question of like what's the tail there and how much time for recovery. Know that it is still correlated and we are still looking at it and it's one reason why we're driving it so hard. I'm really pleased with the improvements that Doug has made since stepping into his role 45 days ago. Isiah Austin: Very helpful. And then just as a follow-up question on the topic of just cutting -- like having corporate restructuring in order to address the current situation. Any idea on whether that could cause concern around long-term performance? Just kind of thinking about what specifically you guys are thinking of cutting in that restructuring? Craig Pommells: Yes, I'll start with that one, Isiah. What we're doing here is driving incredible focus. I mean we -- given the prior -- our highest priority is [indiscernible] and guest experience. So we have -- that's always been there. We have elevated that even more. And there are some other work streams that are value creating, but over a longer period of time that we have kind of pulled back on for now. But in terms of regaining our momentum from where we are, we think we'll have the resources to do that, and we can make other decisions as it relates to G&A in the future. But we all -- another point is we also had previously committed to getting back to our historical G&A run rate. In some ways, what we're doing here is, we're accelerating some of those decisions. Operator: The next question will come from Jon Tower with Citi. Jon Tower: Just a quick one for me. Craig, I was just wondering if you could remind us what the plans are for the debt that's coming due later this year? Craig Pommells: John, the -- our plans are -- for the convertible that matures in June of 2026, our plans would be to pay that about the time that it matures by drawing down on the revolver. We repaid about half of that when we refinanced a few months ago. So we have about half of that original convert outstanding, and then we have the capacity on the revolver to cover that. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Julie Masino for any closing remarks. Julie Masino: Thank you so much for joining us today. Although, we are facing headwinds, we are confident that the plan we are executing will drive improved performance and that we will regain our momentum. Finally, I want to express my sincere appreciation to our team members for their hard work and dedication. Thank you, and happy holidays. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

58天前Insight Analytics约5分钟阅读

WINE.L 2026 Q2 财报电话会议

Operator: Good morning, and welcome to the Naked Wines plc Half Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Rodrigo Maza. Good morning. Rodrigo Maza: Hello, everyone, and welcome to our half year '26 results presentation. We are very grateful for your time. I'm Rodrigo Maza, Naked's CEO. I'll be presenting today along with Dominic Neary, our Chief Financial Officer. Here's the agenda that we'll cover this morning. Before we get into the details, a few headlines to set the stage. We've made a lot of progress in the first half of the year. Our performance continues to track in line with the guidance we've shared with the market. We remain focused on delivering shareholder returns, and we're pleased to have completed our first distribution during the summer. As stated during our last presentation, we made structural changes to our business at the start of the year to enhance focus, speed and accountability. We're making tangible progress on both acquisition and retention. We strengthened both our senior leadership team and our Board of Directors. We're happy to welcome Jan Mohr and Susan Hooper as Non-Executive Directors. We extend our gratitude to Deirdre Runnette, who's exiting our Board for all her contributions to Naked Wines. We remain confident in the strategy shared with investors last March as we go through our peak trading season. Results so far are positive. Let's dive in. Naked Wines is all about connecting wine drinkers and winemakers. Our model removes the middlemen, so customers get better wine for their money and winemakers earn more for doing what they do best, making exceptional wine. This direct meaningful relationship builds loyalty, drives a sense of community and differentiates us in the market. Now this is what our model delivers. This chart leverages Vivino's data to show how Naked consistently overdelivers on quality for price when compared to traditional retail brands. This is one of our main drivers of retention. This is our model at scale. Naked currently connects over 0.5 million very satisfied angels in the U.K., the U.S. and Australia with over 300 of the world's most talented independent winemakers. As stated during our strategy event back in March, we think of our footprint as an advantage. This is especially true in the U.S. where the ability to legally deliver wine to over 90% of the population is a true moat. Operating across 3 countries adds meaningful resilience to our business. That diversification protects us from overexposure to any single market or regulatory shift. It also allows us to test things faster, accelerating our learning. When we exceed our angels' expectations, our whole flywheel accelerates. The lighter angels tell others. And when that happens at scale, everything moves. More angels means more funds, more sales, more cash. It's truly a virtuous cycle. When our angels are happy, our winemakers, our teams and our shareholders, they feel it too. Now over to you, Dom. Dominic Neary: Thank you very much, Maza. I'm going to be taking us through HY '26 performance. We'll then move on to our strategic pillars. I'll cover the first 2 of those, and Maza will cover return to growth. So moving on to our financials. We're seeing, first of all, continued strong cash generation, including the GBP 2 million share buyback, which was completed in September. So that's GBP 10 million of cash generation less the GBP 2 million share buyback is an GBP 8 million increase on 12 months ago. Adjusted EBITDA is doubling, reflecting the intentional strategy to reduce acquisition investment and to focus on higher-quality core profitable customers. So adjusted EBITDA up 112% on prior year at GBP 3.6 billion. This strategic change, which we've communicated before, leads to the lower revenue number you see there down on prior year. And as I repeat, this is what we've communicated and this is expected, and it's in line -- tracking in line with our full year guidance. The loss before tax you see there benefits, of course, from the doubling in EBITDA. It includes a number of items. There's a GBP 2 million restructuring, which we've announced in April. There's the one-off impact of EPR costs, which will unwind in H2. And then, of course, there's GBP 2.6 million of the inventory liquidation costs, which we've flagged as we proceed with the liquidation of our inventory. And that is part of the GBP 12 million or $17 million target, which we have over the medium term, which is likely to impact this year and the next 2. As we move on to our key strategic KPIs, free cash flow -- if we start at the top, free cash flow is positive. It's where we expect it to be. So inventories are down in the year -- in the half year. But what we are seeing is some inventory build in the U.K. and Oz, which is why free cash flow is lower than prior year, but this is still a strong result reflecting as it does cash generation ahead of our peak season where we would normally see cash being used up as we build for peak. So a strong result there. As we move on to ROIC, we can see the impact primarily of the doubling in profitability, but also the impact of share buyback impacting that as well. Gross profit margin is up materially. 50% of this is related to inventory liquidation differences between this year and prior year, but the rest of that is a genuine improvement, reflecting significant reductions in first order loss as we acquire customers and cost savings in G&A and marketing efficiencies. And this is despite significant ongoing regulatory cost increases from duty and EPR, which are impacting the industry more broadly. Acquisition breakeven, this is our new metric. So this -- historically, we've looked at a 5-year forecast for marketing acquisition, which we've called payback. We're now, as we've already indicated, moving to a 24-month metric, which we estimate is circa the same as an IRR of 23% and it's the equivalent to what would have been 1.7x in our old payback metric. So acquisition breakeven, which is when we obviously get the breakeven on our marketing acquisition investment, has improved significantly, this time 12 months ago. So we're down to 44 months from 75 months, clearly not at our target, but nevertheless, moving well in the right direction. And that is driven by a number of factors. We're seeing lower CACs, which we'll come on to in a second. We're seeing better retention, particularly of acquisition customers. And there are some notable impacts from margin improvements. And this is an area where we continue to anticipate significant margin improvements forthcoming over the next few years. Adjusted EBITDA, we've already talked about, so I'll move on. Moving on to the bottom row, return to sustainable growth. NPS remains excellent, so no change there. Member retention rate is in line with 12 months ago. It's actually up 100 basis points on the end of last year. We are seeing, as I've indicated, already some positive signals on retention rates of new members. Given this is a 12-month metric, you're not going to see that in here yet. That will come through at the end of the year. But nevertheless, positive movements in retention overall. CAC, as I've already said, is down, and that impacts from a number of factors, but it is critical to our metrics. And revenue per member going backwards slightly. This is largely geographic mix, and there is a little bit of hesitancy in the broader industry -- in our industry, which is having a small impact on that as well. Moving on to our 3 strategic pillars. So we're happy with the progress of our KPIs, and we believe this reflects progress as we implement our new strategic plan. As I've indicated, I'm going to be covering off the first 2 of these pillars. So that's cash and profitability, and Maza is going to be talking to you later about returning to sustainable growth. So if we dive straight into cash, HY '26 sees the continuation of a strong story. So cash generation continues. As I've already said, we've seen GBP 10 million of cash generation, which has funded GBP 2 million of share buyback, which was completed in September. So that's an GBP 8 million net cash increase. And importantly, we've seen an increase in cash generation in cash in the first half of the year against normal seasonality. And of course, that reflects the ongoing improvements both in profitability but also in liquidation of our inventory. So inventory continuing to decline. We are progressing well with this with our plan to generate GBP 40 million of net cash from inventory. Whilst the majority of the big drops are likely to happen in FY '28 and '29, we continue to see improvements here, and we have confidence, particularly because the biggest portion of overstock is in U.S. expensive reds. And the good news on these is that they last for in excess of 10 years. So we continue to anticipate generating net cash from our inventory, and that's a key part of that. We also continue with our commitment to generate value from our capital. So I talked already about the share buyback we completed in September, which the Board believes was at a value that is significantly below the intrinsic value of the company. We continue to anticipate ongoing distributions and, of course, more substantial distributions in the medium term. We will, of course, consider inorganic opportunities as they arise as well. Moving on to our profitable core. Again, we're seeing solid progress with profitability as we reiterate our medium-term target of up to GBP 14 million EBITDA over the medium term, clearly making great progress with this on EBITDA and the improvements to gross margin and G&A I've talked about. Key aspects of this are obviously visible in HY '26. So I've already talked about our new acquisition breakeven KPI, which is replacing payback. This is a much better short-term focus, as I've indicated, targeting about 24-month breakeven point, and we are seeing significant improvements in this. And a key part of those margin improvements is coming out of price increases in Australia and the U.K. And also, of course, another driver is the acquisition retention improvements that I flagged earlier. As a result of this focus on profitability, we are reducing inefficient marketing investment, and that's driving in excess of GBP 5 million of efficiencies versus FY '25. And that reflects the strategy we talked about in March, where we've reduced investment in vouchers and other ineffective channels. We are, of course, focused on costs everywhere across the P&L, and we have delivered GBP 1.5 million of G&A savings, which after inflation delivers the GBP 1.1 million reduction in G&A costs that we're seeing coming through the P&L. We continue to see this as an opportunity to drive significant value. And to that end, we are implementing a ZBB strategy on our costs, which will take effect from FY '27. So continuing focus here. And I'm going to hand over now to Maza, who's going to take you through the final pillar. Rodrigo Maza: Thank you, Dom. As you know, our third pillar is focused on the work we're doing across both retention and acquisition, leveraging our engaged community of angels and winemakers to drive sustainable growth. We're also enhancing our activity around business-to-business sales, which we view as a credible source for medium-term revenue and contribution growth. Back in March, we presented our growth strategy structured around retention and acquisition and enabled by selective tech modernization. While the building blocks remain unchanged, our understanding of how they come together in an improved experience that delivers on our mission and value proposition has evolved. Our business is a loop, not a funnel. What this means is that for us to accelerate sustainable growth, we need to find more ways to tap into our engaged community of angels and winemakers. Retention is our foundation. We remain focused on facilitating discovery with improvements to our catalog and its navigation soon to be scaled. We have created more options for our customers around delivery, and we're focused on unleashing the power of our community, partnering with winemakers to tell not only their wine stories, but to present the category to existing and future angels the Naked way, tearing down the parochial approach to wine that's very prevalent in our industry. As we deliver on our retention priorities, acquisition is becoming more efficient with advocacy and word of mouth becoming its key drivers. We remain committed to acquire customers that have a real interest in Naked's value proposition, which requires us evaluating every channel investment diligently, moving away from underperformance and scaling only those that deliver sustainable customer acquisition costs. Importantly, we remain focused on making sure that the first interaction with Naked delights every new joiner. A few highlights to share on the retention front. Our entry-level range in the U.S. has produced solid results since launch. We've seen a material increase in our rate of sale without cannibalizing our segments within our -- other segments within our catalog, which is exactly what we set out to do. We are now ready to roll out our automatic credit pack guarantee to all angels after a few months of validation. We view this as a key enabler of discovery and therefore, retention. We are now offering more delivery options to our customers. And while results still need to age out, we are seeing frequency improving in the markets in which these alternatives are available. And finally, we have started to offer angels the option to purchase 3-bottle cases through careful cost management to protect unit economics. This is proving to be quite effective as a reactivation lever. Next step is to offer this on the acquisition side of things as well as it reduces the amount customers would pay for trying out Naked Wines, which could obviously have a very positive impact on conversion. As I mentioned already, it's our community that's our unfair advantage and what we need to leverage to get Naked growing again. The campaigns we've recently launched have landed very well, not only commercially, but in driving angel engagement. You are bringing the magic back. This is the type of thing that makes me proud to be Naked. These are real customer comments that show we're in the right direction. As we're starting to get data that backs that up, we've seen referrals in the U.K. reaching the highest levels in over 2 years. Now let's talk acquisition. We've run several tests regarding our acquisition offer across all markets. We've seen significant improvement to our first order contribution as a result, and we are now ready to scale the learnings globally. We have a new homepage experience live in the U.K. and the U.S. This is a massive step forward for Naked as we're now representing our customer value proposition much more clearly while also allowing customers with different levels of intent to explore Naked the way that best suits them. We are very excited about this launch and its potential impact on our growth. It's important to talk about the things that haven't worked out too. We are expecting YouTube and other video platforms to become relevant channels for us. And while they are driving an important number of sessions and improving frequency among existing angels, the fact is that conversion remains challenging. For that reason, we are divesting away from this channel while we see focus on conversion efforts yield results. The same applies for lead gen. After running holdout tests across Australian geographies, it's clear to us that this channel is fast diminishing returns and that it makes no sense for us to continue to invest in it. We plan to get this business growing through advocacy and referrals. In order to do that, we need to go bigger on the moments that best represent Naked's model. The connection between winemakers and angels and how it adds value to both needs to be front and center, and we need both of them, plus carefully selected creators to spread the word about it. While these are still the early days, we're excited with the reaction we're getting and remain convinced that this is how we'll win in the market. Now back to you, Dom. Dominic Neary: Thank you very much, Maza. So moving on to post period end trading and reiterating our FY '26 guidance. So firstly, and importantly, we are in line -- we are tracking in line with guidance. We're delivering on what we said. We are also making good progress with the strategy we set out in March. The clear progress here is visible in margin and marketing efficiencies and, of course, in cash. We continue to see that and expect progress on that and cost savings as we progress. And of course, we continue to reiterate our medium-term inventory target. We continue to be committed to ongoing distributions and engaging with our partners on our next distribution. Peak is progressing satisfactorily so far. The next 2 weeks, as ever every year are critical, and we will revert in January with a trading update. On to our guidance, there is no change to our guidance. We are comfortable with all the metrics and particularly happy with the significant improvement in EBITDA versus 12 months ago. We continue to anticipate the full $17 million of inventory liquidation costs that we've talked about before. Those are, of course, spread over the next 3 years. As we wrap up, the headline is simple. The business is moving in the right direction. Our first half performance tracks the guidance we set, and we've begun returning cash to shareholders, an important milestone. The structural changes we made earlier this year are bedding in and are already driving clearer focus, faster execution and stronger accountability. We're seeing real progress in both acquisition and retention as a result. We've also strengthened the leadership bench and our Board. Jan and Susan bring fresh perspectives and diverse expertise to Naked. We're grateful to Deirdre for her commitment and service. To end, we remain fully confident in the strategy we set out in March. We're going through peak trading with momentum. And so far, results are encouraging. Thank you all for your time. Operator: That's great. Rodrigo and Dominic. Thank you very much indeed for your presentation. [Operator Instructions] While the company takes a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. And Rodrigo, Dominic, if I may now hand back to you to take us through the Q&A session to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you. Rodrigo Maza: Sure thing, and thank you. Dom, do you want to take the first couple of questions, which is basically the same. Dominic Neary: Yes. Thanks, Maza. Yes. So we've got 2 questions, which are on share buybacks, essentially saying, should we be moving faster on those given the shares are trading below intrinsic value. As we set out in March in our Strategy Day, this is a business that is generating cash and is going to have significant excess cash over the medium term as we increase our profitability and as we generate GBP 40 million cash from our excess inventory. We also set out at the full year results, our clear policy of ongoing distributions, which we would be making as we go forward. And so that policy is that we will distribute up to 50% of cash generation in the last 12 months or adjusted EBITDA in the last 12 months as well, the lower of those 2. And as you'll see, we've made progress with that, and we've implemented that and done our first share buyback back in September. So that's an ongoing policy that will continue. Of course, that still leaves potentially material excess cash, particularly over the coming years. And we've been very clear that we would make one-off and will make one-off distributions of that where that makes sense. What we also need to be clear about is that -- and we said this, is that the key to that is increasing our profitability and working with our financial partners to agree those one-off distributions, and that's exactly what we're doing. So really to wrap up, we are moving ahead with our ongoing distribution policy. As the business becomes more profitable and as more excess cash is generated, that will free up the opportunity to do one-off distributions. That's a question of when, not if. It's not today, but it's hopefully in the not-too-distant future. Rodrigo Maza: Thank you, Dom. We also have a question related to the revenue mix from core members versus new growth and what's our views on that? So as we've shared, we're still going through the impact of the COVID cohorts. Once that has flowed through our base, we are expecting stabilization in the next couple of years. So that then means that acquisition needs to work, right? And our position there has been very, very clear. We are committed to disciplined acquisition, which means focusing on quality over quantity, getting customers -- getting the right customers through the door, people that actually are interested in Naked for the right reasons, for our value proposition and that deliver healthy paybacks for the business. So in summary, we remain focused on keeping retention, keeping Net Promoter Score high as we go through the COVID cohorts, and we remain committed to our disciplined acquisition strategies. There's another question, how about opening a few pop-up stores for peak season and sell Christmas gift boxes and other high-margin wines? This is something that we're definitely looking into. How can we leverage partnerships to bring the Naked experience into the real world beyond our tasting tour, which is massively successful and it's the biggest wine event in the U.K. But yes, we -- this is an area we're exploring. This is an area that we like. I don't think we need help in selling our Christmas gift boxes. Actually, we're very close to selling out of them this year. Over 70,000 of those Christmas cases have already been delivered into our angels homes. So we're very pleased about that. And yes, Christmas season is going well so far. Dominic Neary: Yes, I'd add we have a fantastic wine calendar as well, which -- advent calendar, which I have one of myself at home. And if there are any left at the end of the street when I go home, I'll be having some of that myself. Operator: That's great, Rodrigo, Dominic. Thank you for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we will publish those responses on the Investor Meet Company platform. But Rodrigo, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please just ask you for a few closing comments? Rodrigo Maza: Yes, of course. Well, first of all, thanks, everyone, for your time. We really appreciate it. We continue to be excited about Naked's future, and we remain very confident in our plan. Thank you for your time, and happy holidays. Operator: Fantastic, Rodrigo, Dominic, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Naked Wines plc, we'd like to thank you for attending today's presentation, and good morning to you all.

58天前Insight Analytics约5分钟阅读

MDCLF 2026 Q2 财报电话会议

David Heuzé: Hi, everyone, and thank you for joining us today for this conference following the release of our half-year results, which were published earlier today. The press release is available on our website. Today, I'm joined by Christophe Douat, our CEO. Hi, Christophe. Christophe Douat: Hi, David. David Heuzé: Dr. Richard Malamut, our CMO. Hi, Richard. Richard Malamut: Hi, David. David Heuzé: And by Stephane Postic, our CFO. Hi, Stephane. Stephane Postic: Hi, David. Hi, everyone. David Heuzé: Before we start, I invite you to review the forward-looking statements disclaimer at the beginning of the presentation available on our website. This webcast will last 45 minutes max. We'll start with a presentation and a Q&A session if we receive questions. [Operator Instructions] But now I leave the floor to you, Christophe. Christophe Douat: Thank you, David. Hello, everybody. We are delighted to have you join us and celebrate the filing of Olanzapine LAI. It's a major event for the company. So lots of emotions and excitation at MedinCell today. Last June, I told you that MedinCell was entering the most transformative years of its history, mostly thanks to Olanzapine. And here we are. Our partner, Teva, filed the Olanzapine LAI at the FDA today. And so the clock will start clicking since FDA has 10 months to get back to Teva with a potential approval sometime in Q4 of '26 for a product that is a major product, a priority at our partner and of course, a priority at MedinCell. So let me remind you of our strategy shift to growth. You can see that UZEDY, and we'll come back to UZEDY in a second, is the first engine of growth of MedinCell. Olanzapine will accelerate growth. And then the third engine is made out of the pipeline, with AbbVie #1 leading the way. Let's step back a bit and look at our strategy in schizophrenia. On the left, you have Risperidone. On the right, Olanzapine. Risperidone was a drug of Johnson & Johnson; Olanzapine, Eli Lilly. Both were significant blockbusters for both companies, respectively. Both companies follow the same strategy, life cycle management with long-acting injectables. You can see on the left that Johnson & Johnson was highly successful, building a franchise, which is now $4.8 billion a year. But you can see on the right that there is no big green box. Eli Lilly failed commercially with the long-acting injectable. Richard will tell us why in a couple of minutes. And we, at MedinCell, gave our partner, Teva, the keys to grab some of that potential, a real, appropriate long-acting injectable of Olanzapine. Let me remind you of the metrics that we have on both products. We are eligible to mid- to high single-digit royalties, eligible for a $4 million milestone at approval of Olanzapine LAI, plus $105 million of commercial milestones for UZEDY and $105 million for Olanzapine LAI. Richard, could you tell us why Olanzapine, on a medical standpoint, has such a large potential, why Eli Lilly failed and why Tiny MedinCell in the south of France succeeded? Richard Malamut: I could do all of that, Christophe, and I will. So first, a reminder that oral Olanzapine is the most prescribed oral antipsychotic, and that's mostly because it's currently used for the more severe patients with schizophrenia, the patients who are refractory, which can be up to 30% of patients. But unlike the Risperidone franchise, there is only one approved product in -- one approved long-acting injectable olanzapine product, and it's not being used for reasons that we'll talk about. So the unmet need is very, very high here to have something in a long-acting injectable form to improve compliance for patients who are exactly the patient you don't wish to have stopped their medications. And so for these reasons, the unmet need is quite high. Now on the next slide, a reminder of the safety finding that has limited the use of the Lilly drug, and that's post-injection delirium and sedation syndrome, PDSS, not very common, seen in less than 0.1% of injections, but is severe enough that the FDA put rather onerous monitoring requirements on the label, including a REMS program, which U.S. psychiatrists are not used to following. And most impactful, every patient on every injection has to be monitored in the clinic for 3 hours. So that's not happening and is largely the reason why the product is not being used. Now PDSS is thought to be due to a burst of Olanzapine in the blood. And on the next slide, you can see how MedinCell formulated our LAI Olanzapine to eliminate that risk of burst and therefore, PDSS. And so what you can see here is that on the top, the Lilly product, when injected directly into human plasma almost completely releases within the first 24 hours. You can imagine that, that would correlate with a burst and then PDSS. But on the bottom, the MedinCell product, subcutaneous, where there are very few blood vessels, but even if injected directly in the human plasma, does not release right away, thereby eliminating the risk of PDSS. And our partner, Teva, did negotiate with the FDA the number of injections needed to fully explore the risk of PDSS. That number was 3,600. And as you can see, Teva has conducted more than 4,000 injections in the clinical program with no cases of PDSS. Here, zero is a really good number and bodes well for not meeting those onerous monitoring requirements that really limited the use of Lilly drug. So on the next slide, you can see the safety data for the Phase III study that Teva conducted in using LAI olanzapine. This was released in September of this year. And the key point is that there were no cases of PDSS and no unexpected or surprising adverse events and always comparable to the oral and LAI formulation of Olanzapine. So based on this, as you heard, the exciting news that Teva has filed the NDA today, we should expect a 10-month review time, bringing approval sometime in the fourth quarter of next year, with commercial launch before the end of 2026. and that's to be followed by submission in Europe, as Teva has already announced. Christophe Douat: So let's go back to our growth engines. And so we've discussed Olanzapine, and I think you can all understand now why it is such a strategic significant product. But let's go back to our Risperidone LAI, which is important both because it is bringing us revenue, but also it is a proof of concept of Teva's ability to get a product to market, which bodes well for olanzapine as well. So you can see that prescriptions keep growing and growing in a very nice regular fashion. This translates into sales. And you can see on the next slide that Teva confirmed their guidance of $190 million to $200 million for 2025, which is the second full commercial year. You can notice as well that Q3 had lower sales as Q2. Teva explained that this was a onetime adjustment of Medicaid gross to net. And now maybe, Richard, you could explain to us why UZEDY is doing so well and why it is such a great drug both for patients and clinicians? Richard Malamut: Yes, I'd be happy to do that. So a reminder that when we formulated UZEDY, long-acting injectable Risperidone, we were looking to address some of the challenges faced by patients, clinicians and even payers with the Johnson & Johnson portfolio of Risperidone and Paliperidone products. So first of all, UZEDY is subcutaneous, smaller needle, more comfortable for the patients; whereas the Johnson & Johnson products are intramuscular, more painful, larger needle. UZEDY reaches therapeutic levels within the first 24 hours after injection, making it easy to transition from oral risperidone; whereas the Johnson & Johnson products require either oral supplementation or titrating injections over several weeks before they reach therapeutic levels. UZEDY comes in prefilled syringes, 4 different doses on a monthly, 4 different doses on every other monthly, which correspond to the 4 used doses of Risperidone in schizophrenia, 2, 3, 4 and 5; whereas the Johnson & Johnson products are converted from -- converted to Paliperidone and require reconstitution in the office, which can be somewhat cumbersome for psychiatrists. And finally, Teva had asked U.S. psychiatrists, what one feature of a long-acting injectable product would they desire? And the #1 feature was flexibility to inject in different areas of the body. So in fact, UZEDY, whether it's injected in the arm, the abdomen or the thigh; has the same efficacy and safety, whereas the Johnson & Johnson product, intramuscular, so has variable exposure with different PK up to 30%. So for all these reasons, UZEDY has done very good and very quickly. So as you would expect, Teva has been collecting real-world data after the launch of UZEDY in May of 2023. Here, you can see on the left, a reaffirmation of the primary endpoint in the Phase III, which was relapse rate and time to relapse in that study compared to placebo. But here on the left, showing significant differences between UZEDY and a second-generation oral antipsychotic on relapse rate and time to relapse. But remember that in schizophrenia, 80% of those patients do not take their medicines. And when they don't take their medicines, they relapse and end up in the hospital. So part of the value here is to keep patients out of the hospital. And in fact, on the right side of the slide, you can see that there was an almost 50% reduction in hospitalization rate, a 50% reduction in time spent in hospital if they needed to be admitted and a correlation with a reduction in healthcare cost, which is of great interest to U.S. payers, of course. So on the next slide, we can see two additional pieces of news that Teva had announced this quarter. First of all, UZEDY has been approved for the treatment of bipolar I disorder in the United States. Bipolar I is much more common in the U.S. And while the adherence rate is better than the 80% nonadherence rate with schizophrenia, still 50% to 60% of those patients are noncompliant. And we know that over 300,000 U.S. patients are already taking a Risperidone product for their bipolar I. And the second bit of news is that Teva has announced approval of long-acting injectable Risperidone in South Korea and in Canada, more to come, but those are the 2 countries that Teva has announced. Christophe Douat: Thank you, Richard. Quite exciting on the UZEDY side as well. Just to give you some numbers, Teva estimates the cumulative peak sales of UZEDY and Olanzapine to be between $1.5 billion and $2 billion. MedinCell sales analysts are above $3 billion. Of course, it could be higher, future will tell. And we are looking forward to getting olanzapine out there as well. Now let's discuss the third engine. UZEDY was engine #1, Olanzapine engine #2. And the leading program of the third engine is the first program we do with AbbVie. There is some piece of news today as we are happy to announce that it will be ready to launch into Phase I in 2026. Very strategic program for both companies. Lead formulation was chosen in September '24. We did -- MedinCell did all pre-IND activities. AbbVie will conduct clinical development. And we are eligible to $315 million of potential milestones with royalties that now get into the low double digit. But beyond AbbVie, we have a pipeline of product, Richard, that maybe you could tell us about. Richard Malamut: Sure. So we've talked about the 2 programs on the right, the partnered programs with Teva in psychiatry. But we also have another late-stage program. This is an Intraarticular Celecoxib to treat pain and inflammation in patients who have had total knee replacement surgery. We've been discussing with the FDA this year design of our next Phase III study as well as endpoints, and we look forward to starting that study in the coming year. And then moving to the left, you can see 2 other programs that we run internally. The first one is a 6-month subcutaneous contraceptive. To differentiate from existing shorter-term subcutaneous contraceptives, it is funded by the Gates Foundation, and we do plan to start Phase I sometime in 2026. And then we also have another global health program to prevent the spread of malaria through the use of ivermectin, which kills mosquitoes and is effective in preventing the spread of malaria in endemic areas, particularly in children who are most vulnerable. And some news on that. We've just announced that, that program is also funded by the Gates Foundation. And then we have one more global health program we've recently disclosed, and that's a program in tuberculosis using a novel molecule, which in long-acting injectable form will improve the adherence in these patients who don't tend to take their pills as many months as they need to and reduce the risk of drug resistance. So we're very excited about that program as well. And then we also have 10 to 15 or so additional programs, undisclosed. They're early in development, so we typically don't disclose until a little later. But these are both internal programs as well as programs that are already partnered. They can be already approved, but can also be NCEs, where you need a long-acting formulation to enable use. And again, we're agnostic to therapeutic area and are developing these in more than 5 separate therapeutic areas. David Heuzé: Thank you, Richard. Let's talk about financials. Stephane Postic: Yes, certainly, with pleasure. So I'm going to comment the financials for the half year that was closed on September 30, '25. So first slide -- next slide, please. So the first slide is on the revenue growth over the period. So very nice improvement in the revenues for the period, an increase of 50% compared to the same half year for the past fiscal year. Three main items are contributing to the revenues. First, obviously, the UZEDY royalties, which accounts for approximately 1/3 of the EUR million. I'll come back to that more in detail in a minute. Then we have half of it coming from the R&D partnerships. So obviously, we mentioned earlier the AbbVie First program, and that represents a big part of these R&D partnerships. And on top of that, we mentioned with Rick, the Gates Foundation program or the malaria program that were performed on behalf of foundations. And the third item falling into these R&D partnerships are the 10 to 15 boxes that we saw on the pipeline. Some of them are proof-of-feasibility studies that we are running for undisclosed partners at the moment, but they might be the future of the licensing deal that we will execute over time. So they are very important as well. And third item in this revenue, a 2.5 million research tax credit that we are benefiting from. And again, it is another proof of the maturity of the pipeline and of the different programs, and it explains why this amount has increased largely compared to the previous year. Next slide, please. You are not on the right, you went too quickly. On the royalties from UZEDY, so as Christophe mentioned, UZEDY is doing very well. You've seen the prescription curve, which is progressing very well. Teva has confirmed their guidance for 2025 to $190 million to $2 million of sales, despite a slightly weaker Q3 '25 than expected, the sales have increased by 65% in USD compared to what they were in the same period last year. Once converted in euro, the increase is a bit lower than the 65%. It's only 50%, but it's still very good. And it is very nice to have those EUR 4.2 million on our P&L. On the next slide, you have the operating expenses of the company. So 22% increase compared to last year. So I remind you, 50% of increase in revenues, only 22% of increase for operating expenses. What's important is that 2/3 of the operating expenses relate to R&D activities. And again, it is a proof and evidence that the pipeline is progressing and that the programs in the pipeline are getting more and more mature. So it is good news for the future. And I remind you that also most of the R&D costs are covered by partnerships and revenues. It is the case for the AbbVie First program, also for the Gates Foundations program and again, for the proof-of-feasibility studies. On the next slide, you have a view on the income statement. So if you combine the 50% increase in income with the 22% increase in operating expenses, you end up with an improved operating loss by 13% to EUR 6.6 million over the half year. It is good. It could have been even better without this negative impact of the U.S. dollar -- the weak U.S. dollar over the period, which has impacted us badly. And this -- if this situation with a weak USD was to persist over time, it might delay our return to profitability, which we plan for fiscal year '26, '27, but we have time to see how this evolves. Another comment on the income statement regarding the financial results. So we have again a noncash impact due to the change in the fair value of the EIB warrants. This impact represents EUR 6.8 million for the period. It is linked to the fact that the stock MedinCell stock price has performed very well over the period, plus 65% increase. Again, on that topic, we are -- negotiations are progressing, but too slowly compared to what we were expecting with the EIB, and we are hoping to find a definitive agreement with them that will enable us to waive the put option that exists with the EIB. So without this noncash adjustment to the fair value of the warrants, the net loss would have been drastically reduced to 9 million. And finally, a word on the cash position. So at the end of September, we had EUR 53 million in bank. That's a bit lower to what we had at the end of March, where it was just after the capital raise that we performed at the end of February. So it was probably a peak in our cash position. That said, it is a comfortable cash position that is sufficient to respect all the covenants that we have towards our banks and especially the EIB, and it gives us sufficient visibility for the next 2 years, at least because we obviously will be getting additional royalties on a quarterly basis from UZEDY and hopefully from Olanzapine at the end of '26, plus potentially commercial milestones as well. That's it for me. David Heuzé: Thank you. Thank you, Stephane. And now let's move on to the Q&A session. First question for you, Christophe, maybe what does progress beyond 2026 look like, number of approved products, revenue scale or global partnerships? And how do you plan to maintain technological leadership as competitors [ enter the AI ] space potentially, including big pharma? Christophe Douat: Okay. So on the first question, the best educated guess can be done by looking at the pipeline beyond. So '26 should be approval of Olanzapine. And then you can see in the pipeline, you have CWM potentially WWM, which has commercial potential; AbbVie #1, and then the rest of the pipeline in formulation. As far as technology leadership, that's a very good question. And I will give a bit of context here. 10 years ago, Johnson & Johnson was probably doing about $1 billion in schizophrenia. That became $5 billion worldwide 10 years later. So every single company now in schizophrenia, bipolar want to do a long-acting injectable of their drug. And we believe that the number of indications with long-acting injectable will increase in the next 10 years. Some analysts believe that the global long-acting injectable market will go from about $15 billion today to 50, 5-0, in 10 years, and we want to be best positioned to do that. And so to do that, I predict that at the end of the day, half of our innovation will come from internal innovation, half from external. We already have people scouting the world for new technologies in either academic setting, small companies, and we probably do alliances at some point. We are also working hard at developing the new generations of people. And that is a very significant effort to keep maintaining our lead. We've shown that in our space, we are the best positioned company. We could do things that Johnson & Johnson could not do, we could do things that Eli Lilly could not do. We were the first company that could maybe meet the dream of Melinda Gates. And so we want to maintain that lead for sure, and we'll keep investing in technology. David Heuzé: Thank you, Christophe. Stephane, next question, what are the revenues linked to the joint venture with Corbion for H1? Stephane Postic: So for H1, they are fairly limited, less than 100,000. And that's because when you understand the business model of the JV, at the moment, the orders that the JV is receiving from their different partners is not linear because we are at the beginning of the commercialization. So there can be big orders, one half year and smaller ones on the next one. So over time, it will increase and become more stable. But for the moment, it's limited. David Heuzé: Okay. Next question also for you, Stephane. OpEx has gone up quite notably, largely due to R&D spend. How should we anticipate this to look for the full year and in outer years? Stephane Postic: So indeed, it has increased for the first half year. As I mentioned, it is the evidence that we are gaining credibility and enriching the company portfolio, more programs, more mature programs. So I would say that it's a good news if we are continuing investing in this R&D cost because it is the future of MedinCell and the future licensing deals that is there. David Heuzé: Okay. Next question. The press release that we issued today states that MedinCell has decided to accelerate certain activities related to technological innovation to further extend its capabilities in terms of formulation. Is this perhaps related to peptide or protein capabilities? Christophe Douat: Yes, but not only. There's three directions we could work on. First is highly hydrophobic molecules. Second is the dose because sometimes we are limited by the dose because you don't want to have a depot, which is too big subcu. And then the highly hydrophilic, yes. David Heuzé: Thank you, Christophe. Next question. Last winter, you indicated the first AbbVie program was targeting IND in 18, 24 months. Where we are on that clock today, formulation, CMC readiness? Can you share more about the timeline? When do you expect IND filing and clinical start? And what remaining getting [ attempts ] could push IND beyond mid-'26? Christophe Douat: I think we answered that question during the presentation. As we stated that, yes, we were expecting the start of clinical activities during 2026, which means that all other pre-IND activities, including CMC, are on track. David Heuzé: Thank you, Christophe. Next question. You frame the deal has up to 6 programs, so deal with AbbVie, okay? Have AbbVie and MedinCell already done selected a second and third candidate? And if so, what's the [ growth rate ] for CMC preclinical starts across '26, '27? And are the candidates adjacent category of therapeutic areas are differentiated? Christophe Douat: So as I said, I think, in our French presentation, I can't comment on the status of our discussion with AbbVie. And so I'll go back to the first product, which is on track to go into a clinical stage in '26. David Heuzé: Yes. We just can add that we stated when we announced the collaboration that it can be in different therapeutic areas. That's only what we can say today. Next question. The Board of Directors of MedinCell has been strengthened with additional appointments of prominent industry leaders. Do you see partnership arising from operations tied to these individuals potentially, including Intra-Cellular or Novartis? Christophe Douat: Obviously, we selected -- we select Board members for their competencies, experience, and the 2 new Board members have incredible experience and competencies. If they can help us, like other Board members, using their networks, we would love to use that capability. David Heuzé: Next question for you, Richard. Is it feasible for both mdc-STM and mdc-CWM to enter clinical development in 2026? Or are you prioritizing one of the programs? Richard Malamut: Yes. So we expect all our programs to succeed. And the timelines are based on the data accumulation on the programs. And so as of today, we're looking for the WWM to enter Phase I sometime towards the end of 2026. STM, we think maybe a little later. David Heuzé: Thank you, Richard. Next question, Stephane. Outside of the $4 million for the potential approval of olanzapine next year, are there any other milestones to anticipate for 2026? Stephane Postic: So I'm not sure I can disclose much on that, but we hope, indeed, to have more milestones in '26, '27. And you know that we are eligible to several types of development and commercial milestones from Teva on one side, also from AbbVie. So there are different sources of milestones that can be achieved in '26, '27, and it's -- there's a probability to it. David Heuzé: Next question and last question. You've indicated that you currently have multiple collaborations, deals ongoing. Could you please comment on the pace for future partnerships that might materialize and get announced in the next 5 years? Christophe Douat: Okay. So obviously, I can't comment on the current collaborations, but I can comment on what we are building here. And the image I will take is a string of pearls, pearls meaning blockbuster potential drugs. So we have UZEDY, then Olanzapine, AbbVie #1. And now all our focus and efforts are trying to work on the next pearls after those programs. David Heuzé: Thank you, Christophe, and thank you all for your questions. It was a very good discussion. Before we leave, Christophe, I... Christophe Douat: Thank you for being with us tonight and sharing this amazing news. You can see that it's quite emotional. We've been working on olanzapine LAI for over 10 years against all odds, our team here really knew we could solve it, and we did, but we also convinced Teva that we could. Teva has been a formidable partner on this, taking the product through clinicals. And here we are with a major, major first-in-class product that could be launched in about a year. So exciting news. As I said in our French meeting just earlier today, here, we will be drinking champagne tonight to celebrate this news. And we are looking forward to our next discussions and following all the progress. You see that even beyond Olanzapine, UZEDY is progressing well and the rest of the pipeline as well. And the three engines are really performing well. Thank you. David Heuzé: Thank you, guys. Thank you, everybody, for joining us today. We truly appreciate your trust and your interest in MedinCell and hope to see you soon. Thank you. Bye.

