AI Investor Insight

NOK 2026 Q1 财报电话会议

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's First Quarter 2026 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. Today with me is Justin Hotard, our President and CEO; along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency and portfolio basis and other financial items will be relating to our comparable reporting. Please note that our Q1 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages for the quarter. Marco will then go through the financial performance, and we'll then move to Q&A. With that, let me hand over to Justin. Justin Hotard: Thank you, David, and good morning, everyone. Our first quarter gave us a solid start to 2026. Net sales grew 4% to EUR 4.5 billion with an operating margin of 6.2%, and we delivered a free cash flow of EUR 629 million in the quarter. Gross profit was EUR 2 billion and gross margin expanded 320 basis points, supported in part by the absence of a onetime charge in mobile infrastructure in the prior year. It also benefited from strong performance in Optical Networks as we began to see the synergy benefits from the Infinera acquisition. Operating profit was EUR 281 million, with operating margin expanding 200 basis points. We saw strong momentum with AI and cloud customers. Net sales grew 49%, and we received EUR 1 billion in new orders, particularly driven by Optical Networks. At the group level, book-to-bill was above 1. And in Network Infrastructure, it was well above 1. I'm proud of Team Nokia's execution in Q1. The focus now is on delivering through the year and maximizing the growth opportunity in front of us. At our Capital Markets Day last November, we outlined our view of the AI super cycle and the market opportunity for Nokia. Since then, demand has accelerated. At the time, expectations were for the largest hyperscalers to spend around $540 billion in CapEx in 2026. Now, those expectations have increased to over $700 billion. This reflects the pace at which our customers are scaling infrastructure for AI. Today, AI-driven traffic is estimated at around 20% of total network traffic, which is roughly 80 exabytes per month and is still primarily human to machine. As we move deeper into agentic AI adoption and ultimately physical AI adoption, machine-to-machine traffic will become the primary driver of traffic, and that will lead to a step change in network traffic. We already see this demand in AI factories, both in data center interconnect and inside the data center in routing and switching. Increasingly, this is also driving demand in transport networks across metro and long haul, and we believe this is a structural shift in the market, which will sustain for multiple years. We now expect our AI and cloud addressable market to grow at a 27% CAGR between 2025 and 2028, up from the 16% we shared in November. This implies the addressable market for network infrastructure growing at a 14% CAGR compared to 9% that we shared in November. This is already benefiting Nokia in orders and in revenue. In March, we introduced several new products at OFC. These launches reflect our focus on accelerating innovation following the Infinera acquisition. The industry is scaling from hundreds to thousands of fibers between data centers. To address this demand, we introduced our next-generation hyperscale multi-rail solution, which will begin shipping later this year. It scales fiber capacity without expanding physical infrastructure, delivers an 8x increase in density and is 25% more dense than competing products announced recently. In addition, we also shared that we're evolving how we bring optical solutions to market. Our road map moves to a building block architecture with 4 optical engines that are embedded in multiple form factors compared to the 2 engines per generation previously. The architecture allows us to bring 13 application-optimized solutions to market. For customers, this means simplified deployment and a reduced total cost of ownership of up to 70%. These products will begin sampling in the first half of 2027 and will ship in volume in the second half. In Q1, we also saw strong growth in our IP networks pipeline as we build deeper engagements with our AI and cloud customers on switching and routing. We were awarded new design wins and continue to build a strong pipeline of further opportunities. We expect this to translate into new orders over the coming quarters. We've also increased our investment in optical networks and our new indium phosphide manufacturing facility in San Jose, California is on track to begin ramping production later this year. As a result, we are increasing our growth assumptions for network infrastructure in 2026. We now expect growth between 12% to 14%, up from the 6% to 8% we communicated in January. For Optical and IP networks combined, we expect growth of 18% to 20%, up from 10% to 12%. Turning now to Mobile Infrastructure. This new segment began operating in January, and the team is focused on aligning our road map to customer needs, streamlining the integrated business to improve productivity and delivering on the KPIs we outlined at our Capital Markets Day. Core software had another strong quarter, growing 5% and gaining market share. In the quarter, we delivered 6 competitive swaps. Our customers are modernizing their platforms with cloud-native solutions, adopting new security features and driving end-to-end automation with a focus on reducing operating expenses. Radio networks also delivered on our expectations. We signed several deals in the quarter, including with Virgin Media O2. At Mobile World Congress, we introduced a new generation of radios that are AI RAN ready. Our Doksuri remote radio heads deliver a 30% improvement in power efficiency and up to a 25% reduction in weight. In addition, we continue to make good progress on AI RAN in partnership with NVIDIA, and we are on track to begin field trials by the end of the year. Technology standards continue to perform well across its markets. The business continues to deliver stability, and we expect largely flat net sales for the full year with improved profit generation year-over-year. With that, I'll hand over to Marco. Marco Wiren: Thank you, Justin, and hello from my side as well. As Justin mentioned, we had a solid start to the year with EUR 4.5 billion in sales, growing 4% with growth in both operating segments. Gross profit was just over EUR 2 billion with a gross margin of 45.5%, a 320 basis points improvement on year-on-year. Operating profit was EUR 281 million, with an operating margin of 6.2%, and this is up 200 basis points compared to the previous year. Free cash flow was EUR 629 million, and the quarter ended with a net cash of EUR 3.8 billion. Network Infrastructure sales grew 6% in quarter 1. Optical Networks had another strong quarter with 20% net sales growth, and this is mainly driven by AI and cloud customers. We also grew in telecom as operators invest to meet increasing demands on transport networks. IP Network sales grew 3% with growth in AI and cloud, offset by softness in other customer segments during the quarter. We expect growth in IP Networks to start to accelerate in quarter 2 as we ramp shipments tied to new design wins with AI and cloud customers. Fixed Networks declined by 13%, reflecting our portfolio strategy to focus on higher-margin products. Sales of our optical line terminal products were largely stable in the quarter. And looking ahead, we expect the sales trend to improve as the year progresses. We see a supportive demand environment, especially in the U.S. with fiber deployments remaining a key investment focus for Tier 1 operators. Gross margin in Network Infrastructure was 43.4%, increasing 150 basis points. The increase was driven by a higher gross margin in Optical Networks, benefiting mainly from Infinera integration synergies and scale. We continue to expect some gross margin headwinds through the year as a result of product mix. Operating margin was 6.7%, a 30 basis points below the previous year as we had a full quarter of Infinera expenses compared to 1 month last year. For the full year, we do expect to slightly increase the Network Infrastructure operating margin. However, our focus this year is on investing to capture the long-term growth opportunity in the market. In Mobile Infrastructure, net sales grew by 3%. Core software sales grew 5%, while Radio Networks sales were flat. Technology Standards sales grew by 10% as a result of signing several deals in consumer electronics and multimedia, which contributed catch-up sales in the quarter. Gross margin increased by 430 basis points to 48.5%, in line with our long-term target for mobile infrastructure gross margins. The increase was mainly related to EUR 120 million contract settlement, which negatively impacted the previous year. We expect Mobile Infrastructure gross margins in the second and third quarters to be somewhat weaker and then much stronger in quarter 4. And this is consistent with the typical seasonality in the business. Operating margin was 8.9% in the quarter, an increase of 380 basis points, reflecting the settlement impact and lower operating expenses supported by the ongoing cost-saving program. If we then turn to look at our sales growth by customer segment, AI and Cloud grew 49%, mainly driven by Optical Networks. Mission-critical Enterprise and Defense grew 19% and Technology licensing grew 10%. These growing markets offset a 2% decline in telecom to deliver 4% growth for the group. The decline among telecom customers was partly related to some of the portfolio decisions we are taking in Fixed Networks. Overall, we continue to see the telecom market as relatively flat. The quarter 1 was a strong quarter for free cash flow generation, which amounted to EUR 629 million. We saw the typical working capital unwind in the first quarter related to the receivables buildup at the end of '25 from a strong quarter 4 sales seasonality. For your models, remember that quarter 2 is typically a seasonally low period for cash as we pay employee cash incentives in that quarter. Finally, to our '26 guidance assumptions. Our group level financial outlook remains unchanged, and we are currently tracking somewhat above the midpoint of the range for comparable operating profit, which is between EUR 2 billion and EUR 2.5 billion. Justin has already mentioned the 2 key assumptions for the full year that have changed. We now target to grow faster in Network Infrastructure this year with 12% to 14% growth, up from the previous assumption of 6% to 8%. And specifically in Optical and IP Networks, we now target 18% to 20% growth, up from the previous 10% to 12% growth. Then regarding quarter 2, we currently assume a 5% to 9% sequential increase in net sales. For operating profit, we expect quarter 2 to account for between 12% and 16% of the full year based on the comment I already made that we are tracking somewhat above the midpoint of the full year range. This would equate to H1 being between 24% and 28% of the full year operating profit, consistent with 2025. And this is mainly due to the growth-related investments we are making to support the long-term opportunities in the business. And with that, let me hand back to David for Q&A. David Mulholland: Thank you, Justin and Marco. As usual, for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to 1 question and a brief follow-up. Sherry, could you please give the instructions? Operator: Yes, sir. Thank you. We will now begin the question and answer session. [Operator Instructions] I will now hand it back to you, Mr. David Mulholland. David Mulholland: Thanks, Sherry. We'll take our first question today from Fredrik Lithell from Handelsbanken. Fredrik Lithell: Congrats, a great report. I would like to step into the world of Optical Networks and ask you your raised assumption for the year. Is that based on that you see more positively on getting better traction on sort of production capacity throughout the year, so earlier than you anticipated before? Or is there something else in there that gives you the opportunity to raise that guidance? Justin Hotard: Yes. Thanks, Fredrik. So I think 2 things I would touch on. I think one is a little bit more confidence on supply. And obviously, the fab is one component. There's also the other -- the components of the optical subsystems, the DSPs, obviously, that's in pluggables. Obviously, as you think about our larger systems, there's multiple different elements to that. So it's a bit more supply confidence on optical from -- obviously, as we said, demand is strong -- demand continues to be strong on optical. And then it's also related to some of the traction we're starting to see in IP networking. And as we've talked about in the past, the IP networking business has been a little bit lumpy as we drive the growth, but we're starting to see more visibility for the year, and that's a part of what's driving the growth. David Mulholland: Did you have a follow-up, Fredrik? Fredrik Lithell: I'm fine with that. David Mulholland: Thanks Fredrik. We'll take our next question from Janardan Menon from Jefferies. Janardan, please go ahead. Janardan Menon: Just wanted to dive into the design wins and the EUR 1 billion that you've reported saying most of that or the bigger portion of that is from Optical. Are these still on the 800 gig side? You had put out a very impressive portfolio of products at the 1.6T, 2.4T, 3.2T at OFC, which you said would be starting to come through by late 2027. So are you already seeing some order intake on those? Or is it too early for those kind of more leading-edge products to be -- or next-generation products we're seeing orders right now? And I have a small followup. Justin Hotard: Yes. First of all, thanks, Janardan. So I think if you look at the demand that we're seeing -- the demand that we're fulfilling, I should say, for this year, I really see that momentum on the back of our 800-gig pluggable and then the associated line systems and the platforms that we have available and shipping today. A key thing that I maybe didn't touch on in my comments, I'll just emphasize is that the road map we launched at OFC, I touched on the fact that it's largely oriented towards 2027. But a key note there is that road map was designed with a real focus on AI and cloud customers and designed in collaboration with some of those customers. So we talk a lot about that customer collaboration. I talked about it at CMD a little bit. We talk about it quite a bit internally, and that's a good example. And then as I would just kind of give you macro broad brush orders, I think what we see in orders generally is some elongation in orders in terms of a desire for a longer-term commitment on orders. And that's, of course -- that's also something we're seeing in terms of our demand back into the supply chain, providing longer-term commitments. And I think that's very normal with the kind of demand expansion we're seeing in the lead times. And I think if you look at other -- our peers or other players in our ecosystem in this space, they're all saying similar things. So I would say that, that's very consistent for us as well. Janardan Menon: Understood. And I know you don't want to talk about