58天前Insight Analytics约5分钟阅读

CMP 2025 Q4 财报电话会议

Operator: Good morning, and welcome, everyone, to the Compass Minerals' Fiscal Fourth Quarter and Full Year 2025 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Brent Collins, VP of Treasurer and Investor Relations. Please go ahead. Brent Collins: Thank you, operator. Good morning, and welcome to the Compass Minerals' Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. Today, we will discuss our most recent quarterly and full year results and provide some commentary on our outlook for fiscal 2026. We will begin with prepared remarks from our President and CEO, Edward Dowling; our CFO, Peter Fjellman; and our Chief Operations Officer, Pat Merrin. Joining in for the question-and-answer portion of the call will be Ben Nichols, our Chief Commercial Officer. Before we get started, I'll remind everyone that the remarks we make today reflect financial and operational outlook as of today's date, December 9, 2025. These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially. A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find a reconciliation of these items in our earnings release or in our presentation, both of which are also available online. I'll now turn the call over to Ed. Edward Dowling: Thank you, Brent. Good morning, everyone, and thank you for joining us today. I'll begin our call this morning by recapping our accomplishments for fiscal 2025. Compass Minerals today is a significantly healthier, more focused company than it was a year ago. The story of 2025 is primarily one of improving our financial position of the company and providing the foundation to pursue its back-to-basic business model. You'll recall that the company began last year with an excess amount of North American highway deicing salt following 2 milder winters. To address this issue, we made the deliberate decision to scale back on production ahead of the '24, '25 deicing season. The section, combined with more normal winter weather across our service markets allowed inventory levels to revert to more sustainable levels and provide a substantial release of working capital. That working capital dividend in turn, allowed us to delever during the year and reduce our net debt by 14% or $125 million. During the year, the company also took steps to rationalize its corporate cost base. In March, we carried out a sizable reduction in force and also made a strategic decision to wind down Fortress, company's fire-retardant business. These efforts contributed to a $25 million improvement in reported SG&A year-over-year, representing an 18% reduction. Our ability to demonstrate that we can generate cash reduced debt and cut costs contributed to a successful refinancing midyear that provided a number of positives for the company. First, that allowed for an amendment to our credit agreement that enhances our liquidity and provides more financial flexibility; second, it allow us to extend the maturity wall of our outstanding debt, these improvements in our debt structure provide us with time and flexibility to support our back-to-basic strategy. While the action is being taken to improve our financial position and foundation have been at the forefront, we've also been taking steps to improve the operational and organizational aspects of the business. In the Salt segment, the decision to curtail rock salt production following the '23, '24 deicing season resulted in an adverse impact to margins during 2025 due to the higher per ton cost profile. However, that negative margin impact is transitory and we have already ramped up both Goderich and Cote Blanche mines to more normal levels of production, which will result in a reduction of production cost per ton, all things being equal. Throughout the year, we progressed a number of initiatives to improve the operations of our salt assets in continuous improvement initiatives at the Goderich mine and Cote Blanche as well as an overhaul of our safety and program. The Plant Nutrition segment, our primary efforts have been centered on restoring the health of the pond complex it out of Ogden. Our SOP operation in Utah is similar to any other manufacturing plant in the world that it operates better when higher quality feedstock is flowing through the facility. The restoration of the pond complex will improve the quality of the material that goes into Ogden which improves how the plant operates and helps drive down costs. Pat will speak more in a moment about some of the work that we have planned for 2026. We expect further enhancements of the operations in Utah. Our results in fiscal 2025 are already reflecting these improvements with sales volumes growing up by 19% year-over-year. Adjusted EBITDA increasing by almost 107% during the same period to $35 million. From a leadership perspective, our executive structure and team have overhauled during the year. We took steps to simplify the organization as part of a reduction of force I referred to earlier, and we added the leaders whose skill sets and experience better aligned with our back-to-basics framework. As we reflect on the year, I think 2025 will be remembered as a pivotal year for Compass Minerals. We successfully reset the organization and establish a foundation that enables us to sharpen our focus on improving operations, enhancing profitability and reducing debt. Internally, we speak often about people, processes and systems. We are approaching all 3 of these with a mindset of continuous improvement and our focus on these will allow us to continue building on the progress we made this year. I am energized by the opportunities ahead and believe we're well positioned to build a sustainable value through back-to-basic framework. It's exciting time to be part of Compass Minerals. Before turning the call over to Peter, I want to acknowledge the efforts of our employees over the last year. Strategic pivots and transitions like the One Compass Minerals has been undertaking are both exciting and disruptive. Our workforce has embraced our new strategy, and I'm proud of how they've risen to the challenge. With that, I'll turn the call over to Peter for a review of our fourth quarter and full year results as well as a quick summary of our 2026 guidance. Peter Fjellman: Thanks, Ed. I'll begin my remarks by discussing our quarter and year-end financial performance before providing perspective around our outlook for 2026. We posted consolidated operating earnings of $12 million for the quarter, which is an improvement from the operating loss of $30 million a year ago, which included noncash impairments in the Plant Nutrition segment of $18 million. Consolidated net loss was $7.2 million, which improved from $48 million net loss in the same period last year. Adjusted EBITDA grew significantly to $42 million for the quarter from roughly $16 million the year before. For the full fiscal year, consolidated revenue was approximately $1.25 billion, which was up 11% year-over-year. The company reported operating income of $25 million compared to an operating loss of $117 million last year. We posted a consolidated net loss of $80 million versus a consolidated net loss of $206 million a year ago. Both periods include noncash impairments related to our now terminated Fortress fire retardant business and fiscal 2024 also includes impairments related to certain write-downs in our Plant Nutrition business. Adjusted EBITDA for the year was $199 million compared to $206 million last year. The comparability of these numbers on a reported basis are impacted by the noncash gain related to Fortress contingent consideration liability write-down. Adjusted for these items, a modified adjusted EBITDA increased by approximately 4% year-on-year from $184 million to $191 million. Drilling down into the segment results. Salt business revenue in the fourth quarter was $182 million, compared to $163 million a year ago. Total volumes were up 13% compared to the prior period. While total pricing for the segment was down 1% year-over-year to approximately $106.50 per ton due to a shift in product mix. Highway deicing volumes increased 20% year-over-year, while C&I volumes declined 3% over the same period. From a pricing perspective, highway deicing and C&I prices increased 1% and 7%, respectively. Net revenue per ton, which accounts for distribution costs, decreased 1% to roughly $77.50. On a per ton basis, operating earnings came in lower year-over-year at $12.60 per ton, down 9% and adjusted EBITDA per ton decreased 7% to $23.43. Both of these measures reflect the impact of higher cost production flowing through the income statement with current sales. Those higher cost tons, the result of our decision to temporarily curtail production of our highway deicing assets ahead of last year's deicing season. For the full fiscal year, revenue totaled a little over $1 billion, up 13% year-over-year. These results reflect a more average winter compared to the weak 2023, '24 deicing seasons that we experienced 2 years ago. Highway deicing volumes were up 20% year-over-year to 9 million tons and C&I volumes were up 1% over the same period to 1.9 million tons. Total Salt segment volumes were up 16% year-over-year. Pricing dynamics were mixed year-over-year with highway deicing prices down 2% and C&I prices up 4% in 2025. Operating earnings for the year were $146 million, and adjusted EBITDA was $219 million. Both of these measures reflect the same adverse cost pressures related to our salt production curtailment that I spoke about a moment ago. I'll speak to this more in a moment, but it is important to remember that since we ramped up highway deicing production, cost per ton are projected to improve as we benefit from improved fixed cost absorption resulting from higher production levels. Moving on to the Plant Nutrition segment. The fourth quarter saw volumes dip 9% from the prior year period. Pricing was up 8% to $670 per ton. As Ed mentioned, we made good progress on our initiatives aimed at improving the cost structure in the segment over the last year, and this has resulted in improvements in profitability. Operating earnings have improved to approximately $100 per ton year-over-year and adjusted EBITDA increased to approximately $218 per ton over the same period. For the full year, volumes within the segment were 326,000 tons, which is a 19% increase year-over-year. The improvement in operations in Utah is providing more consistency and higher productivity at the plant, and this allowed us to serve business beyond our core markets in the Western U.S. and to sell down inventory during the year. Average pricing for the year was down approximately 4% to $634 per ton. Operating income per ton was $20 for the year, and adjusted EBITDA per ton was $107. I'll now spend a couple of moments commenting on the company's financial position before commenting on our guidance for 2026. To echo Ed's comment, the company is more stable today compared to a year ago. The key priority last year was rationalizing our North America highway deicing inventory position. At the end of September, those inventory values and volumes were lower by 33% and 36%, respectively, compared to prior year. We've taken a thoughtful approach as we built inventory ahead of the 2025, '26 highway deicing season. Our focus is on disciplined production planning and alignment within our sales forecast for the season. The refinancing transaction included in June, has set a financial foundation that will allow the company to build upon the organizational and operational initiatives that are already underway. The refinancing comprised of an amendment to our credit facility alongside a new note issuance. The amendment delivered 2 key benefits. First, it locked in the commitment level of the facility, $325 million for the full term of the agreement, eliminating the step downs that have been scheduled in the prior agreement. Second, it revised the leverage covenant from a total net debt calculation to a net first lien debt measure. Together, these changes enhance our liquidity and provide greater financial flexibility. In addition, the note offering extends our maturity wall by several years and therefore, affording the company additional time to execute our improvement and efficiency initiatives. The company's stability has been further strengthened by the resolution of several legal and tax matters. In 2025, the long-running class action lawsuit related to the alleged disclosure issues was settled and was fully paid by insurance. Subsequent to year-end, we also reached an agreement to settle the Ontario mining tax dispute related to tax assessments from 2002 through 2018. That settlement resulted in approximately $10 million net cash outflow after accounting for refunds we expect to receive once impacted federal and provincial tax returns are amended and filed. The resolution of these matters removes uncertainties that had been a source of concern for some stakeholders and now allows the company to redirect time and resources toward back-to-basic efficiencies. At the quarter, we had liquidity of $365 million comprised of $60 million of cash and revolver capacity of around $305 million. Finally, moving to our outlook for fiscal 2026. The range of guidance for total company adjusted EBITDA for 2026 is $200 million to $240 million. The range for Salt segment adjusted EBITDA in 2026 is $225 million to $255 million and reflects an expected improvement in adjusted EBITDA margins of approximately 200 to 300 basis points over full year 2025. This is being driven by stronger pricing and lower anticipated per ton costs that are largely the result of higher fixed cost absorption attributable to restoring production levels at the mines. The company refines these processes for forecasting salt volumes for this year. The company used a combination of factors, including historic relationships of sales to commitments, market data and historical weather-based trends for planning purposes. The primary motivation for changing the process is to more tightly align our production, sales and inventory processes. Based on the company's current view of these factors, sales volumes are forecasted to decline approximately 8% at the midpoint of guidance. Ultimately, sales will be driven by winter weather and how that drives demand in certain markets. For the Plant Nutrition segment, the range for adjusted EBITDA in 2026 is $31 million to $36 million. We are projecting lower sales volumes in 2026 for a couple of reasons. First, we think some market demand was pulled forward into 2025, which will result in a slightly softer market from a demand perspective in 2026. Additionally, we continue to focus on restoring the health of the pond complex, ensuring that we do not overharvest the ponds for an unsustainable short-term uplift to production. Despite the decrease in sales, we expect to generate a similar level of adjusted EBITDA in 2026 on higher pricing and improved cost structure. The guidance range for adjusted EBITDA related to corporate overhead and other is negative $56 million to negative $51 million. These results reflect the cost rationalization efforts began in 2025, and the midpoint of guidance implies an improvement of corporate adjusted EBITDA of approximately 15% year-over-year when accounting for the impact of the $7.9 million gain recognized related to the write-off of the Fortress contingent consideration liability in 2025. With respect to our capital program for 2026, total capital expenditures for the company are expected to be within the range of $90 million to $110 million, assuming a winter in line with our forecast. This level of capital investment is what we consider to be normal for a business on a regular basis. The increase in 2026 reflect the fact that we reduced CapEx in 2025 due to the slow start we had to the 2024, 2025 deicing season and our desire to align capital spending with our ability to generate cash flow. Balancing CapEx with cash flow remains important to us. and we'll continue to actively monitor that as the deicing season progresses. With the improved financial flexibility we have after last year's winter and refinancing, we now have the option to advance important capital projects even if winter is softer than our expectations. I'll now turn the call over to Pat, who will discuss some operational priorities related to our back-to-basic strategy for the year as well as some of the larger projects we have planned for fiscal 2026. Patrick Merrin: Thanks Peter. As part of our back-to-basic strategy, we are focusing on a number of key operational systems in 2026. The first is implementing our fatal risk management system, which was launched in October. There is nothing more important than the safety of our employees and contractors, and this new system aligns with best practices in the industry. The next major effort we'll be working on is developing life of mine planning processes to give us a better ability to manage the capital and production plans, which will allow us to thoughtfully adjust production and costs based on market conditions. Lastly, we are implementing a maintenance system to focus on preventative maintenance and equipment reliability. These are all in an effort to create low-cost fit-for-purpose operations that can flex with the market conditions as required. On the capital front, at Goderich mine, the work planned for this year includes the continued construction of the Northeast bypass to allow for more direct access to the current production bases in the mine and the reopening of a utility corridor as well as completing the final mill design. We've made the determination that we will build a new mill rather than move the existing mill as has been discussed as an option in the past. This decision was made to align the capabilities of the mill with market opportunities as well as reducing project execution risk. These initiatives at Goderich are being done to more centrally position the mill to the shafts, and to allow us to abandon higher-cost areas of the mine, both of which should improve cost per ton in the future, all things being equal. Other major projects this year include a project to install a new dryer in the compaction process at Ogden, which will improve the yield and quality out of that facility as well as a project related to a new head frame at Cote Blanche. The balance of our capital program is normal course maintenance capital. With that, I'll now turn the call over for questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] We'll go first to David Begleiter at Deutsche Bank. David Begleiter: Could you address again the volume decline you're forecasting in highway deicing and whether that's a structural decline or maybe some sort of cyclical decline? Or how do you look at that number going forward? Ben Nichols: David, this is Ben. I appreciate the question. I think 2 things to note. One is our commitment levels year-over-year were slightly up, which we had communicated previously. The reason you're seeing a decline in the forecasted sales volume is it's just a reversion to more typical winter assumptions. The prior winter operated at, call it, 95-plus percent of commitment levels. And our guidance moving forward is just a move back to more typical weather. David Begleiter: Understood. In terms of the full year guidance range, what are the drivers do you think to get to the upper and lower end of that guidance, EBITDA band? Ben Nichols: Yes, David, Ben again. I think the primary driver would be upside in winter weather. That's going to be the biggest impact to getting to the upper end of the guidance. And then obviously, any efficiencies that come with better market demand. Edward Dowling: And I would add -- David, this is Ed. I would add consistent operations and success with our improvement efforts that are ongoing at the different mines. Operator: We'll move next to Jeff Zekauskas at JPMorgan. Jeffrey Zekauskas: Given that you expect your volumes as a base case to be lower in both segments year-over-year, does that mean that your inventories are unlikely to grow next year? Peter Fjellman: Yes, this is Peter. So we continue to align our inventories and our production levels. to meet those demands and that range of demand. Edward Dowling: Yes, this is Ed, we'll comfortably continue to manage our inventory in the company. Our objective is to use cash and retire debt. And we'll ensure that we maintain the proper level of inventory as we proceed along that path over the course of the year. So we're not planning on building inventory over and above kind of where we are. Does that answer that? Jeffrey Zekauskas: To put it a different way, do you expect to use working capital in 2026 or not? Ben Nichols: Yes. So I think the -- Jeff, this is Ben. And I think the way to think about it is there's time frames within our core business. One is the inventory that you're carrying through this season. And so as we think about our inventory profile through this season, call it, end of March, we feel pretty confident that we're fully aligned to our sales forecast. At that point, we'll make the decision as to how the winter informs the next season. and we will adjust our production planning and inventory strategy accordingly. So that's how I would think about it. Jeffrey Zekauskas: And then in Plant Nutrition, why were volumes pulled forward? And how much of your volumes do you think were pulled forward? Ben Nichols: Yes, Jeff, this is Ben. The exact number would be hard to pin down. Really, it was just a function of the way the market behaves. And luckily, we were in a good place at Ogden from a production stability standpoint, we had the inventory in place to go ahead and serve the business and monetize in fiscal '25. So it was a significant portion of the delta between the year-over-year variance, but I wouldn't give you an exact number. Jeffrey Zekauskas: Were there onetime benefits in the fourth quarter in that your year-over-year, your projection for EBITDA next year is really no different than what you earned in '25, and you had obviously a very, very strong second half. Why are you making more in Plant Nutrition next year, as a base case? Ben Nichols: Yes. Primarily, it's going to be the price upside you see in the P&L. Operator: [Operator Instructions] And at this time, we have no further questions. I would like to turn the conference back over to Ed Dowling for closing remarks. Edward Dowling: Well, thank you all for your interest in Compass Minerals. Please don't hesitate to reach out to Brent, if you have any follow-up questions. We look forward to speaking with you over the next quarter. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