growth in Networks and Optical separately, but it's been quite a big increase in -- it's quite a big increase in your guidance from 10% to 12% to 18% to 20%. Is most of that from Optical? Or are you going to see a meaningful acceleration in your IP side from Q2 onwards, which could, say, take you towards the double-digit 10% kind of growth rates there by the end of the year? Justin Hotard: Yes. I would say that the optimism we have on the 18% to 20% is across both sides of the business right now. David Mulholland: We'll take our next question from Artem Beletski from SEB. Artem, please go ahead. Artem Beletski: I would like to ask on AI and cloud-related orders. So I think book-to-bill was around 3 in the quarter. And when do you actually expect some catch-up to be seen in terms of deliveries? And could you maybe talk still about some potential delivery constraints what you have in this area? Justin Hotard: Yes. I think, Artem, first of all, I'd say right now, I'm focused on maximizing the opportunity that we see. And I don't see the book-to-bill is something I need -- we need to catch up to. Our focus right now is on just maximizing the demand. As I said as well, we are starting to see some elongation of the order cycle, which is normal in these. And then in terms of constraints, I mean, I won't get into too much detail, but I think it's -- generally, it's -- there's a fair amount of constraint in the semiconductor ecosystem in general. We don't talk about it, but if you think about the kinds of lead times you hear across the semiconductor manufacturers, the leading players, I think that gives you a pretty good indication of what lead times are, and then obviously, in other areas, at the scale that we're building indium phosphide as an industry, obviously, that's driving demand back into the supply chain that we need to build capacity for. And so we're working on that as well. And that gets a little bit to the point on investment. As you think about investment, I would think about it in optical in a few ways, right? One is investing and scaling the capability and capacity. We're obviously bringing on the second fab, but it's scaling production capability into the supply chain. And then, of course, continuing to invest in the product portfolio to make sure we're maximizing the coverage of the portfolio against the market demand that we see. David Mulholland: Thanks Artem. Did you have a quick follow-up? Artem Beletski: Yes, I had actually. So just relating to fixed networks. So you do highlight some headwind coming from consumer premise fiber business that is not seen strategic. Is it something that should be prevailing throughout this year or how we should think about it? Justin Hotard: Yes. I think it's something that is going to -- we're going to continue to be disciplined throughout the year. And there's probably two things to consider here. One is the macro market on fiber, particularly with what's happening in the U.S., we talked about some of this last year with the CapEx builds of the Tier 1 and Tier 2 operators, obviously, beat us some tailwind. So we feel good about the underlying business, but we want to make sure that we're focused on the right type of business for us long term. And so we expect that we'll have -- continue to have some headwind on the CPE side as we become more disciplined in that space and focus on the areas where it's valued. We also think this is a business that has good long-term prospects in data center. And we launched at OFC. I didn't touch on it, but at OFC, we launched an out-of-band management solution oriented towards data center. So we really like this business and we realized it was a bit of a tough quarter. It's just a situation where we're going through what I think is a very intentional transition to making sure the business has a long-term sustainable growth profile, not just in top line, but more importantly, in gross margin and operating profit. David Mulholland: Thanks Artem. We'll take our next question from Simon Leopold from Raymond James. Simon Leopold: Thank you, David. So the first thing I wanted to touch on was, in the past, you've floated this idea of growing the switching business by on the order of EUR 1 billion into hyperscale opportunities. I'm wondering with -- given sort of the commentary today and the wins you've had, could you update us on really the current opportunities in the sales funnel and longer-term prospects for this business unit? Justin Hotard: Yes. I don't -- Simon, I'm not sure there's much more that we'll say than what we described, but maybe just to kind of break it down a little bit. Good design wins in Q1. Those don't show up meaningfully in orders. They're in pipeline, but they're not in orders in Q1. So we expect to see some of that start to flow in, in Q2. And as you likely know, these businesses are more design win driven. And what I mean by that is it's not a procurement event where you kind of -- you have a procurement, and then if you're awarded that, you win that procurement, then you go to the next procurement. It's more about getting designed into a specific use case and application. And so that means that the sales cycle is a little bit longer, but encouraged by the progress that we're making here, and we'll continue to update you as we see the longer-term forecast. But I'm really pleased with the work that the team is doing and the progress we're making. Simon Leopold: And then as a quick follow-up here. It does seem as if the press release cadence in the mobility business has stepped up a bit. And you didn't talk that much about it today, but I just want to get a better feeling. You mentioned the field trial for the AI RAN. Wondering if there's any movement change in your view on how this particular business unit in mobility RAN might be trending, particularly relative to how you talked about it last quarter. Justin Hotard: Yes. I think, first of all, Simon, a couple of things. One is, and we touched on this a little bit in our -- well our segment performance shows it, and I think we touched on it. Overall, the telecom market is flat. I think what we realize is that strategically, this is a market where we need to find new sources of value, and those can come either from enabling new services for the telcos to monetize or a business that's less CapEx intensive. And I think we fundamentally believe that the future is much more of an evolution and is software-driven. We've talked about that in a number of forums. What I'm very pleased about right now is that the AI-RAN trials and the engagement around a model that will fundamentally be different for the baseband because we'll start to detach software innovation. And what I mean by that is not just features, but actual performance enhancements from the underlying hardware, just like you see model performance gets better in AI with GPUs, but you continue to see model performance improve even over the life of the same GPU. It's one of the benefits of that architecture. We see that same thing coming in this part of the business. And so I'm really pleased that we're seeing such strong interest from the industry. And I think this is a business as we -- as I said at CMD, our focus is not on making the business necessarily a growth business because the underlying market is not growing, but to make it one that's much more profitable and delivers an attractive return on invested capital. And that's our focus. I'm very pleased with the start the team has coming together in MI. Obviously, a lot more work to do and a big milestone later this year with NVIDIA. David Mulholland: Thanks, Simon. We'll take our next question from Rob Sanders at Deutsche Bank. Rob, please go ahead. Robert Sanders: Maybe just a question around profitability in optical. I think originally with the Infinera deal, you were looking at double-digit operating margin. But clearly, you're stepping up your investment. So I was just wondering if you're still sort of on track to hit that target maybe by next year? The second question would just be around hiring and OpEx. Given the opportunity is clearly growing, what is your view around OpEx growth this year? Justin Hotard: Do you want to take those? Marco Wiren: Yes. When it comes to the Optical, just like when we announced the deal in Infinera deal, we said that we aim for double-digit operating margins, and this is something we are still believing in. We've seen a very good synergy work that the teams have been doing, and we are on track or actually ahead of our targets when it comes to synergy captures. So we're very pleased with that work. And also when it comes to -- if you look the combination of these 2 companies, how well they actually complemented each other. And this has been extremely successful among our customers as well. So we have had very good design wins. We were very fast to decide on the road map. And this is one reason why we've seen these good wins on the Optical side. So there's a lot of positive things that we've seen, thanks to that integration and acquisition. Yes. And when it comes to OpEx, we've just said that we invest in capturing these opportunities in Optical side. And just like Justin mentioned earlier, supply is constrained. So we are investing in securing that we get the supply that is needed. So we focus on that. Otherwise, we don't guide any specific OpEx numbers. David Mulholland: Thanks Rob. We'll take our next question from Ulrich Rathe from Bernstein. Ulrich, please go ahead. Ulrich Rathe: I have 2 questions. The first one would be, so you're maintaining the group EBIT outlook with this higher growth in Optical, IP and you're explaining that you want to secure growth with higher investments. Could you talk a little bit more about the mix of these costs? Is this more R&D? Is it more sales and marketing? Is it more into production? Just more color on that cost increase would be helpful. That would be my first one. Justin Hotard: I think, first of all, Ulrich, and I'll let Marco add if he needs to. But just to remind you, we always provide a range, and we give you some direction on the range, right? So we're not changing our guidance, which is the range. What we -- and we said we're slightly above -- we're guiding somewhat above the midpoint, right? So the key thing here for us is as we look at the business, we're making investments, and you touched on a number of them. It's R&D, obviously, sales and marketing and production. And Marco just touched on some of that, right? It's -- there's obviously -- there's CapEx with the work that we're doing around the fab. But there's also investment in OpEx and scaling capability and manufacturing. And if you just think about what's happening in this part of the business, particularly around Optical, we're also going through a massive step function in volume as an industry. And so that means that we actually have to do work to mature the supply chain, mature the production capability as an industry, and we're not immune to that. So we're investing to make sure that we're successful in that and that we can capture the fullness of the opportunity around us. Marco Wiren: I think this is pretty much the same actually, if you look also the whole industry in Optical side. So the whole supply chain is doing the same as well to secure that we actually can capture those demand opportunities. But still, there's more demand than supply. So that's why it's important that we invest in capturing these opportunities. David Mulholland: Did you have a follow-up, Ulrich. Ulrich Rathe: Yes, a quick follow-up maybe. On this guidance upgrades and for the Optical growth, there still seems to be a relative dearth of customer announcements with hyperscalers. Could you talk about the reasons? You talked in the past about that you don't actually care that much, you'd rather care about the business. But is there possibly a hesitation on the side of the hyperscalers to talk about Nokia given Nokia is not a U.S. company? Or are there any other specific reasons why you wouldn't have sort of more meaningful announcement that tell us what you're doing with which hyperscaler and these kinds of questions? Justin Hotard: Yes. I think, Ulrich, you probably have to talk to our customer or perhaps through who they are, but you could ask customers about us. From my perspective, that's not my priority. My priority is making sure we're partnering with them effectively. We're delivering what they need, and we're helping them execute on their strategies. That's my focus. And obviously, we're capturing our share of the opportunity that's out there. So that's where I spend my time. Obviously, I think what's a little bit different about us than some of the U.S. players more broadly is that we also don't have a concentration dynamic because the business is more diversified. And so that may be also something, but there's no indication that I get that there's any kind of geopolitical dynamic to this. David Mulholland: Thanks Ulrich. We'll take our next question from Richard Kramer from Arete. Richard Kramer: Justin, you mentioned the elongation of the order book. Can you tell us how much of that EUR 1 billion of new contract orders is firm, i.e., that you have purchase orders against it versus long-term sort of frame contracts, just to understand the timing of realizing that additional incremental EUR 1 billion of orders. Justin Hotard: Yes. Actually, Richard, this is a great question. So just to clarify, we have -- actually across the business, including with our telco customers, we have multiyear frame agreements. And sometimes we announce some of those. But the only thing you see in orders is firm purchase orders with delivery dates. What we haven't dimensionalized for you is anything kind of above a certain lead time. But we are -- one thing we are seeing is some of that elongation. But I see that as a net positive because I think it's tied to the demand -- the underlying demand for the products, and it helps us with predictability and capacity planning. So for me, it's a positive in terms of how we're managing and scaling the business. David Mulholland: Did you have a quick follow-up, Richard? Richard Kramer: For Marco -- yes, please. A quick one for Marco. Given the working capital buildup, the employee incentives, the EUR 750 million to EUR 850 million of pending CapEx to your EUR 900 million to EUR 1 billion expectation, restructuring and so on, will year-end cash be materially lower than what we see now? It just feels like you have a lot of cash constraints or drains on the business in the next 2 to 3 quarters. Marco Wiren: Yes. Thank you. Yes. Just like you said, we had a very good cash generation in quarter 1 and quarter 2 is lower. But we do generate cash continuously year-by-year as well, and we are also securing that we have a very good cash position to have the freedom to make decisions that we need to do, of course, always allowing us to follow the capital allocation principles that we have in the company, that first priority is on R&D. And then secondly is to find other investments inorganic that could support our growth and then dividend. And if we deem to have excess capital, then we can consider share buybacks as well. But we are quite confident about our cash position. David