58天前Insight Analytics约5分钟阅读

CHG.L 2025 Q4 财报电话会议

Michael Ord: Good morning, and thank you for joining us for Chemring's full year results for the period ending 31st of October 2025. I'm joined today by James Mortensen, our Chief Financial Officer; and we have Tony Wood, our Chairman, with us also. This morning, I'll start with the group highlights for the year, then hand over to James for a detailed review of our financial and operational performance. I'll then return to discuss the market environment and update you on the progress we've made in delivering our growth-oriented strategy. FY '25 was another year of solid performance for Chemring. What was particularly pleasing is that we achieved this despite some short-term headwinds, most notably softness in U.K. government order placement across national security and defense, which impacted Roke. This resilience reflects the work we've done to build a high-quality business capable of navigating challenges and delivering sustainable growth. Global defense spending continues to increase, driven by U.S. demands for greater burden sharing across NATO, the conflict in Ukraine and rising tensions in the Asia Pacific region. These dynamics underpin a sustained upcycle in defense and security investment, which is expected to persist into the next decade. Our record order book is clear evidence of this trend. During the year, we secured several strategically important contracts, including STORM, Roke's GBP 251 million U.K. MOD multiyear missile defense program. And these wins strengthen our future prospects and support our ambition to double annual revenue to GBP 1 billion by 2030 while maintaining strong margins. Turning to the headline numbers. Our three Energetics businesses delivered exceptional results with all three achieving record order books and two delivering record revenues and operating profits. The group revenue increased by 2% to GBP 498 million, and operating margin improved from 14.3% to 14.8%, reflecting strong operational effectiveness and agility. Earnings per share were 19.4p and cash conversion rose to 114%, reinforcing the cash-generative nature of the group. Order intake reached GBP 781 million, up 20% year-on-year, delivering another record order book of GBP 1.3 billion, up 32% since last year. We also continue to advance our safety and ESG agenda and our total recordable injury frequency rate fell to 0.48 from 0.69, demonstrating progress towards zero harm ambition. Looking ahead, I'm more confident than ever in Chemring's position to capitalize on long-term demand. We are a specialist manufacturing and technology business with the unique positions at the heart of national security, defense and space markets, all markets in which growth has been driven by rising global instability and the need to rebuild defense industrial capacity after decades of underinvestment. With market-leading positions, which are often sole source, our diversified and synergistic portfolio is by design and hard work, positively exposed to structural tailwinds expected to persist for many years, and our track record of execution is evident in expanding margins and excellent cash conversion. Our resilient balance sheet enables investment in organic and bolt-on acquisitions and enhance our offering and strengthen market leadership. In summary, Chemring is very well positioned to deliver superior and sustainable shareholder value over the longer term. I'll now hand over to James, who will take you through the financial results, operational performance and our innovation review in more detail. James Mortensen: Thanks, Mick. In what has been a challenging U.K. contracting environment, we have still managed to deliver an improvement across all of our key metrics, demonstrating the resilient high-quality nature of the business. So first to the highlights. Another record order book, up GBP 1.3 billion, up 32%. Continued momentum in revenue, up 2%. Operating profit was up 6%, resulting from a focus on operational excellence. This resulted in margin up 50 basis points to 14.8%. EPS up 3% despite higher tax and finance costs, strong cash conversion at 114%. And so the Board has declared a final dividend of 5.3p, giving a total dividend of 8p, up 3%. So turning next to our segmental performance. Countermeasures & Energetics revenue grew 17%. Energetics delivered ahead of schedule and improving operational performance at our Tennessee Countermeasures business resulted in a strong result. Operating profit was up 37% and margin increased to 19.1%. It was a weaker period in Sensors & Information, as expected and previously highlighted. This was because there were delays to U.K. government spending and the prior year benefited from JBTDS LRIP. This meant revenue was down 18% and operating profit down 25%. As a result of early action to control cost, we maintained operating margins of nearly 18%, demonstrating how even in the current market, this is a high-quality business. Group revenue was up 2% despite an FX headwind of GBP 5 million. Group operating profit was up 6% and operating margin was up 50 basis points to 14.8%. On a constant currency basis, group revenue would have increased by 3% and operating profit by 7%. So let's look in a bit more detail at each of the segments. It was another strong year for order intake in Countermeasures & Energetics, demonstrating the critical often sole source, highly engineered nature of the products in this segment. Order intake was up 21% as our customer programs are ramping, we are seeing that demand often in the form of multiyear orders. There was a strong performance in Energetics with completed projects delivering ahead of schedule in Chicago and Norway. We also saw some benefit from increased pricing and the results of our continued focus on operational excellence, improving volumes. This resulted in a particularly strong H2 margin performance. The expansion projects in Chicago and Scotland are substantially complete with just the commissioning phase to be completed in Scotland. In Norway, the first phase is complete and delivering ahead of schedule. However, as a result of higher infrastructure and groundwork costs, we now expect total costs of GBP 180 million, up from the GBP 145 million initial estimate. This will be offset by GBP 90 million of grants, given the net spend of GBP 90 million. We still expect to generate very attractive returns on the investment and for group revenue to increase by GBP 100 million per annum and operating profit by GBP 30 million per annum from 2028 once the three capacity expansion programs are complete. In countermeasures, teams executed well across all of our facilities. In particular, we saw improving operational performance at our Tennessee countermeasures business with improving volumes coming out of that facility, the operational challenges and low-margin contract that held us back last year are now completely behind us. Operating profit grew 37% and margin was up 280 basis points to 19.1%, reflecting that strong operational execution. We have great visibility into next year and beyond. Order cover remains really strong with 95% coverage for '26, 93% for '27 and 59% for '28. So moving now to Sensors & Information, where order intake grew 19% to GBP 179 million. In particular, it was pleasing to see that Roke order intake was up 24% on the prior year. Revenue was down 18% to GBP 175 million as a result of a softer U.K. government contracting environment affecting Roke. We have tightly managed the business in this challenging environment, reducing headcount by about 80 in the year, whilst protecting key capabilities. We now have a bigger bench of employees with the highest clearance than when we started the year. This demonstrates we are well positioned for the current environment and for when order flow improves. We continue to execute well in our U.S. Sensors business, receiving a $15 million order for the naval version of our biologic detector. We remain on track to receive the FRP award for the Army version, JBTDS, in 2026. In August, we completed the Landguard acquisition. Integration has progressed well, and the business performed in line with plan. We think this is a great business with a strong management team, and we are confident this is a combination that will deliver. Early action to manage our cost base meant we held operating margin at 17.8%. Operating profit fell 25% following the drop in revenue. The order book grew 5% on prior year at 45% order cover for FY '26. It's in a similar place to last year, and we expect to return to growth in the second half of FY '26. Given the critical areas where we support our customers and the strong pipeline and opportunity for product sales, we remain on track to grow Roke to GBP 250 million by FY '28. So moving on to net debt. With a strong focus on cash generation, cash conversion was 114% in the year with operating cash of GBP 112 million. We have continued to invest in additional capacity with GBP 76 million spent in the Energetics and a further GBP 29 million spent on automation and maintenance. This has been offset by GBP 24 million of grant funding. We've also returned GBP 26 million to shareholders through our growing dividend and the share buyback, and we've also purchased shares to satisfy acquisition consideration and employee share options. After great progress made by the business in managing working capital, closing net debt of GBP 89 million was lower than expected, representing 0.95x (sic) [ 0.90x ] leverage. On capital allocation, we remain consistent. Overall, we want to maintain a resilient balance sheet, and we will target leverage of less than 1.5x. First, we'll continue to invest in the business. Norway is now the primary focus, given spending is largely complete in Chicago and Scotland, but we were also looking at opportunities for further automation like at our U.K. Countermeasures business. Second, we'll continue to execute focused M&A. Landguard was a good example of a bolt-on within Roke, which remains the main focus. We'll also continue to screen for targets in space and missiles in the U.S. and Europe. We'll remain disciplined, and we have a healthy pipeline of opportunity. The target annual dividend cover of 2.5x has now been met, and so we expect to maintain that level of cover going forward. And finally, we'll return surplus capital to shareholders. We've returned GBP 4 million in the year with GBP 36 million remaining on the buyback. So now let's turn to FY '26 and how we see that progressing. Overall, trading guidance unchanged with 76% revenue cover next year with a similar H2 weighting to prior year. In Countermeasures & Energetics, we are targeting low double-digit growth. That's made up of mid-teens growth in Energetics and low single-digit growth in Countermeasures. Like last year, we expect an H2 weighting. Sensors & Information, we are targeting mid-double-digit growth. U.S. Sensors will be flat as we wait for JBTDS to full rate production expected to start in FY '27. We expect Roke to return to near '24 revenue levels next year, but a return to growth in H2, so an H2 weighting for revenue and profit. Interest costs will be about GBP 10 million. Rates haven't come down as much as we thought and net debt is higher. We now expect CapEx in '26 to be in the range of GBP 100 million to GBP 110 million, mainly resulting from higher costs in Norway. And finally, as we enter a growth phase, we expect cash conversion in the range of 80% to 85%, but returning to normal levels in the medium term. We're also mindful of some external factors, which we also flagged last year, continued short-term budget timing disruption in the U.S. and U.K. and obviously, any significant movements in FX. So that was the numbers. Now for innovation, one of our core values, and it still amazes me just how much capability we have. Drones pose an increasing threat, not just to our armed forces, but also to our civilian infrastructure. This is CORTEXA, a small, rapidly deployable system that is a result of over 5 years work with the U.K. MOD. It's a great example of how Roke can fuse its software with the best off-the-shelf technology. Depending on the mission, you can swap out the sensors and it's compatible with a range of factors. As the threat changes, it can evolve by training the AI classifier. It combines miniature active radar and point tilt zoom sensors to provide a high-resolution capability in day or night. The AI in Roke software allows you to identify multiple threats automatically. First on radar, so the system can determine its location and its track. Next, an image generated by the sensor -- using an image generated by the sensor, AI classifies the object. Is it a threat and how serious? So not just if it's a drone, but what kind of payload does it have? Then this is fed back to operators in a simple user interface, so they can take appropriate action fast. The system can track more than 20 threats at a time, so it can counter the increasing threat of drone swarms. This product has both military and civil applications. Having already sold our first preproduction units to a key reference nation, we can see a clear market opportunity. So thank you. That brings me to the end of my section. I'll hand back to Mick for the strategy update and outlook. Michael Ord: Thanks, James. Before turning to our operational performance and growth opportunities, let me start with what we're seeing in our core markets and why this underpins our confidence in the longer-term outlook. Geopolitical tensions remain at the highest levels in recent memory, whether it's the conflict in Ukraine and an increasingly assertive Russia or rising tensions across the Asia Pacific, this environment is driving a fundamental rearmament cycle expected to last at least a decade, possibly two. Technology and innovation continue to reshape defense and security activities and demand for traditional capabilities such as munitions and missiles is growing alongside disruptive technologies. This very significant increase in demand has exposed vulnerabilities in NATO's defense industrial base after years of underinvestment. Rebuilding resilience will take time and governments are placing greater emphasis on national security and closer collaboration with industry. In the U.S., the world's largest defense market, the Trump administration is focused on maintaining overwhelming military superiority. The FY '26 DoD funding request is $961 billion. And in parallel, the U.S. has signaled it will no longer shoulder NATO's financial burden, prompting members to target defense spending of 3.5% of GDP by 2035. How nations respond to this rising global instability will likely create significant opportunities for Chemring. Next, I'll focus on the U.K. and Europe. Starting with the U.K. While short-term softness persists, we expect sustained investment in capability, resilience and technology over the medium to longer term. The U.K. government has committed to increase defense spending to 2.5% of GDP by April 2027 and an ambition to reach 3% in the next parliament. Recent publications, notably the Strategic Defense Review, National Security Strategy and Defense Industrial strategy, all signal a focus on sovereign-based manufacturing and advanced technologies. Priorities in munitions, energetics, active cyber defense and operational mission support are all aligned with Chemring's strengths. The defense investment plan expected before year-end should outline funding priorities and its release should trigger new contracts in munitions, energetics and digital defense capabilities. Turning to Europe. Defense budgets are rising sharply, reaching EUR 326 billion in 2024 with a further EUR 100 billion increase projected by 2027, alongside major EU initiatives, including the EUR 800 billion Readiness 2030 program and the EUR 150 billion Security Act for Europe instrument. European priorities are to increase industrial capability and military readiness and the Nordic nations, in particular, are investing heavily in energetics. Our sales into Europe have grown over 120% in the past 3 years, and we expect this upward trend to continue. Against this positive backdrop, let's review our progress in 2025. We set out 3 strategic imperatives last year: grow, accelerate and protect, and I'm pleased to report good progress against all 3 areas. Organic growth initiatives are on track with some ahead of schedule. Our U.S. countermeasures business rebounded after FY '24 challenges with operational improvements in Tennessee delivering higher production volumes and reduced downtime. And in August, we acquired Landguard Group, enhancing Roke's defense technology portfolio and creating operational synergies. Integration is progressing well, and we see a healthy pipeline of similar bolt-on opportunities across Roke and the U.S. space and missiles market. And as always, safety remains nonnegotiable with our recordable injury frequency rate reduced, reinforcing our zero harm ambition. Our Energetic expansion program is advancing well. In Chicago, the expansion program is ostensibly complete and was delivered on budget. The facility fit-out has been successful with the team establishing continuous flow production operations ahead of schedule. With strong order visibility, the business is firmly on the front foot. In Scotland, construction of the new propellants facility is complete, along with the installation of production machinery. Facility commissioning is underway and revenue generation is on track for FY '27. Market demand for double-based propellants remains strong, and the facility's order book is underpinned by a 12-year agreement with Martin-Baker and GBP 47 million worth of NLAW missile orders from Saab. In Norway, Phase 1 of the expansion program is ahead of schedule and Phase 2 is progressing well despite some cost increases. However, investment returns remain strong. In addition to our existing production site, the Norwegian government has allocated funding for the next phase of work to establish the new greenfield production facility. In Germany, work is on track to deliver a new Energetic blending facility in 2027, supporting Diehl Defense's 155-millimeter munitions line under our EUR 231 million framework contract. And in the U.K., we are completing customer-funded studies assessing the feasibility of establishing new energetic material production capabilities at our Ardeer site in Scotland. These projects strengthen our critical position in munitions and missile supply chains. And whilst they are long term in nature, we remain focused on delivering near- and medium-term growth. Roke faced a challenging U.K. market in FY '25 with slower-than-expected recovery in U.K. government order placement. But importantly, we've seen no cancellations and no competitive losses, only contract delays and extensions. And notwithstanding these challenges, Roke was successful in securing GBP 65 million worth of contract renewals from national security customers, continuing to provide a very solid underpin for the business. Looking forward, Roke will increase revenues from its growing portfolio of market-leading defense products, and we will continue to access more international markets. Highlights for the year have been the launch of the DECEIVE EW detection and attack system and CORTEXA, the counter-drone system, which James took you through, both of which have been well received by U.K. and international customers. And the team won more than GBP 20 million in defense product orders outside of the U.K., including Resolve, Perceive and Locate systems to Latvia, Sweden and Egypt and with the expectation of further orders to come in '26. With recovery in national security expected in H2 of '26 and with opportunities pipeline that exceeds GBP 900 million, Roke remains well positioned for future growth and all of which supports confidence in Roke achieving GBP 250 million worth of revenue by 2028 with continued strong margins. So to conclude, we've made solid progress in '25, continuing to build a high-quality and resilient business whilst investing for future growth. Trading since the start of the current financial year is in line with our plans and with 76% of expected '26 revenues already in the order book, the Board's expectations for '26 performance remain unchanged. With market-leading products, technologies and services critical to our customers and with a resilient balance sheet, we are confident in achieving our ambition of EUR 1 billion annual revenue by 2030 and balancing near-term performance with longer-term growth and value creation. So that concludes the presentation, and we're now happy to take your questions. Could I ask that you state your name and the organization that you represent before asking your question? Thank you. Sash Tusa: Sash Tusa from Agency Partners. You talked about the U.K. government's request for proposals for new energetics production. Clearly, one of the sites that's been highlighted by the government is Ardeer. If it's not, it's something very near it. And one of the products that they -- particular products they're looking for is HMX, which is something you already produce. Are there any other sites or any other products that you would be interested in bidding for, firstly? And then secondly, what do you see as being the risks if other companies decide to come into the U.K. market and try and bid for other capabilities or indeed sort of bundle up some of the capabilities the U.K. government is looking for? Michael Ord: It's a good question. So as you know, Sash, earlier this month, the government put out a public notice asking for expressions of interest from companies interested in establishing the production of energetic materials here in the U.K. I mean in advance of that PPN, earlier in the year, we had already completed the first feasibility study for our site up in Ardeer in Scotland. And indeed, as we sit here at the moment, we're currently complete or working through a second feasibility study associated with the infrastructure that will be required to increase capacity expansion at the Ardeer site. So maybe step back and look at that. So firstly, we really welcome the U.K. government's focus on establishing production of energetic materials here in the U.K. We've had a long tradition in producing energetic materials at our Ardeer site and others. And we believe that we're very well placed to help the government in that national mission. There's a raft of materials that you'll have seen in the public procurement notice, and you're absolutely right. So we are looking at -- is it possible to establish HMX/RDX NTO production in Ardeer, all of which are materials that we produce in Norway. And clearly, there's a huge synergistic opportunity there for the Norwegian and the U.K. businesses to work together, and we've been in conversation with the U.K. government associated with that. And if you look down that list of materials, then our primary focus is probably in the high explosives area. So you'll see the likes of HNS and PETN on that list. So those are materials that are not produced in the U.K., so the high explosive materials that ourselves, but also other U.K. defense companies in the U.K. We import from overseas. We know how to produce those materials. We do so in small quantities in our laboratories. So we will be in discussion with the U.K. government associated with primarily the high explosive elements of those materials. There are other areas such as nitrocellulose and nitroglycerin, et cetera, that clearly, we know how to manufacture those, and we make nitroglycerin in our lab for test purposes and whatever. But we don't really see that as an area that we want to pursue. With regards to do we see it as a competitive threat if other companies want to establish operations here in the U.K.? No, I don't. I think that establishing a greater defense industrial base here in the U.K. is good for everyone. I think a rising tide lifts all boats, and that will be good for Chemring. And specifically in a number of the materials that they're looking for, we don't manufacture them and we don't see strategically that we would want to invest in those manufacturing and they don't compete directly with us. So it's not as if someone will be establishing capacity that would eat our lunch. And indeed, we have a very dominant and very strong and well-established position for military high-grade explosives in Norway. As you know, we're one of the largest and soon to be the largest producer of HMX and the whole of NATO with our expansion programs, et cetera. And as we mentioned, the opportunity to establish a second production facility in Norway in partnership with the Norwegian government. We will put our Norwegian business well ahead of all of the European competitors in that area. So long-winded answer to say, I see this as a very good thing. We're actively engaged. And I do think it's a good opportunity for us. Sash Tusa: And just a follow-up. Norway Phase 3, I think you indicated earlier on this year that you would hope that the Norwegian government would commit to that probably by the end of the year. Is that still a possibility? Or are there any particular issues that have caused the Norwegian government to delay that? Or is it just government stuff getting in the way? Michael Ord: So I think you're getting ahead of Phase 2. So the second phase of the feasibility study for the greenfield is well advanced. So it's a matter of public record. The Norwegian government has allocated funding for that second phase of the feasibility study. And the team in Norway are in final stages of agreeing what the contract looks like for that second phase. We're hopeful that we'll get that contract signed this side of Christmas. And then we will crack on with that feasibility study. We think the second phase is going to take between 6 and 8 months. And just as a reminder, so Phase 1, which we've done was a feasibility study, which we proved it was feasible and Norwegian government have supported that. The second phase, which is what we're just about to execute is concept selection, which will agree the physical configuration of the second facility that we'll build, what materials we'll produce and then what capacity and then Phase 3 is the detailed design and then construction. So no, a lot of momentum, funding being allocated. I expect to see a contract hopefully, this side of Christmas. Really excellent opportunity, really exciting. David Richard Farrell: David Farrell from Jefferies. A couple of questions for both of you, really. I'll start with James. Can you just help us on Roke and the order cover? I think you've got GBP 95 million for execution in the year ahead. This time last year, that number was GBP 101 million, which ended up being 58% cover what you ultimately delivered. So how can you have confidence that Roke will come back to the extent you expect in the second half? Is there an assumption here that part of STORM gets booked in the first half and then gets delivered over the second half, which in turn has an implication for the margins? James Mortensen: Yes, a couple of questions in there. So we are flagging that we do think Roke is going to recover next year. And we do think it's going to get to near '24 levels next year. But obviously, that recovery is in the second half, and we're flagging particularly that the operating profit is weighted in the second half. STORM, we are progressing that, and we probably will see some orders that we execute through the next couple of years on that. But it's not because of STORM that we're saying that we're going to get back to that revenue. No, we think actually, it's the product side of the business that is going to come back strongly in the second half as well. And then also that national security business as well. We talked about the GBP 65 million of renewals that we got. We expect that renewal season, April, May to be really strong this year as well. David Richard Farrell: Okay. Going back to Energetics. In this kind of new world, clearly, some of your customers probably are reevaluating whether or not they are vertically integrating. Is there any evidence that your customers are maybe going to be producing some of the HMX and RDX for their own usage and then kind of using you for kind of excess amounts over the next maybe decade? Michael Ord: No. I know you're -- so there -- absolutely. So the likes of Rheinmetall or whatever are vertically integrating their supply chain, especially for munitions, and we know the likes of BAE Systems and whatever are exploring the possibility of doing the same. None of these are our customers. So our primary customers are in the missile domain or rocket artillery or whatever. And where we supply into munitions programs, we have long-term supply agreements to supply those munition programs. So I think we've spoken before in the past that we've got a long-term supply agreement with Diehl Defense to support their munitions program that goes out to 2031. We expect that, that will get extended into the mid-30s, potentially longer as well. So I think that trend of -- you're seeing that some munitions manufacturers are vertically integrating and producing extensively the likes of RDX. I think we will see that, but it doesn't eat into our market share because we don't supply those anyway. And we haven't factored supply in them into what we see as our forward demand model. David Richard Farrell: Yes. And final question, just coming back to the GBP 1 billion revenue ambition. Clearly, a large proportion of that GBP 150 million presumably is another Energetics facility. You've talked about 6 to 8 months kind of for the next stage in Norway, which can take us to the end of the year, which maybe give us kind of 3, 4 years kind of build on a greenfield. That seems quite ambitious potentially. So is the chance of really that GBP 1 billion is more 2031 than 2030, depending upon when you sanction the new project? James Mortensen: So we've always said about the GBP 1 billion. So yes, GBP 850 million, our current organic plan and then GBP 150 million on top. That GBP 150 million is made up of either -- we'd love to do it organically, right? And so we've always talked about the Energetics expansion projects, but there are other things that will come along as well. And then also, there's the bolt-on M&A that we're going to do. And like Landguard, it just takes a few to kind of get there as well. And so there are both routes that we can get there. It's not just holding on the Energetics expansion. Benjamin Pfannes-Varrow: Ben Varrow from RBC. First one, we've spoken about the 2 possibilities of plants in Norway and the U.K. Can you expand on -- or give an update on Germany? James Mortensen: All right. Yes. So in Germany, in Germany, so we're building a blending facility at the site in Lubin where we're going to supply MCX for the 155 munition line, the Diehl contract that Mick was just talking about. And so plans are progressing really well in relation to that. We're going to start breaking ground, and we expect to be in operation from '27, supplying into that filling line. It could be that there are other opportunities that arise in Germany or in other European countries. But that's the one that we're focused on, and that's the one that we're executing against. Benjamin Pfannes-Varrow: Okay. In terms of Norway, the current expansion. So is that all on track despite the CapEx overrun? And sort of what gives you comfort that, that CapEx number doesn't swell further from here? James Mortensen: Should I do that? Michael Ord: Well, in Norway, the first phase we've delivered -- well, kind of a little bit of ahead of schedule actually. So we've seen revenue already coming on ahead of when we expected to do that. It is right to say that the second phase that we have seen some cost increases associated with that, and James spoke to those. I mean there's a few factors that we kind of saw, like, that caused that. So we've had -- I think we've talked about a little bit in the past, the geological issues that we've had there. And we've also identified areas of infrastructure that require greater scope than we originally forecast. And that would take us back to -- if you go back to October '23, where the ASAP program was opened by the European Union, there was only -- in the window was only open for, I think, it was 57 days. The team did a fantastic job to be able to submit all of the proposals in such a short period of time to secure what ended up being GBP 90 million worth of grant, which delivers a fantastic IRR return on these projects for all of our shareholders. But because everybody was moving so quickly, it's understandable that maybe some of the estimates and the uncertainty that was associated with those was a little bit broader than maybe we would have preferred. But we're -- I think we've got all of that under control now. That's our -- we understand what's caused that cost increase. We've baselined the schedule. And so therefore, we've got confidence now that we'll execute against that. Benjamin Pfannes-Varrow: Last one just on working capital. Advanced payments continue to feature quite a bit. How should we think about that going forward? Is that an unwind at some point? Or is that really just a feature of the tightness of the Energetics business. James Mortensen: So I think we think it will continue to be a feature of the tightness of the energetics market. I think we did quite well last year. And so that's why you saw that in the kind of strong cash conversion we saw. What we are seeing is that often quite a lot of those advanced payments, we then put that into the supply chain to get the kind of long lead time items so that we can ramp at the rate that we want to. And so you've also seen a slight increase in inventory as well. And so that's the unwind that you would expect is the inventory will come down, but also those advanced payments as well. George Mcwhirter: George McWhirter from Berenberg. Two questions, please. Firstly, on Roke, can you just comment on the split between products and services that you expect in FY '26. And also in FY '28 as well in the midterm. James Mortensen: So I think we've always guided about the split in the Roke business is about kind of 70-30 between product and services. It's probably slightly less than that last year. We expect it to be probably slightly more than that by the time you get to FY '28 as that kind of product business grows faster than the services business. George Mcwhirter: The second one is on Roke as well. In terms of the U.K. defense investment plan expected to be published in December, what's the risk that if it's published in 2026 that the growth recovery is pushed to the right? Michael Ord: So I'm confident that the defense investment plan will be published before the end of the year. And I think, look, you've got to look at '25, I think, has been a year of significant activity and change from a U.K. government and U.K. MoD perspective. There was a general election in '24. We got the new administration. I think we were one of the first companies that were advising shareholders that to expect some fiscal trickle, I think, as we explained it, around as the new administration came in and that they instigated as we expected, the strategic defense review. And when you've seen the cycle many, many times, as some of us have been in this industry for decades, that always slows down the process of contracting and budget allocation and whatever. And then as we went through '25, then that did play out. We saw the strategic defense review, then we saw the defense industrial strategy. They all came out. They were a little bit delayed, took a little bit longer, but it's a complex landscape that the MoD are navigating through. And that's probably the reason -- the major reason why we saw the slowing down of contract placements and whatever. I think the key backdrop to that, though, is that there has been no change to the threat environment or the capabilities that the U.K. MoD and the national security -- sorry, our national security clients are identifying as crucial going forward. And that is what we've aligned the Roke business 100% towards. So I'm confident that the investment plan, it will come out. It may take a while for us to really be able to percolate and then into what does it mean for specific projects and contracts. But I do think that it will underpin the recovery that we're expecting in Roke in '26. Richard Paige: I'm Richard Paige from Deutsche Numis. I'm afraid another one on Energetics, please. I think on the original schedule, the GBP 100 million of revenue, GBP 30 million of operating profit, you talked about GBP 15 million delivery in '25. It feels as though you're ahead of that schedule. Is that squeezing more from what you're adding or existing facilities? Or is it ultimately trying to understand if a GBP 85 million remainder is still well on track as well? James Mortensen: Yes. So I think we said, yes, we were going to probably deliver about GBP 15 million in '25, about GBP 30 million in '26. I think what we're saying is that actually, we've gone really well in Chicago and Norway. And those -- that first phase in Norway and moving into the new facility in Chicago has meant that actually, we brought some of that GBP 30 million this year into '25. And so it's not a kind of one-off. It's -- the business has just grown a bit quicker than what we thought. And so that should continue going forward. Richard Paige: And trying to shift the focus from Roke and Energetics, I will ask one on U.S. sensors. Is there a prospect of contracts outside of EMBD and JBTDS at the moment? James Mortensen: Yes. So in terms of that business, so the JBTDS, so -- and in both of those products, we're sole source into the U.S. government. The JBTDS product, we can sell that internationally now. And so it was great. We were displaying it at DSEI, and we were -- we saw some good interest from countries around the world, obviously, friendly U.S. nations, but we can't sell that around the world. I think in the short term, though, we do think the focus is going to be U.S. And JBTDS, we're going to have another fallow year this year while we wait for that full rate production order, which we expect in the -- at some point in '26, and then we'll ramp up FRP through '27 and beyond. Richard Paige: And then one last one, again, trying to avoid the other 2 countermeasures. You talked about improved operational performance from Tennessee. Are you now there at full run rate for that business? Or are there other opportunity? James Mortensen: Look, we've seen some really good volumes coming out of that facility now. It's the only fully automated countermeasures facility anywhere in the world. And so the team there have done a fantastic job. Like I say, we're seeing much better volumes out of there. No, I don't think we're at full rate yet. But yes, we're going really nicely now. Michael Ord: Not far to go, though. We've really come up the yield curve in Tennessee across all the facilities, especially the new facility. I think we'll see a really strong year in '26 from Tennessee coming through. And then more broadly from a countermeasures perspective, the U.K. countermeasures business is going like a train. So the demand that's going into that business is fantastic. And that business, so as a reminder, only about 25% -- 20%, 25% of the volume goes into U.K. MOD, 75%, we export and Andy and the team do a fantastic job of exporting across the whole of Scandinavia, European NATO all the way through the Middle East and into Asia Pacific. And we're seeing enhanced demand for especially airborne, but increasingly naval countermeasures. And we're looking at that business with regards to is there an opportunity for us to invest for greater capacity in that business over the next couple of years. So we're really quite excited actually about the -- especially the European NATO countermeasures business market. There's a lot of opportunity there. David Richard Farrell: David Farrell from Jefferies. Quick follow-up. James, you said in your prepared remarks, you're always amazed how much capability you have. I imagine others in your space are also amazed by your capability and would like to partner with the -- to what extent kind of JVs going forward help you drive revenue growth? Because I guess so far, we've not really seen much evidence of that, but maybe some of your peers are putting in place JVs, framework agreements, MOUs, et cetera. Michael Ord: It's an interesting question. So Roke works with probably all of the defense companies that you could name in some way, shape or form, whether they work in partnership with them or they sub to them or with the likes of -- you see the STORM contract where Roke is the prime and you've got the major traditional primes as their subcontract. So I think there's all forms of relationship are open. From a Roke perspective, joint venture could potentially be one of those that we would explore. I think Sash had a question. Sash Tusa: Actually, I've forgotten it. Michael Ord: Let me ask Sash a question. Asking one on [indiscernible] or something... Unknown Analyst: I'll fill the void. Thank you for the extra color on CORTEXA Guardian and revealing that. Could you just put a number on the potential pipeline within the sort of GBP 300 million product pipeline for Roke? James Mortensen: For CORTEXA specifically, so we wouldn't want to kind of call that out. But I mean you can tell, it's got both military and civil applications. You only need to go online actually. There's a good kind of LinkedIn post from the Roke team where they were demonstrating it in Canada. They were on the top of a hotel in a kind of competition against those of other systems. And I think they all think that their system worked pretty well. You kind of saw it at DSEI, it's kind of got a much smaller form factor and it's a really nice product. So whilst I won't want to put a number on it, I mean, we think it's a really nice product. Michael Ord: I would say, do go and have a look at that LinkedIn post. It's a really unique and innovative thing that the Canadians did. In the middle of Ottawa, on the top of a hotel, on the roof of a big hotel where Roke alongside lots of other companies set up their counter drone detection capabilities and then operators did fly drones against these systems. And I think that was a demonstration of not only -- I mean, we just normally kind of primarily think about it this is from a military context perspective, clearly, what's going on from a Ukraine point of view. But the -- I think the Canadians were really smart in doing it on a hotel in the middle of Ottawa. And I think that demonstrates the significant proliferation that we're going to see in these counter drone and drone detection capabilities associated with critical national infrastructure and civilian infrastructure as well, which is why we think a system such as CORTEXA, which is very scalable, very high-end capable that's interoperable with effectors and whatever has got a fantastic market opportunity. And as James said, we've sold 2 systems to a very high-end specialist military user in the European sphere. Unfortunately, we're not allowed to disclose who that customer is. But it is a military customer that is at the forefront of new technology adoption in these areas such as counter drone technologies and electronic warfare. James Mortensen: And it's interesting, actually, isn't it? I think Sash was out in Estonia, wasn't it, for the kind of field trials for the EW kit. And I think that's where we're seeing Roke performing really well is kind of in the field up against our competitors, actually demonstrating that these products work really, really well. And so we've got really good feedback on Perceive, and now CORTEXA as well. Michael Ord: Sash you remembered your question. Sash should build up. Sash Tusa: On opportunities for M&A and bolt-ons in particular, I wonder if you could just explain for Landguard, Landguard was both an add-on, but also an effectively a supplier to you. So what's the net increase in your external revenues from Landguard as opposed to the internal efficiencies you get from owning your own supplier of software-defined radios and VPX cards and so. James Mortensen: Yes. So we said Landguard was going to generate about GBP 10 million in revenue. Sash Tusa: That's external revenue. James Mortensen: Yes, that's external. Sash Tusa: Yes. Okay. And then I just wondered, Alloy Surfaces, sorry, I know this is now history or at least like but what happened so quickly there? And are there any other businesses you've got that might experience the same sort of sudden deterioration in trading or other businesses that you're worried might experience that? Michael Ord: Yes. Good question. So I'll answer the second bit first. So no, there are no other businesses that we are worried that potentially the demand signal would diminish. So what happened with Alloy Surfaces is -- actually, let's take it back. So you saw last year in '24 that we reacted very quickly to the U.S. DoD signaling potentially different machine configurations associated with explosive hazard detection. And the transition of the HMDS product, moving from an OEM new build program into just purely a sustainment phase, which clearly is not our business model. And you saw us act very quickly to sell that business to someone who is a better owner of that business in that sustainment phase. So I think we -- that was a demonstration of that we're very active in making sure that our whole portfolio, not just the businesses, but the capabilities are incredibly relevant to our customers today and going forward because that drives growth. So HMDS was the first one that we did when we saw that technology sunsetting. With Alloy Services, I think we have been saying over the last couple of years that we've seen the demand for these pyrophoric decoys starting to wane. And the reason for that is that, as I'm sure you know that the pyrophoric decoys are primarily most effectively used for things such as insertion and extraction of troops, normally at nighttime, and that was incredibly important when you were in the counterinsurgency operations in Afghanistan and et cetera. Clearly, in the new configuration from a mission perspective in the U.S. DoD, where it's more associated with area denial in the Asia Pacific, the DoD signaled to us that they saw the demand for pyrophoric decoys diminishing significantly. So we acted very quickly to ensure that, firstly, we took cost out of the business to maintain performance. And then we got to a point where we identified that actually we were not the best owners for that business. So -- and if you go all the way back, Sash, I'm sure you do. If you think back to the heights of Afghanistan and whatever, Alloy Surfaces actually expanded from one facility up to three facilities because the demand for those decoys for those counterinsurgency operations was so large. And then as we came off the counterinsurgency missions and then into the new force configuration over a number of years, we went from three facilities down to one. And then unfortunately, we got to a position where we couldn't sustain a single facility. James Mortensen: But just to be clear, there's still some really nice IP within that business. We're the only people we're sole source to the U.K., U.S. government on that -- on those pyrophoric decoys. And so we will still -- we're in a process to sell that business. And so we hope to realize some value for it. Michael Ord: It's a very viable product line. It's just not a stand-alone business in its current configuration. Any more questions? Just looking around, Sash. We'll come back again in a few minutes. Okay. All right. All right. Well, if there's no more questions, then thank you very much for joining us today, and we look forward to presenting our FY '26 half year results to you in June. Thank you very much.

58天前Insight Analytics约5分钟阅读

ASHTY 2026 Q2 财报电话会议

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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TKAMY 2025 Q4 财报电话会议

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.

58天前Insight Analytics约5分钟阅读

GIII 2026 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to G-III Apparel Group Third Quarter Fiscal 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Neal Nackman, Chief Financial Officer. Neal, please go ahead. Neal Nackman: Good morning, and thank you for joining us. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guaranteed, and actual results may differ materially from those expressed or implied in forward-looking statements. Important factors that could cause actual results of operations or the financial condition of the company to differ are discussed in the documents filed by the company with the SEC. The company undertakes no duty to update any forward-looking statements. In addition, during the call, we will refer to non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA, which are all non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to GAAP measures in our press release, which is also available on our website. I will now turn the call over to our Chairman and Chief Executive Officer, Morris Goldfarb. Morris Goldfarb: Thank you, Neal, and thank you, everyone, for joining us. We delivered strong profitability in the third quarter despite the impacts of tariffs, with earnings exceeding the high end of our guidance range. This was driven by the strength of our go-forward portfolio, particularly our owned brands, as well as a healthy mix of full-price sales and our mitigation efforts against tariffs. Our solid year-to-date performance highlights G-III's ability to effectively manage through a dynamic and often challenging marketplace. Since PVH's unexpected decision to end our long-standing licensing partnership, we've demonstrated significant progress in transforming our business model and accelerating our longer-term strategies. At its peak, the Calvin Klein and Tommy Hilfiger brands represented over $1.5 billion in annual net wholesale sales. And this year, these brands are expected to generate approximately $800 million. As previously mentioned, the PVH sales decline accelerated quicker than originally anticipated. Despite this decline, our teams replaced more than 70% of the lost sales volume through organic growth of our go-forward owned and licensed portfolio. Our newer brands, like Donna Karan, have enabled us to command greater pricing power while maintaining healthy price elasticity. Our balance sheet during this period has strengthened, ending the quarter with a net cash position of $174 million. We remain keenly focused on executing our strategic priorities, making disciplined brand investments and positioning our portfolio to capture market share and long-term growth. Our third quarter performance reflects healthy consumer demand for our brands. Seasonal weather boosted our cold weather categories, which saw a nice pickup in sell-throughs across brands and channels as we move through the quarter. Within wholesale, we saw meaningful gains in women's outerwear with full price retail sales up nearly 20%. Our marketing investments have driven a significant increase in consumer engagement as seen in the uptick in traffic across our direct-to-consumer business. In digital, we saw traffic lift over 20% across our owned dot-com, which drove substantial growth in conversion rates and overall sales. As we exited October, trends continued to improve through the Black Friday period, with Europe posting high single-digit growth and North America up double digits compared to last year. Performance across channels indicates that our product offerings continue to align with consumer preferences. Demand has been steady across brands during the holiday season, supported by full price sell-throughs. Looking ahead, we remain mindful of the global consumer environment and are taking a prudent approach to our outlook for the remainder of the year. Now let us review our third quarter fiscal 2026 financial results. Net sales for the quarter were $989 million, generally in line with the expectations. Non-GAAP earnings per diluted share were $1.90, $0.37 above the midpoint of our guidance range. Gross margins were 38.6%, outperforming expectations, driven by a healthy mix of our higher-margin owned brands and solid selling into the full price channel. Units were down year-to-year as our disciplined inventory management kept inventories nearly flat, up just 3% despite tariffs. We remain in the strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million in stock year-to-date. As we work to maximize the full potential of our globally recognized brands, we're guided by our strategic priorities. Our growth is powered by an exceptional foundation of experienced leadership, world-class merchant capabilities, a diverse product mix, a reliable supply chain and long-standing retail relationships. Together, these strengths enable us to bring brands to market and scale them across channels with speed. Our strategy centers on driving both near- and long-term growth. Building brand strength remains a core focus, and our strong seasonal marketing and promotional cadence continue to deliver results. We're also prioritizing investments in technology, infrastructure and talent to enhance our business and improve efficiency. As we look to the final months of the fiscal year, we remain focused on holiday performance and spring selling. We continue to plan our key brands to grow mid-single digits this year. Capturing the long-term potential of our own brands is a top strategic priority. These brands are powerful, sustainable drivers of profitability, delivering higher margin and incremental licensing income. We're focused on 4 key pillars. First, product and consumer engagement. We're leveraging each brand's unique DNA to deliver differentiated products across every shopping channel. By extending our core assortments and entering new categories, we're delivering growth in the wholesale channel, particularly in North America. We will continue to build momentum through impactful marketing campaigns, strategic partnerships and innovative collaborations, ensuring that each of our brands remains firmly at the center of its own culture. Second, driving direct-to-consumer. Complementing our strong wholesale business, we're enhancing our digital capabilities to boost traffic and conversion on our brand sites and many marketplaces. Meanwhile, we continue to evolve our North American retail segment strategy to deliver profitability and continue to optimize our international retail performance. Third, international expansion. Our owned brands remain highly underpenetrated internationally. Strategic investments and partnerships, including AWWG, position us to capture the substantial long-term growth opportunity. Fourth, category expansion through licensing. Our partners have helped us extend into additional categories like fragrance, eyewear and home as well as experiential categories such as hospitality, all deepening consumer connections and broadening brand reach. We believe we have many opportunities to monetize as we grow each brand. To support our key pillars, we continue to invest in marketing to amplify the global visibility of our brands. We see tremendous potential across all growth avenues, including product, channel, category and geographies. Now I'll share some brand highlights from the third quarter. Donna Karan outperformed expectations, delivering impressive double-digit sales increases in North America. We expect growth of 40% in fiscal 2026, reinforcing the brand's position as a key growth driver within our portfolio. The brand is leveraging its iconic DNA and aspirational luxury positioning to capture strong consumer demand at higher price points, underscoring its enduring appeal and pricing power. As we continue to develop the brand into a full lifestyle offering, we're excited about the introduction of Donna Karan Weekend, which hit stores in early November. The collection offers a more casual yet refined aesthetic, and we're already seeing great results across channels. Dresses, denim and knit sets are early standouts so far in the fourth quarter. Donna Karan Jewelry launched in mid-November, exclusively on donnakaran.com, and will roll out to department and specialty stores in spring 2026. The collection already gained buzz with its signature twisted cuff earning the Accessories Council's 2025 award for design excellence, and we've seen strong sell-throughs through the first few weeks. In the quarter, donnakaran.com outperformed, with traffic up approximately 150% and average order values increasing over 10%, alongside healthy AURs and strong sell-throughs. Now 1.5 years since launch, we're seeing close to 20% of our sales from repeat customers. This growth was led by dresses, footwear and handbags, with particular strength in our best-selling Baldwin handbag. Wholesale momentum during the quarter was equally impressive. The brand is currently sold in about 1,700 points of sale, and we expect to add roughly 200 more by spring 2026. We're increasing penetration across better department stores with retailers allocating a greater footprint to the brand in new and existing stores. Premium retailers like Saks, Bloomingdale's and Nordstroms have expanded distribution, both online and in-store this fall, reflecting the brand's ability to enter new accounts while maintaining its aspirational brand positioning. On the marketing front, we launched our Fall 2025 Campaign, Woman to Woman, in early September, featuring a new cast of talent with deep connections to the brand. The campaign resonated strongly, generating approximately 5.6 billion impressions and over $11 million in earned media value. We carried that momentum into the holiday season with refreshed campaigns, strategic paid media and VIP partnerships aimed at attracting new audiences to shop. Building on the brand's outstanding domestic success, we've been disciplined in our distribution rollout and see significant opportunities to expand across categories and channels, ultimately capturing the long-term global potential. Karl Lagerfeld delivered another strong quarter, amplified by the success of our global brand initiative starring the iconic Paris Hilton. Our fall/winter 2025 campaign, From Paris with Love, delivered a high-impact global rollout across our key markets, marking one of our strongest media performances to date. This culminated in the standout cultural moment during Paris Fashion Week. An exclusive late-night event at the Palais de Tokyo, where Paris Hilton took over the DJ booth in a series of custom Karl Lagerfeld looks. The event drew an extraordinary gathering of fashion leaders, celebrities and global influencers. The campaign was supported by a series of high-impact in-store activations across the globe, driving local visibility and reinforcing the campaign's momentum at retail. Building on this, we rolled out our holiday campaign, From Karl with Love, with activations designed to emphasize storytelling, retail experiences and wider influencer amplifications. From a brand perspective, we continue to see strong growth in our women's business in North America outperforming. Our global men's business continues to be a key growth catalyst, complementing our women's business and posting close to 20% growth in the quarter. Karl Lagerfeld jeans, currently sold internationally, is resonating with younger consumers and driving incremental growth, with sales up over 30% in the third quarter. The Studio Collection continues to reinforce its role as the brand's halo with its fashion-forward design, driving strong press and consumer interest across the campaign and gaining presence in key European retailers. Specifically, in North America, we saw a healthy performance across wholesale and retail, with strong full price selling and AUR increases. With just over 3,200 domestic points of sale in Fall 2025, we expect to add approximately 100 more by Spring, driven by extended assortments and increased footprint. Our North American direct-to-consumer business saw a positive comp sales increases, showing that our refreshed product is resonating across men's and women's. Internationally, despite a soft macro environment, the brand continued to perform well, supported by disciplined pricing, which drove strong gross margin improvement amid a more promotionally competitive landscape. Our customer activations led directly to improved traffic and performance. As cooler weather hit, we saw digital traffic accelerate across our own dot-com as well as digital partners, including marketplace. Looking ahead to spring, our collaboration with Paris will continue for a second season, driving high global visibility across key markets. In our hospitality business, we're looking forward to sharing some news shortly on a new project. With strong global recognition and momentum behind our expansion initiatives, the brand is well positioned to gain share across North America and Europe, while capturing significant untapped opportunity in Asia, setting the stage for sustained long-term growth. DKNY, our largest brand, was led by healthy full-price sell-throughs in North America across key categories, reinforcing brand relevance. Our North American direct-to-consumer business also showed solid improvement, with positive comp growth across stores and dkny.com, up 20% on higher conversion. Internationally, we continued to see solid traction. Fall 2025 deliveries and improving sell-throughs helped meet targets despite softer European markets. Europe showed notable progress led by handbags, our top-performing category, with strong full price sell-throughs. Digital performance at DKNY similar to Karl remains robust, driven by growth at Answear and Zalando. We hosted pop-ups across 8 major cities for the Paola handbag, featuring localized collaborations and digital first activations, which successfully elevated our hero styles and drove reorders in key markets like Spain and Poland. We're expanding our global footprint with a new license partner in China to reposition the brand for growth there. Marketing momentum is strong. Our Fall 2025 campaign with Hailey Bieber delivered record results, with 7.9 billion impressions and $15.9 million in earned media value. A major Dubai media takeover amplified awareness across global audiences, with a particular emphasis on driving our Middle East business. We focused investments in product and marketing. We are successfully positioning the brand and laying the groundwork for meaningful growth ahead. Vilebrequin continued to strengthen its global brand presence by expanding premium lifestyle offerings and creating unique experience for its aspirational customers. While retail softness in Europe and Caribbean weighed on results, growth in France helped offset the pressures. In July, we revealed a partnership with Fiat on the limited edition Fiat Topolino micro car. The collaboration has generated great global coverage. We also advanced our luxury hospitality strategy with an exclusive boutique at the Hotel Christopher in St. Barths and robust double-digit growth at our Cannes flagship and Beach Club. Partner-operated clubs in Doha and Crete performed well, and upcoming launches in Oman and Miami Beach alongside curated swimwear lifestyle assortments reinforce confidence in long-term global expansion. Turning to our omnichannel capabilities. We experienced robust digital performance across North America and Europe, further demonstrating that our efforts here are really paying off. We continue to focus on our DTC business performance, highlighted by our North American segment, which remains on track to be close to breakeven in fiscal 2026. Internationally, we see healthy performance across our DTC business, supported by improved full-price selling and strength across our digital ecosystem. Our retail footprint saw improved productivity and profitability across stores internationally. As we continue to expand this area, we're making targeted investments to sharpen our global go-to-market execution. From strengthening our data capabilities to extending our Shopify platform across brands and regions, we're positioning the business to capture long-term growth. We're leveraging deeper consumer insights to guide design and merchandising. At the same time, we're elevating our product presentation across owned and partner sites, enhancing imagery, description and video content to deliver a richer consumer experience at higher conversion. Digital sales in the quarter delivered nearly 20% growth with outside performance by Donna Karan, highlighting the significant value and long-term potential of this channel. This momentum reinforces our ability to meet consumers wherever they shop. Expanding our portfolio of strategic licenses remains key to our growth strategy. Licensed brands are capital light way to scale and further diversify through complementary brands that offer unique attributes across varying aesthetics, consumer segments, channels and geographies. Our licensed team sports business continues to gain momentum, delivering a solid quarter with sales up 9%. We're experiencing a strong NFL season supported by strategic activations around key moments with retail partners. Additionally, through our sublicense agreement with Fanatics, we brought timely L.A. Dodger World Series product to market, reinforcing our agility in capturing demand. This quarter marked the first shipments of Converse apparel across channels, delivering strong results fueled by consumer enthusiasm for the product. As part of Nike, Inc, the partnership reflects our confidence -- their confidence in our expertise, and expands our ability to reach new consumer globally. Levi's is our largest men's coat brand and continues to post solid growth. Nautica Jeans is scaling distribution, posting a solid quarter, and Halston and Champion are also performing well after launching just over a year ago. BCBG, one of our newest licenses, launched in the fall across approximately 300 points of sale and is performing our initial expectations with high AURs, and we expect to launch an additional 50 Macy's doors this spring. As we execute the wind down of our PVH licenses, both Tommy Hilfiger and Calvin Klein continued to perform well at retail. We remain committed to supporting our retail partners and delivering what consumers expect from these brands. Our disciplined approach to inventory and focus on full price selling are helping us maximize profitability as we manage the exit. We anticipate that the remaining PVH brand sales will be approximately $400 million in next year's fiscal 2027. As licenses expire, we're redeploying talent and resources to accelerate growth in our go-forward brands. Thanks to our agile teams and flexible business model, we've already offset a substantial portion of the PVH sales reduction, and are confident in our ability to sustain long-term success. While the marketplace is full of brands with high potential, only a few operating companies like ours can help them reach it. As we look ahead, we're deliberate in selecting those that align with our portfolio and support our long-term growth trajectory. In closing, we delivered a strong third quarter, with gross margins and earnings per diluted share far exceeding expectations despite the impact of tariffs. Our consumers continue to respond to newness and fashion, and we're encouraged by the solid trends we've seen throughout the holiday season to date. Looking ahead, we're updating our fiscal 2026 guidance to take into consideration our third quarter earnings outperformance, combined with the uncertainties around the consumer environment and tariff-related margin pressures. We now expect net sales to be approximately $2.98 billion, and importantly, we're raising our full year non-GAAP earnings per diluted share guidance to $2.80 to $2.90. I'm incredibly proud of our teams for executing on our priorities and delivering strong profitability amid uncertainty. With a strong balance sheet and a proven track record, we have the flexibility to drive growth, pursue strategic opportunities, including acquisitions, and return capital to shareholders. As part of this strategy, we're proud to introduce our first-ever dividend program. I'll now pass the call to Neal to discuss our third quarter financial results as well as our fourth quarter and full year fiscal 2026 guidance. Neal Nackman: Thank you, Morris. Net sales for the third quarter ended October 31, 2025, were $989 million compared to $1.09 billion in the same period last year, generally in line with our expectations. Net sales of our wholesale segment were $977 million compared to $1.07 billion last year. The decline in sales compared to the prior year is primarily a result of lower sales from Calvin Klein and Tommy Hilfiger license businesses, due largely to several expired licenses, specifically Calvin Klein jeans and sportswear, which we exited at the end of last year. Net sales of our retail segment were $46 million for the quarter compared to net sales of $42 million in the prior year despite operating less stores. The increase was driven by solid comp sales increases across our North American DKNY and Karl Lagerfeld Paris stores as well as strong sales growth on our Donna Karan website. Gross margin was 38.6% in the third quarter of fiscal 2026 compared to 39.8% in the previous year's third quarter. The wholesale segment's gross margin was 36.7% compared to 38.4% in last year's comparable quarter. Gross margin declined 170 basis points this year compared to last year as a result of the impact of tariffs. Gross margins were better than our expectations, driven by a stronger mix of full price sales. Gross margin in our retail segment was 50.8%, down from 52.3% in the prior year. This decline primarily reflects the liquidation of the G.H. Bass branded product which is transitioning to a license arrangement with the Aldo Group beginning January 2026. Non-GAAP SG&A expenses were similar to the prior year at $258 million compared to $259 million in the previous year. We continue to stay vigilant with our expense management. We have rightsized our warehouse space and continue to prudently invest in people, marketing and technology to position the company for growth. Non-GAAP net income for the third quarter was $83 million or $1.90 per share compared to $116 million or $2.59 per share in the previous year. These results were significantly better than our expectations. Turning to the balance sheet. Inventory levels remain in good shape. Inventories modestly increased 3% to $547 million at the end of the quarter from last year's $532 million. We continue to focus on disciplined inventory management with units down year-over-year, and our inventory is well positioned to meet holiday demand. We remain in a strong financial position, ending the quarter in a net cash position of $174 million after repurchasing approximately $50 million worth of shares year-to-date. This compares to a net debt position of $119 million in the same period of the previous year. Our total availability remains very strong at approximately $875 million. Our financial strength provides us flexibility to invest in our business and other strategic opportunities, including acquisitions to drive future growth. In addition, our Board has approved a new dividend program to further enhance our returns to stockholders. The Board of Directors has declared an initial quarterly cash dividend of $0.10 per share. The company intends to pay dividends quarterly in the future, subject to market conditions and the approval of the Board of Directors. Turning to guidance. We now expect fiscal year 2026 net sales of approximately $2.98 billion, a decrease of approximately 6% to last year. We continue to expect our key owned brands, DKNY, Donna Karan, Karl Lagerfeld and Vilebrequin to grow at a mid-single-digit rate this year. Our updated view is that the gross impact of tariffs will amount to approximately $135 million, and we now estimate the unmitigated impact to be approximately $65 million for fiscal 2026. As a reminder, since we are primarily a North American wholesale business, we were limited in our ability to adjust pricing on inventory already sold into retailers for the fall and holiday seasons. As a result, we are absorbing a larger share of these costs in this fiscal year to remain competitive and protect market share. Looking ahead, as we move through fiscal 2027, we expect gross margins to normalize and ultimately expand as we exit lower-margin licenses, increased penetration of our higher-margin owned brands and implement targeted price increases. Our owned brands, Donna Karan and Karl Lagerfeld, are well positioned to command greater pricing power in the marketplace. Non-GAAP net income for fiscal 2026 is expected to be between $125 million and $130 million, or diluted earnings per share between $2.80 and $2.90. This compares to non-GAAP net income of $204 million or diluted earnings per share of $4.42 for fiscal 2025. Adjusted EBITDA for fiscal 2026 is expected to be between $208 million and $213 million compared to adjusted EBITDA of $326 million in fiscal 2025. Let me add some context around modeling. We now expect gross margins for the full fiscal year 2026 to be down approximately 200 basis points. The fourth quarter gross margin decline will reflect the highest penetration and impact from tariff inventory. We expect interest expense to be approximately $1.5 million for the full year, benefiting from the $400 million debt repayment last year. We expect capital expenditures of approximately $40 million, principally driven by the build-out of shop-in-shops for our new brand launches, leasehold improvements and technology investments. We are estimating a tax rate of approximately 29.5% for fiscal 2026. We have not anticipated any potential share repurchases for the fourth quarter in our guidance. That concludes my comments. I will now turn the call back to Morris for closing remarks. Morris Goldfarb: Thank you, Neal, and thank you all for joining us today. I'm proud of our team's work this quarter, and I'm confident in G-III's future as a global leader in fashion. I'd also like to thank our entire organization and many partners and all our stakeholders for their support. Operator, we're now ready to take some questions. Operator: [Operator Instructions] And our first question comes from Bob Drbul with BTIG. Robert Drbul: I guess can we unpack the gross margin performance a bit more? When you look at the results and you look at the performance and the upside to it, can you just give us some more color around how you did that, sort of the various buckets? And then I guess when you think about the unmitigated $65 million for this year, when you look at next year in gross margin, do you believe you'll be able to fully mitigate the tariff situation? And I guess just be very curious to hear about pricing. Neal Nackman: Thanks, Bob. The -- look, I guess the best way to help frame this is I think if you went back to our expectations at the beginning of the year, we would have expected pre-tariffs to have been up somewhere around 50 basis points in terms of gross margin percentage. And that's, again, driven by what we expect will be continued improvement of the mix of our own brands and higher gross margins. So now if you play back and extract the impact of tariffs, we're probably expecting to be down about 200 basis points, which comes awfully close to about the $65 million impact that we've been referring to. The majority of that gross margin hit for us now looks like it's going to be in the fourth quarter, but we took a sizable hit for that in the third quarter as well. One of the reasons that we were better than we had expected for the third quarter gross margins is we did extremely well in the full price selling and had -- and really didn't want to take advantage of heavy discounting in the off-price market. So we probably left some of those sales on the table at the moment. The inventory levels are in good shape. We didn't feel we need to push that out at all. I think in terms of the last part of your question with respect to getting to where we go on gross margins, early to say if we'll capture all. But certainly going into every market week that we'll have prospectively, we're going to know our costs as opposed to this past year, really not knowing the tariff cost that we have to put into our product. So we'll know that upfront. And our intent will be to put that into price and achieve normal margins for us, which again should reflect higher margins on the owned businesses, weaker margins in the licensed portfolio and overall a mix that continues to show a higher gross margin going forward. Morris Goldfarb: Bob, we've raised our prices to the level that we believe the consumer will expect and accept. And it's working. There are a couple of areas that we need to make some adjustments. We're seeing a little discontent in a couple of areas, and we're adjusting those prices. So we'll source more efficiently. We'll -- as Neal said, our own brands are more productive. If you look at the -- we just stated in our peak years, we did approximately $1.5 billion with PVH brands that we paid a royalty and advertising charges for it. So we were out of pocket for royalties for north of $150 million on a reasonable year. That money stays in our company for marketing, for margin enhancements and for building, let's say, better product if needed, as needed. So we have opportunities that we did not have before. We also have with our own brands, a direct-to-consumer possibility that we never had with licensed with PVH, we were -- we never had a site that we could market through. And we never had global distribution. Our own brands afford us the ability of direct-to-consumer, which in itself is better margin business. And as we get it to scale, it's going to make a difference in our company. And the other piece is, for the first time in over a decade, we're seeing daylight in our own bricks model. We're very close to breakeven, and there's a slim chance we break even or make a small profit this year. But I think we have the formula right, and we're about ready to grow that sector of our -- so opportunities for margin enhancements are absolutely there. We're launching a more important men's initiative. We've hired talent to help us with the growth of men's and new initiatives. So it's all looking good. It's not a walk in a park, replacing half of your top line in a short period of time is no small feat with the economics we're faced with, with the tariffs that are thrown at us and all the factors that relate to how we do a business. But not want to complain. This is what we're challenged to do, and this is what we will do. So we're highly confident that we can achieve what we say we can. Robert Drbul: Great. And if I could just ask a follow-up. Just as you look at next year, I think you talked about the PVH license business being $400 million, and I think you said margins would be -- gross margins would be up next year. Any other sort of preliminary thoughts around the top line or the bottom line goals that you're thinking about as you look to next year? Morris Goldfarb: We've got a whole bunch of thoughts, quite honestly, and we're working toward executing some of them, which are possible. That might be an acquisition. It might be another license. It might be distribution through another channel. Too early to bring them to our investor group. It's all work in progress. We are not sitting by and bringing our business down to a nonproductive scale. But that said, there is no rush. We have a strong balance sheet, as you see. We're not desperate to sign on another license or acquisition. As we find it, we'll execute it. And for the moment, we're cautiously looking at the right synergistic action that we're likely to find in the coming months. Operator: And our next question will come from Ashley Owens with KeyBanc. Ashley Owens: Maybe just to follow up on PVH really quickly. I know you said it's now expected to come down to about $400 million next year. So effectively, another halving of the business declines accelerating quicker than you initially expected. Just be curious how that reshapes the mix and the residual drag into next year. And from your perspective, does this accelerate the time line for reaching a cleaner base? I think you'll still have another chunk of roll-offs at the end of 2026. So would be curious on your thoughts here. Morris Goldfarb: So the thoughts are really kind of mixed. We're not in control of our own destiny. We have partners. On one side, we have less than a great relationship with PVH. We're at the mercy of where the retailer wants to take our business and their business. Fortunately, for us, we're outperforming expectations with our own brands. And if you track PVH's performance with their own brands, it appears from where I sit, they're not achieving what their goals were on taking in their own brands and producing them and servicing the marketplace. They highlighted the fact that their business in North America is 2/3 underwear. Well, God bless them, let them produce underwear, and we're in the fashion business. So the lanes that we created for fashion with PVH's brands, I believe, are open to ourselves and other fashion providers that they are not going to fill. So the opportunity to expand our own brands or newly acquired or licensed brands is there, I believe, because of PVH's inability to execute on what they thought they would. Ashley Owens: Okay. Got it. Maybe just quickly then on owned brands, especially like Donna Karan, just given the information you've provided us, I think you said up 40% this year, but still early in the broader reset that you executed. Would just be curious as to what the priority levers to keep that momentum going into next year are and where the biggest opportunity is to scale from here? Morris Goldfarb: Well, we've achieved -- I don't want to say perfection, but the launch was great. The -- when you launch a brand, you find flaws in what you've created and you go on, you improve. And every quarter, you get margin enhancements, you get better product, you get customers that have tried your product and become repeat customers. What's beautiful about Donna Karan is we're finding even on our digital side that, as I said, we can track our own today. We're finding over 20% of our customers is -- are return customers. So they're satisfied customers that are supporting the brand not only in a category that they might have bought, but now they'll expand and say where their first acquisition might have been a dress, they'll say, wow, it came in great, fit. I got lots of compliments on it. I'm buying a handbag. And we're getting lots of that. The strength of the business overpoweringly for the moment is the dress side. We have a dress business that is not only retailing well, but it's retailing well at a much higher price point than our other brands, and that would be Tommy Hilfiger, Calvin Klein, DKNY, Karl Lagerfeld, Donna Karan is at a premium price point turning as well as the lower price point brands that we're marketing. So we're finding opportunities in consumer acceptance. And as I stated in the script, we've also expanded distribution to pretty good penetration in Dillard's, Nordstrom's, Bloomingdale's, Saks, Neimans, so we're getting a healthier penetration of, call it, more premium department stores. Operator: And the next question comes from Mauricio Serna with UBS. Mauricio Serna Vega: Yes, I would like to get -- if you could provide a little bit more detail on what has been the performance from the other parts of your business. You've had several licenses that you're lapping the launches this year. Maybe could you talk a little bit about Nautica? And any initial thoughts about what you've seen with Nike and BCBG, that will be very helpful. Morris Goldfarb: So thank you, Mauricio. I'll start with Nautica. We signed a license with ABG for Nautica as we found one might say surprisingly that PVH was taking back Tommy Hilfiger. So we needed a brand that was close in DNA to Tommy. And Nautica is an American spirited brand and colors of Nautica are similar. They're red, white and blue. And we thought as we were exiting categories with Tommy through our PVH license, as we vacated a classification of product, we would be able to market our newly licensed Nautica brand. So we're doing exactly that. It's growing nicely. It's not easy finding the appropriate space for it. But as it shipped, it's retailing well and the scale of it is beyond what we expected. So we're happy with Nautica. We had a unique opportunity to invest in Halston that gives us long-term ability to own the brand, and we're carefully marketing the brand in the right venues. I would not say that was a major success on its first effort. Second effort a little bit better, and our third delivery appears to be really well accepted. We'll be in the middle of shipping it soon. We're excited by what we see, and we believe there's an opportunity there. It's not nothing that I would point to of scale today, but it does have a $250 million to $300 million opportunity in our portfolio. So it merits the actions that we're taking. I can't give you an income statement on that area just yet. I can tell you that it does cost money to build brands. It does cost money to launch brands. And when you make the right decisions, you prosper after the first couple of years of spending. But it is a capital-light means of growing your business. We did not spend very much money on an acquisition. We spent money on talent, samples, shopping, all the good stuff, showroom, but all very manageable. BCBG, better. BCBG was -- we first shipped it recently with good door distribution. We know what we've got to do to make it better, same as always. We're in over 300 doors very quickly, working well. Go to Converse and Converse through Nike is a little bit unique. It's global. It's got distributors all over the world that we've -- we're working to understand their needs. They're working very hard. The global distributors are working hard to understand how we can make their business better. It's a wide open field for us with great cooperation from the Converse organization. So we're excited by it, and it further enhances our -- call it, our active business. It's classified somewhat as skate. We don't have a skate initiative other than this, and we're not cannibalizing our own dollars. This is all new to us, and we're excited by where that goes. So -- and there'll be others. There'll be 1 or 2 other announcements on licenses that are also scalable. We're not signing licenses that we see a potential of $20 million or $30 million. Those are the pieces that we're cleaning up. I guess our measuring tool would be in a 3-year period if a brand doesn't hit over $100 million in sales, it's really -- it shouldn't be on our radar screen. And we also have a private label initiative that we work hard at. That's spearheaded through our overseas organization that manages to get private label businesses globally. So we're working harder on that than we've ever worked. So we're conscious of the fact of what we need to do to keep the comfortable scale of our business. And the backdrop is if it doesn't work, we'll be profit-driven and not top line driven. We're doing well on managing our business. We've not focused on headcount reduction. If some of these things don't work, that will be a necessary evil that we'll have to look at closely. But there are opportunities throughout the company. Hope I answered a little bit of what you're looking for, Mauricio. Mauricio Serna Vega: Yes, yes, definitely was very helpful. If I could just have a quick follow-up for -- on the gross margin. Maybe just looking at the guidance that you gave, I think it implies for fourth quarter like roughly a little bit over 400 basis points margin contraction. As we think about spring '26 and the initiatives that you're doing on pricing and so forth, should we expect like a pressure more aligned with Q3? Or I would suppose sequentially better than Q4, but just thinking about whether it could be closer to Q3 or still like meaningful pressure. Neal Nackman: Yes. Without getting into the specifics of the quarters for next year, I think, Mauricio, if you're interested generally, where we got impacted by tariffs was a little bit in the second quarter, more significantly in the third quarter and the most in the fourth quarter. So essentially, if you reverse those, that's where we expect to get the pickups into next year. Operator: And the last question comes from Dana Telsey with Telsey Advisory. Dana Telsey: Morris, as you think about the wholesale channel of distribution, how have the order trends been changing lately, particularly for your own brands like the Donna Karan and the Karl Lagerfeld? And then, Neal, given the gross margin, excluding the tariff, the complexion coming from your own brands, certainly, what I've been seeing in the stores is the good sell-through of Donna Karan and Karl and have the -- whether it's extended sizing, whether it's handbags, the improvement in retail, are any of these potential additive catalysts that are incremental for 2026 and going forward? Morris Goldfarb: Thank you, Dana. The order trends, sometimes you can almost feel it. You feel it in the air. If you walk outside and it's cold, trends are going to be better this time of the year. So I would tell you, we had a few surprises. As you see, our inventory levels are relatively low. There's a different percentage of off-price to regular retail, full-price retail that we have today. So demand was significantly higher at the full-price channel for us this year than most years. And if you shop the stores, we're very proud of the way our inventory looks -- the retailers that chased product are prospering. The highlights for us were the coat area and the dress area, and it's not just one brand, it's across the broad. All of our brands are doing well. The sell-throughs are higher than they've been historically. So it's all said with all of what's been thrown at us, I'd say we had an excellent year and still a little time to go, but we're happy with the consumer. We're happy with our retail partners. And our staff has done an amazing job of managing during this period. I boast about it regularly. So if I've said it one too many times here, I apologize, but it's a great team of people that step up when needed, and this is a period of time that stepping up is essential. We've all done it. And thank you, team, if you're listening. And you had another follow-up on that one on this question that I missed, Dana. Did I? Dana Telsey: It's about -- when you think about next year, extended sizing, what you've done with Weekend, what you've done with handbags, what you've done with own retail, how do you think of the incrementality of that of your own brands and the opportunity for contribution, whether to top line or to margin? Morris Goldfarb: Well, pretty much all -- if you look at the new-to-market brands, and I would consider Donna Karan new-to-market, it's not even all the new elements or new classifications that we bring. It's the penetration of the old. It's -- you have a period of time which is proof of -- call it, proof of concept. The dresses have to sell before you get door expansion and penetration within the doors that you've had. So we're in a good mode. All our initiatives with Donna Karan work. So I'll tell you, our dress business will grow. Our sportswear business will grow. Our handbag business will grow. Our footwear business will grow. So there's -- and the Weekend, which we just shipped, we're very excited about, and we believe that the brand will be a shining star within the retail world. With that, we also have a greater penetration internationally, and we haven't touched international for Donna Karan yet. So we're about to. We're testing some Donna Karan product in the European market. But we're cautiously distributing it and carefully distributing it into a full-price channel distribution. So that's all working. And with that, Karl Lagerfeld, the same way. Karl Lagerfeld has grown somewhat dramatically this year. we have a greater concentration in calendar 2026 on growing the men's side of Karl Lagerfeld in North America. So there are -- if your question is targeted to organic growth opportunities, every one of our brands has potential to grow organically. That's what we've basically done to mitigate the PVH givebacks. So -- and there's still plenty of room where -- as I said earlier, we're not under pressure to make an acquisition. We're not under pressure to sign another license. We have these great assets that have a lot of bandwidth, a lot of ability to grow without pressures on margin. Thank you Dana. With that, I thank you all. I wish you all happy holidays, and thank you for your time and your support of our company. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