Mulholland: Thanks Richard. We'll take our next question from Felix Henriksson from Nordea. Felix Henriksson: Congrats for a strong order quarter. Given the unprecedented demand in AI and cloud, and also the supply-constrained market environment across the sector, is pricing something that's contributing to your guidance upgrade in Optical and IP? Are you starting to see support from raising prices for that? Justin Hotard: Yes. Felix, thanks for that. Maybe I'll comment, Marco, you may want to add. But I think in general, what we see is if you look at Optical, you've actually got -- structurally, you've got a cost curve that's probably coming down, which is enabling scaling. And so I would say, in general, we don't see -- is not a contribution on pricing, it's much more unit volume. What I will say is that I think we acknowledge that there are some cases where pricing is going up. I mean memory has been talked about quite a bit as a structural pivot. And that's a place where we have some exposure across the business. And obviously, we're working with customers on that because in our minds, that's something that's structural that we're -- in some cases, we're passing on. In other cases, we're also working on things like redesigning our products, right? But again, those are focuses that we're working on mitigating. And then -- but in general, I would say, if you look at the growth, it's much more volume driven than it is price driven. Marco Wiren: And just building on that, if you think the new launches that we introduced also in the OFC, the main focus is power of the bid. So how can we improve the power of the bid for our customers because that's one of the main KPIs they have, so helping them to improve their cost base. David Mulholland: Did you have a quick follow-up, Felix? Felix Henriksson: Yes. Just a quick one. I'm not sure if I missed it already, but can you just comment on how long the lead times between getting the order to actual revenues in Optical are at the moment? Just trying to get a sense of the EUR 1 billion incremental AI and cloud orders for Q1, whether or not those will already support 2026 or more so for 2027? Justin Hotard: Yes. I don't think we gave you a specific one, Felix. But I think dimensioning probably for this -- for the broader demand that we see is like in this -- in the Optical space is 12 to 18 months. I mean there's -- as you know, there's always exceptions in these things where some things might be sooner depending on the specific product, but that's probably a good way to think about the broader lead times we're seeing today. David Mulholland: Thanks, Felix. We'll take our next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead. Sandeep, we can't hear you. Operator: I just find this, perhaps your line in on mute. Sandeep Deshpande: My first question is regarding the switching business of Nokia. You -- on the Optical side, you probably have all the hyperscalers as customers at this point. You announced in the past few quarters wins on switches at multiple hyperscalers. Would you suggest at this point that you have a fairly broad exposure in terms of at least what is the future design win activity or future shipments at all the hyperscalers? Or is it still very limited to 1 or 2 hyperscalers in terms of your switching business? Justin Hotard: I don't know if I'll give you that much dimensioning, Sandeep, but I would say that as you look at the AI and cloud customer base -- the macro AI and cloud customer base, there's quite -- there's a set of different strategies that each one pursues. And I'd say the places where we get traction is where our portfolio fits our strategy is probably the best way to give you the answer. David Mulholland: Did you have a quick follow-up, Sandeep? Sandeep Deshpande: Is it broader today than it was, say, a year ago, the customer base? Justin Hotard: Yes. I think it's -- yes, I guess I don't quite measure it that way. I'm looking more at the design wins in the footprint. And I think that's certainly broader based on what we see today than it was a year ago. Sandeep Deshpande: And I have a quick follow-up on the financials. Marco, I mean, well before your time, I mean, Nokia in the past in terms of merger, M&A has -- in terms of integration has had problems. Clearly, at this point, you have tremendous growth. So that is helping the top line very significantly. But has the company got a structured process in place such that in terms of the integration with Infinera that this underlying doesn't have any issues going in the mid- to long term? And then secondly, given that there is a new fab ramping up as well later this year, are there any risks associated with that later in the year, given typically with semiconductor fab ramp-ups that can have issues? Marco Wiren: Yes. First of all, if you look at the integration, as I mentioned earlier as well that we are tracking extremely well on that compared to our own targets and also what we guided the Street. And we've been actually doing it better than we expected. So the team is extremely focused on securing the integration, and speed is extremely important here. So I understand your comment on the past perhaps, but this is definitely going well, and we're extremely happy with the progress. Do you want to... Justin Hotard: Yes, maybe I'll just add on that. I would just say, Sandeep, two things. One is, I think if you look underneath this, even if you took the growth out, I think you'd see very solid execution on the integration. I think the team has done really well. One of the most important things in integration that's a driver of outcome is cultural. And when you -- one thing that was clear to me when I went to OFC was, I could not -- everybody was Nokia -- was a member of Team Nokia. There wasn't an Infinera Nokia team, it was one team. That's hugely important, right, for being successful. The two other comments I'll make here is one acquisition, as you well know, does not a trend make in terms of successful execution and integration. So we have more work to do before we decide we're effective at this. And it's something that with the focus we put under the Chief Corporate Development Officer, Konstanty, obviously, one is making sure we find the right business for -- the right place for our portfolio businesses. Two is obviously being smart with how we think about capital allocation in terms of M&A where we believe that's accretive to our strategy. And then three is making sure we actually execute the integration. So that's a place where I'm pleased with the work that he and the team are doing, obviously, in close partnership with Marco, with our Chief People Officer, with all the key functions and the business presidents. But there's a journey here. And I think the net here is Infinera has been a good one. We need to get the learnings on that and then make sure we also don't forget the lessons from some of the challenges we've had in the past. Marco Wiren: And then when it comes to the manufacturing, remember that Indium phosphide is quite different compared to silicon manufacturing. So this is, first of all, much lower CapEx needed, but also it's faster. And I think that our team is working extremely well and understanding based on the learnings also from the Fab 1, we are transferring those into the Fap 2 and very good learnings from Fab 1. I don't know, Justin, if you want to say something more. Justin Hotard: Yes. I would just say our guide -- the only thing I would add is I think our guidance is risk balance understanding -- contemplating that ramp. And the reality is Fab 2 is a fraction of the ramp for '26, it's much more material to the longer term. David Mulholland: Thanks Sandeep. We'll take our next question from Jakob Bluestone from BNP Paribas. Jakob, please go ahead. Jakob Bluestone: So I had a question on the sort of margin progression as your IP revenues scale. I mean you've put through a sizable increase in your revenue guidance for some of the components for NI, but it's a sort of more modest change in your language at the group level. So if you can maybe just help us understand for IP in particular, as that business starts to accelerate, is it a bit like what we've seen on Optical, where initially it's perhaps not quite as accretive to margins? And then as that business starts to gain scale, it becomes a lot more margin accretive as well. So just if you can help us sort of understand the drivers there. Justin Hotard: I think the way I think about it, Jakob, is -- I think probably like any business, there's a scaling effect, right? I guess for me, the big focus right now is on capturing the opportunity and making sure it's accretive profit into the company. that's the priority. I don't know, Marco, if you'd add anything. Marco Wiren: No, it's -- always when you're starting with the new products, it takes some time to get the profitability up, and that's why we also mentioned that we see some impact of that in NII for first half of this year. But just like Justin said, that these are definitely accretive to our operating profit, and we see good opportunities there. Jakob Bluestone: As like San Jose... David Mulholland: Thanks Jakob. Go ahead Jakob... Jakob Bluestone: So I just had a quick follow-up. Just on the San Jose fab, can you maybe just help us understand, I don't know if there's any way to quantify whether that will cover your internal needs from the outset or not? Justin Hotard: Yes. I mean I think as we've talked about, San Jose gives us support. Certainly support for the growth that we see and expansion capacity for us as well beyond the portfolio that we have today and the volume that we see in the market. So that doesn't mean that we won't look at ways to accelerate -- further accelerate capacity because as we said, we think long term, this is a structural market, and we're pretty uniquely positioned as one of the few manufacturers with indium phosphide manufacturing capability at scale. But we think that too gives us -- certainly gives us the runway for the near term. David Mulholland: Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler. Sébastien, please go ahead. Sébastien Sztabowicz: The main opportunity for Nokia remains get across with optical line system and your pluggable optics. But I'm just curious, have you seen any specific opportunity building up around co-packaged optic or near package optics because the market seems to be quite bullish or there are a lot of demand building up these days. Justin Hotard: Yes. I think on that side, we've not made any announcements there. We've demonstrated -- at OFC, we demonstrated some technology development, but no announcements at this time. Sébastien Sztabowicz: Okay. And a follow-up on Infinera and the synergies. Previously, you were talking about maybe generating the EUR 200 million synergies in 2026 instead of '27. Are you still on track with that? And attached to this question, given the accelerated investment, is it fair to assume still a nice improvement of margin in Optical Networks this year or not? Marco Wiren: Yes. Thank you, Sébastien. Yes, the synergy, as I said earlier, we are tracking very well and a little bit ahead of our schedule. We originally said that it will take 3 years from the closing. And we said that we are tracking somewhat better than that. And we see the impact of synergies already in our quarterly reports as well. Just like in quarter 1, we mentioned that Infinera acquisition synergies are benefiting Optical business, and we will see those throughout the year as well. David Mulholland: Thanks Sébastien. We'll take our next question from Oliver Wong from Bank of America. Oliver, please go ahead. Oliver Wong: I had a question on -- going back to the Q1 AI orders and just your backlog and AI orders in general. I guess, so you mentioned that the lead times in Optical and I think IP are 12 to 18 months currently, but you also significantly increased your growth assumptions for this year for Optical and IP. So I was wondering, are these orders even though the lead times are up to 18 months are -- is much of this still quite kind of near-term loaded? And also in terms of the IP growth expected this year, I presume that most of that is from switch business. But you mentioned kind of big design wins and then that translating into orders starting next quarter. So are a lot of these design wins expected to kind of translate into revenues this year? Justin Hotard: I think as we touched on some of the design wins will start ramping this year. And yes, and I should clarify, we talked a little bit about Optical being 12 to 18 months. I think you've heard other peers in the industry talk or some of the players -- the ecosystem peers talk about being sold out over multiple years. I think that's probably a pretty good indication of where we see the Optical side. IP is a little bit shorter, but I would say there's parts of that supply chain that have constraints. And so obviously, we work closely with customers on forecasting and planning. And as we said, the only thing we register are the actual purchase orders themselves. That's what you'll see translated to orders. David Mulholland: Thanks, Oliver. We'll take our last question this morning from Emil Immonen from DNB Carnegie. Emil, please go ahead. Emil Immonen: So, I have a question on... David Mulholland: We can barely hear you. Your line is very hard to hear. Emil Immonen: Can you hear me now? David Mulholland: Yes, that's a bit better. Emil Immonen: Yes. So the growth you're saying the 27% market growth that you're now seeing instead of 16%. Could you comment on, is that volume or is that price-driven? Justin Hotard: It's volume driven. Emil Immonen: Okay. In that case, given the Fab 2 coming online at the end of this year, does that mean that you're building a third fab maybe? Because I think previously, you said that you were planning your current capacity to the earlier growth you were seeing in demand. Justin Hotard: Yes. I think one thing we've -- maybe just to clarify in case we haven't clarified in the past, Fab 2, when we shared in November, what we talked about was Fab 2 being able to be sufficient to meet the demands of the guidance we provided, and there was additional capacity on top. Obviously, we're not making any announcements about additional manufacturing capacity at this time. But that's the way I would think about it is that in the prior guidance, there was excess capacity and ability to build. I would take the -- if you kind of stitch the conversation together, I'll stitch it together for you. We're making additional investments that probably means that we're -- part of what we're doing there is investing in ramping Fab 2 at scale. And again, it's not just the fab, it's all the components of the supply chain because that fab produces a critical component, which is the optical component, but there's also a DSP, there's other components in our pluggables, and there's also many other components in our subsystems from the ecosystem. So all of that factors into this. David Mulholland: And thank you, ladies and gentlemen, for joining us today. This concludes today's call. I would like to remind you that during the call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your devices.

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HXGBY 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Hexagon Q1 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead, sir. Anders Svensson: Thank you, operator. Good morning, everyone, and welcome to Hexagon's First Quarter 2026 Conference Call. First, I will direct you to the standout cautionary statement, and then we turn into the next slide. Before I begin, a reminder that the upcoming potential spin-off of Octave, we are now presenting Octave as discontinued operations. We have provided this first bridge here for you to understand the performance of continuing Hexagon, Octave and taking them both together, meaning the former Hexagon Group. Looking at the headline numbers for the first quarter. Hexagon continuing operations delivered a revenue of EUR 964 million, with an organic growth of 8%. EBIT was EUR 251 million, giving us an operating margin of 26%. Octave generated EUR 327 million in revenues, organic growth was 1% and EBIT1 of EUR 83 million, delivering an operating margin of 25%. At the former group level, including Octave, revenues were EUR 1.29 billion, with organic growth of 6% and an operating margin of 26%. During the quarter, we also completed the sale of our Design & Engineering business on the 23rd of February, and the business was deconsolidated as of that date. Today, unless I mention otherwise, I will discuss Hexagon, the continuing operations, excluding Octave and with D&E deconsolidated as of the 23rd of February. Mattias will cover the Octave business separately after Norbert. So turning to the agenda for today on the next slide. So I will start with taking you through Hexagon's performance in the first quarter, and then dive into our business area performance. Norbert Hanke, our interim CFO, will then take you through the Hexagon financial performance. He will then hand over to Mattias Stenberg, CEO of Octave, who will then cover the Octave performance in the quarter. We will then, of course, have time for your questions at the end of the presentation. So next slide. Starting with the first quarter performance then for Hexagon on the highlights of the quarter slide. The first quarter of '26 was a strong start of the year and also a busy one for us at Hexagon. We delivered 8% organic growth with a gross margin of 63% and operating margin of 26% and cash conversion at 77%. Alongside this strong financial performance, we continue to take decisive portfolio actions to sharpen Hexagon's focus on the core precision measurement and positioning opportunities. We completed the Design & Engineering business sale to Cadence for approximately EUR 2.7 billion in cash and stock. And here in April in the second quarter, we announced the agreement to acquire Waygate Technologies from Baker Hughes for approximately $1.45 billion. And this is then expanding Manufacturing Intelligence into the very attractive area of nondestructive testing. And I will cover this more in detail on the next slide. Mattias and Octave team held Investor Day in New York on March 26 with the spin-off expected to become effective on May 22. We also continue to build the new Hexagon executive team. Renée Rädler has been announced as the Chief People Officer on the 1st of April, and Enrique Patrickson, who will join us as Chief Financial Officer on the 24th of April, meaning tomorrow. And I wish Enrique welcome to Hexagon, and both of them welcome to the executive team. And I'm happy to have you on board. Finally, a humanoid robot, AEON, is making excellent progress in the past quarter. AEON successfully completed a pilot at BMW and will be deployed in production at the Leipzig facility. It is a significant milestone in demonstrating the real-world industrial capabilities of AEON. In parallel to this, our pilot at Schaeffler has resulted in an agreement to deploy up to 1,000 AEONs in the next 7 years. This is a big step that we communicated here in April as well. Then we expect commercialization of AEON by the end of 2026. So a very active quarter of delivery. Let me now give you the overview of the Waygate acquisition. So next slide. Acquiring Waygate is a natural next step for us at Hexagon as a market leader in the nondestructive testing, they fit very well into our portfolio focus on precision measurement and positioning technologies. They're completing the measurement chain from surface to the interior of components. The computed tomography hardware combined with our volume graphic software creates a unique value position for customers. And the business also brings exposure to maintenance, repair and operation markets with recurring utilization-driven demand, which boosts our exposure to the growing aerospace markets. Waygate has a portfolio of assets with different growth and margin profiles. This brings a meaningful opportunity for us to create value. RBI is already growing very well at good and healthy margins of about 30% EBIT. Radiography is a strong business where we can leverage our manufacturing and sales footprint to really drive synergies across the business and leverage shareholder value. The ultrasonic testing and imaging solutions are also very good assets. But here, we will assess the position of those assets. They are either challenged by not being market leaders or they have a -- not a perfect strategic fit for us. So we will look at these assets from different perspectives, and we will try to then either through acquisitions make them into market leaders or we will have also the possibility to go through strategic reviews or do turnarounds of these assets. Now turning to our organic growth performance in more detail for the quarter on the next slide. So we delivered a strong organic growth of 8% in the first quarter and that's a significant acceleration from the prior year. This was primarily driven by Autonomous Solutions, which grew 13%; Manufacturing Intelligence, which grew 9%. Both businesses benefited from growth in aerospace and defense. Geosystems grew 2%, while completing the channel destocking program that I talked to you about in the fourth quarter report. Excluding this impact, the underlying growth would have been 4% for Geosystems, which gives us the confidence in that the momentum is again building within Geosystems. Recurring revenues grew 6% driven by continued momentum in construction software subscriptions and also GNSS correction services. You can see the rolling 12-month figures in the chart on the right. For the full transparency, excluding the impact of our Design & Engineering business, software & services account for 44% of sales for the remaining Hexagon corresponding to recurring revenues of around 28%. The new product adoption is also progressing very well, especially if you look at our laser tracker, ATS800, and also our new robotics total station, TS20, and this is, of course, supporting the growth trajectory across our businesses. Turning now to the development by region and industry in the quarter. So on the next slide. Here, you have a snapshot of the development, and I'll start with the geography. The Americas was the strongest region delivering a 15% organic growth with a positive performance across all of our business areas. North America was especially strong, while South America was weaker. EMEA recorded 4% organic growth with broad-based contributions across the portfolio. China reported a decline of 4%. Performance in Manufacturing Intelligence was very solid, but the wider China business was impacted by the weaker Geosystems business and also by the completion of the destocking actions taken within Geosystems in China. Without the destocking initiative of roughly EUR 8 million in the quarter, there was actually also single-digit growth in China as a whole. The rest of Asia delivered 7% organic growth, a solid performance, reflected the good momentum in several of our key markets in this region, and especially a strong India. By industry, if we look at it like that, construction remains our largest vertical, and we recorded a strong growth in Americas with also good growth in Western Europe. General manufacturing, the second largest vertical showed broad-based strength across all the regions. Aerospace and defense continued to perform strongly, while Mining was more mixed with uncertainty impacting the demand in South America. We also had some pull-in of deliveries from the first quarter into the fourth quarter last year, and that had some negative impact for the first quarter. Automotive remained under pressure, particularly in the EMEA, but we also saw signs of weakness in China. Electronics was very strong in the quarter, and this is primarily then in China and rest of Asia. That's where a strong majority of our exposure is, and it was very strong growth. Agriculture, while only being 2% of our sales, still remains weak globally. I now turn into profitability on the next slide, and I'll start with the gross margin. And I want to say first that the Design & Engineering that normally operates with strong margins had a challenged start to the year. So while it was very strong in the first quarter of 2025, which is the reference period, it performed quite badly during the 6, 7 weeks that it was within our business before it was sold on the 23rd of February. There's a lot of reasons for that. But if we exclude the impact of Design & Engineering in both periods, both in the first quarter of '26 and the first quarter of '25, the gross margin was 62%, and in the comparison period, 62.6%. So it's 60 bps down year-on-year. Gross margin was, however, stronger in this quarter than in the last 2 quarters, quarter 4 and quarter 3 of 2025. And you will also be able to see this in the appendix slide attached to this presentation. The ramp-up of new product sales continue to support cost volumes, but this was offset by a full quarter of tariff impact. And in the comparison period, there was very little tariff impact. And we also had input cost inflation and also on freight, and this is driven then by the Middle East conflict primarily. If you look at the currency for the quarter, that also created a significant headwind. Going forward, we will mitigate these pressures through pricing and also freight surcharges, et cetera, and actions are already taken at the end of the quarter. But the full impact of this given our delivery times should be seen in the third quarter. Turning now to operating earnings. During the first quarter, we delivered an operating margin of 26.1% versus 25.9% in 2025. Importantly, excluding also here the full impact of Design & Engineering business in both periods, the operating margin grew 80 basis points versus the previous year. And this, I would say, is a meaningful improvement, driven by the organic growth performance and benefiting from our restructuring program that we communicated in the second quarter report. With some of the contributions also a gain from a sale of a building within the quarter of about EUR 8 million. Offsetting our good performance was, like as mentioned, a weak Design & Engineering performance and tariffs and cost inflation. We also saw the strong currency headwind on EBIT, and that corresponded to a negative 60 basis point performance. Year-on-year reduction in capitalization to amortization gap, which we have talked about before, had an impact of 70 basis points negative. A key driver for the margin improvement was the cost reduction program. We benefited here about EUR 10 million during the quarter, and the program remains on track for a total savings within Hexagon at EUR 74 million at the end of the year. We also had generally good cost control despite the growth, and that also, of course, supported the performance. Now turning to the business area performance. I'll start with Manufacturing Intelligence. MI delivered a revenue of EUR 433 million and an organic growth of 9%. We also had a very strong order intake in the quarter, which is positive for the coming 2 or 3 quarters. If I start with the geography, the Americas was the strongest region, but we also saw growth in EMEA and Asia. By industry, Aerospace & defense continue to perform very strong and the automotive business remained under pressure, particularly in the European markets, but as I mentioned, also in China. Operating margins came in at 23.7%, down from 24.6% in the first quarter of last year. And this reflects the impact of currency headwinds and tariffs and the weak D&E performance in this year, which more than offset the positive operating leverage from higher volumes. Again, if we eliminate D&E as we have divested these parts from both periods, the operating margin improved from 23.1% to 23.6%, so 50 bps up. Looking ahead, we had an agreement to acquire Waygate Technologies, and this is a transformative step for Manufacturing Intelligence, and it expands, as I mentioned, into the adjacent nondestructive testing market and positions us to offer customers a truly end-to-end precision measurement solution from the surface to the interior and through the life cycle of products. And as I mentioned earlier, we did divest D&E on the 23rd of February. If I move then into Geosystems slide. Revenue was EUR 349 million with an organic growth of 2%. And even if -- great to see a return to growth here, I should note again that if we disregard the China destocking program, which now has ended, the actual underlying growth of Geosystems was around 4%, which is a more accurate read of the demand environment within the business. By geography, America was the strongest. EMEA was broadly flat. And we saw solid performance in the Western Europe, offsetting the weakness we saw in Middle East. In Asia, China reflected a destocking that I mentioned, but India performed very well. By end markets, construction software & services delivered double-digit growth, very good to see, and we are seeing also the contribution of the TS20 total station. Operating margins were 26.9% compared to 27.4% in the prior year. The decline primarily reflects currency headwinds, which were partially offset by strong cost discipline and favorable product mix. Turning now to our superstar of the quarter, Autonomous Solutions on the next slide. Revenue was EUR 176 million and organic growth of 13%. By industry, aerospace and defense continues to be a major growth driver with very strong demand. Mining was more mixed in the quarter. Customers remain cautious with capital expenditure, which also softened the demand for equipment investment, but our mining and safety business remained resilient during the quarter. Agriculture, as I mentioned, is subdued globally. We are not worried about the mining business in the midterm. There is a lot of activity. But as I said, a bit of hesitation with high oil prices for capital investments. By geography, both America and EMEA delivered strong double-digit growth, and APAC declined. Within the product portfolio, demand for anti-jamming solutions and GNSS correction services was particularly strong in the quarter, benefiting from the growing need for a secure and reliable positioning in defense, but also in critical infrastructure applications like aerospace. Operating margins expanded to 34.1%, up from 31.6% in the prior year, 250 basis points improvement is strong, and that's driven primarily by the strong operating leverage on the higher volumes and also a favorable product mix. Of course, also here, partially offset by currency headwinds and tariffs. That concludes my overview of the business area performance, and I will now hand over to Norbert, who will take you through the Hexagon continuing operations financials. Go ahead, Norbert. Norbert Hanke: Thanks, Anders. I will take you now through the Q1 performance. Unless stated otherwise, the slides and my comments will relate to continuing operations, so it will exclude Octave. Turning to the next slide, please. Let us begin with the Q1 2026 income statement, taking the sales bridge first. Revenues were EUR 964 million with a reported growth essentially flat year-over-year. Currency had a negative impact of 6%, and there was a 1% negative structural effect from the sale of D&E, resulting in organic growth of 8%. Gross earnings were EUR 606 million with a gross margin of 62.9% compared with 64.4% in Q1 last year. The 150 basis point decline reflects currency headwinds, tariff impacts and cost inflation that Anders discussed earlier. As he also mentioned, excluding the full impact of D&E, the decline would reduce to 60 basis points. EBIT1 was EUR 251 million with an operating margin of 26.1%, up 20 basis points year-on-year or up 80 basis points, excluding D&E. This improvement was supported by the cost restructuring program and organic growth in the quarter, partially offset by a reduction in the R&D gap of 70 basis points and currency. Earnings before taxes grew 4% to EUR 224 million supported by the operating improvements. Earnings per share were at EUR 0.067, up 3%. Next slide, please. Now moving to the bridge. As discussed, net sales were essentially flat on a reported basis with organic growth of 8%, offset by currency headwinds and the structural impact from D&E. On operating earnings, EBIT1 increased to EUR 251 million from EUR 249 million last year. The improvement was driven by the cost restructuring program and the net gain of the sale of the facility, supporting organic performance in the quarter. Currency represented a meaningful headwind with a 35% drop through, primarily reflecting the weaker dollar. On the margin bridge, we expanded 20 basis points to 26.1%, both organic and structural effects were accretive, while currency diluted margins by around 60 basis points. Next slide, please. Turning now to the restructuring program. We are targeting EUR 74 million of annualized savings with the full run rate expected by