58天前Insight Analytics约5分钟阅读

CMGMY 2025 Q4 财报电话会议

Michael Ord: Good morning, and thank you for joining us for Chemring's full year results for the period ending 31st of October 2025. I'm joined today by James Mortensen, our Chief Financial Officer; and we have Tony Wood, our Chairman, with us also. This morning, I'll start with the group highlights for the year, then hand over to James for a detailed review of our financial and operational performance. I'll then return to discuss the market environment and update you on the progress we've made in delivering our growth-oriented strategy. FY '25 was another year of solid performance for Chemring. What was particularly pleasing is that we achieved this despite some short-term headwinds, most notably softness in U.K. government order placement across national security and defense, which impacted Roke. This resilience reflects the work we've done to build a high-quality business capable of navigating challenges and delivering sustainable growth. Global defense spending continues to increase, driven by U.S. demands for greater burden sharing across NATO, the conflict in Ukraine and rising tensions in the Asia Pacific region. These dynamics underpin a sustained upcycle in defense and security investment, which is expected to persist into the next decade. Our record order book is clear evidence of this trend. During the year, we secured several strategically important contracts, including STORM, Roke's GBP 251 million U.K. MOD multiyear missile defense program. And these wins strengthen our future prospects and support our ambition to double annual revenue to GBP 1 billion by 2030 while maintaining strong margins. Turning to the headline numbers. Our three Energetics businesses delivered exceptional results with all three achieving record order books and two delivering record revenues and operating profits. The group revenue increased by 2% to GBP 498 million, and operating margin improved from 14.3% to 14.8%, reflecting strong operational effectiveness and agility. Earnings per share were 19.4p and cash conversion rose to 114%, reinforcing the cash-generative nature of the group. Order intake reached GBP 781 million, up 20% year-on-year, delivering another record order book of GBP 1.3 billion, up 32% since last year. We also continue to advance our safety and ESG agenda and our total recordable injury frequency rate fell to 0.48 from 0.69, demonstrating progress towards zero harm ambition. Looking ahead, I'm more confident than ever in Chemring's position to capitalize on long-term demand. We are a specialist manufacturing and technology business with the unique positions at the heart of national security, defense and space markets, all markets in which growth has been driven by rising global instability and the need to rebuild defense industrial capacity after decades of underinvestment. With market-leading positions, which are often sole source, our diversified and synergistic portfolio is by design and hard work, positively exposed to structural tailwinds expected to persist for many years, and our track record of execution is evident in expanding margins and excellent cash conversion. Our resilient balance sheet enables investment in organic and bolt-on acquisitions and enhance our offering and strengthen market leadership. In summary, Chemring is very well positioned to deliver superior and sustainable shareholder value over the longer term. I'll now hand over to James, who will take you through the financial results, operational performance and our innovation review in more detail. James Mortensen: Thanks, Mick. In what has been a challenging U.K. contracting environment, we have still managed to deliver an improvement across all of our key metrics, demonstrating the resilient high-quality nature of the business. So first to the highlights. Another record order book, up GBP 1.3 billion, up 32%. Continued momentum in revenue, up 2%. Operating profit was up 6%, resulting from a focus on operational excellence. This resulted in margin up 50 basis points to 14.8%. EPS up 3% despite higher tax and finance costs, strong cash conversion at 114%. And so the Board has declared a final dividend of 5.3p, giving a total dividend of 8p, up 3%. So turning next to our segmental performance. Countermeasures & Energetics revenue grew 17%. Energetics delivered ahead of schedule and improving operational performance at our Tennessee Countermeasures business resulted in a strong result. Operating profit was up 37% and margin increased to 19.1%. It was a weaker period in Sensors & Information, as expected and previously highlighted. This was because there were delays to U.K. government spending and the prior year benefited from JBTDS LRIP. This meant revenue was down 18% and operating profit down 25%. As a result of early action to control cost, we maintained operating margins of nearly 18%, demonstrating how even in the current market, this is a high-quality business. Group revenue was up 2% despite an FX headwind of GBP 5 million. Group operating profit was up 6% and operating margin was up 50 basis points to 14.8%. On a constant currency basis, group revenue would have increased by 3% and operating profit by 7%. So let's look in a bit more detail at each of the segments. It was another strong year for order intake in Countermeasures & Energetics, demonstrating the critical often sole source, highly engineered nature of the products in this segment. Order intake was up 21% as our customer programs are ramping, we are seeing that demand often in the form of multiyear orders. There was a strong performance in Energetics with completed projects delivering ahead of schedule in Chicago and Norway. We also saw some benefit from increased pricing and the results of our continued focus on operational excellence, improving volumes. This resulted in a particularly strong H2 margin performance. The expansion projects in Chicago and Scotland are substantially complete with just the commissioning phase to be completed in Scotland. In Norway, the first phase is complete and delivering ahead of schedule. However, as a result of higher infrastructure and groundwork costs, we now expect total costs of GBP 180 million, up from the GBP 145 million initial estimate. This will be offset by GBP 90 million of grants, given the net spend of GBP 90 million. We still expect to generate very attractive returns on the investment and for group revenue to increase by GBP 100 million per annum and operating profit by GBP 30 million per annum from 2028 once the three capacity expansion programs are complete. In countermeasures, teams executed well across all of our facilities. In particular, we saw improving operational performance at our Tennessee countermeasures business with improving volumes coming out of that facility, the operational challenges and low-margin contract that held us back last year are now completely behind us. Operating profit grew 37% and margin was up 280 basis points to 19.1%, reflecting that strong operational execution. We have great visibility into next year and beyond. Order cover remains really strong with 95% coverage for '26, 93% for '27 and 59% for '28. So moving now to Sensors & Information, where order intake grew 19% to GBP 179 million. In particular, it was pleasing to see that Roke order intake was up 24% on the prior year. Revenue was down 18% to GBP 175 million as a result of a softer U.K. government contracting environment affecting Roke. We have tightly managed the business in this challenging environment, reducing headcount by about 80 in the year, whilst protecting key capabilities. We now have a bigger bench of employees with the highest clearance than when we started the year. This demonstrates we are well positioned for the current environment and for when order flow improves. We continue to execute well in our U.S. Sensors business, receiving a $15 million order for the naval version of our biologic detector. We remain on track to receive the FRP award for the Army version, JBTDS, in 2026. In August, we completed the Landguard acquisition. Integration has progressed well, and the business performed in line with plan. We think this is a great business with a strong management team, and we are confident this is a combination that will deliver. Early action to manage our cost base meant we held operating margin at 17.8%. Operating profit fell 25% following the drop in revenue. The order book grew 5% on prior year at 45% order cover for FY '26. It's in a similar place to last year, and we expect to return to growth in the second half of FY '26. Given the critical areas where we support our customers and the strong pipeline and opportunity for product sales, we remain on track to grow Roke to GBP 250 million by FY '28. So moving on to net debt. With a strong focus on cash generation, cash conversion was 114% in the year with operating cash of GBP 112 million. We have continued to invest in additional capacity with GBP 76 million spent in the Energetics and a further GBP 29 million spent on automation and maintenance. This has been offset by GBP 24 million of grant funding. We've also returned GBP 26 million to shareholders through our growing dividend and the share buyback, and we've also purchased shares to satisfy acquisition consideration and employee share options. After great progress made by the business in managing working capital, closing net debt of GBP 89 million was lower than expected, representing 0.95x (sic) [ 0.90x ] leverage. On capital allocation, we remain consistent. Overall, we want to maintain a resilient balance sheet, and we will target leverage of less than 1.5x. First, we'll continue to invest in the business. Norway is now the primary focus, given spending is largely complete in Chicago and Scotland, but we were also looking at opportunities for further automation like at our U.K. Countermeasures business. Second, we'll continue to execute focused M&A. Landguard was a good example of a bolt-on within Roke, which remains the main focus. We'll also continue to screen for targets in space and missiles in the U.S. and Europe. We'll remain disciplined, and we have a healthy pipeline of opportunity. The target annual dividend cover of 2.5x has now been met, and so we expect to maintain that level of cover going forward. And finally, we'll return surplus capital to shareholders. We've returned GBP 4 million in the year with GBP 36 million remaining on the buyback. So now let's turn to FY '26 and how we see that progressing. Overall, trading guidance unchanged with 76% revenue cover next year with a similar H2 weighting to prior year. In Countermeasures & Energetics, we are targeting low double-digit growth. That's made up of mid-teens growth in Energetics and low single-digit growth in Countermeasures. Like last year, we expect an H2 weighting. Sensors & Information, we are targeting mid-double-digit growth. U.S. Sensors will be flat as we wait for JBTDS to full rate production expected to start in FY '27. We expect Roke to return to near '24 revenue levels next year, but a return to growth in H2, so an H2 weighting for revenue and profit. Interest costs will be about GBP 10 million. Rates haven't come down as much as we thought and net debt is higher. We now expect CapEx in '26 to be in the range of GBP 100 million to GBP 110 million, mainly resulting from higher costs in Norway. And finally, as we enter a growth phase, we expect cash conversion in the range of 80% to 85%, but returning to normal levels in the medium term. We're also mindful of some external factors, which we also flagged last year, continued short-term budget timing disruption in the U.S. and U.K. and obviously, any significant movements in FX. So that was the numbers. Now for innovation, one of our core values, and it still amazes me just how much capability we have. Drones pose an increasing threat, not just to our armed forces, but also to our civilian infrastructure. This is CORTEXA, a small, rapidly deployable system that is a result of over 5 years work with the U.K. MOD. It's a great example of how Roke can fuse its software with the best off-the-shelf technology. Depending on the mission, you can swap out the sensors and it's compatible with a range of factors. As the threat changes, it can evolve by training the AI classifier. It combines miniature active radar and point tilt zoom sensors to provide a high-resolution capability in day or night. The AI in Roke software allows you to identify multiple threats automatically. First on radar, so the system can determine its location and its track. Next, an image generated by the sensor -- using an image generated by the sensor, AI classifies the object. Is it a threat and how serious? So not just if it's a drone, but what kind of payload does it have? Then this is fed back to operators in a simple user interface, so they can take appropriate action fast. The system can track more than 20 threats at a time, so it can counter the increasing threat of drone swarms. This product has both military and civil applications. Having already sold our first preproduction units to a key reference nation, we can see a clear market opportunity. So thank you. That brings me to the end of my section. I'll hand back to Mick for the strategy update and outlook. Michael Ord: Thanks, James. Before turning to our operational performance and growth opportunities, let me start with what we're seeing in our core markets and why this underpins our confidence in the longer-term outlook. Geopolitical tensions remain at the highest levels in recent memory, whether it's the conflict in Ukraine and an increasingly assertive Russia or rising tensions across the Asia Pacific, this environment is driving a fundamental rearmament cycle expected to last at least a decade, possibly two. Technology and innovation continue to reshape defense and security activities and demand for traditional capabilities such as munitions and missiles is growing alongside disruptive technologies. This very significant increase in demand has exposed vulnerabilities in NATO's defense industrial base after years of underinvestment. Rebuilding resilience will take time and governments are placing greater emphasis on national security and closer collaboration with industry. In the U.S., the world's largest defense market, the Trump administration is focused on maintaining overwhelming military superiority. The FY '26 DoD funding request is $961 billion. And in parallel, the U.S. has signaled it will no longer shoulder NATO's financial burden, prompting members to target defense spending of 3.5% of GDP by 2035. How nations respond to this rising global instability will likely create significant opportunities for Chemring. Next, I'll focus on the U.K. and Europe. Starting with the U.K. While short-term softness persists, we expect sustained investment in capability, resilience and technology over the medium to longer term. The U.K. government has committed to increase defense spending to 2.5% of GDP by April 2027 and an ambition to reach 3% in the next parliament. Recent publications, notably the Strategic Defense Review, National Security Strategy and Defense Industrial strategy, all signal a focus on sovereign-based manufacturing and advanced technologies. Priorities in munitions, energetics, active cyber defense and operational mission support are all aligned with Chemring's strengths. The defense investment plan expected before year-end should outline funding priorities and its release should trigger new contracts in munitions, energetics and digital defense capabilities. Turning to Europe. Defense budgets are rising sharply, reaching EUR 326 billion in 2024 with a further EUR 100 billion increase projected by 2027, alongside major EU initiatives, including the EUR 800 billion Readiness 2030 program and the EUR 150 billion Security Act for Europe instrument. European priorities are to increase industrial capability and military readiness and the Nordic nations, in particular, are investing heavily in energetics. Our sales into Europe have grown over 120% in the past 3 years, and we expect this upward trend to continue. Against this positive backdrop, let's review our progress in 2025. We set out 3 strategic imperatives last year: grow, accelerate and protect, and I'm pleased to report good progress against all 3 areas. Organic growth initiatives are on track with some ahead of schedule. Our U.S. countermeasures business rebounded after FY '24 challenges with operational improvements in Tennessee delivering higher production volumes and reduced downtime. And in August, we acquired Landguard Group, enhancing Roke's defense technology portfolio and creating operational synergies. Integration is progressing well, and we see a healthy pipeline of similar bolt-on opportunities across Roke and the U.S. space and missiles market. And as always, safety remains nonnegotiable with our recordable injury frequency rate reduced, reinforcing our zero harm ambition. Our Energetic expansion program is advancing well. In Chicago, the expansion program is ostensibly complete and was delivered on budget. The facility fit-out has been successful with the team establishing continuous flow production operations ahead of schedule. With strong order visibility, the business is firmly on the front foot. In Scotland, construction of the new propellants facility is complete, along with the installation of production machinery. Facility commissioning is underway and revenue generation is on track for FY '27. Market demand for double-based propellants remains strong, and the facility's order book is underpinned by a 12-year agreement with Martin-Baker and GBP 47 million worth of NLAW missile orders from Saab. In Norway, Phase 1 of the expansion program is ahead of schedule and Phase 2 is progressing well despite some cost increases. However, investment returns remain strong. In addition to our existing production site, the Norwegian government has allocated funding for the next phase of work to establish the new greenfield production facility. In Germany, work is on track to deliver a new Energetic blending facility in 2027, supporting Diehl Defense's 155-millimeter munitions line under our EUR 231 million framework contract. And in the U.K., we are completing customer-funded studies assessing the feasibility of establishing new energetic material production capabilities at our Ardeer site in Scotland. These projects strengthen our critical position in munitions and missile supply chains. And whilst they are long term in nature, we remain focused on delivering near- and medium-term growth. Roke faced a challenging U.K. market in FY '25 with slower-than-expected recovery in U.K. government order placement. But importantly, we've seen no cancellations and no competitive losses, only contract delays and extensions. And notwithstanding these challenges, Roke was successful in securing GBP 65 million worth of contract renewals from national security customers, continuing to provide a very solid underpin for the business. Looking forward, Roke will increase revenues from its growing portfolio of market-leading defense products, and we will continue to access more international markets. Highlights for the year have been the launch of the DECEIVE EW detection and attack system and CORTEXA, the counter-drone system, which James took you through, both of which have been well received by U.K. and international customers. And the team won more than GBP 20 million in defense product orders outside of the U.K., including Resolve, Perceive and Locate systems to Latvia, Sweden and Egypt and with the expectation of further orders to come in '26. With recovery in national security expected in H2 of '26 and with opportunities pipeline that exceeds GBP 900 million, Roke remains well positioned for future growth and all of which supports confidence in Roke achieving GBP 250 million worth of revenue by 2028 with continued strong margins. So to conclude, we've made solid progress in '25, continuing to build a high-quality and resilient business whilst investing for future growth. Trading since the start of the current financial year is in line with our plans and with 76% of expected '26 revenues already in the order book, the Board's expectations for '26 performance remain unchanged. With market-leading products, technologies and services critical to our customers and with a resilient balance sheet, we are confident in achieving our ambition of EUR 1 billion annual revenue by 2030 and balancing near-term performance with longer-term growth and value creation. So that concludes the presentation, and we're now happy to take your questions. Could I ask that you state your name and the organization that you represent before asking your question? Thank you. Sash Tusa: Sash Tusa from Agency Partners. You talked about the U.K. government's request for proposals for new energetics production. Clearly, one of the sites that's been highlighted by the government is Ardeer. If it's not, it's something very near it. And one of the products that they -- particular products they're looking for is HMX, which is something you already produce. Are there any other sites or any other products that you would be interested in bidding for, firstly? And then secondly, what do you see as being the risks if other companies decide to come into the U.K. market and try and bid for other capabilities or indeed sort of bundle up some of the capabilities the U.K. government is looking for? Michael Ord: It's a good question. So as you know, Sash, earlier this month, the government put out a public notice asking for expressions of interest from companies interested in establishing the production of energetic materials here in the U.K. I mean in advance of that PPN, earlier in the year, we had already completed the first feasibility study for our site up in Ardeer in Scotland. And indeed, as we sit here at the moment, we're currently complete or working through a second feasibility study associated with the infrastructure that will be required to increase capacity expansion at the Ardeer site. So maybe step back and look at that. So firstly, we really welcome the U.K. government's focus on establishing production of energetic materials here in the U.K. We've had a long tradition in producing energetic materials at our Ardeer site and others. And we believe that we're very well placed to help the government in that national mission. There's a raft of materials that you'll have seen in the public procurement notice, and you're absolutely right. So we are looking at -- is it possible to establish HMX/RDX NTO production in Ardeer, all of which are materials that we produce in Norway. And clearly, there's a huge synergistic opportunity there for the Norwegian and the U.K. businesses to work together, and we've been in conversation with the U.K. government associated with that. And if you look down that list of materials, then our primary focus is probably in the high explosives area. So you'll see the likes of HNS and PETN on that list. So those are materials that are not produced in the U.K., so the high explosive materials that ourselves, but also other U.K. defense companies in the U.K. We import from overseas. We know how to produce those materials. We do so in small quantities in our laboratories. So we will be in discussion with the U.K. government associated with primarily the high explosive elements of those materials. There are other areas such as nitrocellulose and nitroglycerin, et cetera, that clearly, we know how to manufacture those, and we make nitroglycerin in our lab for test purposes and whatever. But we don't really see that as an area that we want to pursue. With regards to do we see it as a competitive threat if other companies want to establish operations here in the U.K.? No, I don't. I think that establishing a greater defense industrial base here in the U.K. is good for everyone. I think a rising tide lifts all boats, and that will be good for Chemring. And specifically in a number of the materials that they're looking for, we don't manufacture them and we don't see strategically that we would want to invest in those manufacturing and they don't compete directly with us. So it's not as if someone will be establishing capacity that would eat our lunch. And indeed, we have a very dominant and very strong and well-established position for military high-grade explosives in Norway. As you know, we're one of the largest and soon to be the largest producer of HMX and the whole of NATO with our expansion programs, et cetera. And as we mentioned, the opportunity to establish a second production facility in Norway in partnership with the Norwegian government. We will put our Norwegian business well ahead of all of the European competitors in that area. So long-winded answer to say, I see this as a very good thing. We're actively engaged. And I do think it's a good opportunity for us. Sash Tusa: And just a follow-up. Norway Phase 3, I think you indicated earlier on this year that you would hope that the Norwegian government would commit to that probably by the end of the year. Is that still a possibility? Or are there any particular issues that have caused the Norwegian government to delay that? Or is it just government stuff getting in the way? Michael Ord: So I think you're getting ahead of Phase 2. So the second phase of the feasibility study for the greenfield is well advanced. So it's a matter of public record. The Norwegian government has allocated funding for that second phase of the feasibility study. And the team in Norway are in final stages of agreeing what the contract looks like for that second phase. We're hopeful that we'll get that contract signed this side of Christmas. And then we will crack on with that feasibility study. We think the second phase is going to take between 6 and 8 months. And just as a reminder, so Phase 1, which we've done was a feasibility study, which we proved it was feasible and Norwegian government have supported that. The second phase, which is what we're just about to execute is concept selection, which will agree the physical configuration of the second facility that we'll build, what materials we'll produce and then what capacity and then Phase 3 is the detailed design and then construction. So no, a lot of momentum, funding being allocated. I expect to see a contract hopefully, this side of Christmas. Really excellent opportunity, really exciting. David Richard Farrell: David Farrell from Jefferies. A couple of questions for both of you, really. I'll start with James. Can you just help us on Roke and the order cover? I think you've got GBP 95 million for execution in the year ahead. This time last year, that number was GBP 101 million, which ended up being 58% cover what you ultimately delivered. So how can you have confidence that Roke will come back to the extent you expect in the second half? Is there an assumption here that part of STORM gets booked in the first half and then gets delivered over the second half, which in turn has an implication for the margins? James Mortensen: Yes, a couple of questions in there. So we are flagging that we do think Roke is going to recover next year. And we do think it's going to get to near '24 levels next year. But obviously, that recovery is in the second half, and we're flagging particularly that the operating profit is weighted in the second half. STORM, we are progressing that, and we probably will see some orders that we execute through the next couple of years on that. But it's not because of STORM that we're saying that we're going to get back to that revenue. No, we think actually, it's the product side of the business that is going to come back strongly in the second half as well. And then also that national security business as well. We talked about the GBP 65 million of renewals that we got. We expect that renewal season, April, May to be really strong this year as well. David Richard Farrell: Okay. Going back to Energetics. In this kind of new world, clearly, some of your customers probably are reevaluating whether or not they are vertically integrating. Is there any evidence that your customers are maybe going to be producing some of the HMX and RDX for their own usage and then kind of using you for kind of excess amounts over the next maybe decade? Michael Ord: No. I know you're -- so there -- absolutely. So the likes of Rheinmetall or whatever are vertically integrating their supply chain, especially for munitions, and we know the likes of BAE Systems and whatever are exploring the possibility of doing the same. None of these are our customers. So our primary customers are in the missile domain or rocket artillery or whatever. And where we supply into munitions programs, we have long-term supply agreements to supply those munition programs. So I think we've spoken before in the past that we've got a long-term supply agreement with Diehl Defense to support their munitions program that goes out to 2031. We expect that, that will get extended into the mid-30s, potentially longer as well. So I think that trend of -- you're seeing that some munitions manufacturers are vertically integrating and producing extensively the likes of RDX. I think we will see that, but it doesn't eat into our market share because we don't supply those anyway. And we haven't factored supply in them into what we see as our forward demand model. David Richard Farrell: Yes. And final question, just coming back to the GBP 1 billion revenue ambition. Clearly, a large proportion of that GBP 150 million presumably is another Energetics facility. You've talked about 6 to 8 months kind of for the next stage in Norway, which can take us to the end of the year, which maybe give us kind of 3, 4 years kind of build on a greenfield. That seems quite ambitious potentially. So is the chance of really that GBP 1 billion is more 2031 than 2030, depending upon when you sanction the new project? James Mortensen: So we've always said about the GBP 1 billion. So yes, GBP 850 million, our current organic plan and then GBP 150 million on top. That GBP 150 million is made up of either -- we'd love to do it organically, right? And so we've always talked about the Energetics expansion projects, but there are other things that will come along as well. And then also, there's the bolt-on M&A that we're going to do. And like Landguard, it just takes a few to kind of get there as well. And so there are both routes that we can get there. It's not just holding on the Energetics expansion. Benjamin Pfannes-Varrow: Ben Varrow from RBC. First one, we've spoken about the 2 possibilities of plants in Norway and the U.K. Can you expand on -- or give an update on Germany? James Mortensen: All right. Yes. So in Germany, in Germany, so we're building a blending facility at the site in Lubin where we're going to supply MCX for the 155 munition line, the Diehl contract that Mick was just talking about. And so plans are progressing really well in relation to that. We're going to start breaking ground, and we expect to be in operation from '27, supplying into that filling line. It could be that there are other opportunities that arise in Germany or in other European countries. But that's the one that we're focused on, and that's the one that we're executing against. Benjamin Pfannes-Varrow: Okay. In terms of Norway, the current expansion. So is that all on track despite the CapEx overrun? And sort of what gives you comfort that, that CapEx number doesn't swell further from here? James Mortensen: Should I do that? Michael Ord: Well, in Norway, the first phase we've delivered -- well, kind of a little bit of ahead of schedule actually. So we've seen revenue already coming on ahead of when we expected to do that. It is right to say that the second phase that we have seen some cost increases associated with that, and James spoke to those. I mean there's a few factors that we kind of saw, like, that caused that. So we've had -- I think we've talked about a little bit in the past, the geological issues that we've had there. And we've also identified areas of infrastructure that require greater scope than we originally forecast. And that would take us back to -- if you go back to October '23, where the ASAP program was opened by the European Union, there was only -- in the window was only open for, I think, it was 57 days. The team did a fantastic job to be able to submit all of the proposals in such a short period of time to secure what ended up being GBP 90 million worth of grant, which delivers a fantastic IRR return on these projects for all of our shareholders. But because everybody was moving so quickly, it's understandable that maybe some of the estimates and the uncertainty that was associated with those was a little bit broader than maybe we would have preferred. But we're -- I think we've got all of that under control now. That's our -- we understand what's caused that cost increase. We've baselined the schedule. And so therefore, we've got confidence now that we'll execute against that. Benjamin Pfannes-Varrow: Last one just on working capital. Advanced payments continue to feature quite a bit. How should we think about that going forward? Is that an unwind at some point? Or is that really just a feature of the tightness of the Energetics business. James Mortensen: So I think we think it will continue to be a feature of the tightness of the energetics market. I think we did quite well last year. And so that's why you saw that in the kind of strong cash conversion we saw. What we are seeing is that often quite a lot of those advanced payments, we then put that into the supply chain to get the kind of long lead time items so that we can ramp at the rate that we want to. And so you've also seen a slight increase in inventory as well. And so that's the unwind that you would expect is the inventory will come down, but also those advanced payments as well. George Mcwhirter: George McWhirter from Berenberg. Two questions, please. Firstly, on Roke, can you just comment on the split between products and services that you expect in FY '26. And also in FY '28 as well in the midterm. James Mortensen: So I think we've always guided about the split in the Roke business is about kind of 70-30 between product and services. It's probably slightly less than that last year. We expect it to be probably slightly more than that by the time you get to FY '28 as that kind of product business grows faster than the services business. George Mcwhirter: The second one is on Roke as well. In terms of the U.K. defense investment plan expected to be published in December, what's the risk that if it's published in 2026 that the growth recovery is pushed to the right? Michael Ord: So I'm confident that the defense investment plan will be published before the end of the year. And I think, look, you've got to look at '25, I think, has been a year of significant activity and change from a U.K. government and U.K. MoD perspective. There was a general election in '24. We got the new administration. I think we were one of the first companies that were advising shareholders that to expect some fiscal trickle, I think, as we explained it, around as the new administration came in and that they instigated as we expected, the strategic defense review. And when you've seen the cycle many, many times, as some of us have been in this industry for decades, that always slows down the process of contracting and budget allocation and whatever. And then as we went through '25, then that did play out. We saw the strategic defense review, then we saw the defense industrial strategy. They all came out. They were a little bit delayed, took a little bit longer, but it's a complex landscape that the MoD are navigating through. And that's probably the reason -- the major reason why we saw the slowing down of contract placements and whatever. I think the key backdrop to that, though, is that there has been no change to the threat environment or the capabilities that the U.K. MoD and the national security -- sorry, our national security clients are identifying as crucial going forward. And that is what we've aligned the Roke business 100% towards. So I'm confident that the investment plan, it will come out. It may take a while for us to really be able to percolate and then into what does it mean for specific projects and contracts. But I do think that it will underpin the recovery that we're expecting in Roke in '26. Richard Paige: I'm Richard Paige from Deutsche Numis. I'm afraid another one on Energetics, please. I think on the original schedule, the GBP 100 million of revenue, GBP 30 million of operating profit, you talked about GBP 15 million delivery in '25. It feels as though you're ahead of that schedule. Is that squeezing more from what you're adding or existing facilities? Or is it ultimately trying to understand if a GBP 85 million remainder is still well on track as well? James Mortensen: Yes. So I think we said, yes, we were going to probably deliver about GBP 15 million in '25, about GBP 30 million in '26. I think what we're saying is that actually, we've gone really well in Chicago and Norway. And those -- that first phase in Norway and moving into the new facility in Chicago has meant that actually, we brought some of that GBP 30 million this year into '25. And so it's not a kind of one-off. It's -- the business has just grown a bit quicker than what we thought. And so that should continue going forward. Richard Paige: And trying to shift the focus from Roke and Energetics, I will ask one on U.S. sensors. Is there a prospect of contracts outside of EMBD and JBTDS at the moment? James Mortensen: Yes. So in terms of that business, so the JBTDS, so -- and in both of those products, we're sole source into the U.S. government. The JBTDS product, we can sell that internationally now. And so it was great. We were displaying it at DSEI, and we were -- we saw some good interest from countries around the world, obviously, friendly U.S. nations, but we can't sell that around the world. I think in the short term, though, we do think the focus is going to be U.S. And JBTDS, we're going to have another fallow year this year while we wait for that full rate production order, which we expect in the -- at some point in '26, and then we'll ramp up FRP through '27 and beyond. Richard Paige: And then one last one, again, trying to avoid the other 2 countermeasures. You talked about improved operational performance from Tennessee. Are you now there at full run rate for that business? Or are there other opportunity? James Mortensen: Look, we've seen some really good volumes coming out of that facility now. It's the only fully automated countermeasures facility anywhere in the world. And so the team there have done a fantastic job. Like I say, we're seeing much better volumes out of there. No, I don't think we're at full rate yet. But yes, we're going really nicely now. Michael Ord: Not far to go, though. We've really come up the yield curve in Tennessee across all the facilities, especially the new facility. I think we'll see a really strong year in '26 from Tennessee coming through. And then more broadly from a countermeasures perspective, the U.K. countermeasures business is going like a train. So the demand that's going into that business is fantastic. And that business, so as a reminder, only about 25% -- 20%, 25% of the volume goes into U.K. MOD, 75%, we export and Andy and the team do a fantastic job of exporting across the whole of Scandinavia, European NATO all the way through the Middle East and into Asia Pacific. And we're seeing enhanced demand for especially airborne, but increasingly naval countermeasures. And we're looking at that business with regards to is there an opportunity for us to invest for greater capacity in that business over the next couple of years. So we're really quite excited actually about the -- especially the European NATO countermeasures business market. There's a lot of opportunity there. David Richard Farrell: David Farrell from Jefferies. Quick follow-up. James, you said in your prepared remarks, you're always amazed how much capability you have. I imagine others in your space are also amazed by your capability and would like to partner with the -- to what extent kind of JVs going forward help you drive revenue growth? Because I guess so far, we've not really seen much evidence of that, but maybe some of your peers are putting in place JVs, framework agreements, MOUs, et cetera. Michael Ord: It's an interesting question. So Roke works with probably all of the defense companies that you could name in some way, shape or form, whether they work in partnership with them or they sub to them or with the likes of -- you see the STORM contract where Roke is the prime and you've got the major traditional primes as their subcontract. So I think there's all forms of relationship are open. From a Roke perspective, joint venture could potentially be one of those that we would explore. I think Sash had a question. Sash Tusa: Actually, I've forgotten it. Michael Ord: Let me ask Sash a question. Asking one on [indiscernible] or something... Unknown Analyst: I'll fill the void. Thank you for the extra color on CORTEXA Guardian and revealing that. Could you just put a number on the potential pipeline within the sort of GBP 300 million product pipeline for Roke? James Mortensen: For CORTEXA specifically, so we wouldn't want to kind of call that out. But I mean you can tell, it's got both military and civil applications. You only need to go online actually. There's a good kind of LinkedIn post from the Roke team where they were demonstrating it in Canada. They were on the top of a hotel in a kind of competition against those of other systems. And I think they all think that their system worked pretty well. You kind of saw it at DSEI, it's kind of got a much smaller form factor and it's a really nice product. So whilst I won't want to put a number on it, I mean, we think it's a really nice product. Michael Ord: I would say, do go and have a look at that LinkedIn post. It's a really unique and innovative thing that the Canadians did. In the middle of Ottawa, on the top of a hotel, on the roof of a big hotel where Roke alongside lots of other companies set up their counter drone detection capabilities and then operators did fly drones against these systems. And I think that was a demonstration of not only -- I mean, we just normally kind of primarily think about it this is from a military context perspective, clearly, what's going on from a Ukraine point of view. But the -- I think the Canadians were really smart in doing it on a hotel in the middle of Ottawa. And I think that demonstrates the significant proliferation that we're going to see in these counter drone and drone detection capabilities associated with critical national infrastructure and civilian infrastructure as well, which is why we think a system such as CORTEXA, which is very scalable, very high-end capable that's interoperable with effectors and whatever has got a fantastic market opportunity. And as James said, we've sold 2 systems to a very high-end specialist military user in the European sphere. Unfortunately, we're not allowed to disclose who that customer is. But it is a military customer that is at the forefront of new technology adoption in these areas such as counter drone technologies and electronic warfare. James Mortensen: And it's interesting, actually, isn't it? I think Sash was out in Estonia, wasn't it, for the kind of field trials for the EW kit. And I think that's where we're seeing Roke performing really well is kind of in the field up against our competitors, actually demonstrating that these products work really, really well. And so we've got really good feedback on Perceive, and now CORTEXA as well. Michael Ord: Sash you remembered your question. Sash should build up. Sash Tusa: On opportunities for M&A and bolt-ons in particular, I wonder if you could just explain for Landguard, Landguard was both an add-on, but also an effectively a supplier to you. So what's the net increase in your external revenues from Landguard as opposed to the internal efficiencies you get from owning your own supplier of software-defined radios and VPX cards and so. James Mortensen: Yes. So we said Landguard was going to generate about GBP 10 million in revenue. Sash Tusa: That's external revenue. James Mortensen: Yes, that's external. Sash Tusa: Yes. Okay. And then I just wondered, Alloy Surfaces, sorry, I know this is now history or at least like but what happened so quickly there? And are there any other businesses you've got that might experience the same sort of sudden deterioration in trading or other businesses that you're worried might experience that? Michael Ord: Yes. Good question. So I'll answer the second bit first. So no, there are no other businesses that we are worried that potentially the demand signal would diminish. So what happened with Alloy Surfaces is -- actually, let's take it back. So you saw last year in '24 that we reacted very quickly to the U.S. DoD signaling potentially different machine configurations associated with explosive hazard detection. And the transition of the HMDS product, moving from an OEM new build program into just purely a sustainment phase, which clearly is not our business model. And you saw us act very quickly to sell that business to someone who is a better owner of that business in that sustainment phase. So I think we -- that was a demonstration of that we're very active in making sure that our whole portfolio, not just the businesses, but the capabilities are incredibly relevant to our customers today and going forward because that drives growth. So HMDS was the first one that we did when we saw that technology sunsetting. With Alloy Services, I think we have been saying over the last couple of years that we've seen the demand for these pyrophoric decoys starting to wane. And the reason for that is that, as I'm sure you know that the pyrophoric decoys are primarily most effectively used for things such as insertion and extraction of troops, normally at nighttime, and that was incredibly important when you were in the counterinsurgency operations in Afghanistan and et cetera. Clearly, in the new configuration from a mission perspective in the U.S. DoD, where it's more associated with area denial in the Asia Pacific, the DoD signaled to us that they saw the demand for pyrophoric decoys diminishing significantly. So we acted very quickly to ensure that, firstly, we took cost out of the business to maintain performance. And then we got to a point where we identified that actually we were not the best owners for that business. So -- and if you go all the way back, Sash, I'm sure you do. If you think back to the heights of Afghanistan and whatever, Alloy Surfaces actually expanded from one facility up to three facilities because the demand for those decoys for those counterinsurgency operations was so large. And then as we came off the counterinsurgency missions and then into the new force configuration over a number of years, we went from three facilities down to one. And then unfortunately, we got to a position where we couldn't sustain a single facility. James Mortensen: But just to be clear, there's still some really nice IP within that business. We're the only people we're sole source to the U.K., U.S. government on that -- on those pyrophoric decoys. And so we will still -- we're in a process to sell that business. And so we hope to realize some value for it. Michael Ord: It's a very viable product line. It's just not a stand-alone business in its current configuration. Any more questions? Just looking around, Sash. We'll come back again in a few minutes. Okay. All right. All right. Well, if there's no more questions, then thank you very much for joining us today, and we look forward to presenting our FY '26 half year results to you in June. Thank you very much.

58天前Insight Analytics约5分钟阅读

VNCE 2026 Q3 财报电话会议

Operator: Good morning or good afternoon, and welcome to the Vince Q3 2025 Earnings Conference Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to Akiko Okuma to begin. So please go ahead whenever you are ready. Akiko Okuma: Thank you, and good afternoon, everyone. Welcome to Vince Holding Corp., Third Quarter Fiscal 2025 Results Conference Call. Hosting the call today is Brendan Hoffman, Chief Executive Officer; and Yuji Okumura, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website. Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the Investors section of the company's website at investors.vince.com. Now I'll turn the call over to Brendan. Brendan Hoffman: Thank you, Akiko, and good morning, everyone. We are extremely proud of our third quarter performance as we drove healthy sales growth across all channels and exceeded our expectations for both top and bottom line. Our assortments are resonating across both our women's and men's businesses. But most encouraging is the acceptance we have seen to the strategic price increases implemented this quarter as well as in the momentum in our DTC segment, given the enhancements we have made to the customer experience. In our women's assortment, which has the highest impact from tariffs, prices increased more than our overall average increase of approximately 6%, but units were nearly flat to last year, validating the quality and value of our product in the marketplace. Beyond the pricing actions, our teams have done an exceptional job in continuing to manage the evolving tariff environment. Our goods are flowing smoothly despite significant changes in sourcing and importantly, we've maintained our quality standards throughout this transition. With respect to customer experience, following the store renovations from earlier this year, we enhanced our e-commerce site in Q3 with a strategic site refresh, increased marketing support and the launch of dropship. Our e-commerce site refresh elevated the customer experience with more modern, creative elements and enhanced site merchandising. We are now using AI-generated video content to enrich product detail pages and introduce more service elements like our Cashmere care guide. This investment in our digital platform contributed meaningfully to our strong performance, and we're seeing the benefits flow through in both conversion rates and average order values. Our e-commerce site also significantly benefited from the marketing investments we made in mid-funnel marketing this quarter. Through this work, we grow triple-digit growth in site traffic late in the quarter and supported full price new customer acquisition as well. And at the end of the quarter, we went live with a new dropship strategy, which we believe will be a significant growth opportunity for us moving forward. In the first month since launch, we have seen significant increase in volume. Our initial launch focused only on shoes, but we have plans to expand to other categories, capitalizing on our partnership with Authentic Brands and the category expansion opportunities that provides. The dropship strategy allows us to not only offer more fashion-forward products that we might typically feel comfortable procuring directly, but enables us to showcase a more diverse assortment to our customer providing learnings on customer preferences that we may incorporate into our store channel as well. In addition to these initiatives, we opened 2 new stores this quarter in Nashville and Sacramento, following our successful store opening in Marylebone, London earlier this year, which continues to exceed our expectations. Moving to our wholesale business. We delivered solid growth versus last year, with some of this reflecting the timing benefits from the Q2 shipment delays that we discussed previously, as well as ongoing performance of key partners. We were excited to recently celebrate our 2025 holiday collection, along with our continued partnership with Nordstrom with an immersive experience in L.A. with Nordstrom's top clientele, Nordstrom's VP Fashion Director; and our Creative Director, Caroline Belhumeur. It was a great event to kick off the holiday season and highlight our holiday campaign, which celebrates our brand spirit and showcases connections through stories and gift giving with a 360-degree omnichannel strategy. Thus far, we have seen a very strong start to the holiday quarter, including record sales across the Black Friday and Cyber Monday weekend in our direct-to-consumer business. Given the strength of Q3 and the momentum we are continuing to drive, I am more confident than ever in the trajectory ahead for Vince Holding Corp., and the prospects we have to leverage our platform further to drive growth. We continue to successfully navigate the tariff challenges while maintaining the quality and brand integrity we are known for. We are beginning to reinvest in the business, particularly in marketing initiatives that we had pulled back on earlier in the year and we're seeing positive returns on these investments. The underlying fundamentals of our business remain strong. We're operating with disciplined execution, while positioning for growth. With that strong foundation and the momentum we're building, I'll now turn it over to Yuji to discuss our financial results in more detail and provide our updated outlook. Yuji Okumura: Thank you, Brendan, and good morning, everyone. As Brendan reviewed, we are very pleased with our third quarter performance as we saw momentum continue across the business, enabling us to begin to reinvest in key areas of the business. Total company net sales for the third quarter increased 6.2% to $85.1 million compared to $80.2 million in the third quarter of fiscal 2024. With respect to channel performance, our wholesale channel increased 6.7% and our direct-to-consumer segment increased 5.5%. As Brendan reviewed, part of the growth in wholesale reflects the timing of shipments, given the delays we experienced earlier in the year with tariff disruption. Our teams are doing an excellent job and continuing to manage our supply chain and our goods are flowing smoothly and expect to be back in line to normal course timing by the spring. Gross profit in the third quarter was $41.9 million or 49.2% of net sales. This compares to $40.1 million or 50% of net sales in the third quarter of last year. The decrease in gross margin rate was primarily driven by approximately 260 basis points due to the unfavorable impact of higher tariffs and approximately 100 basis points due to increased freight costs partially offset by 140 basis point increase due to favorable impact of lower product costing and higher pricing and approximately 110 basis points due to favorable impact of lower discounting. As Brendan reviewed, we are very encouraged by customers' response to our strategic price changes and our team's ongoing focus on tariff mitigation efforts. Given timing and mix of sales, we experienced less of a headwind than originally expected from tariffs during the quarter but expect these costs to ramp into the Q4. Selling, general and administrative expenses in the quarter are $36.5 million or 42.8% of net sales as compared to $34.3 million or 42.8% of net sales for the third quarter of last year. The increase in SG&A dollars was primarily driven by approximately $1.1 million related to compensation and benefits and $760,000 of increase in marketing and advertising costs as we reinvested into mid-funnel activities. Operating income for the third quarter was $5.4 million compared to operating income of $5.8 million in the same period last year. Net interest expense for the quarter decreased to $1 million compared to $1.7 million in the prior year. The decrease was primarily due to lower levels of debt under our term loan credit facility. At the end of third quarter of fiscal 2025, our long-term debt balance was $36.1 million, a reduction of $14.5 million compared to $50.6 million in the prior year period. Income tax expense was $2 million compared to 0 income tax provision in the same period last year. The increase is due to the impact of applying our estimated annual effective tax rate to the year-to-date ordinary pretax income. In the prior comparative period, we had a year-to-date ordinary pretax losses for the interim period, and as such, we did not record any tax expense for the same period last year. As a reminder, following the change in controls that earlier this calendar year, we have limitations to use of the NOLs that we did not have last year also impacting the cash tax expense comparison to previous years. Net income for the third quarter was $2.7 million or income per share of $0.21 compared to net income of $4.3 million or income per share of $0.34 in the third quarter of last year. The year-over-year decline in net income was driven by the increase in tax expense. Adjusted EBITDA was $6.5 million for the third quarter compared to $7.4 million in the prior year. Moving to the balance sheet. Net inventory was $75.9 million at the end of the third quarter as compared to $63.8 million at the end of the third quarter last year. The year-over-year increase was primarily driven by approximately $4.2 million higher inventory carrying value due to tariffs. Turning to our outlook. As Brendan discussed, we have seen a very strong start to the fourth quarter with a record holiday weekend sales performance in our DTC segment. Our outlook for the period assumes that this momentum continues with the growth in DTC segment expected to outpace our total net sales growth for the period, which is expected to increase approximately 3% to 7%. This guidance also takes into account potential shift in timing with respect to wholesale shipments given end of the year seasonality. In addition, we expect adjusted operating income as a percentage of net sales for the quarter to be approximately flat to 2% and for the adjusted EBITDA as a percentage of net sales to be approximately 2% to 4% compared to 6.7% in the prior year period. Our guidance for the quarter takes into account approximately $4 million to $5 million of estimated incremental tariff costs that we continue to expect to partially offset with our mitigation strategy. Given our year-to-date performance, and our outlook for the fourth quarter, we expect full year net sales growth to be approximately 2% to 3%. Adjusted operating income as a percentage of net sales to be approximately 2% to 3%, and for the adjusted EBITDA as a percentage of net sales to be approximately 4% to 5% compared to 4.8% in the prior year period despite incurring approximately $8 million to $9 million of incremental tariff costs compared to last year. This concludes our remarks. And I'll now turn it over to the operator to open the call for questions. Operator: [Operator Instructions] And our first question comes from Eric Beder at SCC Research. Eric Beder: Congratulations on a great Q3. I want to talk a little bit about some of the potential drivers here. So you have just started to roll out some of the licensed product, we've seen handbags and suiting in our store tours. I'm curious, you mentioned it also in your comments, where do you think that goes? And I know that the tariffs kind of slowed down the rollouts. What should we be thinking about the potential for that in 2026 and beyond? Brendan Hoffman: Well, I think it's -- I'm even more bullish now after the last month based on my comments on dropship. So what we saw with dropship with Caleres and shoes in the last 4 or 5 weeks, is truly spectacular. And so the opportunity to launch that on e-commerce in the spring on these other categories and then figure out how to better utilize that within the stores, in addition to obviously showcasing the product I think it has -- it can have a real impact on our business more than I was anticipating prior to the dropship launch. Eric Beder: And when you look at -- I know that you've been also looking at putting -- you put some COH denim into some of the stores. How should we be thinking about that potential opportunity to kind of collaborate with other our key fashion brands to kind of help both of you? Brendan Hoffman: Yes. That's something that we're going to continue to explore and prioritize. Very happy with the Citizens of Humanity collab. It also highlights the opportunity we have in denim. So whether we do that in-house, although that's a long haul or continue to do partnerships in denim with Citizens and look for other categories that perhaps ABG isn't licensing at this point. And we can bring to kind of round out our assortment. So that was another good win for Vince. Eric Beder: Great. And you opened up 2 new stores in new markets. I know it's very short. Could you give us a little bit of thought process? And then kind of what should we be thinking about -- I know that we pulled back on that a little bit this year just because of all things going on this year. But given the results here, what is the store opportunity kind of back on full swing for next year and going forward? Brendan Hoffman: Yes. I mean we're pleased with the way the Nashville and Sacramento have been received within the community. It's still early days. Also, we'll be monitoring what it does to our e-commerce business. I think we have 60 stores now between the outlets and full price. And I wouldn't expect that number to move much, maybe a couple more, a couple less depending on opportunities. We continue to be really pleased with our Marylebone store in London. So I'm going to see if there's opportunities in other parts of Europe, both to do business where we can be profitable like Marylebone and also provide some visibility for us in regions where we have a wholesale business and stores can just reinforce that. So we'll continue to monitor the direct-to-consumer opportunity led by e-commerce. But as I've always said, it's not an either/or with direct-to-consumer and our wholesale business. It's both. It's an and. And I think they just reinforce each other, and we saw that in Q3 and continue to see that in Q4. Eric Beder: Great. Congrats and good luck for the rest of the holiday season. Operator: The next question comes from Michael Kupinski from Noble Capital Markets. Michael Kupinski: And I'd like to offer my congratulations as well. Sales were obviously much better than what we were looking for. Were there any particular bottlenecks or limitations that could have delivered even better sales? And I'm thinking any inventory constraints for particular items, for instance? Brendan Hoffman: I mean, there's never a crystal ball. So you always -- there are certain things you wish you had a little bit more. But I think overall, we were in a good inventory position. Really working through the first half of the year, disruption from tariffs as we discussed. So as I'm doing my store tours, I'm not getting too much pushback from the stores about where they need more inventory. I think Vince also since I was here last, is doing a much better job with our logistics and operations, refilling the stores on a timely basis. So I think we have a good handle on that. Again, not to harp on it, but I am so excited about it, this dropship opportunity, which allows us to take full advantage of Caleres' shoe inventory. I mean that's a big deal because that's where we did have some holes in our inventory assortment because it's a little bit more difficult with our third-party partners to properly procure ahead of time. So this opens up a really big opportunity for us going forward, as I've been saying. But overall, the inventories, I think we're in a good position and help fuel the growth we saw. Michael Kupinski: And how much of the strong revenue growth was driven by price versus product volume? I know that you touched on that in your comments, but I was wondering if you could just expand on that. Brendan Hoffman: Yes. Well, I mean we are really pleased that the units held steady and actually grew at the higher price points. So we had anticipated given the price changes that we would see a little bit of erosion in our unit velocity. But so far, we haven't seen that. And the customer seems to be trading up with us. I don't know if that's because they're trading down from other luxury brands. And as those prices skyrocket, but our core customer continues to see us as a value. And as I said in my comments, women's was where we had to take the largest price changes. And the units held strong. So it was a win-win, and that's continued into all of it. So we'll continue to monitor that, continue to see if there's even a little bit more opportunity to push up price where we think the customer will react positively. But definitely a driver was the strength in the units. Michael Kupinski: And then given that wholesale and direct-to-consumer looked like revenues were -- the revenue growth were pretty much similar. But I was wondering if there was any divergence between the 2 channels in terms of product sales and particularly as you go into the fourth quarter. Brendan Hoffman: No. I mean we -- our e-commerce was clearly the big winner and driver when you look across all the channels. But overall, saw strength at the register with our wholesale partners. We continue to work with Saks Global to make sure that we're able to properly service their business while they go through their transformation. So that creates a little bit of noise. But overall, as we start December, the product is checking at the register everywhere. Michael Kupinski: Got you. My final question is, can you just talk a little bit about trends in freight costs. I know that I was just wondering if you negotiate annual contracts. And if you could just talk a little bit about what you're seeing there. Yuji Okumura: Yes, certainly. So yes, we are seeing freight cost increases. That's also partially due to the fact that we are changing sources as well of where we are sourcing the product. So it's really more the product of -- depending on the shift in timing, we're airing more stuff or certain pieces are taking longer in terms of distance wise to get here. So it's not so much of the actual inherent sort of freight contracts and the pricing related to that. It's really more along the lines of the timing of when we want to bring in the product, which method we're using to bring in the product. Operator: [Operator Instructions] We have no further questions so I'll hand the call back to the management team for any closing comments. Brendan Hoffman: Okay. Well, thank you all again for your participation today, and we look forward to updating you on our year-end results in the spring, and happy holidays to all. Thank you. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