the end of 2026. In Q1, we delivered EUR 10 million of incremental savings, bringing the annualized run rate to EUR 51 million. We are therefore well on track and progressing towards our targets. As shown on the chart, we expect continued ramp-up through 2026, reaching the full EUR 74 million run rate by year-end. This program continues to be a meaningful contributor, and we remain confident in the delivery. Next slide, please. Turning to cash flow, where we continue to demonstrate strong operational discipline. Adjusted EBITDA was EUR 351 million, up 3% year-on-year, reflecting organic growth and benefits from the restructuring program, partly offset by currency headwinds. Capital expenditure amounted to EUR 76 million, down 38% versus the prior year, partly driven by proceeds from the sale of a building following our footprint rationalization. This resulted in cash flow post investment of EUR 250 million, up 16% year-on-year. Working capital was an outflow of EUR 56 million, reflecting the normal seasonal pattern in Q1 as we see activity ramping up through the quarters. As a result, operating cash flow before tax and interest was EUR 194 million. This translate into a cash conversion of 77%, a significant improvement from 60% in Q1 last year. After taxes of EUR 46 million and net interest of EUR 24 million, cash flow before nonrecurring items was EUR 124 million, up 84% year-on-year. Next slide, please. This slide shows working capital to sales on the new Hexagon base, providing a view of the underlying trend. On this base, Q1 performance is in line with normal seasonal patterns. Net working capital was an outflow of EUR 56 million compared to EUR 68 million in the prior year. The rolling 12 months working capital to sales ratio improved to 11.9%, trending down versus last year. So to conclude, we delivered organic growth of 8% with stable margin despite significant currency headwinds and gross margin pressure on tariffs and input cost inflation. Cash conversion improved to 77% and the restructuring program continues to deliver with EUR 10 million of savings in the quarter and an annualized run rate of EUR 51 million. Looking ahead, currency is expected to remain a headwind, and we remain focused on execution. I will now hand over to Mattias. Next slide, please. Mattias Stenberg: Thank you very much, Norbert. Let's take a look at the first quarter results for Octave. What you're seeing in the numbers this quarter, it's not just a transition to recurring revenue. It truly reflects the early impact of connecting workflows across the asset life cycle, which is where the real value in this business sits. Recurring revenue grew 6% organically compared to the prior year, with SaaS revenue continuing to grow at strong double-digit rates. Reported organic total revenue grew 2%, whereas reported revenue is down year-over-year, driven by currency impact and the disposal of the federal services business that we did last year. If you look at monthly project-driven subscription license revenue, that was roughly flat with the prior year period, while perpetual licenses and professional services revenue declined, reflecting the deliberate shift we are doing towards subscription-based models. The EBIT for the first quarter reflects the lower perpetual license contribution together with lower levels of R&D capitalization and higher related amortization. Excluding these factors, underlying profitability was in line with the prior year period as disciplined cost savings offset incremental public company costs. Cash conversion was a healthy 118% in the quarter. Next slide, please. If we look at our workflow environment in Q1, the trends were consistent with our expectations. In Design, perpetual license sales declined, while monthly subscription licenses continued their sequential improvement. Build delivered strong double-digit growth driven by SaaS adoption in construction and project controls. Operate also saw strong revenue growth across quality management, APM and EAM. And in the Protect area, recurring revenue continued to grow offset by lower perpetual licenses and services revenue. Our advantage, however, is not in a single product. It is in how these workflows connect. Intelligence created in design, build, operate and protect becomes more valuable when it is shared across the life cycle. Next slide, please. To the left here, you can see the monthly subscription licenses. We saw a step down as earlier discussed in the activity level in early 2025. However, since then, we've seen sequential improvement, and that positive trend continued in Q1, and we do expect year-over-year comparisons to get easier as we move through 2026. In the middle chart, you can see that excluding this short-term volatility from project-driven licenses, the underlying trend is, in fact, strong. Recurring revenue continues to grow at a high single-digit rate, reflecting healthy underlying momentum across the portfolio. And on the right, you can see that our quarterly perpetual licenses continue to decline in line with expectations as we shift towards recurring revenue models. We do expect this shift from perpetual to continue to pressure total revenue growth for the remainder of this year. Next slide. If we turn towards some of the information we shared at Octave's first Investor Day in March, and if you haven't watched it yet, you can access the videos and presentations at the Investors page at octave.com. One of the key takeaways that we discussed there was that we expect to accelerate organic recurring revenue growth to 10-plus percent over the medium term. Approximately 2/3 of that ARR growth is expected to come from our existing customer base. What underpins this is that expansion within our installed base is driven by the multi-workflow adoption where we see a clear step-up in ARR as customers move beyond a single workflow. We expect the remaining 1/3 of growth to come from new customers as we invest in growth areas and expand the partner channel to broaden our coverage across geographies as well as customer segments. Next slide, please. Turning to customer highlights in the quarter. We had a number of important wins, both for new logos as well as expansion. And I think these wins really reinforce several of the strategic themes we outlined at our Investor Day in March. If we start with new logos, we added Visa CashApp Racing Bulls for enterprise asset management to handle their logistics and operations in their F1 business through a multiyear SaaS contract. We signed both BNSF Railroad and Spokane 911 on multiyear SaaS deals for our OnCall Dispatch platform. We also landed a leading U.S.-based LLM developer on a design subscription for their facilities infrastructure. And these wins demonstrate 2 things that we emphasized at our Investor Day: the diversity of our addressable market across mission-critical industries and our ability to land new customers on recurring SaaS-based contracts as we accelerate the shift towards recurring revenue. On the expansion side, I want to highlight 2 deals that could not have happened a year ago, frankly, from an organizational perspective as these businesses then sat in separate Hexagon divisions. The first, a global motion and control leader and existing design customer expanded into operate through a 4-year strategic agreement, adding both our EAM and ETQ solutions across their global manufacturing operations. The other one was Kimberly-Clark, who signed a deal that consolidates over 700 of their systems onto our platform in a 5-year SaaS conversion spanning design and operate. And I think this is a great illustration of our -- how our opportunity for ARR per customer expansion where customers adopting 3 or more workflows consistently reach 7-figure ARR levels. And while the 86% of our customer base is still on a single workflow, and that is the expansion runway embedded in this business. We also expanded with a leading European chemical producer displacing a competitor for critical communications across their production plants. This customer now runs on Octave across all 4 workflow environments, design, build, operate and protect, validating both our platform strategy as well as the value customers see in consolidating onto our solutions. And lastly, we cross-sold our build solutions into a long-standing design customer with a major copper mine operator, extending our relationship to include project controls. So to me, what these examples really show is that once we land in one workflow, expansion into adjacent workflows is not theoretical. It is happening, and it materially increases our ARR. So in summary, the Q1 customer activity validates our strategy. We're winning new logos on SaaS, expanding within our base across the workflows and displacing competitors where our integrated life cycle approach gives us a clear right to win. And this is what differentiates us. We are not competing as a point solution. We are competing as a life cycle partner for mission-critical assets where failure is not an option. Next slide, please. So if we turn to our Investor Day outlook, in the nearer term, 2026 is a transition year as we become an independent public company. We're targeting 3% to 4% total revenue growth on the back of 6% to 8% ARR growth with adjusted operating margins stepping down modestly as we absorbed roughly 100 basis points of public company costs and up to 100 basis points from revenue model shift, net of savings. We do expect revenue growth to be second half weighted, reflecting both the recovery in monthly subscriptions and the typical back half seasonality of enterprise software bookings. For the second quarter on a U.S. GAAP basis, we expect organic recurring revenue growth of 6%, so similar to Q1. And we expect organic total revenue growth to be flattish year-over-year due to the declines in perpetual licenses that we have discussed. On a reported basis, which will reflect, again, then the disposal of the federal services business, we expect second quarter total reported revenue to be down approximately 4% over the prior year. Next slide, please. Our medium-term ambitions remain as we laid out in March. ARR growth of 10-plus percent and total organic revenue growth of 6% to 8%. Over time, of course, these growth rates will converge as recurring revenue becomes a larger and larger part of total revenue. We also expect free cash flow margins to expand from today's level of roughly 20% to 23% to 24% of the medium term. Next slide. So I'd like to close by reiterating why we believe Octave is a compelling investment. We operate in a large and growing market. It's $28 billion today, reaching $40 billion by 2029. We have a deeply embedded sticky installed customer base with 97% gross retention and significant room to expand. Our recurring revenue base of $1.1 billion continues to grow as a share of the mix. AI amplifies the value of 3 decades of domain data and context that is very hard for anyone to replicate. We are leaders in our product categories as recognized by basically all the major industry analyst firms. We operate in mission-critical environments where failure is not an option. And as customers connect workflows across the life cycle, value compounds and expansion becomes more predictable. That is the foundation for sustainable growth and profitability as we scale as an independent company. So final slide, please. So as a reminder, on the key dates for the separation. The Hexagon AGM vote is tomorrow, April 24. And assuming approval, the record date and effective date for the distribution is May 22, with Octave SDRs expected to begin trading on Nasdaq Stockholm on May 26, and the Class B shares on Nasdaq New York on May 28. So with that, thank you very much. And I'll hand back to you, Anders. Anders Svensson: Thank you, Mattias. Let me jump forward directly into the Q1 summary slide. So Hexagon delivered a strong financial performance. Our cost restructuring program is clearly on track and delivering. On the portfolio side, we completed the sale of our Design & Engineering business to Cadence, and we also announced here in April an acquisition of Waygate Technologies. As we have heard, the Octave spin is remaining on track. And all these actions are then sharpening Hexagon's future focus on the core positioning measurement technologies, positioning technology and autonomy opportunities. Our full executive team is now in place, as I mentioned, with Enrique and Renée. And looking ahead, we have a solid foundation entering into the second quarter. We had a strong order intake within Manufacturing Intelligence. And with the closure of the Geosystems destocking program, we provided a clean base for growth of Geosystems going forward. We remain, of course, attentive to the macroeconomic situation, particular to the tariffs, currency dynamics and also what's happening in the Middle East situation. We are, however, very confident on the momentum of our different businesses going forward. And as we have just heard from Mattias, Octave generated another very strong quarter of SaaS growth, contributing to recurring revenue growth in the mid-single digits. Before I move forward, I want to take this opportunity to thank you, Norbert Hanke, who has been an excellent interim CFO, covering from the gap in August 2025 when David Mills was stepping down. And now handing over to Enrique Patrickson. Norbert will remain as an Executive Vice President at Hexagon, leading our ventures operations and also strategic projects. And I'm very much looking forward to continue working with you, Norbert, in that capacity. Before we move to the Q&A, I would like to draw your attention to an upcoming event on the next slide. We will be hosting our Capital Markets Day in April, at April 30. That's next week, Thursday, in London. And this will include strategy updates from each of our business areas. And also importantly, we will present the new updated financial targets for Hexagon, reflecting the new portfolio composition that I have spoken about today. So of course, I encourage all of you to join us in London or follow the event via the webcast. And details and registration are available on our Investor Relations website. So with that, we are now happy to open up for questions. And in the room, we have Mattias Stenberg, Norbert Hanke, Ben Maslen, and myself. So please go ahead, operator. Operator: [Operator Instructions] We will now go to your first question, and your first question today comes from the line of Alice Jennings from Barclays. Alice Jennings: I've got a couple. So the first one is just on, I guess, the outlook for Q2. So you've expressed some confidence, but then also recognized a bit of uncertainty. So could you perhaps outline where in the business, like which divisions you have the most visibility or also the most uncertainty? So thinking about divisions, but then also the industries. And then I just have a question on the Waygate acquisition. So I understand that we're expecting to see some revenue synergies from cross-selling. But how long after the deal is closed? Can we expect to start seeing some of these synergies? And how meaningful could these be? Anders Svensson: All right. Thanks, Alice. So I can start a bit and Norbert, you can maybe contribute as well. So if we look at the different businesses and the outlook for Q2, of course, we don't give forecasts on the future. But we have a very strong order intake in our Manufacturing Intelligence business, and that will, of course, benefit us in the coming quarters. And as I mentioned within the Geosystems area, we have completed the destocking initiative. So we don't have -- we don't start every quarter with a negative sort of EUR 8 million to EUR 10 million that is already sort of cleaned, and we have now a clear base to move forward from. And as I said, the underlying growth has now turned positive within Geosystems, and we expect that to continue also going forward. In the Autonomous Solutions, we have a very strong demand in different sectors like aerospace and defense, et cetera. And we don't see any signs of that changing. And we don't see any signs of the weak business of agriculture improving dramatically either. So many of the businesses are expected to remain in a similar level. Mining, perhaps not growing very much in the second quarter because that's related to what I said in the presentation. But more in the midterm, we don't see any risk for our mining business as the activities is still very strong. If you look at electronics, for example, we expect that to continue to be a strong business for us also going forward. Automotive will be challenged in Europe. I think also we have seen now some negative growth for us in automotive in China, and that might remain. But given also the high oil prices, you might come back to more electric cars and that will also benefit our automotive sales in China. So we have to wait and see what happens within that business. General manufacturing is a strong business across all the different businesses, basically, and we expect that to continue on similar levels. So I think that's a summary of what we can say about the outlook. If I then should comment on the Waygate acquisition. So of course, there is a process here that we need to go through until we have actually closed this acquisition. And then there is an integration of the acquisition. And we will start seeing benefits, I think, quite quickly of the synergies because we have similar exposure to customers. We will also complement our offering, and we will go to market with the same people across the different geographies. So I think you will see synergies coming quite quickly after the integration of the business into Manufacturing Intelligence. Operator: Your next question comes from the line of Daniel Djurberg from Handelsbanken. Daniel Djurberg: Congrats to a nice growth profile here. I was wondering, Anders, if you could -- you mentioned some pulls from Q1 into Q4, still strong organic growth, 8%. And my question is, did you experience any prebuys for some reason? And how much of the organic growth was a result of this, if so? And also, if so, would it impact you negatively later on? Anders Svensson: Thanks, Daniel. The pull-in from Q1 to Q4, which I referenced was primarily within deliveries in mining. And I wouldn't say that, that has a significant impact for -- with the performance in the first half year here in 2026. Of course, the first part of the quarter was a bit weaker within mining, of course, due to that. But not any permanent effects in any way. Pre-buys, we actually don't see across the different businesses to any extent that we can recognize that this is a typical prebuys. So we don't see that as a future negative impact for us either. Daniel Djurberg: Super. May I ask you another question on Waygate, obviously, early days, but you mentioned that you will do a strategic review of imaging solution and ultrasonic testing. So my question is, can you already start to plan for this right now? Or do you need to await the full consolidation and then see and plan later on? Or more or less, can you do theoretically a divestment or something at the same time as you do the transaction later in 2026? A little bit hypothetical question, perhaps. Anders Svensson: Yes, I would agree with you, Daniel. I think we are here, first, making sure that we do the acquisition before we do anything else and close the acquisition. Then I didn't say that we will divest these businesses. I will say that we will evaluate them to see if we can make them into a market-leading position, #1 or #2 within those businesses as well. That could be with complementary acquisitions. We will also evaluate if we can do a turnaround of the business to improve the performance and create shareholder value. And then we don't exclude to do strategic reviews of businesses, which we don't exclude for any of our businesses, actually. We are always evaluating our portfolio. Operator: Your next question for today comes from the line of Johan Eliason from SB1 Markets. Johan Eliason: Just two questions from my side, just starting on the cash conversion, obviously, a good improvement, 77% in this quarter and then 60%, I guess, on some sort of comparable basis a year ago. But is -- I think your target has historically been 80% to 90% cash conversion. But considering Octave bringing all the SaaS and subscription prepayments with it. I guess, one should assume that this 80%, 90% target will be more difficult to achieve going forward? Or how do you see it? Norbert Hanke: Yes, Johan, I will take it here. For the time being, yes. I would agree, 77% was a good performance, as we said as well from our point of view. But say, we will have the CMD next Thursday, and I think you will hear quite a bit from Enrique as well going forward, what will be the target and how to achieve this. And I think I would then say, wait until Thursday. Hopefully, you are there. Johan Eliason: Yes, I am. Okay. Just trying. Then another question. On the robotics, you mentioned the Schaeffler, 1,000 robots coming 7 years or so. Are those on commercial terms? So can you sort of indicate what sort of price tags you are targeting for your type of robotics? I remember when you showed us them in September, I think it was -- there was a wide range of assumptions on what price tags robots could fetch from the consumer side to the professional industrial use? So do you have any indications here? And are you sort of satisfied with the returns for your clients, obviously, but with the returns for you as well in the deals you seem to have struck right now? Anders Svensson: Yes. Johan, I think we are not going out with any numbers, as you can see from the release. So we are very happy with this deal. I think the key thing for us here, it proves that this solution with AEON is commercially viable and implementable in an industrial application. And we could also see that with the BMW announcements. We are happy with the outcome for our customer here, and we are also happy with the situation for ourselves in the deal. But we don't comment on anything else regarding the deal. Operator: We will now take our final question for today, and the final question comes from the line of Mikael Laséen from DNB Carnegie. Mikael Laséen: I have a question for Mattias about Octave, and specifically, how we should think about the capitalized software development costs going from 8% to 4% over the medium term? And my question is about the total R&D expenditures. How should you think about stats in '26 and going forward? Mattias Stenberg: Yes. No, thanks, Mikael. I think I'll pass to you, Ben, for the detail. But I mean it is correct that we are stepping down capitalization. But I'll let you take it, Ben. Benjamin Maslen: Yes. Mikael, so as we said at the Analyst Day, there's no plans at the moment to change the gross level of R&D expenditure, which has been about 18% to 19% of revenues the last few years. I think there are areas where as we implement AI, we could get savings, but the priority at the moment is to reinvest in the product and drive growth. That was the message from a few weeks ago. Obviously, we're moving the product development more and more towards SaaS, where you have continuous development cycles, and it doesn't really make sense under the accounting standards to capitalize. So this will be gradual at first, and we'll go from 8% of capitalized software development costs in 2025. It will come down this year. And then we think by in the medium term, it will come down to about 4%, as we said a few weeks ago. Mikael Laséen: Okay. So the cash effect from the R&D activities will essentially then develop in line with sales? Benjamin Maslen: Yes. I think that's probably the best guide at this point, yes. Mikael Laséen: Okay. Can I also follow up with a quick question on the stock-based compensation. That probably is expected to go from 1% to 4%. Will you have a step up now when you have been separated and listed? Or will that be a gradual process? How does it work? Benjamin Maslen: Yes. It will be a gradual process as the new program gets approved and kicks in, and it layers and stacks up kind of year-over-year. So I would say it's fairly linear between the 1% and the 4%. Operator: There are no further questions. I will now hand the call back to Anders for closing remarks. Anders Svensson: Thank you very much, and thank you, everyone, for participating and engaging with questions. Looking forward to seeing you all then on next Thursday in London. And we wish you all a great day from here. Bye. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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AAL 2026 Q1 财报电话会议

Operator: Thank you for standing by, and welcome to American Airlines Group's First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead. Neil Russell: Thanks, Latif. Good morning, everyone, and welcome to the American Airlines Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to 1 question and 1 follow-up. Before we begin, please note that today's call contains forward-looking statements, including statements concerning future events, costs, forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued earlier this morning, form 10-K for the year ended December 31, 2025, and subsequent quarterly reports on Form 10-Q. Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, we will be discussing certain non-GAAP financial measures, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release and investor presentation each of which can be found in the Investor Relations section of our website. A webcast of this call will be archived on our website. The information we're giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest in American and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom. Robert Isom: Thanks, Neil, and good morning, everyone. I'd like to start my comments this morning by saying that American continues to make significant progress on our objectives to deliver for our investors. American Airlines is a premium global airline that is positioned to win for the long term. Our focus on delivering on our revenue potential this year is guided by our 4 pillars. Elevating our customer experience, growing our global network, driving premium revenue and leading in loyalty. We're seeing the benefits of our multiyear commercial initiatives come through in our revenue performance. Demand for American's product continues to grow, and during the quarter, we recorded the 9 highest revenue intake weeks in our history. First quarter revenue grew 10.8%, and we expect this demand strength to continue, as we anticipate the second quarter will deliver revenue growth of approximately 15%. The first quarter also included a few challenges including a $320 million revenue impact from winter storms and a $400 million increase in fuel expense versus the forward curve in January. Even with those headwinds, our pretax margin improved approximately 2 points year-over-year. I'm proud of how our team has managed the business through these disruptions with a focus on safety and delivering a world-class customer experience. Thank you to the American Airlines team for your resilience and continued commitment to excellence. It's this dedication that makes American the premium global airline that our customers trust. Moving forward, we're working to take the appropriate actions to drive revenue to offset the increases in fuel costs. Assuming the current forward fuel curve, we expect to be profitable in 2026. Devon will provide an update on our second quarter and full year outlook in a few minutes, but I'd like to quickly summarize the progress that we've made on our 4 pillars and my perspective on how these initiatives will come to drive American forward. Our first pillar, Elevating Our Customer Experience, is centered on delivering a consistent and premium experience across every step of the travel journey. We're increasing the number of premium seats across our fleet through new deliveries and fleet retrofit. In the first quarter, lie flat and premium economy seats grew more than twice as fast as main cabin seats. American's flagship suite offers customers a luxurious flying experience, and we're expanding this product across our international capable fleet. The flagship suite has delivered leading Net Promoter Scores since its introduction. We're also investing in the customer experience, both on the ground and in the air. American offers the industry's leading large network with new flagship lounges planned for Miami and Charlotte, bringing our total to 10 premium lounges, the most of any airline. We're investing in new and expanded Admirals Club lounges across our network and have announced 12 new or refreshed lounges over the past year, and there's more to come. We're enhancing our onboard experience through upgrade of food and beverage offerings and luxury onboard items, including bedding and duvets and our Centennial themed products such as amenity kits and sleepwear. Connectivity in-flight is critical to the customer journey. Today, AAdvantage members enjoy complementary high-speed satellite WiFi sponsored by AT&T on more aircraft than any other carrier globally. Finally, reliability and disruption management are among the most important drivers of customer satisfaction. We're making intentional investments in our schedule and technology to deliver more on-time arrivals, fewer misconnections and a smoother travel experience. Our largest investment started earlier this month in the form of a new 13 bank structure at DFW. We expect the new structure will support an even more reliable operation as approximately 1/3 of our aircraft touch DFW every day. Since the rebanking, we've seen improvements in customer connection rates and NPS scores. The DFW operation running smoothly is critical to the success of our entire system, and we anticipate this structure will help to enable effective future growth at our largest and most impactful hub. All of this will result in improved customer satisfaction scores and an even more reliable operation. Our second pillar is Growing Our Global Network. American is a premium global airline with the most comprehensive North American network in the industry. In 2026, we're prioritizing growth in hubs where we can improve both our local share and hub profitability as we efficiently utilize existing infrastructure, particularly in Philadelphia, Miami and Phoenix. Later this year, we also expect to add flights at DFW to take advantage of new gate expansions at Terminal A and Terminal C. We'll, of course, adjust our growth rate depending on factors, including demand and fuel price. However, our long-term network objectives stay the same. Finally, we're grateful to Secretary Duffy, Administrator Bedford, and their leadership teams for acting swiftly to minimize flight disruptions at Chicago O'Hare during the upcoming summer travel season. We expect to operate 500 flights per day this summer and look forward to continuing to grow local share, deepening loyalty and increasing co-brand credit card acquisitions. We're excited about our strategic growth opportunities in future years. We have hubs in some of the fastest-growing economic regions in the country and construction projects are underway to enable growth. We expect our operation at DFW to become the largest single airline hub in the world once the new Terminal F is operational in 2027. During the quarter, we also announced plans to further invest in Miami by redeveloping Concourse D, which we expect to enhance operations, elevate the customer experience and improve regional and international travel. And in 2028, upon completion of our investments in Terminals 4 and 5 at LAX, we'll have a significantly expanded operation with the newest facility offering a modern convenient customer experience. We remain on track to increase our international capable fleet to approximately 200 aircraft by the end of the decade and plan to continue to grow alongside our joint business and One World Partners. We're launching new service to destinations such as Budapest and Prague as well as to Caracas and Maracaibo where American will be the first U.S. airline to reconnect service to Venezuela in 7 years. Our third pillar is driving premium revenue. We continue to deepen the relationships we have with our corporate and agency partners and are capturing greater share among high-value customers. Our customer base skews higher end, and our customers have shown that they're willing to spend more for an improved travel experience. We're focused on improving our revenue mix through better segmentation and redefining our fair products. We've already seen the impact of these efforts in our premium cabins, with paid load factors in business and premium economy at the highest levels in our history, up approximately 10 points versus 2019. This reflects both strong demand and improved commercial execution and it highlights the opportunity we see across the premium segment. We also think there's significant opportunity in upselling in the main cabin. Last year, we began sharpening the differentiation between Basic Economy and Main Cabin and that strategy is working. These targeted changes have led to increased demand for our extra legroom product, Main-Cabin Extra. Loyalty is our fourth and final pillar, American invented airline loyalty and today, the AAdvantage program is the largest airline loyalty program in the world. We offer more value per mile, countless ways to earn and redeem miles and more engagement opportunities for AAdvantage members. During the quarter, we redesigned the loyalty experience in our mobile app, enhancing the AAdvantage activity screen to improve performance, clarity and engagement. These efforts, combined with the introduction of free WiFi produced record AAdvantage enrollments in the first quarter, up 25% year-over-year led by customers in New York, Chicago and Los Angeles. Our new co-branded card partnership with Citi plays a critical role in our loyalty strategy and offers our customers the most straightforward and seamless path to status in the industry. This partnership has significant upside as it is designed to drive long-term growth in credit card acquisitions, spend and member engagement. The first quarter got off to a fast start with card acquisition setting all-time records while spend on our co-branded cards increased 9% year-over-year. Now I'll turn the call over to Devon to share more about our first quarter financial results and outlook for the second quarter and full year. Devon May: Thank you, Robert. Excluding net special items, American reported a first quarter adjusted loss per diluted share of $0.40. While the increase in jet fuel prices kept this from being a profitable quarter, we were able to improve our pretax margin by nearly 2 points year-over-year. Revenue performance in the quarter exceeded our initial expectations. Total revenue grew 10.8% year-over-year, reflecting strong demand for our product and the continued returns of our multiyear commercial initiatives. Premium demand continued to perform well throughout the quarter, with year-over-year premium unit revenue growth, 7 points higher than Main Cabin extending the momentum we saw last year and underscoring the strength of both our premium customer base and the products we offer. At the same time, we saw a meaningful improvement in main cabin revenue performance following the economic uncertainty that affected last year's results. This strength was further supported by continued momentum in managed corporate revenue, which increased 