58天前Insight Analytics约5分钟阅读

SGU 2025 Q4 财报电话会议

Operator: Good day, and welcome to the Star Group Fiscal 2025 Fourth Quarter Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead. Chris Witty: Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer; and Rich Ambury, Chief Financial Officer. I would now like to provide a brief safe harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10-K for the fiscal year ended September 30, 2025, and the company's other filings with the SEC. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff? Jeffrey Woosnam: Thanks, Chris, and good morning, everyone. Thank you for joining our fourth quarter conference call. It's an exciting time for us as we conclude another fiscal year and begin a new heating season. As we close out 2025, it's a great opportunity to reflect on Star's performance over the past 12 months. Most notably, temperatures were 8% warmer than normal this year, but 8% colder than in fiscal 2024. The lower temperatures coupled with recent acquisitions resulted in a 29 million gallon or 12% year-over-year increase in heating oil and propane volume. At the same time, we kept overhead expenses largely in check, maintained disciplined margin management and continued to invest in installation and service as a complementary service offering, which posted revenue growth of over -- of nearly 10% over fiscal 2024. The resulting bottom line impact on these efforts, along with cooler temperatures, fueled a year-over-year increase in adjusted EBITDA of $24.8 million or 22.2%. While net customer attrition rose modestly, we believe we are taking the necessary steps to manage through this with our ongoing focus on customer service across our operating footprint. Our internal customer satisfaction indicators and loss rates continue to improve, although we observed a lower level of overall real estate activity in the marketplace, which in part impacted new customer additions. Our acquisition program remains an important component of our overall business strategy. And in total, we completed 4 separate transactions during fiscal 2025, adding just under 12 million gallons of heating oil and propane volume annually. We continue to have many additional opportunities in various stages of review. In terms of overall capital allocation, in fiscal 2025, we invested approximately $81 million towards acquisitions and $16 million in unit repurchases and paid $26 million in distributions. We believe all of these activities serve to increase shareholder value. A recap of our results would not be complete without mentioning how proud I am of our talented team of employees who have not only supported but taken genuine ownership in effectively executing our strategy of differentiating Star from the competition through providing outstanding service and value to our customers. We are steadfast in our mission to grow and diversify the company by continuing to make both heating oil and propane acquisitions, keeping net attrition as low as possible and maximizing installation and service profitability over time. We look forward to taking advantage of further opportunities to improve the organization and its performance in fiscal 2026. So with that, I'll turn the call over to Rich to provide additional comments on the quarter and year-end results. Rich? Richard Ambury: Thanks, Jeff, and good morning, everyone. For the fourth quarter, our home heating oil and propane volume increased by 1.5 million gallons or 8% to 20 million gallons as the additional volume provided from acquisitions more than offset net customer attrition and other factors. Our product gross profit increased by $2.5 million or 6% to $45 million as the positive impact from higher home heating oil and propane volume was only offset by slightly lower per gallon margins, driven in part by the mix of volume associated with recent acquisitions. Delivery, branch and G&A expenses increased by $5 million year-over-year, largely reflecting the additional operating costs attributable to acquisitions of $4.2 million. Operating costs in the base business rose by just $800,000 or less than 1%. Depreciation and amortization rose by $1.3 million and net interest expense increased by $1.4 million year-over-year. These changes were largely attributable to the impact from recent acquisitions. We posted a net loss of $28.7 million in the fourth quarter of fiscal 2025 or $6.4 million less than the prior year period, reflecting a noncash favorable change in the fair value of derivative instruments of $12.2 million and a $3.8 million benefit from the sale of certain real estate. The impacts of these positive items were largely offset by a $3.6 million lower income tax benefit, a $3.3 million increase in our adjusted EBITDA loss, again, higher depreciation and amortization expense and higher acquisition-related financing costs, along with other factors. The adjusted EBITDA loss for the fourth quarter increased by $3.3 million to $33 million as the impact from an increase in volumes sold was more than offset by slightly lower home heating oil and propane per gallon margins and an increase in operating expenses of $5 million, again, of which $4.2 million was due to recent acquisitions. Now turning to the results of fiscal 2025. Our home heating oil and propane volume increased by 29 million gallons or 12% to 283 million gallons, again, reflecting colder temperatures and the additional volume provided from acquisitions more than offsetting net customer attrition and other factors. Temperatures in Star's geographic areas of operations for the full year were 8% colder than the prior year period, but 8% warmer than normal. Our product gross profit rose by $57 million or 12% to $525 million due to an increase in home heating oil and propane volumes sold and higher home heating oil and propane per gallon margins and a slight increase in gross profit from other petroleum products. In addition, as previously mentioned on prior calls, we've improved our service and installation profitability, which contributed to an increase in gross profit of $3.8 million year-to-date. Delivery, branch and G&A expenses rose by $36.6 million, of which $10.6 million was attributable to our weather hedging program. As a reminder, in fiscal 2025, we recorded an expense of $3.1 million under our weather hedges compared to a benefit of $7.5 million recorded in fiscal 2024, reflecting weather conditions in both periods. Aside from this, recent acquisitions accounted for an increase in expenses of $23 million year-over-year, while related costs in the base business rose again by just $3 million or 0.8%. Depreciation and amortization rose by $3.9 million and net interest expense increased by $2.8 million. These changes again were largely attributable to the impact from recent acquisitions. We posted net income of $73.5 million for fiscal 2025 or $38.2 million higher in the prior year period largely due to an increase in adjusted EBITDA of $24.8 million and a noncash favorable change in the fair value of derivative instruments of $32 million, which more than offset higher income tax expense of $16 million and other factors. Adjusted EBITDA rose by $24.8 million to $136.4 million, reflecting an $18.5 million increase in adjusted EBITDA in the base business and $17 million increase in adjusted EBITDA from recent acquisitions, partially offset by a $10.6 million change in expenses relating to the company's weather hedge contracts. And with that, I'll turn the call back to Jeff. Jeffrey Woosnam: Thanks, Rich. At this time, we'd be pleased to address any questions you may have. Chloe, can you please open the phone lines for questions? Operator: [Operator Instructions] The first question comes from Tim Mullen with Laurelton Management. Timothy Mullen: I was just curious if you guys could share any thoughts on the regulatory environment, specifically in New York? And what impact in the years ahead do you think it could have on Star Gas, things like the fossil fuel ban and some of the other regulatory items. Jeffrey Woosnam: It's really just very difficult for us to try to predict how that regulatory environment is going to impact us as a business. And a lot of that is still in flux and some of those plans are still trying to being determined. So again, it just -- it's really difficult to comment on how that might impact us going forward. Operator: [Operator Instructions] The next question comes from Michael Prouting with 10K Capital. Michael Prouting: Jeff, on the customer attrition, I just happened to notice -- so looking just at the fourth quarter, that looked like customer gains were down, customer losses were up. And then also, if you just look at the last few years, if you look at the net attrition for the year, it does seem like things are trending in the wrong direction. Was there anything specifically you think that affected attrition in the fourth quarter? And what are your thoughts about attrition going forward for the coming year? Jeffrey Woosnam: We're just generally seeing a low level of prospect activity in the marketplace, Michael. I would say for the full year because some of this is timing, but certainly for the full year, the encouraging part of it is that you can see that our loss rates as a percentage of our customer base are down and continue to come down each year, and I think they are really at historical low points. And all of our -- as I've mentioned, all of our customer with internal customer satisfaction indexes are pointing in the right direction. So the overall impact of that is it's lower churn on the business. The challenge has been new customer gains. And that's something we're constantly reviewing. There's -- in part, as I mentioned in my remarks, we've seen a lower level of activity -- real estate activity, which just takes fewer prospects out of the market. And I would also note that while fiscal '25 was colder than '24, it was still 8% warmer than normal, and we really didn't have a lot of disruptive weather in that period, which tends to attract prospects to our high-quality brands. So we're just constantly reviewing our sales and marketing structure and activities and to attract more customers to our brands. Michael Prouting: Okay. And then I had just actually 2 other questions. Jeff, one for you on the acquisition front. I just wanted to get your color on how the pipeline looks at this point and whether you see the effect of any significantly large deals? And I also had a question for Rich. So in terms of free cash flow, the K was not filed last night, although I have been going through it this morning. But I did happen to notice that free cash flow was lower than I would have expected in the fourth quarter. And it looks like that could be attributed to a combination of working capital tied up in receivables and inventory. And I was just wondering, especially with the inventory, if there was anything there like you guys got a really good deal on heating oil or just what it might have driven the lower-than-expected free cash flow in the quarter? Jeffrey Woosnam: Sure. Related to acquisitions, our pipeline is -- it remains active. We have a number of different opportunities currently under review. Nothing significantly sizable, several tuck-in opportunities, some smaller standalones, but we'll have to see how all of that kind of transpires and comes to fruition. But I'm very pleased with just the overall level of activities and transactions that we've been able to complete this past year. And really, when you think about it, 4 quality deals in 2025 and 4 in '24. So 9 completed acquisitions that we're very proud of over the last 2 years. But hopefully, we can continue that trend. Richard Ambury: Yes, if you look at our receivables, I think we have the same -- relatively same day sales outstanding this year versus last year on our accounts receivable. I don't really see any big difference between our free cash flow this year versus last year. We're paying the same taxes. EBITDA was $3.3 million less this year versus last year. Interest is up a little bit. The timing of income taxes could be possibly impacting free cash flow. But it all depends, too, on the timing of some inventory coming in, barges this year versus last year. And the way the cash flows work, it's a change versus the change in the prior year, but I don't see anything really impacting free cash flow or leading to possibly a distributable cash flow calculation because interest expense is up a little bit. Our cash taxes are not really all that much different. And interest expense is up a bit as well. And we didn't have any tremendous fourth quarter capital purchases this year versus last year, Michael. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jeff Woosnam, CEO, for any closing remarks. Jeffrey Woosnam: Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2026 fiscal first quarter results in February. Happy holidays, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

58天前Insight Analytics约5分钟阅读

CNM 2025 Q3 财报电话会议

Operator: Hello, and welcome to the Core & Main Q3 2025 Earnings Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand it over to Glenn Floyd, Director of Investor Relations. Please go ahead. Glenn Floyd: Good morning, and thank you for joining us. I'm Glenn Floyd, Director of Investor Relations at Core & Main. We appreciate you taking the time to be with us today for Core & Main's fiscal 2025 Third Quarter Earnings Call. Joining me this morning are Mark Witkowski, our Chief Executive Officer; and Robyn Bradbury, our Chief Financial Officer. Mark will begin today's call by sharing an update on our business and recent performance. Robyn will follow with a review of our third quarter results and our outlook for the year. We'll then open the line for Q&A, and Mark will wrap up with closing remarks. As a reminder, our press release, presentation materials and the statements made during today's call may include forward-looking statements. These are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations. For more information, please refer to the cautionary statements included in our earnings press release and in our filings with the SEC. We will also reference certain non-GAAP financial measures during today's discussion. We believe these metrics provide useful insight into the underlying performance of our business. Reconciliations to the most comparable GAAP measures are available in both our press release and in the appendix of today's investor presentation. Thank you again for your interest in Core & Main. I'll now turn the call over to our Chief Executive Officer, Mark Witkowski. Mark Witkowski: Thanks, Glenn, and good morning, everyone. Before we dive into our results, I want to start by reminding everyone of Core & Main's value proposition. Core & Main is a leading specialty distributor of water infrastructure products and services in North America, supporting the repair, upgrade and expansion of our nation's critical water systems. Our competitive advantages, including national scale and resources, local market expertise backed by the best trained sales force, industry-specific technology and comprehensive product solutions position us to lead an attractive secular growth market, driven by aging infrastructure, increasing water demand and ongoing investment needs. Our business model is built for resilience. Today, municipal projects represent over 40% of our sales, providing steady, predictable demand, supported by reliable funding sources. Our nonresidential end market, which represents roughly 40% of sales, benefits from a diverse project mix across commercial, industrial and infrastructure applications, many of which are poised for growth. Residential activity represents less than 20% of our sales. And while near-term dynamics in this market remain challenged, we continue to view the long-term outlook as attractive, supported by population growth and a structural undersupply of housing. This diversification, combined with emerging growth drivers like data centers and treatment plant modernization provides a strong foundation for our business. Core & Main consistently produces strong free cash flow and compelling returns on invested capital, giving us the flexibility to reinvest in the business, pursue strategic growth opportunities and return capital to shareholders. We continue to control our own destiny through disciplined execution on multiple fronts. For example, expanding into high-growth geographies, broadening our product offering in areas like treatment plants, smart meters and fusible HDPE, and deploying our strong balance sheet to pursue accretive M&A opportunities, including our recent expansion into the $5 billion Canadian market. These strategic investments are expanding our addressable market, strengthening customer relationships, and positioning us to capture above-market growth as near-term headwinds subside. Equally important, our pricing discipline and gross margin expansion in recent quarters demonstrate the strength of our value proposition in addition to our team's ability to execute. We are staying focused on what we can control and building the foundation for sustained growth and profitability. Turning now to the quarter. We delivered positive net sales growth despite soft residential demand and a tough comparison from last year, driven by contribution from acquisitions and strong performance across our sales initiatives. Municipal construction remains strong, supported by a highly favorable funding and demand environment. The recent federal government shutdown had little-to-no impact on the municipal projects we support as roughly 95% of funding for these projects comes from state and local sources. Local utility rate revenues and municipal bonds are dependable sources of funding and certain states are also advancing new legislation to repair and upgrade aging infrastructure. Recent actions include Texas authorizing up to $20 billion of funding for new water supply projects over the next 2 decades, New York deploying approximately $3 billion in new water infrastructure investments and Arkansas committing more than $500 million to water and sewer upgrades, each reinforcing a robust project pipeline. The state revolving funds provide a renewable source of capital to support water and wastewater infrastructure projects with current balances exceeding $100 billion in total. Supplemental funding from the Infrastructure Investment and Jobs Act remains a multiyear tailwind with roughly $30 billion allocated to the states and more expected next year, but only a fraction deployed by municipalities so far. Taken together, these dynamics provide long-term funding for critical water infrastructure projects that can no longer be deferred and remain essential to public health and economic development. In nonresidential, we continue to see healthy growth in infrastructure projects such as road and bridges, education and health care and data centers. This growth is helping to offset softness in commercial, retail and office space projects. Data centers represent a low single-digit portion of our total sales mix today, but they are becoming a more meaningful driver of our growth as AI-driven capacity expands. These projects require more water infrastructure than traditional manufacturing facilities due to cooling needs as they draw large volumes from local water supplies. This often necessitates upgrades to municipal systems and in some cases, on-site water treatment facilities to conserve usage. We also see private investment flowing into public utilities to build capacity, creating opportunities for Core & Main across the municipal and private end markets. Data center development doesn't happen in isolation. As these campuses come online, they attract workers and ancillary businesses, driving demand for housing, retail and commercial services, all of which drive the need for new water infrastructure. And this concentrated population growth places strain on local water systems, triggering further investment in water distribution and treatment infrastructure. We're seeing this firsthand at a major hyperscale campus near South Bend, Indiana, where project-related demand has been so substantial that our local branch has nearly tripled in size over the past few years. In many cases, the initial investment for data centers unlocks capacity for broader municipal, residential and nonresidential expansion, creating a long-term tailwind across our core markets. As we expected and discussed on last quarter's call, residential lot development softened during the quarter, particularly in the Sun Belt markets. Builders are carefully pacing lot development against housing affordability concerns and consumer uncertainty. But as housing affordability improves in the future, we will be well positioned to capitalize on the release of pent-up demand. Our growth initiatives continue to lay the foundation for long-term results. Let me highlight a few areas where our execution is creating competitive advantages. First, our product initiatives, including fusible HDPE, treatment plant solutions and geosynthetics each achieved double-digit growth in the quarter as we expand our ability to deliver integrated solutions for aging water infrastructure. Meter products returned to high single-digit growth in the third quarter. Recent contract awards, including our largest metering contract award to date, give us confidence in both near and long-term demand for our advanced metering products. Driving growth through geographic expansion also remains a key priority. We recently opened new branches near Houston and Denver, bringing our year-to-date total to five new locations. We expect to open more branches before fiscal year-end, and we are evaluating over a dozen additional high-growth markets for future expansion. These new branches enhance our proximity to high-growth markets and increase our service levels, supporting continued market share gains. In September, we completed the acquisition of Canada Waterworks, further expanding our growth platform in a fragmented $5 billion Canadian addressable market. This acquisition aligns with our core strengths and increases exposure to growing end markets. Canada is a natural adjacency to our U.S. markets, and we're excited to welcome the Canada Waterworks team to Core & Main. Integration activities are underway with a solid plan to realize synergies. While we continue to invest in growth, we remain equally focused on improving profitability. Gross margins improved by 60 basis points year-over-year to 27.2%, reflecting the success of our private label initiative and disciplined sourcing and pricing execution. Our private label strategy continues to produce strong results, and we are on track for private label products to represent approximately 5% of our total sales this year. On SG&A, we've implemented roughly $30 million of annualized cost savings in an effort to improve operating leverage and maximize the efficiency of our business. We expect to realize these savings over the next 12 months. We remain disciplined in our headcount decisions by selectively filling critical sales roles, while reallocating resources to areas of the business with the greatest growth potential. At the same time, we continue to invest in modern technologies to help us drive future SG&A leverage. These tools strengthen customer service, uncover more selling opportunities and expand our ability to take advantage of emerging AI capabilities. We expect these investments to enhance productivity and support margin expansion. Our strong free cash flow provides flexibility to pursue strategic M&A, invest in organic growth and return capital to shareholders. Profitable growth remains our top capital allocation priority, supported by a robust pipeline of acquisition and greenfield opportunities. We will remain disciplined on valuation and returns while maintaining balance sheet flexibility to drive shareholder value. As part of our disciplined capital allocation strategy, earlier this morning, we announced a $500 million increase to our share repurchase authorization. This action reflects our conviction in our growth outlook and free cash flow generation, and the Board's shared confidence in our ability to continue creating long-term shareholder value. With this expanded capacity, we can act opportunistically as market conditions present attractive opportunities. We are gaining momentum across our sales, growth margin and operational initiatives, strengthening our ability to drive organic growth, expand margins and achieving operating leverage. We remain confident in the attractiveness of our end markets over the medium and long term, and we continue to invest in our associates and value-added capabilities to capture growth and market share. In closing, I want to express my sincere appreciation for our teams across the country. Their dedication and focus on execution have been instrumental in advancing our strategic priorities, and I couldn't be more proud of what we've accomplished together this year. Thank you for your continued support and confidence in our vision. With that, I'll turn the call over to Robyn to review our third quarter financial results and outlook for the year. Go ahead, Robyn. Robyn Bradbury: Thanks, Mark. Good morning, everyone. I'll start on Page 7 of the presentation with some highlights from our third quarter results. Net sales increased 1% to $2.1 billion. Organic volumes and prices were roughly flat versus prior year, while acquisitions contributed about 1 point of growth. We delivered positive pricing across nearly all product categories in the third quarter. The one exception was municipal PVC pipe, where prices are down roughly 15% year-over-year and nearly 40% from the 2022 peak. As we've noted in prior quarters, even with the continued moderation in PVC pipe pricing, our discipline has enabled us to sustain a stable price environment overall. We estimate our end markets were down low single digits in the quarter, driven by declines in residential lot development and a tough comparison from last year. The residential decline was concentrated in Sun Belt markets like Florida, Texas, Arizona and Georgia, where developers have slowed the pace of new development. Activity appears to have stabilized as we move through the quarter, and we remain confident in the attractive long-term fundamentals of these high-growth markets. Our overall portfolio is resilient. Municipal demand continues to be a source of strength, and we're seeing solid activity in large, complex nonresidential projects where our scale, product breadth and technical expertise give us a strong competitive position. This balanced mix across end markets provides stability through varying demand environments. Gross margin in the third quarter was 27.2%, up 60 basis points year-over-year. This improvement was driven by benefits from our private label initiatives and disciplined purchasing and pricing execution. Total SG&A expenses increased 8% to $295 million. SG&A growth in the quarter was driven by acquisitions, elevated inflation in areas like facilities and fleet, higher employee benefits costs and strategic investments to support future growth. SG&A in the third quarter was $7 million lower than the second quarter, reflecting a reduction in onetime items and disciplined cost management. Cost inflation in our industry typically runs in the low single-digit range annually, but it's trending closer to mid-single digits this year. Against the softer end market backdrop and no incremental pricing, the productivity gains we're delivering aren't enough to fully absorb these pressures, especially given how efficient we already operate from an SG&A as a percentage of sales standpoint. This level of inflation is not typical, and while we expect it to moderate over time, we have moved quickly to address it. Since the last quarter, we've implemented $30 million of annualized cost savings with roughly $1 million of savings recognized in the third quarter. These savings primarily reflect reductions in personnel-related costs as we've eliminated approximately 4% of non-sales focused roles since last quarter. We expect fourth quarter SG&A to be roughly $25 million lower than the third quarter due to a seasonal reduction in sales and the results of our cost actions. Our approach is measured and focused on shifting resources without compromising customer service or long-term growth. While we take targeted actions to improve efficiency, we continue to invest in growth-focused roles to support product line and geographic expansion, including greenfields. We have an experienced management team that understands what takes to drive operational excellence through cycles, balancing near-term efficiency with the investments required to continue positioning Core & Main for long-term growth and success. We are committed to driving annual SG&A rate improvement going forward. Adjusted diluted EPS increased approximately 3% to $0.89 compared to $0.86 last year. Growth was driven by higher adjusted net income and the benefit of a lower share count from share repurchases. As a reminder, we exclude intangible amortization from adjusted EPS because a significant portion relates to the formation of Core & Main following our 2017 leveraged buyout. This adjusted metric better reflects the underlying earnings power and free cash flow generation of our business, which is why we view it as an important indicator of our performance. Adjusted EBITDA of $274 million was 1% below the prior year, while adjusted EBITDA margin declined 30 basis points to 13.3%, driven by a higher SG&A as a percentage of net sales. This was partially offset by 60 basis points of gross margin expansion. Turning to the balance sheet, cash flow and capital allocation. We ended the quarter with net debt at nearly $2.1 billion and net debt leverage of 2.2x, well within our target range. Liquidity was $1.3 billion, including $89 million of cash and the remainder under our ABL facility. Operating cash flow was $271 million, reflecting nearly 100% conversion from adjusted EBITDA and highlighting the strength of our cash generation ability. Over the last 12 months, we have generated free cash flow equal to 5.6% of our market capitalization, a level that is more than double the average free cash flow yield of S&P 500 companies and meaningfully above specialty distribution peers. We returned $50 million to shareholders through share repurchases during the third quarter, reducing our share count by roughly 1 million. Year-to-date, we've repurchased approximately 2.9 million shares for $140 million, including an additional $43 million deployed so far through the fourth quarter. We announced a $500 million increase to our share repurchase authorization this morning, bringing our total capacity to approximately $684 million. Since our 2021 IPO, we have repurchased over 50 million shares, roughly 20% of our original shares outstanding, reflecting our commitment to returning capital to shareholders. We remain opportunistic with share repurchases, and our strong cash-generating ability provides ample capacity to continue evaluating organic and inorganic investments to maximize long-term value. Turning to our outlook on Page 9. We are reaffirming the full year guidance we issued in September, including net sales of $7.6 billion to $7.7 billion, adjusted EBITDA of $920 million to $940 million, and operating cash flow $550 million to $610 million. Full year net sales growth is projected at 4% to 5%, excluding the impact of one fewer selling week compared to last year, which represents a roughly 2% headwind for FY '25. End market volumes are anticipated to be flat to slightly down for the year, reflecting a low double-digit decline in residential lot development, partially offset by low to mid-single-digit growth in municipal volumes and a roughly flat nonresidential market. Pricing is expected to have a neutral impact on sales growth, and we remain on track to deliver 2 to 4 percentage points of above-market growth. Gross margin is expected to improve year-over-year supported by continued private label growth and disciplined purchasing and pricing execution. We have successfully navigated a dynamic environment over the last few years, and I'm extremely proud of how consistently our teams have executed. We've meaningfully expanded our market share while broadening our addressable market through product and service adjacencies. We've demonstrated disciplined pricing, delivered sustainable gross margin expansion and generated strong free cash flow to reinvest in the business and return capital to shareholders. Our next objective is to convert that momentum into stronger growth and improved SG&A leverage. We have the management team in place to execute on that plan, supported by a long track record of operational excellence and disciplined cost management. We remain confident in the long-term fundamentals of our end markets. And with the strategic investments we've made, combined with our balance sheet flexibility and proven execution, we are well positioned to continue growing above the market through disciplined execution, value-accretive M&A and the exceptional service that enables us to support our customers and capture new opportunities. With that, we'll open the call for questions. Operator: [Operator Instructions] Our first question for today comes from Brian Biros of Thompson Research Group. Brian Biros: Can you talk about the large complex projects that you talked about? Do you have any updated market share numbers, growth rates or kind of revenue exposure numbers? Our understanding from a variety of context that these projects, depending on how you classify them, are seeing growth rates well above other end markets. And that distributors still play a critical role in these projects, maybe even more so as many products are still going through distribution as opposed to OEM direct, helping control the flow of products to the site. So just curious to what you're seeing given the value you provide there to these large complex projects. Mark Witkowski: Yes, Brian. It's Mark. We're excited about these complex projects, in particular, the data center activity that we've seen out there and for a number of reasons and some of which you mentioned there, I mean, these fit really right into our value proposition where these local relationships with the underground contractors really matter. They really rely on that local distribution to get them all the products that they need, and that's when scale really comes into play as well and having access to all the material that they need to really be that one-stop shop for our customers. So it really becomes critical, the ability to be able to timely supply all the products that they need, the pace of these projects as quick as you can imagine. And we're in a really good position just given our geographic diversity to capture a lot of that business. And I gave that example on the call about a market that Robyn and I recently visited about a year ago to really see this in action and on-site and talking to the customers there about really the value proposition and how they rely on our consistent and quality service that we provide really puts us in a great position then as these projects pop up in other markets. And in many cases, those customers travel to the next project. And we're really in a great position to capture that. So yes, we've seen really good growth in communities where these pop up. I'd say, as I've mentioned, this is still kind of a low single-digit overall exposure for us, but we've seen it grow rapidly. And like I said, really excited about really the growth that that's driving in that space. I'd say, in addition, what we see is these projects typically put a lot of demands on the water systems. That does a couple of things. One, it increases the value of water in a lot of these communities, which puts money back into the communities for further investment and then obviously puts a strain on the systems as well, which requires additional investment typically, some of which is done by the companies that are building these projects and then turned over to the municipalities. So we've just really seen a lot of characteristics there that drive some long-term demand for us and excited about that. Brian Biros: It'd be interesting to see where that goes over the next few years. I guess on the guidance, it looks like it's largely maintained. But I think the municipal outlook was raised slightly, now expected to be up low single digits to mid-single digits, where last quarter, it looked like it was just low single digits. So maybe just what's causing that slight raise? And is that just a short-term timing kind of for Q4? Or is that maybe signaling we could see an improved municipal market into the mid-single digits going forward for you guys? Robyn Bradbury: Yes. Thanks, Brian. We have a lot of confidence in our municipal end market. There's significant funding going in there at all levels. So on the federal side, there's still ample funding coming in at those levels with very little of the IIJA spending has been spent really at all. The municipalities are using a lot of local water funds to support their projects, and we're seeing them increase rates to customers there. So there's good tailwinds there. And then like Mark mentioned in the prepared remarks, there's a lot of state-level funding going out to support municipalities as well. So did lift it a little bit but just feel really good about the municipal end market over the short term, medium term, long term. Operator: Our next question comes from Matthew Bouley of Barclays. Matthew Bouley: I wanted to follow up on the end market side. Obviously, you just touched on muni. What I'm getting at is if you have any kind of early thoughts on 2026? So given where municipal is; I think I heard you say residential, might have been some signs of stabilization in Q3. And obviously, you got non-res, where it sounds like the data center piece is driving things. So just, I don't know, any help on kind of early thoughts and directional trends into 2026 there? Mark Witkowski: Yes. Thanks, Matt. It's Mark. Yes. As Robyn touched on in terms of the municipal end market, we continue to see that as really strong, steady growth for us as we wrap up 2025 and into 2026 and beyond. Nonresidential for us is, like we've talked about on previous calls, it's a mixed bag there. We've seen some really good strength in areas like these more complex projects that we see, and then there's been pockets of softness with the lighter commercial business that tends to follow some of the residential activity. So as we think about the resi side, obviously, we're watching rates closely. There's more decisions here coming up from the Fed in December, and we'll see what they touch on in terms of the outlook. So we want to see a little bit more on that front before we call residential as we go forward. It clearly softened into the second half of the year, which we warned people out earlier this year. So we're likely to see maybe a bit of a headwind as we start off 2026. But just given the overall levels of residential, I think we've covered most of that risk for any further softening of that. I would expect that at some point here, that pent-up demand is going to release, and we'll be back into really good residential growth that could then spur some of that additional commercial development. And I think on top of kind of continued investment of these data centers, I don't see that slowing down here anytime soon, that provides a really good backdrop here at some point when we see that resi market release. Matthew Bouley: Okay. Got it. Second one, kind of jumping into the margins. Obviously, a solid gross margin result there, above 27%. So if I heard you correctly, I think you said SG&A would be down $25 million sequentially in Q4. Correct me if I'm wrong, but that seems to imply the gross margin probably ends up fairly similar sequentially. So I'm just curious if this kind of 27% level is sort of a new normal here? And any sort of additional color there on what's driving the strength there? Robyn Bradbury: Yes. Sure. Matt, I'll take that one. So you're right. We had really strong gross margin performance in the quarter, driven by growth in our private label initiative. We did a really good job with some purchasing and pricing execution in the quarter. And we do expect to be able to continue to enhance gross margins from here, leveraging some of those margin initiatives that we've talked about. Gross margin in the fourth quarter should be -- it's probably going to be more in the range between the second and third quarter. Third quarter will probably be a little bit higher, maybe the peak level for the year as it can move around a little bit, but expecting a good result in the fourth quarter for gross margins, expecting -- you're right, expecting to bring SG&A down by about $25 million as we start to recognize some of the cost actions that we've done already. So should be a good result there. And then we expect to, like I said, continue to expand gross margins annually from there. It might not be exactly perfect sequentially every quarter. But on an annual basis, we expect to get that expansion. Operator: Our next question comes from David Manthey of Baird. David Manthey: First question on the top line. Last quarter, you said you expected residential to continue to soften through the second half. And Robyn, if I heard you right, you said you're seeing stabilization at the end of the third quarter. I don't want to read too much into that, and I know it's not getting stronger, but is that a slightly more optimistic residential view than you were expecting 90 days ago? Robyn Bradbury: Yes. Thanks, Dave. For resi, we started to see -- like we talked about on the last quarter call, we really started to see that soften at the end of July, and it really continued into August, September and October. So for the full quarter, it was soft and it was down in that kind of low double digits to mid-teens range for the quarter. I wouldn't say we've seen good movement there. We've just seen it kind of soften as homebuilders were developing less lots, awaiting some better affordability and some better demand there. So not a lot of movement during the quarter, but it did really perform in line with what we expected. We started to see some of that soften late last quarter and saw that continue throughout the quarter. David Manthey: Okay. And second, on gross margin. With private label at 5% of the mix, it doesn't seem large enough to move the needle. I know you talk about it a lot, and I'm sure there's a wide disparity between all other products and private label. But could you maybe talk about the magnitude of that in terms of stack ranking relative to gross margin benefit? And then you mentioned some of the other sourcing and pricing initiatives. Could you really lean into those a little bit and give us an idea of maybe some of those other buckets that are lifting gross margin? And how much opportunity remains in the coming, say, 1 to 3 years? Robyn Bradbury: Yes, sure. So private label is a big driver for us. And I would say, in the quarter, a good portion of that was driven by private label growth and then the other half or less than half was driven by our really strong execution on purchasing and pricing. And private label has expanded our margins, I would say, pretty significantly over the last several years since we started getting into this and driving the growth there. So we're really happy with the 5% of sales that we will have at the end of this year. Our long-term target there is in that 10% to 15% range. So lots of opportunity to continue to expand there. As we move forward into the upcoming years, I would say private label is going to still be a pretty big driver there. We think that can drive something like 10 to 20 basis points a year, some of our sourcing initiatives can drive additional margin enhancement on top of that. So those are areas that we have a lot of confidence and ability to continue to drive the gross margin improvement. Sourcing is a lot of managing the relationships with our suppliers and spend -- shifting our spend where it is best positioning us in the marketplace. And then on the purchasing side, we did a really nice job this year of buying ahead of price increases, similar to how we always do. We see price increases coming to the market kind of in the early spring time frame. And we're always constantly managing our inventory to make sure we're optimizing margin as much as possible. Operator: Our next question comes from Nigel Coe of Wolfe Research. Nigel Coe: Just want to go back to SG&A. So the guide for 4Q, does that fully embed the run rate of SG&A savings? That $30 million annualized, is that fully baked into 4Q? And then on the one hand, you're talking about you're running very lean right now. But then I think the slides and you referenced this, you're exploring further opportunities. I'm just actually wondering what kind of direction you're moving in, in terms of looking at further productivity? Robyn Bradbury: Yes. Sure, Nigel. Thanks for the questions. So the $30 million, a lot of that will hit in Q4 from a run rate perspective, not all of it. I would say it's probably going to be more in the kind of $5 million range of SG&A savings impact in the fourth quarter from some of the actions that we've taken. Some of them will go into effect. We've executed on the changes, but we'll realize more of the savings in FY '26. So we won't get the full run rate in Q4, but we'll get the full run rate into FY '26. And then remind me of your second question, Nigel? Nigel Coe: Yes. The second part of the question was really around -- on the one hand, you're talking about you're running very lean. You're not going to sacrifice growth initiatives, et cetera. But then you also then talk about other productivity actions that you're exploring. So I'm just wondering what direction you see above and beyond that $30 million? Robyn Bradbury: Yes, sure. Yes. And we do -- we -- if you compare us to others, we do have a very efficient SG&A rate already. We haven't gotten the operating leverage that we expected lately, and so that's where the cost-out actions came from. We do have a lot of things that we're working on to gain additional productivity in addition to the cost-out actions that we've already taken. And a lot of that stems around technology to make us more efficient, to service our customers better, to automate more in the back office. And so we have made some investments in technology that we believe will result in further productivity and help us get that SG&A leverage starting into next year. Operator: Our next question comes from Joe Ritchie of Goldman Sachs. Joseph Ritchie: So I wanted to touch on the private label discussion again. Can you just -- maybe just elaborate on what the constraint is on potentially moving private label in that initiative faster since you are seeing some good gains from that? And then where are you seeing the biggest penetration across your product lines or systems? Mark Witkowski: Yes, Joe, it's Mark. Thanks for the question. Yes, I would tell you on private label, we've been really pleased with the progress that we've made there. We've expanded our capabilities there pretty significantly, things that you need to continue to grow it at that pace, obviously include a lot of the product work that's done. We've got great engineers and researchers that help us on that product development that has to be sourced and vetted to continue to advance that through the system. You need the logistics capability. So we continue to invest in distribution space and facilities and equipment to work all that product through the system. Obviously, you need some customer acceptance on that side. So these are all kind of well-ingrained processes that we have to continue to expand that and has really been the key piece, as Robyn mentioned, to allow us to expand gross margins here over the past few years. So we've got continued opportunities there. That's big part of what we continue to look at. And I'd say we've got a really solid plan over the next 2 to 3 years to expand that. I think a pace of 1 point or so a year is something that we felt as achievable and something that we've been able to deliver historically. So we'll continue to work down those paths, and I think you should expect to see that growth as we move forward. Joseph Ritchie: Got it. That's helpful, Mark. And then I guess my follow-on question, look, it's interesting to hear you talking about the data center opportunity. Clearly, that is going to continue to accelerate, and there's a lot of momentum in the market. I guess as you think about your positioning, your capabilities, whether you need to make investments in certain regions in order to participate in a more meaningful way going forward, maybe just kind of talk a little bit through like whether there is additional investment that's necessary. And then also, to some degree, why it's such a small portion of your business today, given that there has been development over the last few years? Mark Witkowski: Yes. Thanks, Joe. As it relates to the scale, I think we obviously participate on a lot of projects all throughout the country, large-scale water replacement projects, other types of commercial and residential development. So this is still a good and important part of our business that's growing rapidly. I would tell you, we're always looking to make additional investments and improve our market position across the country, but we're -- we've got a great foundation. We have a broad geographic reach. So wherever these hyperscalers go to make these investments. We're always in a good kind of foundational position based on the local relationships that we have. It's still very much a local business. It's typically some of our best customers that are working on these types of projects because they're so critical to those developers to be successful. Where we've got the best relationships locally, we tend to get a lot of this work. And in areas where we need to earn those relationships with the customers that are doing that work, those are investments that we make similar to how we would operate in other markets where we're trying to improve our market position. So you should expect as there is growth in data centers in certain markets that we're looking to enhance our capabilities, build out our capacity and make sure that we can service that to the best of the customers' needs. So I think it looks very similar in terms of the investments. We've also got national relationships with some of the large contractors to get involved in these. So we attack it from various aspects, and we'll continue to invest to make sure that we get more than our fair share of that business. Operator: Our next question comes from Anthony Pettinari of Citi. Anthony Pettinari: Robyn, you had talked about cost inflation running kind of mid-single digit versus maybe a more typical low single-digit rate. And I'm wondering if you could give any more context in terms of the drivers there? And then just maybe in terms of cadence, like when those comps get easier, when you might expect that rate to normalize or any other color there? Robyn Bradbury: Sure. Yes, I would say the areas that we've seen driving the majority of the inflation this year have been on our facilities, on our fleet and on medical costs. So those are the main drivers. Obviously, those are some big buckets of costs for us. Our largest bucket of cost is personnel-related expense and then it's our facilities after that. So as we go through and renew some leases that we've had in the past that we've gotten really good pricing on, some of those fair market values are up and causing some inflation there. And then similarly on the fleet, we've just seen inflation there over time. And then medical is an area that we've had -- we had a big impact last quarter. We had a lot of high-cost claims, but there's also a lot of inflation hitting that area. So expect that to continue into the fourth quarter. Don't have a lot of that remediating in the fourth quarter yet. But I would say we started -- we'll probably anniversary around -- that around the second quarter of next year. That's when we started to see the larger impacts of that inflation. So we do expect it to moderate at some point in the coming quarters and get back to something that's a little bit more normalized per our industry. Anthony Pettinari: Okay. That's very helpful. And then just following up on data centers. Mark, I think that you made a reference to these being quick projects. I'm not sure if I heard that right. But in terms of kind of visibility into these projects, maybe time line, I'm sure it's hard to generalize, but is it possible to talk about sort of maybe what a typical project looks like in terms of your visibility into the demand and the time line and completing that? Mark Witkowski: Yes. Thanks, Anthony. Yes, I'm happy to clarify that. These projects are -- they're not completed quickly. They're -- I'd say the pace of construction of these is at a pace that requires that operational excellence that we provide our customers. So they're fast-pace projects, but they can last several years based on the nature of the build-out. We've seen some of the projects that we've worked on, just they continue to add phases to these projects. So we'll get pretty good visibility out as we get involved in these, at least kind of a year out of work that's being done, and then those projects can then expand beyond there based on what we've seen. So they can last quite a while, but your -- the pace that you have to execute at is very quick, and that's where the trust that our customers place in us really comes in hand and our ability to execute these projects so that they can be successful and they can be a preferred contractor on these projects going forward. That's when it really becomes a win-win for us and our customers when we're both working to complete those projects as efficiently as possible. Operator: Our next question comes from Patrick Baumann of JPMorgan. Patrick Baumann: Had a couple of cleanups here. Just on pricing, I think you said muni PVC pipe down about 15% in the quarter year-over-year, kind of implies everything else was up like low single digits. Is that right? And then is that -- kind of that algo, do you expect that to continue into '26 such that prices on net will remain stable? Robyn Bradbury: Yes. Thanks, Pat. That's right. PVC pricing has kind of come down off its peak levels over time, and that's the right range of what we're seeing. Don't expect a lot of changes from this point in the year. So pricing flat for the year. And as we get into FY '26, we'll provide more details on the next call. But expecting pricing to be at least flattish for FY '26. We could have some product categories that are down but expect the majority of them to be up overall. So I feel like that's going to be stable at minimum. Patrick Baumann: What are you seeing in other commodity products outside of the PVC stuff... Robyn Bradbury: Yes, well -- yes, if you think about steel and copper are really the only true commodities that we have that move with the underlying markets, and those would both have price favorability for the year. They've been price favorable for a while, and I would expect that to continue. So those are small areas of our overall products and sales, but those are up. And I would say, virtually every product, except for the municipal PVC, is up year-over-year. Patrick Baumann: And ductile iron is also up? Robyn Bradbury: Yes, that's right. Patrick Baumann: Okay. And then on the M&A pipeline, can you just talk about like what you're seeing there? Been a little bit of a lull here in terms of activity. What's causing that? And what -- how should we think about you guys deploying capital to M&A over the next 6 to 12 months? Mark Witkowski: Yes, Pat, it's Mark. We're still very excited about the M&A pipeline that we've got. We've got some very active deals that we're working right now. We got many opportunities that we continue to see out on the horizon. There has been, I'd say, a lull in the deals that are out in the market. We haven't, I'd say, missed out on anything in the market. I just want to assure you of that. It has been a I'd say, a lull in activity. But we are working some in real time that we're excited about and expect you'll hear some announcements from us soon, and we continue to be very active on that front. So I'd expect from a capital deployment perspective, our priorities haven't changed. We'll continue to invest organically. We will deploy capital for M&A, and we'll continue to look at share repurchases as you saw our additional authorization that we announced this morning. So continued right along with our strategy and the priorities that we've laid out. Operator: Our next question comes from Sam Reid of Wells Fargo. Richard Reid: Just looking for a little bit more detail on the SG&A cuts. And perhaps could you just give us a sampling of some of the, call it, maybe more back-office type jobs that you're eliminating as part of this process? Are they concentrated at the branch level, more skewed towards corporate? Just love some additional perspective there. Robyn Bradbury: Yes. Thanks for the question, Sam. We did, like I said on the call, $30 million of cost out. The majority of that is personnel-related costs. We were able to make reductions in about 4% of our roles overall. We were not focused on anything that was driving sales. I mean, we talked about in the last quarter that these were going to be very targeted actions, and we weren't going to do anything to compromise any customer service or long-term growth. And I think we've done a really good job of making sure those were targeted. On the back-office side, I would say, over time, we've been able to leverage technology and become more efficient. So I wouldn't point to any particular role, but I would say we were able to make some changes generally across the board to take cost out overall and then some additional kind of supporting functions. So it was a mix of head count, which is why we didn't talk about it in a detailed way on the last call because we knew it was going to be a little bit broad and across the board, but also kind of very targeted to specific areas that maybe we've had some overlap from M&A or maybe we've converted systems, and we're able to become more efficient in that way. Richard Reid: That helps, Robyn. And then to switch gears here, I just want to drill down a little bit on the muni -- or the meter business, I should say. It sounds like you were awarded a meter contract this quarter, if I'm not mistaken. Just maybe a little additional context on that. And then talk to the high single-digit growth, just maybe give me some context on whether that's coming from newer projects or whether that's more kind of just recurring from kind of some of your longer-term meter contracts. Mark Witkowski: Yes. Thanks, Sam. It's Mark. We continue to be really successful on the smart meter front. We've been, I would say, pivotal in advancing the digitization of the municipalities. And this is an area where we can really drive demand by going in and selling the value that we can bring by really converting them from a manual or kind of a legacy maybe first-generation system that they put in to really provide them the advantages of a modern system. So we've been, I'd say, very successful in many parts of the country selling [ to ] some of the largest municipalities now, which have been, I'd say, some of the slower adopters of the technology. So we're really starting to see some movement there and really gain the confidence of our manufacturer partners that we help sell their products for to really be the lead and drive the demand of these system enhancements for the municipalities. So real pleased with the progress there. We have achieved, I'd say, over the last couple of years, some of the largest projects in not only our company's history, but in the country's history in terms of the size and scale of these. So that's going to be a continued driver of growth for us and just really excited about the performance of our team there and continue to expect good growth ahead of us. Operator: Our next question comes from Matt Johnson of UBS. Matthew Johnson: I guess, first off, if we could just talk a little bit about greenfields. I think you guys have opened five year-to-date is what you said. I guess could you guys provide a little more color on, I guess, your ambitions for the rest of the year? Are there any specific markets that you're targeting, whether it be in the U.S. or Canada? And then is the target for FY '26 also to open 5 to 10 new greenfields? Mark Witkowski: Yes. Thanks for the question. Yes, we are really excited about some of the greenfields that we've got opened this year. As we've mentioned on the call, a couple of really good markets where we've got coverage today, but really looking to continue to expand in both Denver and Houston is really priority markets for us. We've got I'd say, several more identified, a few of which I expect will get opened between now and the end of the year still and a really good pipeline ahead of us that we're evaluating. We've got over a dozen markets right now that we're assessing for continued expansion and growth and expect that you'll see continued growth from a greenfield perspective. As we've talked about on previous calls, we typically are able to get those profitable within -- at least breakeven within the first year and profitable in years 2 and 3. And we've had really good success there as we've opened more this year. And the ones we've opened in prior years are continuing to perform as well. So that will be a continued strategy that you see as we look to continue to expand our geographic presence, and that would be both in the U.S. and in Canada. Matthew Johnson: That's great. And then I guess just one more for me. You guys talked a little bit about some of the different state funding that's gone, I think, across Texas, New York and Arkansas. And I think the number in Texas is far larger, at around $20 billion. So I guess, could you guys talk a little bit about how large the Texas market is for you guys and kind of what your participation rate looks like in that state and kind of how impactful you think this new bill could be for you guys moving forward? Mark Witkowski: Yes. Texas is a very important market for us. As you can imagine, as you think about construction spend across the U.S. for us, Florida Texas, California, those are really important markets, and they tend to drive -- just in those three states alone can really drive our business. So this additional investment into Texas, I think it will be really important to us. We've got good, strong position in Texas and expect us to be able to capitalize on that. In addition, Texas has had other advancements. One of the elements that we're excited about, which is very long-term oriented, that they now provide for corrugated HDPE as a solution for a lot of storm drainage work in Texas, which has been a heavy concrete market as well. So as we work to advance a lot of those products into the products that we distribute, that can be another good long-term growth driver. That's not -- those investments aren't things that happen overnight, but really set up a good foundation, and you'll continue to see us invest in Texas, just like we announced the greenfield in Houston. I'd expect that you'll continue to see us make more investments in that state. Operator: At this time, I'll now pass it back to Mark Witkowski for any further remarks. Mark Witkowski: Thank you all again for joining us today. Before we close, I want to leave you with a few key points. Over the last several years, Core & Main has executed exceptionally well through an unprecedented environment. We captured benefits from large price increases in 2021 and 2022, committed to holding it, and that is exactly what we've delivered. During that period, we also said we were over-earning gross margin by roughly 100 to 150 basis points. We moved through that normalization exactly as we expected, and we're now back to delivering steady structural gross margin expansion. Today, we're managing through stubborn inflation, higher cost and softer end markets. But we're not standing still. We've executed cost actions, and we see a clear path to generate future growth and operating leverage. Our strategic investments and sales initiatives are creating real share gains, and our diversified model positions us to generate resilient profitable growth. We've navigated several unusual years with discipline, consistency and transparency, and we're confident in our ability to deliver long-term value as the market returns to a more supportive backdrop. Thank you for your continued interest in Core & Main. Operator, that concludes our call. Operator: Thank you all for joining today's call. You may now disconnect the lines.

58天前Insight Analytics约5分钟阅读

TOL 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Toll Brothers Fourth Quarter Fiscal Year 2025 Conference Call. [Operator Instructions] The company is planning to end the call at 9:30 when the market opens. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Douglas Yearley, CEO. Please go ahead. Douglas Yearley: Thank you, Drew. Good morning. Welcome, and thank you all for joining us. With me today are Rob Parahus, President and Chief Operating Officer; Wendy Marlett, Chief Marketing Officer; and Gregg Ziegler, our new Chief Financial Officer. While Gregg has been on these calls for many years, this is his first as our CFO. Congratulations, Gregg. Gregg Ziegler: Thank you, Doug. Douglas Yearley: As usual, I caution you that many statements on this call are forward-looking based on assumptions about the economy, world events, housing and financial markets, interest rates, the availability of labor and materials, inflation and many other factors beyond our control that could significantly affect future results. Please read our statement on forward-looking information in our earnings release of last night and on our website to better understand the risks associated with our forward-looking statements. Overall, I am pleased with our performance in fiscal 2025. We executed well and produced another year of strong results, notwithstanding a difficult sales environment. We delivered 11,292 homes at an average price of $960,000, generating a record $10.8 billion of home sales revenues. We posted an adjusted gross margin of 27.3%, an SG&A margin of 9.5% and earnings of $13.49 per diluted share. We grew our community count by 9%, continued to produce strong operating cash flows of $1.1 billion and returned approximately $750 million to stockholders through share repurchases and dividends and generated a return on beginning equity of 17.6%. These are the results that our entire team can be so proud of, and I'm grateful for the hard work and dedication that made these results possible. In our fourth quarter, we met or exceeded guidance across all of our core homebuilding metrics, generating $3.4 billion in home sales revenue with an adjusted gross margin of 27.1% and an SG&A margin of 8.3%. We earned $4.58 per diluted share, which was modestly below guidance, primarily due to the delayed closing of the sale of our Apartment Living business that we announced back in September. We expect to complete this transaction by the end of the first quarter and to completely exit the multifamily business over the next few years. Our fourth quarter and full year results demonstrate that our luxury business is differentiated as we serve a more affluent customer who is less impacted by the affordability pressures that continue to impact the broader housing market. These results also underscore the resilience of our business model. Our results over the past few years and especially this last year have proven that our business model and strategy can produce strong returns in good markets and bad. To illustrate this point, we started fiscal 2025 with fewer than 6,000 homes and $6.5 billion in backlog, down 9% in units and 7% in dollars from the prior year. Yet in fiscal 2025, we delivered a record 11,292 homes and $10.8 billion in home sales revenues, up 4% in units and 3% in dollars despite a soft market throughout the year. We did this while maintaining an attractive adjusted gross margin of 27.3% and an operating margin of 15.7%. Our business today is more nimble, thanks in large part to the broadening of our geographies, product lines and price points as well as our shift to a more balanced portfolio of build-to-order and spec homes, all of which have helped us bring down construction cycle times, improve inventory turns and gain efficiencies in the land development and construction processes. Our spec strategy has also allowed us to appeal to buyers looking for a quicker move-in, further widening our addressable market. In addition, many of our specs are sold early in the construction process, which affords many of our customers the opportunity to choose their finishes and make upgrades, an important competitive advantage for Toll Brothers. Specs accounted for approximately 54% of our deliveries in fiscal 2025. Given our year-end backlog and our deliveries guidance for fiscal 2026, we expect a similar ratio this year. In the fourth quarter, we signed 2,598 net agreements for $2.5 billion, down 2% in units and 5% in dollars compared to Q4 of last year. We sold at a pace of approximately 2 contracts per community per month. Sales modestly improved as the quarter progressed with October being our strongest month. Since the start of our fiscal 2026 6 weeks ago, our per community deposit activity has been almost identical to the same 6 weeks last year, which is somewhat encouraging since last year's period was up 22% from the prior year. Deposit activity in these first 6 weeks is also about the same as it was in October. Based on historical seasonal trends, it should have been down. While this activity is positive, it is just one data point, and November and December are seasonally slow, so we are not reading too much into it. The real tell for whether the housing market can accelerate will be the spring selling season, which starts in late January. We are encouraged that mortgage rates have stabilized in the low 6% range and may go lower. We also recognize that the underlying fundamentals that fuel housing demand in the long term have not changed. Demographics are favorable with millennials still in their prime home buying years and Gen Z right behind them. We also continue to have a structural undersupply of millions of homes in this country, and the average age of the home in the U.S. is now 40 years and growing. All of these trends support demand for new homes. In terms of pricing in the quarter, we continue to take a measured approach to balancing pace and price. Our average incentive was the same as the third quarter at approximately 8% of delivered price, which is also the current incentive on the next homes sold. Our average sales price in the quarter was approximately $972,000, down from $1 million in Q4 of last year due to mix. Geographically, we continue to see relative strength in the East from Boston down to South Carolina as well as in Coastal California and Boise in the West. Among our buyer segments, we saw little meaningful variation in demand. Given the cloudy near-term outlook for the overall housing market, which is being driven in large part by well-known affordability pressures, we are pleased to be serving an older, more affluent customer. According to data published by the National Association of REALTORS last month, the median age of a first-time homebuyer is at an all-time high of 40 years old and the median age of all buyers is now almost 60. And with just 1 in 5 sales to a first-time buyer, the vast majority of sales in the market are to move up or move down buyers. These trends play right into our strategy. Over 70% of our business serves the move-up and move-down segments. These buyers are wealthier, have greater financial flexibility and most have equity in their existing homes. The remaining 25% to 30% of our business is focused on the older, more affluent first-time buyer who is also feeling less affordability pressure. While we actively market rate buydowns and they do drive traffic, we have a very low take rate as our buyers do not need a lower rate to qualify for a mortgage and they'd rather spend incentive dollars upgrading their homes through our design studios. In the fourth quarter, the average spend on design studio selections, structural options and lot premiums was approximately $206,000 per home or roughly 24% of base price. These upgrades benefit our margins as they tend to be highly accretive. The financial strength of our customers is also highlighted by our high percentage of all cash buyers, the low LTVs of those who do take a mortgage and our industry low cancellation rate. Consistent with the past several quarters, approximately 26% of our buyers paid all cash in the fourth quarter. The LTVs of buyers who took a mortgage in the quarter were approximately 69%, and our contract cancellation rate was 4.3% of beginning backlog. Turning to land. At fiscal year-end, we controlled approximately 76,000 lots, 57% of which were optioned. We continue to target a mix of 60% optioned and 40% owned over the long term. Our land position allows us to continue being highly selective and disciplined as we assess new opportunities. It also facilitates our plans to continue growing community count over the next several years, including another 8% to 10% in fiscal 2026. In our fourth quarter, we repurchased $249 million of our common stock, bringing our full year repurchases to $652 million at an average price of $120.44 per share. During fiscal 2025, we repurchased 5% of our outstanding shares at the beginning of the year. We also paid $97 million in dividends. Dividends and buybacks have been and will continue to be an important part of our capital allocation strategy. As I mentioned earlier, in September, we announced the sale of a significant portion of our Apartment Living business to Kennedy Wilson. The purchase price is now $380 million, reflecting ongoing investments since the September announcement. We thought it would close in Q4, it will now close this quarter. We closed on part of the transaction last week and expect to complete the balance by the end of January. When it is completed, Kennedy Wilson will acquire about 1/2 of our Apartment Living portfolio, including our operating platform and organization. We expect to sell our remaining interest in the retained properties over the next few years. As we exit the multifamily business, we anticipate using the significant cash proceeds from these transactions to both grow our core homebuilding business and return capital to stockholders. With that, I will turn it over to Gregg. Gregg Ziegler: Thanks, Doug. Our fourth quarter capped off another strong year for Toll Brothers as we beat guidance across all our core homebuilding metrics. We would have beat on earnings as well, except for the delay in the Apartment Living sale. In fiscal year 2025's fourth quarter, we delivered 3,443 homes and generated home sales revenue of $3.4 billion, flat in units and up 5% in dollars from 1 year ago. The average price of homes delivered increased 4% to approximately $992,000. Fourth quarter net income was $446.7 million or $4.58 per diluted share compared to $475.4 million and $4.63 per diluted share 1 year ago. For the full year, we delivered 11,292 homes, up 4% year-over-year and generated home sales revenue of $10.8 billion, up 2.6%. Full year net income was $1.35 billion and $13.49 per diluted share compared to $1.57 billion and $15.01 last year. As a reminder, net income in 2024 included approximately $124 million or $1.19 per share of gains related to one parcel of land sold to a commercial developer for a data center. Excluding this gain, last year's net income would have been $1.45 billion or $13.82 per share. We signed 2,598 net contracts in the fourth quarter for $2.5 billion, down 2.3% in units and 5.0% in dollars from 1 year ago. The average price of contracts signed in the quarter was approximately $972,000, down 2.8% compared to last year's fourth quarter. As Doug mentioned, the decrease in ASP was primarily due to mix as we had fewer sales in our Pacific region. At year-end, our backlog stood at $5.5 billion and 4,647 homes. Our cancellation rate as a percentage of backlog was 4.3% in the fourth quarter. Our fourth quarter adjusted gross margin at 27.1% was slightly better than guidance. In the quarter and throughout the year, we outperformed expectations in all regions and buyer segments, reflecting the ongoing benefits of our cost control efforts and improved efficiencies. SG&A as a percentage of revenue was 8.3% in the quarter, flat compared to the same quarter 1 year ago and in line with our guidance. Joint venture, land sales and other income was $6 million in the fourth quarter compared to $44.5 million in the fourth quarter of fiscal year 2024 and our guidance of $65 million. As we noted earlier, the miss was primarily because of the delay in the closing of the Apartment Living transaction. In addition, we booked $24 million of pretax impairments that were primarily related to 3 land positions that we now intend to sell. Impairments included in home sales cost of revenue totaled $16.4 million in the quarter, almost half of which related to only 1 community in Oregon compared to $24.1 million in the prior year period. We continue to generate strong cash flow in fiscal 2025 with approximately $1.1 billion of cash flow from operations. We ended the fiscal year with over $3.5 billion of liquidity, including $1.3 billion of cash and $2.2 billion available under our revolving bank credit facility. In fiscal 2025, we invested $2.9 billion in land acquisition and land development. We also returned approximately $750 million to stockholders through share repurchases and dividends. Our net debt-to-capital ratio was 15.3% at fiscal year-end, and we have no significant debt maturities until fiscal 2027. Our balance sheet is in great shape. Turning to our first quarter and full year 2026 guidance. I want to emphasize that our assumptions and estimates are based on current market conditions, which, as Doug noted, are choppy. We have not assumed any market improvement in our forecast. We are projecting first quarter deliveries of 1,800 to 1,900 homes with an average price between $985,000 and $995,000. Consistent with normal seasonal patterns, first quarter deliveries are expected to be the low point of the year with deliveries for the full fiscal year weighted to the second half. For full year 2026, we are projecting new home deliveries of between 10,300 and 10,700 homes with an average price between $970,000 and $990,000. We expect our adjusted gross margin in the first quarter of fiscal 2026 to be approximately 26.25% and for the full year to be approximately 26.0%. We expect interest and cost of sales to be approximately 1.1% in the first quarter and for the full year. We project first quarter SG&A as a percentage of home sale revenues to be approximately 14.2%, reflecting lower fixed cost leverage as the first quarter tends to be our lowest revenue quarter. Also included in the first quarter SG&A is about $14 million of annual accelerated stock compensation expense that does not recur in the remainder of the year. For the full year, we project SG&A as a percentage of home sale revenues to be approximately 10.25%. Other income, income from unconsolidated entities and land sales gross profit is expected to be $70 million in the first quarter and $130 million for the full year. Our first quarter guidance includes gains on the sale of our apartment living assets to Kennedy Wilson. I want to be clear that after we complete the Apartment Living transaction with Kennedy Wilson, we will retain about half our existing interest in Apartment Living assets, which will be managed by Kennedy Wilson in the future. We do not intend to commit any new capital and will exit the multifamily business as we sell off the retained properties. We project a first quarter and full year tax rate of approximately 23.2% and 25.5%, respectively. We are budgeting $650 million of share repurchases in fiscal 2026, with most of that occurring later in the year, aligned with the higher operating cash flows we typically generate in the second half. We expect our weighted average share count to be approximately 97 million for the first quarter and 95 million for the full year. Based on land we currently own or control, we expect to grow community count by 8% to 10% by the end of fiscal 2026 and are targeting 480 to 490 communities. With that, I will turn the call back over to Doug. Douglas Yearley: Thank you, Gregg. Before we open it up to questions, I'd like to thank the entire Toll Brothers team for staying focused on our customers and consistently executing on our core strategies. Most importantly, you've helped position the company for continued success in 2026 and beyond. For that, I am truly grateful. Drew, let's open it up for questions. Drew? Douglas Yearley: Sure all of you right there can hear me, but we need to find our moderator. If everybody can hear me, my sincere apologies. We've apparently lost our moderator. We are being told that our prepared comments came through loud and clear. So if you could just hang in with us for hopefully just a second here, we're going to get Drew back. This may be Drew's last time working with Toll Brothers, but we'll enjoy him hopefully for the next half hour. And if we need to extend this beyond 9:30 because of this short delay, we will be more than happy to. So this is a first. It's not fair to Gregg Ziegler as he sits in the chair, but we will get through it. So please hang. Thank you. [Technical Difficulty] While we wait for our friend, Drew, we would ask that you e-mail questions in, and we will read them back to everybody and move through it. So why don't you send them... Gregg Ziegler: If you want, you can send them to Drew Petri. He is e-mailing you all as well just in case you don't have his e-mail address, but dpetri@tollbrothers.com. Douglas Yearley: So it's dpetri@tollbrothers.com. And we'll do this the old-fashioned way for the moment. Operator: I apologize. It looks like our original operator may have disconnected. We'll go to our next question. Our next question comes from Stephen Kim at Evercore. Douglas Yearley: Just want to make sure our friend Drew is okay. Thank you again, apologies. And Stephen, let's get it rolling here. Stephen Kim: All right. Sounds good. So thanks for all the help. I wanted to ask about your assumptions for the active adult buyer. I thought it was interesting you said the 70% of your sales are move up and move down. I was wondering if you could give us a sense of the move down. And any other kind of age breakdown of your buyer to the degree you can do it. And I'm curious what kind of trends you factor into your land purchasing decisions today? Because obviously, the stuff you're buying now or tying up, I should say, today isn't going to be used probably for another maybe 4 or 5 years. And so I'm curious as to what sort of potentially changing trends should we be cognizant about with respect to the move-down buyer in particular, in terms of what you're considering as well? Douglas Yearley: Sure. So active adult is doing well, as you would expect, older, more affluent buyer invested in the markets, equity in their existing homes. It's about 17% of our revenue. So the biggest part of that plus 70% we referenced being both move up and move down is our core move-up business, which is really doing well. Trends with that buyer, I think through these softer times, we continue to expect the active adult group to outperform, and we're seeing that. With respect to the age of the different buyer segments, we don't have great data on that. I think it's pretty consistent with the numbers I gave that the first-time buyer is now approaching 40 and the average buyer is approaching 60. I'm quite confident that would be about where we are. Our first-time buyer is not $250,000 to $400,000, our first-time buyer is $450,000 to -- in California, we have first-time buyers at $1.5 million. They're older, they're more affluent, less impacted by affordability issues, not looking for rate buydown. And I'm sure our age breakdown is pretty consistent with the numbers I gave. With respect to trends on land, we're seeing good deal flow. We are being very conservative. We are being very disciplined in our underwriting. We talk all the time about this combination score of gross margin and IRR. And we have a lot of great land. We have community count growth that's lined up at 8% to 10%, which will follow exactly 9% in '25, but we're seeing good deal flow. Part of that is some softer markets. Part of that is the other big builders with capital do not tend to compete with us for land. So we have a bit of an advantage. And so most of the land we're buying or contracting for now is setting up '27 and '28 revenue. So it's always forward-looking because we have to get entitlements and get roads in and get sales centers open. But we are being quite disciplined, but continuing to see good deal flow and gives us the opportunity to not just focus on returning capital to shareholders, but grow the company. Stephen Kim: Okay. That's helpful. And it was -- I guess my next question is sort of related to that, kind of a continuation of your thought there. I'm curious as to whether or not you think the number of lots owned by the end of next year could stay flat or maybe even decline compared to where it is today. And related to that, cash flow conversion next year, Gregg, any thoughts on maybe a range of values that you would generally target for cash flow conversion? Douglas Yearley: I'll take the first half and turn it over to Gregg. We think owned lots will continue to come down a little bit. They came down a little bit through '25. We're doing more and more land banking, joint ventures with other builders. We're getting extended terms with land sellers where we can buy land over time. That's very important to us as we continue to focus on ROE. And so I think, Stephen, I'd say flat to modestly down on the owned option ratio. I've said before, while right now, 60-40 option to owned is a goal. I mean it's not going to take too long for us to blow through that and give you a new goal that's even better. Gregg? Gregg Ziegler: Stephen, we think cash flow from operations will be modestly lower in '26 as it compares to 2025. So I think that the cash flow conversion, which is your original question, might be -- I'll throw out something in the 60% range. Operator: And our next question today comes from John Lovallo with UBS. John Lovallo: The first one is that, look, you guys have exceeded your quarterly delivery outlook in 11 of the past 12 quarters by like 5% on average versus the midpoint. You beat the gross margin outlook in each of the past 12 consecutive quarters, I think, about 70 basis points on average. I understand that visibility is limited here. But do you believe you're leaving a little bit of room for cushion in your outlook, particularly if the market is at least slightly better in 2026 as we expect it might be? Douglas Yearley: John, I'm a conservative guy. I've run this company, and I think a very conservative way. And I think all I'll say is the guidance we're giving you for '26 is conservative. We are not assuming any improvement in market conditions. We are not assuming that 8% incentive comes down. We have a lot of communities opening in the first half of the year. We have 30 opening in Q1. We have 60 opening in Q2. We now have over 30% -- 35%, excuse me, of our communities that can deliver homes in less than 8 months because, frankly, we've become better and more efficient builders and are turning houses faster. So there is an opportunity to get further into the spring, not just with the communities we have, but with the new openings that can still have deliveries this year. And that's just internally on how we're running the business. That doesn't even go to what the market conditions look like, whether rates come down, whether affordability pressure eases a bit, whether there's overall consumer confidence that improves, none of that is built in. So I'm not going to sit here and tell you that we're going to blow through our guidance, but we've approached it the right way. I've learned this for 35 years. When you're in a softer market that's a bit bumpy, that is the time to be conservative when you guide to the Street. And that's exactly what we've done setting up '26. John Lovallo: Yes, makes a lot of sense. Okay. The first quarter home sales gross margin guide is 26.25%. The full year guide is 26%, which would be seasonally sort of atypical given the normal cadence of sales. What's driving the implied moderation in the gross margin through the year in your view? Douglas Yearley: So we are starting more spec now to set up when people want to move into homes, right? Most people want to move into a home in June, July, August, September as the school year approaches or begins. And so you have to plan your spec strategy, in our opinion, not with an equal cadence month-to-month for spec starts, but begin homes focused on when they deliver and when the buyer wants them. And so in the later part of the year, we will have more spec deliveries. Some of those get sold early and they can go to that design studio and load it, but some of those don't get sold until the house is further along. And so we all know right now, there is a bigger incentive on spec than there is on build-to-order. And in the later part of the year, we will have more specs delivering. So we are being conservative in the gross margin guide, assuming that those specs will require a bit of a higher incentive, and that's in the later part of the year. So that's the answer. Operator: And our next question today comes from Mike Dahl at RBC Capital Markets. Stephen Mea: Steven Mea on for Mike Dahl today. I wanted to kind of dive a little more into the fiscal '26 delivery guide. Like the company delivered around 11,300 homes from beginning backlog of around 6,000 last year, representing a little under 2x your beginning backlog, kind of what you closed out the year with kind of -- and going into next year, the guide at around 10,500 at the midpoint, you're aiming for a little more than 2x your beginning backlog. What kind of -- if you could give us some more color on kind of what gives you confidence in that ramp? I'm assuming spec plays a big part of that, but if there's anything else you could speak to and perhaps any more color you can give on the spec strategy side, that would be helpful. Douglas Yearley: Sure. I'll be happy to. So let's go through the numbers for you because I want to make it clear. We have 4,500 homes in backlog. We have 3,000 spec homes or as we call quick move-ins under construction. That takes you to 7,500. We have 1,500 build-to-order homes that we believe conservatively will be sold and settled in fiscal '26. I mentioned that 35% or more of our communities are now delivering homes in less than 8 months from when the buyer signs the agreement to the closing date. I mentioned the new communities that will be opening in the first half of the year, and we are very comfortable in that 1,500 number. And then we have another 2,300 spec permits that have not started construction, but of those, we are selecting individually based on market conditions, 1,500 that we will start and will allow us to sell and settle by year-end. So when you add 4,500 backlog, 3,000 spec under construction, 1,500 build-to-order and 1,500 spec at permit that we are now selecting to start to have them done in those prime summer months, that gets you right to 10,500. Stephen Mea: Got it. That's super helpful. I appreciate the quantitative walk there. And if I could squeeze one in on the exit of the -- of the announcement to exit the remaining in the multifamily business. If you could give us a bit more color on how you came to that decision? And if I could also ask how we should maybe think about the use of potential additional proceeds once you're able to fully exit the business? Douglas Yearley: Sure. It's been a business I've been very proud of for the last 15 years. If we were private, we would stay in it. But we recognize as a public homebuilder, we're not getting the full credit that we think we deserve for the earnings generated from that business. We understand that analysts, investors and Wall Street would prefer that we focus on core pure-play homebuilding. And so we have waived the white flag. We are selling the business. We will focus exclusively on our for-sale business. And we wish our team who is so talented to have a tremendous future under the Kennedy Wilson platform in terms of the money generated, the cash generated from the sale, not just to Kennedy Wilson, but then the subsequent sale of the retained assets, it's going to be used to grow the business and to return cash to shareholders. Operator: And our next question today comes from Trevor Allinson with Wolfe Research. Trevor Allinson: First question on fourth quarter orders. Typically, they're down mid-single digits sequentially. This quarter, they were up 9%. I think ex COVID, that was the best sequential performance you guys have seen in a really long time. But you mentioned demand still remains soft. So what drove the outperformance in the quarter? Was that a desire to work down inventory? Or why did that outperform normal seasonality so significantly? And then with that in mind, how are you thinking about orders relative to normal seasonality here in your first quarter? Gregg Ziegler: Trevor, it's Gregg. Fourth quarter '25 order growth there, I think that we saw it in quite a number of geographies across the country as well as most of our buyer segments. So I think that we did well, and you will notice in the results there that the North region was definitely above our expectations. So we're proud of the results that we had there. As you're asking about orders for our contracts for the rest of the year, especially into Q1, I think our comments around the November demand we saw in deposits is probably as far as we would like to comment publicly on orders as we move forward. Trevor Allinson: Okay. Fair enough. Second question then is around new home inventory kind of industry levels. There's been a lot of talk about that being extended, especially in some of the weaker markets such as Texas and Florida. But obviously, you guys operate at very different price points versus a lot of your peers. So can you talk about where you think new home inventory stands at your price points in some of those more challenged markets? Do you think some of the overbuilding that we've seen is more across price points? Or do you think that from what you guys can see is more concentrated at the entry level? Douglas Yearley: It's definitely more concentrated at the entry level. You look at the Boston to, I'll call it, Philadelphia or even Northern Virginia corridor, which most in this room live in. There's very little on the resale market. There's very little land. For the new homebuilders, we have a pretty unique positioning there. It's tough to come into those markets and find land that you can get entitled quickly and get the machine running. So this is our home corridor that we do well in. We know how difficult the entitlements are, and we're benefiting from it with very, very tight resale markets and very few builders to compete with. That's also been true in Coastal California. We've done very well. I mentioned earlier, and it may surprise some, but while Sacramento and Palm Springs have been a bit off, both Northern Cal and Southern Cal, what we call our coastal markets, which is all the San Francisco suburbs and all the L.A. and Orange County communities are doing extremely well. There is limited resale at our price points. We don't have the other builders anywhere near our price points. And those markets have continued to perform well with limited competition. Just a couple of examples out of both of those East and West Coast areas. We opened a community in Central New Jersey 8 weeks ago in what's seasonally not considered a great time of October and November, and we took 20 sales at $1.8 million. We have a community in Irvine Ranch in Orange County that opened about 6 months ago back in May, has 47 sales at over $6 million, including 14 of those 47 sales just in the past 8 weeks. So those are just two examples. But yes, there are markets that have a lot of big publics that are building a lot of spec at lower prices. And we're in the food chain, right? So we have -- there is some impact on us, particularly because we have a lot of buyers that have homes to sell. But in our core business of $1 million homes, we're just not seeing it. We have a unique niche that we feel very lucky to be in. Operator: And our next question today comes from Sam Reid at Wells Fargo. Richard Reid: Just wanted to dig a little deeper on SG&A. When I run the numbers, it looks like SG&A dollars might be up a little bit year-over-year. Could you just bucket some of the incremental dollar expenses that you're planning for, maybe things like third-party broker commissions, new community growth? Would just love some additional context on the SG&A piece. Douglas Yearley: So it's pain to me to give the guide I gave on SG&A. We're fighting hard every day to reduce overhead in this company, and that effort is elevating. We're more and more focused on it than ever. That's what soft markets do. It is a conservative guide. We're 75 basis points above last year's result. 50 of those 75 basis points is just leverage on less revenue. And that obviously could change if we do better in '26 with our sales and with our deliveries. And the balance of 25 basis points is inflation in wages, it's health care costs, and it's some modest elevated both internal and third-party sales commissions. When you're in a softer market, per house, you pay your salespeople a little more because you don't want to take them backwards in their total comp. So if they're selling a few less houses, you give them a little more per house and you have to incent the third-party realtors a little bit more to get them to come to your community. So those numbers are modestly elevated, but that's the breakdown. 