13% year-over-year. Domestic year-over-year PRASM increased 6.6% in the quarter, and we expect domestic year-over-year performance to accelerate in the second quarter. Our international entities exceeded our initial expectations. Atlantic unit revenue was up 16.7% year-over-year, with London up 25%. Pacific unit revenue increased 7.8% year-over-year. Finally, unit revenue in Latin America was slightly negative, but excluding Mexico, performance was nicely positive in the quarter. Our unit cost, excluding net special items, fuel and profit sharing, was up 5.2% year-over-year. The severe winter storms lowered our Q1 capacity production, which pressured CASM ex by approximately 2 points. As we previously discussed, additional cost pressure came from staffing the operation in advance of the upcoming summer season. We are continuing to see the results of our multiyear effort to reengineer the business and expect over $200 million of incremental savings from these efforts in 2026, bringing our total annual operating savings to approximately $1 billion since this initiative was launched. This transformation leverages procurement excellence, technology investments and process improvements to improve the customer and team member experience while driving a more efficient business. Looking ahead to the second quarter. Demand across all cabins and entities remains robust. We expect domestic unit revenue to grow more than 10% in the second quarter. Internationally, we expect all entities to deliver positive unit revenue performance led by continued strength in the Atlantic region, which we expect to be up high single digits. Our capacity for the second quarter is about 1 point below our initial plans as we have suspended flying to Tel Aviv and Doha, have reduced planned capacity in Chicago and have further decreased some other marginal flying in the face of higher fuel. Further reductions in the very near term don't make economic sense given the current demand environment as we enter our summer peak. But as we move beyond the summer peak, we will be sharp with capacity in light of the current fuel environment. We expect second quarter revenue to be up between 13.5% and 16.5% year-over-year. driven primarily by continued improvements in the domestic entity, growth in corporate customer volumes and our ability to recapture elevated fuel costs. Second quarter CASM ex is anticipated to be up 2% to 4% year-over-year, slightly elevated due to the close-in reductions in capacity. Based on the forward fuel curve from April 20, and we expect a fuel price of approximately $4 per gallon in the quarter. With this second quarter guidance, we expect to deliver adjusted earnings per diluted share of between a loss of $0.20 and a profit of $0.20. We are also updating our full year outlook to reflect our current revenue expectations and the forward fuel curve. The midpoint of the full year earnings guidance is $0.35 per share, approximately flat to 2025 despite jet fuel prices increasing fuel expense by over $4 billion year-over-year. Turning now to our fleet and capital expenditures. We now expect delivery of 49 new aircraft this year, down from our initial estimate of 55 aircraft, reducing CapEx by nearly $300 million. Our deliveries this year include the 12 Boeing 787-9 aircraft in our premium configuration and the continued expansion of our Airbus A321XLR fleet. Based on these deliveries, we now expect total capital expenditures to be approximately $4 billion. We ended the first quarter with nearly $11 billion in total available liquidity, and we have more than $27 billion in unencumbered assets and first lien borrowing capacity. We continue to make significant progress on our financial priorities, ending the quarter with total debt of $34.7 billion, a reduction of $1.8 billion in the quarter. This is the first time our total debt has been below $35 billion since mid-2015. The improvements we have made on the balance sheet provides significant flexibility as we navigate the current environment and reflect the disciplined approach we've taken to capital allocation. I'll now hand over the call to Robert for closing remarks. Robert Isom: Thanks, Devon. We officially celebrated our 100th anniversary this month, a remarkable milestone that reflects a legacy of innovation, resilience and caring for people on life's journey. American is positioned to win by delivering sustainable growth and creating long-term value for shareholders, team members and customers. Our focus remains on executing our commercial initiatives while managing cost efficiently to deliver results and expand our margins. There's tremendous upside ahead for American from elevating our customer experience and growing our global network to driving premium revenue and leading and loyalty, we're executing on the strategy and initiatives that will drive value and shape our next 100 years as a premium global airline. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Catie O'Brien of Goldman Sachs. Catherine O'Brien: Maybe just a higher-level industry one first. Obviously, I understand that the recent fare increases are driven by the spike in jet fuel. But I think it's interesting that there's been no demand impact as of yet, unless you're seeing something different, which please correct me. But even before the spike in fuel, there was quite a bit of pricing momentum. Do you think something has changed structurally in the industry, whether there's been a shift towards better pricing discipline over the last several months? Is it competition? Are product change's playing a role? I just would love to hear your take. Robert Isom: Catie, thanks for the question. I have our Chief Commercial Officer, Nat Pieper here with me to help that as well. I'll just start with this. I think that travel is a good deal. If you take a look at pricing today on real terms versus where we were almost a decade ago, we're just catching up to where we were. So I think people realize that. And then on top of that, we've given them good reason to actually want to spend more. There's been a drive to a premium product. American has been a big part of that. And I think that what you're seeing is recognition that travel is still a good deal. There's an experience-based consumer dynamic going on in the industry, and we benefit from that. We've got a great product out there, a great network and feel really good about demand as we go forward into the future. Nathaniel Pieper: Catie, it's Nat. Thanks for the question. I think the thing that -- a couple of things that are interesting. Number one, is there a long-term resetting in terms of consumer spending hierarchy. There's a lot -- we all remember revenge travel from COVID and people got tired of buying TVs and wanted to go see the world. And I think some of that has continued and extended. For us, a lot of -- we've had 9 weeks so far in the first quarter that were a company record setting from a revenue intake perspective, prior to any of the hostilities in the Middle East that drove fuel where it is. So there's something going on there from a long-term spending perspective. And then as Robert referenced, we think the American offering is really resonating with consumers as well. The investments we've made in customer experience, our network and focusing on local market share, which are our highest yield yielding customers, and then lastly, on the loyalty side. And then there's also a piece of it with getting the right product into the right hands of the right people at the right price, delivering value to consumers. Part of it's bundling, part of it is segmenting and we're making good progress on that. So I think that's a component as well. Catherine O'Brien: That's great. Really helpful. Maybe just for my second question, can you walk us through the assumptions behind your full year revenue outlook? Is there a fuel recapture expectation there? Are you assuming demand is steady or improved, where there's ultimately some demand elasticity? Just really trying to understand the puts and takes and how they may or may not be different at either end of the per share guidance. Nathaniel Pieper: Sure. Certainly, the second quarter revenue estimation for us, plus 15% is an eye-popping number, and we feel good about it. I'll start with, we booked 65% of the second quarter. And it obviously is a strong performance based on the trends that we're seeing in our hubs, a lot of the American specific pieces that are in place. We did incorporate, as you would expect, some fuel recapture in the plan. When we built our plan at the outset, we had significant margin expansion due to a lot of American specific improvements that I referenced earlier and as Robert talked about in our 4 pillars. And obviously, since we shared that plan, fuel has risen an incremental $4 billion of fuel expense for American in the year. Historically, airlines recover that additional fuel expense, either by increasing revenue or by reducing marginal capacity. And we've been encouraged so far by the pace with which revenue has been recaptured and obviously, if fuel continues through the third quarter into the fourth quarter, we're going to see some more broad industry capacity reductions. But as we thought -- we think about it and what we've incorporated in second quarter, roughly 40% to 50% of fuel recapture and we would expect that to grow through the balance of the year, 75% to 85% in Q3 and then ultimately in Q4, if fuel is still at the level with capacity reductions. I think our recapture rate would be in the 90s. Operator: Our next question comes from the line of Scott Group of Wolfe Research. Scott Group: So we've seen some more material capacity reductions from others. I think you guys are not -- I think you'll lead the industry on capacity growth in Q2. How are you thinking about capacity in the back half of the year now that you've got more time to plan for a higher fuel price environment? And just to sort of be clear on sort of the answer that last question, is there an assumption in the guide that RASM growth accelerates further in the back half of the year, I guess, in third quarter as we get a full quarter of this higher fare environment? Devon May: Scott, it's Devon. I'll just start on the capacity discussion. I think Nat's answer on our expectations for fuel recapture effectively already answer your question on RASM that we do expect higher yields going forward as we pass through more of the higher fuel expense. But on capacity for the second quarter, we have planned for slightly higher capacity than what we're putting out there right now. So a couple of months ago, we were at about 6% for Q2. Since that time, we've reduced some line in obvious places like Tel Aviv and Doha. We've also pulled back a little bit domestically with some marginal flying as well as some reductions in Chicago. I'd just say, if you look back at our capacity, we have tended to be very conservative with capacity growth for the past, I don't know, half a decade or so. But you just look at the last couple of years, in 2024, we found ourselves in an oversupply environment and we quickly pulled capacity out in the back half of the year. In 2025, we had a handful of different demand shocks. We did the same thing. And we'll do the same thing here. We're going to keep a close eye on fuel and demand over the next 4 to 6 weeks as we are planning for the off-peak period in August, September and beyond, and we'll make capacity adjustments accordingly. Scott Group: Okay. And then maybe secondly, Robert, I've asked this to some of the others, but I'll ask you as well. Historically, when fuel prices eventually normalize, the industry sort of gives back a bunch of the pricing increases that it's gotten. Is there any reason to think it can be different this time and we can hold on to more of this higher price? Robert Isom: Scott, two things. First off, as Nat alluded to, we had already seen a lot of traction in our efforts in the first quarter before any run-up in fuel prices. On top of that, I really am confident in the initiatives that we're pursuing, whether it's from a customer experience perspective, our network, the initiatives we have to drive premium revenue and loyalty, those are going to pay off. We're giving people good reason to want to engage with American more fully and to spend. And I do view that as a good sign for us. And I just go back to the first quarter, 10.8% revenue improvement, and that includes a really big hit for the worst storms in terms of impact to our operation with Fern and Gianna that we've ever seen in our history. And as we look to the second quarter, as Nat said, a lot of that is on the books. We're anticipating 15% growth I'm bullish on what that means for our business. Operator: Our next question comes from the line of Brandon Oglenski of Barclays. Unknown Analyst: Robert, I'll probably just pose one question about kind of two parts here for you. It's been about 2 years now since you guys made a pretty sizable pivot and then repivoted back on your commercial business travel strategy. So can you tell us where you are in that journey I think you guys said you were fully recaptured on share at the end of last year. But what is next on corporate and business strategy at American? And then secondarily, I think you were hinting at this earlier, but how are you thinking incrementally about upselling or getting incremental rebranded fares on your premium products and maybe within that corporate strategy as well? Robert Isom: Thanks, Brandon. I'm going to let Nat help me out with this. But I'll say that, look, we did pivot and I'm really pleased with what the team has been able to do over the last year. We fully engaged in the marketplace. We've deployed our sales team everywhere and they have accomplished the objectives that we set out to achieve. We've recaptured the share that we've lost. We've gained a little bit since then, and we're going to continue to be very active at improving from there. Nat? Nathaniel Pieper: Brandon, just some numbers to back up the evidence that Robert sees. Managed corporate revenue for us is up 13% year-over-year and our unmanaged business, small and medium enterprises, our advantaged business product is up 28% per year. And obviously, really exceptional yields on both of those products. Further example, our TMC performance is up 11%, thanks to our partnerships with Amex GBT, with BCD and their support of American. I look at all of those results, along with the feedback that we're getting, one of the wonderful things when you make a distribution change is that everybody gives you feedback, a lot of it loud, a lot of it, maybe you don't want to hear. But over time, as that feedback has moderated and become more productive, we're getting good sense that what we're offering and what we're putting on the shelf is resonating with our network, with our customer experience, the loyalty program and delivering value to guests. And so all of those things yes, we feel good about recovering the share that we had lost, but we see runway there as well. And it's a core part of the positive American revenue story that you're seeing and that we see for the rest of the year. Operator: Our next question comes from the line of Ravi Shanker of Morgan Stanley. Ravi Shanker: Can you unpack the FAA decision in Chicago a little bit more? Kind of how does that compare versus your expectations? And what do we think about the incremental steps from here? Robert Isom: Sure. Ravi, thanks for the question. Look, American has been serving Chicago for 100 years. It was our very first flight flown by Charles Lindberg included Chicago. And we are going to be in Chicago for another 100 years. So we had flown about 500 flights a day out of Chicago prior to the pandemic, and it's taken us some time to build back up to that. We're going to be able to fly 500 flights as a result of the initiatives that have been put in place to address over flying. And so I want to, first off, give a shout out to the DoT and FAA, Secretary Duffy and Administrator Bedford, got in front of what would have been a real issue in Chicago. Chicago O'Hare would have likely been in a delay program from the very first flight of the day if something hadn't been done. So I'm pleased, first off, that we're going to avoid an issue of having too much flying in Chicago for the aerospace and ground capacity. And that's good news, not just for American Airlines. It's good news for the entire industry. So real complements to the administration, Secretary Duffy, and Administrator, Bedford for that. And in terms of what we end up with, again, we're going to fly what we had hoped to fly, 500 departures. That will allow us to continue to build in Chicago with our customers. And our product is resonating. And whether it's local passenger growth, our business passenger growth, AAdvantage enrollments, our co-branded credit card enrollments, all of those are meeting and exceeding our expectations. So no one's going to kick us out of Chicago. That's something that everybody is going to have to get used to, including our biggest competitor. We're going to be roommates and roommates for a long, long time. Ravi Shanker: Understood. Very clear. And maybe as a follow-up, Robert, kind of there's been a lot of industry speculation about M&A and such. But can you address that directly, if you can, in addition to what you guys put out over the weekend? But also, I just love your views on what do you think are the -- is the ideal industry structure over time. I think you put in the press release that you think some things needed to change. So what might those things be? Robert Isom: Well, I'll just start out with this and again, on the heels of the Chicago question. Look, we're going to be roommates, and we're not getting married. And so I want to