50 basis points leverage, 25 basis points, those other items. But we're fighting this fight every day, and I am determined to bring that number into all of you by the end of the year with a 9 in front of it. Richard Reid: All helpful context there. Maybe switching gears and talking lot costs. Would just love to hear some context as to where you exited 2025 on lot cost inflation? And then any sense in terms of what's embedded in guide for 2026 lot cost inflation based on what you plan to deliver? Douglas Yearley: The guys around me are telling me it's flat, and our guide is also flat. We're seeing, as I said, there's some opportunities now we're excited about, which sometimes happens in a softer market. We are renegotiating a lot of our land deals. The impairments were up modestly because we did sell out of a few of our deals. But that final sign-off by our land committee in here, there's a lot of conversations about going back and working to get a little better price because the market is a bit softer. So that's a longer answer to log cost land prices being flat. Operator: And our next question today comes from Michael Rehaut with JPMorgan. Michael Rehaut: I wanted to first zero in a little bit and kind of hit the closings guidance. I know, Doug, you kind of walked through some of the math on how to get to the midpoint earlier. But on an overall level, given the fact also that you expect the spec mix to be similar in '26 versus '25, you kind of obviously walked through the community count growth. On kind of looking at it from a different angle, is the guidance for the percent decline in closings largely just driven by math from where you're starting out the year with the backlog being down as it is? Or is there some element of a timing of community openings throughout the year or even perhaps a slower sales pace that you're baking in to protect margins, maybe if you were to be a little more aggressive on deliveries, it might be more at the expense of gross margin. So just trying to look at it from a different angle and understand the decline in closings in '26. Douglas Yearley: Mike, it is the lower backlog to begin '26. Michael Rehaut: Okay. So all those other factors, obviously really not coming into play then. Douglas Yearley: Correct -- I'm sorry, we assume we're going to sell at the same pace. Right now, we're running at about 2 sales per month per community. We have not assumed that's going to improve. And so we're doing the math off of the beginning backlog with those other buckets that I laid out for you earlier in terms of spec under construction, build-to-order that we think can sell and settle and spec permits that we are intending to start to have summer deliveries. But it all starts with that 4,500 of beginning year backlog. Michael Rehaut: Right. That's fair... Douglas Yearley: And as you -- go ahead, please. Michael Rehaut: No, no. Why don't you finish your thought, and then I'll ask my second question. Douglas Yearley: If the 2 per month, which is a pretty low number in the company's history, does a bit better, then obviously, each of those other buckets can improve, but that's not how we're approaching the guidance for '26. Michael Rehaut: Right. Okay. Second question kind of on the gross margins. I think you've highlighted the fact that your incentives are roughly flattish, at least most recently. I think you just said you're [indiscernible] in '26 to be flat versus '25. So I just wanted to understand what's driving the sequential decline in gross margins into the first quarter and then more broadly in the full year, because I would have assumed if you are assuming incentives being flat, I would have thought land cost inflation would be the primary driver of that. But I'd love to understand what's -- what are kind of the impacts or what are the factors driving 1Q and '26 overall relative to '25? Douglas Yearley: Sure. The incentive a year ago on this call that was out there for us was $68,000 a house. The incentive today is $80,000 a house. That explains the full 27.3% down to 26% margin change. And we are projecting out the year again on that same $80,000. Operator: And our next question today comes from Alan Ratner of Zelman & Associates. Alan Ratner: Nice performance in a tough market. Gregg, great job on the first call. I won't hold the technical snafu against you. It's all up from here though. Gregg Ziegler: That's all right. I can blame me for the technical snafu. Douglas Yearley: No, we're going to blame Marty Connor... Martin Connor: Yes. Exactly... Alan Ratner: So a lot of my questions are on the guidance, but I think we beat that topic there pretty good. Doug, just thinking about the consumer and your buyer today. Obviously, there's a lot of cross currents. The stock market remains strong, but we're hearing confidence is challenging. We're seeing on the resale side a lot of delistings. So people that might have been putting their house up for sale, deciding not to move forward with the sale and maybe some of that's seasonal. But I heard your encouraging sales data through the first 6 weeks of the quarter, but are you sensing any change in your consumer confidence or their desire to sell their house because the data would seem to be a bit more alarming on that front. Douglas Yearley: Yes. No, we're not -- I can't -- that's why I caution that don't read too much into November and December just because of the seasonality of those months not being slower sales and not telling us a lot. So it's modestly encouraging that the last 6 weeks were flat to '24, and '24 was up 22% to 23%. And that those 6 weeks were also flat to October, which shouldn't be the case. They should be down. But no, there's nothing I can point to, to feel great about where the market is. Consumer confidence for us, for our client is the #1 driver. Affordability, mortgage rates, while I will celebrate a 5.5% rate it's just not as important to our buyer as we talked about with our buydowns. We market the heck out of buydowns. The drive traffic and very, very few people take it. And so there's issues around job growth, we still have a lock-in effect, of course, that with 70% of our homes requiring a client to sell their existing home, whether they're moving up or moving down, there's still some that are locked in and just don't want to give up that 3% rate. So those are all real headwinds. The passage of time is a bit of a tailwind, right? It's just -- we're pretty far into this down cycle. If you look historically at housing down cycles, we should be on the other side of it and maybe coming out of it. But that's just looking at prior peaks and valleys. And as people stay in their beat up old house and always dreamed of moving those kids up to the pretty Toll Brothers house in a better school district and a bigger lot, join the fancy country club, whatever they want to do with their life, the passage of time has an amazing psychological effect on people finally saying, I've done well in the markets. I have equity in my house. I have a resale market that's pretty darn good, and we're going to bite that finger and move up. Now Marty Connor may not do that because he's a finance geek, but a lot of people want to do that because they want to improve the lives of their kids and their family. And so the passage of time really helps in that regard. But Alan, that's a very soft comment I'm making, right? It's just kind of the psychology of the buyer. But we're getting closer. I think we're getting closer to when we see some light. And I'm excited about that, but I can't point to it. But if there's pressure on rates coming down with a couple more cuts, if confidence improves a bit, as time moves on and we're further along in this down cycle, I think there's a great opportunity because of those long-term tailwinds to see some improvement. But I can't point to any data point right now, and that is the main reason why we're staying conservative in our '26 guide. Alan Ratner: Makes sense. No, understood. I appreciate the comments, even if you call them soft, I think it's helpful just to hear what you're seeing. Gregg, I'm going to put you on the spot and then hop off. Just on the share buyback guide for $650 million. So pretty flat with the past year. If I look at this past year, I think you did -- you generated $1.1 billion of cash. You're saying that maybe that's down a little bit, but you also have the sale of the apartment business in there in the first quarter. So it would seem like unless you're looking to, I don't know, build up cash or delever, which you don't have any debt coming due this year, that there should be an opportunity to drive that buyback number decently higher from '25. So what's holding you back there? Gregg Ziegler: Sure, Alan. We would like to go higher, but we do think that $650 million is very prudent guide at this point to start the year. So we'll continue to evaluate it throughout the year, but this is where we want to launch. Douglas Yearley: We're going to extend for another question because of our friend, Drew. Operator: Our next question comes from Rafe Jadrosich with Bank of America. Victoria Piskarev: You have Victoria Piskarev on for Rafe Jadrosich. My first question is on what are you thinking about stick and brick costs and labor costs for 2026? And what is embedded in the guidance? Douglas Yearley: Great question. We're seeing a modest decrease in construction costs in most parts of the country. It's either flat or it's down slightly. And maybe $2, maybe $3 a square foot in reduction in building costs. It costs us plus or minus $100 a square foot to build our homes. When I started in this business, Rob Parahus is here with me. We're the old guys. We used to build for $55 a square foot. Remember, Rob? So that's a couple of points, right? A couple of percentage points down, which is encouraging. And I think that should continue. We have not built in any continued reduction in building costs for the balance of the year. Operator: Thank you. That concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks. Douglas Yearley: Thanks, everyone. We appreciate all your interest, all your great questions. We're always here to answer any follow-up questions you may have. Have a wonderful, wonderful holiday season, and we look forward to seeing all of you soon. Thanks so much. Operator: Thank you, sir. The conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

58天前Insight Analytics约5分钟阅读

MJWNY 2026 Q2 财报电话会议

Operator: Good morning, and welcome to the Naked Wines plc Half Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Rodrigo Maza. Good morning. Rodrigo Maza: Hello, everyone, and welcome to our half year '26 results presentation. We are very grateful for your time. I'm Rodrigo Maza, Naked's CEO. I'll be presenting today along with Dominic Neary, our Chief Financial Officer. Here's the agenda that we'll cover this morning. Before we get into the details, a few headlines to set the stage. We've made a lot of progress in the first half of the year. Our performance continues to track in line with the guidance we've shared with the market. We remain focused on delivering shareholder returns, and we're pleased to have completed our first distribution during the summer. As stated during our last presentation, we made structural changes to our business at the start of the year to enhance focus, speed and accountability. We're making tangible progress on both acquisition and retention. We strengthened both our senior leadership team and our Board of Directors. We're happy to welcome Jan Mohr and Susan Hooper as Non-Executive Directors. We extend our gratitude to Deirdre Runnette, who's exiting our Board for all her contributions to Naked Wines. We remain confident in the strategy shared with investors last March as we go through our peak trading season. Results so far are positive. Let's dive in. Naked Wines is all about connecting wine drinkers and winemakers. Our model removes the middlemen, so customers get better wine for their money and winemakers earn more for doing what they do best, making exceptional wine. This direct meaningful relationship builds loyalty, drives a sense of community and differentiates us in the market. Now this is what our model delivers. This chart leverages Vivino's data to show how Naked consistently overdelivers on quality for price when compared to traditional retail brands. This is one of our main drivers of retention. This is our model at scale. Naked currently connects over 0.5 million very satisfied angels in the U.K., the U.S. and Australia with over 300 of the world's most talented independent winemakers. As stated during our strategy event back in March, we think of our footprint as an advantage. This is especially true in the U.S. where the ability to legally deliver wine to over 90% of the population is a true moat. Operating across 3 countries adds meaningful resilience to our business. That diversification protects us from overexposure to any single market or regulatory shift. It also allows us to test things faster, accelerating our learning. When we exceed our angels' expectations, our whole flywheel accelerates. The lighter angels tell others. And when that happens at scale, everything moves. More angels means more funds, more sales, more cash. It's truly a virtuous cycle. When our angels are happy, our winemakers, our teams and our shareholders, they feel it too. Now over to you, Dom. Dominic Neary: Thank you very much, Maza. I'm going to be taking us through HY '26 performance. We'll then move on to our strategic pillars. I'll cover the first 2 of those, and Maza will cover return to growth. So moving on to our financials. We're seeing, first of all, continued strong cash generation, including the GBP 2 million share buyback, which was completed in September. So that's GBP 10 million of cash generation less the GBP 2 million share buyback is an GBP 8 million increase on 12 months ago. Adjusted EBITDA is doubling, reflecting the intentional strategy to reduce acquisition investment and to focus on higher-quality core profitable customers. So adjusted EBITDA up 112% on prior year at GBP 3.6 billion. This strategic change, which we've communicated before, leads to the lower revenue number you see there down on prior year. And as I repeat, this is what we've communicated and this is expected, and it's in line -- tracking in line with our full year guidance. The loss before tax you see there benefits, of course, from the doubling in EBITDA. It includes a number of items. There's a GBP 2 million restructuring, which we've announced in April. There's the one-off impact of EPR costs, which will unwind in H2. And then, of course, there's GBP 2.6 million of the inventory liquidation costs, which we've flagged as we proceed with the liquidation of our inventory. And that is part of the GBP 12 million or $17 million target, which we have over the medium term, which is likely to impact this year and the next 2. As we move on to our key strategic KPIs, free cash flow -- if we start at the top, free cash flow is positive. It's where we expect it to be. So inventories are down in the year -- in the half year. But what we are seeing is some inventory build in the U.K. and Oz, which is why free cash flow is lower than prior year, but this is still a strong result reflecting as it does cash generation ahead of our peak season where we would normally see cash being used up as we build for peak. So a strong result there. As we move on to ROIC, we can see the impact primarily of the doubling in profitability, but also the impact of share buyback impacting that as well. Gross profit margin is up materially. 50% of this is related to inventory liquidation differences between this year and prior year, but the rest of that is a genuine improvement, reflecting significant reductions in first order loss as we acquire customers and cost savings in G&A and marketing efficiencies. And this is despite significant ongoing regulatory cost increases from duty and EPR, which are impacting the industry more broadly. Acquisition breakeven, this is our new metric. So this -- historically, we've looked at a 5-year forecast for marketing acquisition, which we've called payback. We're now, as we've already indicated, moving to a 24-month metric, which we estimate is circa the same as an IRR of 23% and it's the equivalent to what would have been 1.7x in our old payback metric. So acquisition breakeven, which is when we obviously get the breakeven on our marketing acquisition investment, has improved significantly, this time 12 months ago. So we're down to 44 months from 75 months, clearly not at our target, but nevertheless, moving well in the right direction. And that is driven by a number of factors. We're seeing lower CACs, which we'll come on to in a second. We're seeing better retention, particularly of acquisition customers. And there are some notable impacts from margin improvements. And this is an area where we continue to anticipate significant margin improvements forthcoming over the next few years. Adjusted EBITDA, we've already talked about, so I'll move on. Moving on to the bottom row, return to sustainable growth. NPS remains excellent, so no change there. Member retention rate is in line with 12 months ago. It's actually up 100 basis points on the end of last year. We are seeing, as I've indicated, already some positive signals on retention rates of new members. Given this is a 12-month metric, you're not going to see that in here yet. That will come through at the end of the year. But nevertheless, positive movements in retention overall. CAC, as I've already said, is down, and that impacts from a number of factors, but it is critical to our metrics. And revenue per member going backwards slightly. This is largely geographic mix, and there is a little bit of hesitancy in the broader industry -- in our industry, which is having a small impact on that as well. Moving on to our 3 strategic pillars. So we're happy with the progress of our KPIs, and we believe this reflects progress as we implement our new strategic plan. As I've indicated, I'm going to be covering off the first 2 of these pillars. So that's cash and profitability, and Maza is going to be talking to you later about returning to sustainable growth. So if we dive straight into cash, HY '26 sees the continuation of a strong story. So cash generation continues. As I've already said, we've seen GBP 10 million of cash generation, which has funded GBP 2 million of share buyback, which was completed in September. So that's an GBP 8 million net cash increase. And importantly, we've seen an increase in cash generation in cash in the first half of the year against normal seasonality. And of course, that reflects the ongoing improvements both in profitability but also in liquidation of our inventory. So inventory continuing to decline. We are progressing well with this with our plan to generate GBP 40 million of net cash from inventory. Whilst the majority of the big drops are likely to happen in FY '28 and '29, we continue to see improvements here, and we have confidence, particularly because the biggest portion of overstock is in U.S. expensive reds. And the good news on these is that they last for in excess of 10 years. So we continue to anticipate generating net cash from our inventory, and that's a key part of that. We also continue with our commitment to generate value from our capital. So I talked already about the share buyback we completed in September, which the Board believes was at a value that is significantly below the intrinsic value of the company. We continue to anticipate ongoing distributions and, of course, more substantial distributions in the medium term. We will, of course, consider inorganic opportunities as they arise as well. Moving on to our profitable core. Again, we're seeing solid progress with profitability as we reiterate our medium-term target of up to GBP 14 million EBITDA over the medium term, clearly making great progress with this on EBITDA and the improvements to gross margin and G&A I've talked about. Key aspects of this are obviously visible in HY '26. So I've already talked about our new acquisition breakeven KPI, which is replacing payback. This is a much better short-term focus, as I've indicated, targeting about 24-month breakeven point, and we are seeing significant improvements in this. And a key part of those margin improvements is coming out of price increases in Australia and the U.K. And also, of course, another driver is the acquisition retention improvements that I flagged earlier. As a result of this focus on profitability, we are reducing inefficient marketing investment, and that's driving in excess of GBP 5 million of efficiencies versus FY '25. And that reflects the strategy we talked about in March, where we've reduced investment in vouchers and other ineffective channels. We are, of course, focused on costs everywhere across the P&L, and we have delivered GBP 1.5 million of G&A savings, which after inflation delivers the GBP 1.1 million reduction in G&A costs that we're seeing coming through the P&L. We continue to see this as an opportunity to drive significant value. And to that end, we are implementing a ZBB strategy on our costs, which will take effect from FY '27. So continuing focus here. And I'm going to hand over now to Maza, who's going to take you through the final pillar. Rodrigo Maza: Thank you, Dom. As you know, our third pillar is focused on the work we're doing across both retention and acquisition, leveraging our engaged community of angels and winemakers to drive sustainable growth. We're also enhancing our activity around business-to-business sales, which we view as a credible source for medium-term revenue and contribution growth. Back in March, we presented our growth strategy structured around retention and acquisition and enabled by selective tech modernization. While the building blocks remain unchanged, our understanding of how they come together in an improved experience that delivers on our mission and value proposition has evolved. Our business is a loop, not a funnel. What this means is that for us to accelerate sustainable growth, we need to find more ways to tap into our engaged community of angels and winemakers. Retention is our foundation. We remain focused on facilitating discovery with improvements to our catalog and its navigation soon to be scaled. We have created more options for our customers around delivery, and we're focused on unleashing the power of our community, partnering with winemakers to tell not only their wine stories, but to present the category to existing and future angels the Naked way, tearing down the parochial approach to wine that's very prevalent in our industry. As we deliver on our retention priorities, acquisition is becoming more efficient with advocacy and word of mouth becoming its key drivers. We remain committed to acquire customers that have a real interest in Naked's value proposition, which requires us evaluating every channel investment diligently, moving away from underperformance and scaling only those that deliver sustainable customer acquisition costs. Importantly, we remain focused on making sure that the first interaction with Naked delights every new joiner. A few highlights to share on the retention front. Our entry-level range in the U.S. has produced solid results since launch. We've seen a material increase in our rate of sale without cannibalizing our segments within our -- other segments within our catalog, which is exactly what we set out to do. We are now ready to roll out our automatic credit pack guarantee to all angels after a few months of validation. We view this as a key enabler of discovery and therefore, retention. We are now offering more delivery options to our customers. And while results still need to age out, we are seeing frequency improving in the markets in which these alternatives are available. And finally, we have started to offer angels the option to purchase 3-bottle cases through careful cost management to protect unit economics. This is proving to be quite effective as a reactivation lever. Next step is to offer this on the acquisition side of things as well as it reduces the amount customers would pay for trying out Naked Wines, which could obviously have a very positive impact on conversion. As I mentioned already, it's our community that's our unfair advantage and what we need to leverage to get Naked growing again. The campaigns we've recently launched have landed very well, not only commercially, but in driving angel engagement. You are bringing the magic back. This is the type of thing that makes me proud to be Naked. These are real customer comments that show we're in the right direction. As we're starting to get data that backs that up, we've seen referrals in the U.K. reaching the highest levels in over 2 years. Now let's talk acquisition. We've run several tests regarding our acquisition offer across all markets. We've seen significant improvement to our first order contribution as a result, and we are now ready to scale the learnings globally. We have a new homepage experience live in the U.K. and the U.S. This is a massive step forward for Naked as we're now representing our customer value proposition much more clearly while also allowing customers with different levels of intent to explore Naked the way that best suits them. We are very excited about this launch and its potential impact on our growth. It's important to talk about the things that haven't worked out too. We are expecting YouTube and other video platforms to become relevant channels for us. And while they are driving an important number of sessions and improving frequency among existing angels, the fact is that conversion remains challenging. For that reason, we are divesting away from this channel while we see focus on conversion efforts yield results. The same applies for lead gen. After running holdout tests across Australian geographies, it's clear to us that this channel is fast diminishing returns and that it makes no sense for us to continue to invest in it. We plan to get this business growing through advocacy and referrals. In order to do that, we need to go bigger on the moments that best represent Naked's model. The connection between winemakers and angels and how it adds value to both needs to be front and center, and we need both of them, plus carefully selected creators to spread the word about it. While these are still the early days, we're excited with the reaction we're getting and remain convinced that this is how we'll win in the market. Now back to you, Dom. Dominic Neary: Thank you very much, Maza. So moving on to post period end trading and reiterating our FY '26 guidance. So firstly, and importantly, we are in line -- we are tracking in line with guidance. We're delivering on what we said. We are also making good progress with the strategy we set out in March. The clear progress here is visible in margin and marketing efficiencies and, of course, in cash. We continue to see that and expect progress on that and cost savings as we progress. And of course, we continue to reiterate our medium-term inventory target. We continue to be committed to ongoing distributions and engaging with our partners on our next distribution. Peak is progressing satisfactorily so far. The next 2 weeks, as ever every year are critical, and we will revert in January with a trading update. On to our guidance, there is no change to our guidance. We are comfortable with all the metrics and particularly happy with the significant improvement in EBITDA versus 12 months ago. We continue to anticipate the full $17 million of inventory liquidation costs that we've talked about before. Those are, of course, spread over the next 3 years. As we wrap up, the headline is simple. The business is moving in the right direction. Our first half performance tracks the guidance we set, and we've begun returning cash to shareholders, an important milestone. The structural changes we made earlier this year are bedding in and are already driving clearer focus, faster execution and stronger accountability. We're seeing real progress in both acquisition and retention as a result. We've also strengthened the leadership bench and our Board. Jan and Susan bring fresh perspectives and diverse expertise to Naked. We're grateful to Deirdre for her commitment and service. To end, we remain fully confident in the strategy we set out in March. We're going through peak trading with momentum. And so far, results are encouraging. Thank you all for your time. Operator: That's great. Rodrigo and Dominic. Thank you very much indeed for your presentation. [Operator Instructions] While the company takes a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. And Rodrigo, Dominic, if I may now hand back to you to take us through the Q&A session to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you. Rodrigo Maza: Sure thing, and thank you. Dom, do you want to take the first couple of questions, which is basically the same. Dominic Neary: Yes. Thanks, Maza. Yes. So we've got 2 questions, which are on share buybacks, essentially saying, should we be moving faster on those given the shares are trading below intrinsic value. As we set out in March in our Strategy Day, this is a business that is generating cash and is going to have significant excess cash over the medium term as we increase our profitability and as we generate GBP 40 million cash from our excess inventory. We also set out at the full year results, our clear policy of ongoing distributions, which we would be making as we go forward. And so that policy is that we will distribute up to 50% of cash generation in the last 12 months or adjusted EBITDA in the last 12 months as well, the lower of those 2. And as you'll see, we've made progress with that, and we've implemented that and done our first share buyback back in September. So that's an ongoing policy that will continue. Of course, that still leaves potentially material excess cash, particularly over the coming years. And we've been very clear that we would make one-off and will make one-off distributions of that where that makes sense. What we also need to be clear about is that -- and we said this, is that the key to that is increasing our profitability and working with our financial partners to agree those one-off distributions, and that's exactly what we're doing. So really to wrap up, we are moving ahead with our ongoing distribution policy. As the business becomes more profitable and as more excess cash is generated, that will free up the opportunity to do one-off distributions. That's a question of when, not if. It's not today, but it's hopefully in the not-too-distant future. Rodrigo Maza: Thank you, Dom. We also have a question related to the revenue mix from core members versus new growth and what's our views on that? So as we've shared, we're still going through the impact of the COVID cohorts. Once that has flowed through our base, we are expecting stabilization in the next couple of years. So that then means that acquisition needs to work, right? And our position there has been very, very clear. We are committed to disciplined acquisition, which means focusing on quality over quantity, getting customers -- getting the right customers through the door, people that actually are interested in Naked for the right reasons, for our value proposition and that deliver healthy paybacks for the business. So in summary, we remain focused on keeping retention, keeping Net Promoter Score high as we go through the COVID cohorts, and we remain committed to our disciplined acquisition strategies. There's another question, how about opening a few pop-up stores for peak season and sell Christmas gift boxes and other high-margin wines? This is something that we're definitely looking into. How can we leverage partnerships to bring the Naked experience into the real world beyond our tasting tour, which is massively successful and it's the biggest wine event in the U.K. But yes, we -- this is an area we're exploring. This is an area that we like. I don't think we need help in selling our Christmas gift boxes. Actually, we're very close to selling out of them this year. Over 70,000 of those Christmas cases have already been delivered into our angels homes. So we're very pleased about that. And yes, Christmas season is going well so far. Dominic Neary: Yes, I'd add we have a fantastic wine calendar as well, which -- advent calendar, which I have one of myself at home. And if there are any left at the end of the street when I go home, I'll be having some of that myself. Operator: That's great, Rodrigo, Dominic. Thank you for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we will publish those responses on the Investor Meet Company platform. But Rodrigo, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please just ask you for a few closing comments? Rodrigo Maza: Yes, of course. Well, first of all, thanks, everyone, for your time. We really appreciate it. We continue to be excited about Naked's future, and we remain very confident in our plan. Thank you for your time, and happy holidays. Operator: Fantastic, Rodrigo, Dominic, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Naked Wines plc, we'd like to thank you for attending today's presentation, and good morning to you all.

58天前Insight Analytics约5分钟阅读

THCH 2025 Q3 财报电话会议

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.

58天前Insight Analytics约5分钟阅读

TKA.DE 2025 Q4 财报电话会议

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.

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