stress this that the idea of the two largest airlines in the world getting together, that is something that we've viewed as being anticompetitive. And obviously, everybody that has weighed in suggests the same thing, bad for customers, bad for the industry. And then ultimately, that would be bad for American Airlines. In regard to consolidation in the industry, we're focused on American Airlines. We're focused on delivering on our core initiatives. And part of that is building out our network. We already have the most comprehensive network in North America. That allows us to really pursue opportunities organically internationally and then also with our partners, some of which are part of OneWorld, others that are part of OneWorld and also joint businesses. All those are accretive to American Airlines. And we really look to continue to focusing on all those partnerships, whether those be domestic or international. Now of course, if there are opportunities from a consolidation perspective or if there's assets that become available in the marketplace, American has a long history of being aggressive. We've got a lot of experience. And whether it is the potential for M&A or the work that we've done to pioneer partnerships, we're going to be on the forefront of that. Operator: Our next question comes from the line of Jamie Baker of JPMorgan. Jamie Baker: So probably for Nat, you know this question about yield stickiness when fuel prices recede as sort of become a conference call stable this season. It came up yesterday on the United call. And I found the commentary there to be interesting. Basically, the suggestion was that historically marketing and government affairs had some degree of influence over pricing decisions. It was not unilaterally left up to revenue management. So that's my question for American. First, do you sort of agree with that broader premise, but more importantly, do you think the industry and/or American specifically, has evolved to a point where maybe going forward, pricing and revenue management exerts wields more influence than in the past? Any thoughts there? I realize it's not quite coming in the form of a question, but I'm trying. Devon May: Jamie, thanks for the question. I guess I'll start with just praising my colleague, Nat, who has government affairs responsibility here. I think he has 0 appetite at American to dabble in revenue management. I saw the transcript and frankly, interesting just from a team perspective and kind of the organizational structure that we have here, pretty well aligned and revenue management is one of those functions core to the airline, core to the assets and experience that American has. So I think we are emphasizing it tremendously. We are investing resources, we're investing people on top of our very experienced people that are here. And I think as technology evolves, and Jamie, we referenced it a little bit, we call it the revenue growth program within American, but that's kind of a sound bite on really being able to effectively segment and bundle one's products, getting the right product into people's hands at the right price. And I think the capabilities that we have and really across the industry are just going to continue to evolve in a positive way at a number of different price points, but ultimately, the goal is to maximize revenue across the enterprise. Jamie Baker: Okay. Interesting. And second, probably for Robert, the news that you might look to pursue more of an NEA type relationship with Alaska and -- well, actually, maybe that's not the way to convey it. But my question relates to pilots. My understanding is that the current scope allows for codesharing with international partners, but not the type of Alaska while long-haul flying that they've started adding post merger. I'm just trying to understand what scope impediments might stand between you and a potentially closer relationship with Alaska? And maybe the answer is not black and white, and I get that as well. Any thoughts there? Robert Isom: Thanks, Jamie. I'll just start with this. We've been working with Alaska for well over a decade. And I remember working with Ben Minicucci to talk about sponsoring them to come into the OneWorld relationship, which we successfully executed, and I think it's been a terrific enhancement to Alaska and has enabled OneWorld and their customers greater access to travel just about anywhere people want to go. We were able to also do great things with the West Coast International Alliance, which has been hugely beneficial, doing things that benefit our consumers, things that we really couldn't have done on our own. And I feel good about where our relationship is and what happens next. The Alaska team is fiercely independent, a very, very successful airline and we are the same. As we go forward, we'll make sure that anything that we do complies with our scope clauses and we're going to make sure that we really take care of our customers and do what's right for both companies and our customers. Now I'll leave it at that. Operator: Our next question comes from the line of Conor Cunningham of Melius Research. Conor Cunningham: Just maybe a point of clarity before I get into another question. Just on the yield progression throughout the year, I just want to make sure that I understand. Is it that you assume that yields will essentially be flat from here to get to your recapture target by the end of the , i.e., you don't need additional fare increases to get to that 90-plus percent come fourth quarter? Nathaniel Pieper: Yes. I think that roughly in line, that's right. We don't need enormous increases to hit our targets as it works through because it balances with the recapture assumptions. Conor Cunningham: Right. So cupful forward curve comes down, you're currently exposed at the higher fares. Okay. Makes sense. All right. And then, Devon, maybe on the cost side, just clearly, some challenges in 1Q given whether I think everyone had those problems as well. But your 2Q guide is actually pretty good and then it seems like the setup for the second half is also in a pretty good standing. So if you could just give some puts and takes that you see moving throughout the year, just on cost, I think that would be helpful. Again, I think it sticks out relative to a lot of what we're hearing so far. Devon May: Sure. Well, it's been a long-term effort on driving efficiencies in the business. It's something we've been at for 3 years. You don't see it every single year because some of these initiatives are long-term in nature. We've had a handful of new CBAs that have driven some cost pressure. But we're seeing it this year. If it weren't for the storms in the first quarter, our cost performance would have been really nice, up 2% to 4% in the second quarter feels pretty good. Obviously, it has been a little bit lower had we flown the entirety of our schedule. The back half of the year, we're set up well. We're going to see pressure in some areas that end up being good pressure, things like selling expense. But our unit cost is going to be dependent on how much capacity we produce. So if we produce a similar amount of capacity to what we're doing here in the second quarter, I would expect unit cost to be in the low single digits. If we pull back on capacity, given the higher fuel, we're going to see some cost pressure there. But we do a nice job getting out of any sort of volume-related costs. We'll continue to do that, and we'll continue to focus on driving an efficient business. Operator: Our next question comes from the line of Tom Fitzgerald of TD Cowen. Thomas Fitzgerald: Just curious within the loyalty program, what geographies you're seeing the most -- the strongest performance in terms of sign-ups? And then if that kind of within that question, if that $1.2 billion of other revenue, if that's kind of a good run rate for that line item moving forward? Nathaniel Pieper: It's Nat. I'll take the first one and then, Devon, the second piece of it. First, just from a resonating perspective, from a volume, as you would expect, it would be in our hubs. But what's exciting about loyalty enrollments is the penetration of our top 3 markets are New York, Los Angeles and Chicago. So places that incredibly competitive hubs for us but also for our competitors. So again, further evidence that the loyalty program, the biggest, the best and it continues to resonate with guests. Devon May: Sure. And yes, just on other revenue or the marketing component of it. We did see an increase. It's pretty meaningful year-over-year quarter-over-quarter just versus the fourth quarter was up something less than 10%. But like we've been saying as remuneration grows, we expect that line item to grow as well. I would expect less volatility in that line item than what we've had from quarter-to-quarter in the past. And it's probably going to be somewhere around $1 billion a quarter for 2026. Robert Isom: Tom, I just want to underscore one stat. While Chicago, New York and L.A. lead, overall, the loyalty growth -- our loyalty enrollments are up 25% year-over-year. Thomas Fitzgerald: That's all great color. I really appreciate that. And then kind of a similar bucket, just on the corporate recapture, Curious what verticals you're seeing the most momentum and maybe other places where there's still room to recover versus the last couple of years? Nathaniel Pieper: Well, the 3 verticals we've seen the most uptake in are banking, health care and pharma and industrials, and that's both domestically and internationally. So encouraged by that performance and really across all verticals, I think there's still opportunity there. But those are the big 3 we're seeing right now. Operator: Our next question comes from the line of Michael Goldie of BMO Capital Markets. Michael Goldie: You've rebanked DFW and now Philadelphia. Can you talk about the operational benefits you expect to get from this? And what other initiatives you're undertaking on the operations front? Robert Isom: Michael, thank you. So 1 of the biggest parts of our elevating customer experience initiative is to improve our reliability, the biggest investments that we're making. So the rebanking of DFW, it really smooths out the operation throughout the entire day. There's never a period during the day where we come close to exceeding the operational capacity of the hub. And from what we've seen so far is just really strengthening our operational reliability. But then it's when it's stressed, say, throw a thunderstorm in which we've had our ability to recover is so much quicker. Over the -- our centennial celebration. I was at in DFW talking to our team went to the control center and asked folks, okay, well, can you -- do you sense something's different. And for the most part, people said, you just don't see as many people running from gate to gate. And so it's an improvement in operation. It takes the stress level down considerably for our customers. but also for our team members as well. And then I know Net could comment on this. But the good thing that we're seeing as well is that revenue is holding and increasing 2 points to that. One is that we just don't have as many misconnect. Second is that we haven't really extended connect times by that much. And so we really haven't seen people book away. So we're retaining more revenue. It's a better customer experience. NPS scores are higher. So we're taking that of course. And those results are very, very promising. And we've expanded it and we'll be expanding it to Philadelphia and taking a look at the potential in other parts of our network as well, and we'd expect similar results. ultimately higher NPS scores, lower misconnections, greater retention of revenue. But that's not all. We've certainly taken a look at our schedule to make sure that we've buffered appropriately in terms of travel times outside of connect times in the hubs. And that, I believe, is paying off. And as well, we're making good use of contractual changes that have happened, especially with our flight attendants, where we've increased boarding times. And so all of that has come to fruition. The airline as a whole, regional mainline, we're in good shape and ready for the summer. So thanks for the question. Michael Goldie: And then as my follow-up, when you think of industry consolidation, which everyone seems to be in agreement on. If M&A is difficult to pass, do you think airlines will increasingly look domestically for partnerships as another avenue? Robert Isom: Well, I appreciate the question. The biggest issue out there today is, again, the largest airlines in the world get together and do something. And the answer to that is it's anticompetitive. So whatever happens next, we look to make sure that anything that we do strengthens our network and in many cases, partnerships are the best way to do that. In other cases, it's just organic growth. And so what you'll see from us this year, included in our growth plan, is to really strengthen our hub in Phoenix, make sure that Miami is fully built out. We've got a lot of work going on in Chicago as noted in Philadelphia as well. it really is the most comprehensive network in North America. And we're -- we've been pioneers in terms of building partners, building relationships. And we've got a tremendous amount of experience here with M&A, should that ever come about. And so I feel really good about where we stand. And as dynamics change and the fortunes of other carriers change, we'll be ready. Operator: Our next question comes from the line of John Godyn of Citigroup. Unknown Analyst: This is Max for John. I just wanted to follow up on the fuel pass-through commentary and getting to a recapture rate in the 90s by the end of the year. If we can maybe get a little bit of geographic color kind of how pass-throughs are evolving internationally versus in the domestic market. Maybe a little bit of color would be helpful. Nathaniel Pieper: Okay. I'll start, just give you the quick entity run through around the world and then come back to the other question. I think just first, domestically, 65% of Americans capacity, as Robert just said, we got the best network in North America, and it's resonating. Unit revenue up 7% in the quarter, and we saw it increase sequentially up into March for double digits. And then as mentioned earlier, the second quarter booked, and we're seeing further acceleration as it goes through in Q1, stellar performance in Philadelphia and LaGuardia as we strategically are shifting to deepen our schedule, improving our service to big markets and really generating higher yields that way. Pleased with the improvement in D.C. as well. And then in the second quarter, DFW full implementation of the 13 bank structure and Los Angeles, as that operation straightens out a little bit, we're starting to see traction there as well. In the Atlantic, 15% roughly of our capacity depending on season, it's our best-performing international entity. Our quarterly RASM, 17%, March was north of 20%. And in the second quarter, as we grow a bit, we'll still see high single digits in unit revenue performance. Heathrow, the stalwart, RASM 25% in the first quarter. not rocket science, our strategy there. We're putting our best most premium airplane into the world's most premium market, and we'll continue that through the summer. British Airways is a terrific partner for us in Heathrow. And obviously, the IAG Group across the transatlantic as well. Rest of Europe remains strong. We've got 4 new routes coming online here in May, two out of Philadelphia to Prague and Budapest, 2 out of Dallas to Athens and Zurich and bookings there look terrific. Latin America, roughly 15% and mixed bag with breakeven RASM on the quarter, short-haul international challenge due to the events in Mexico, but that's starting to turn positive as we get to May into June bookings. And in the deep South, that's been strong. Brazil was the stalwart there. And then in 2Q, as we grow Argentina, we'll see better revenue performance in that. And then the other highlight for Latin America for American, we're excited to restart a Venezuela service next week. We'll be the first U.S. carrier to do that, and it just further enhances our industry-leading Latin American operation out of Miami. Lastly, in the Pacific roughly 5% of our capacity, 8% unit revenue growth in the first quarter, a little bit higher expectation in the second quarter. And again, the shift of our 2 big markets. In the first quarter, Oceania performance was great. It will stay decent in the second quarter, but Japan really becomes a stalwart as we fold into May into June. And no coincidence. We've got 2 terrific joint business partners in each of those arenas, Qantas in Australia and Japan Airlines across the Pacific. So a good story around the entities. It's a terrific demand environment, both for the domestic and the international. Unknown Analyst: Great. That was great color. And kind of as my follow-up, every airline has a bit of a different philosophy guiding its capacity decision. Can you help us understand what yours is if the macro situation continues? And you revisit second half capacity growth plans. Are you managing to margin neutrality and ROIC target or any other targets kind of got in this decision? Robert Isom: Yes. We touched on capacity earlier. I'd just say we're always going to be sharp on capacity. When we had a supply issue in 2024, we pulled capacity pretty quickly. In '25, we had different demand shocks, we pulled capacity to get supply more in line with demand as well. This year, we have this fuel increase. And we are going to do what's needed on capacity to make sure that we are passing on as much of that fuel increase to customers as possible. So we'll be watching for the next 4 to 6 weeks before we have to make some capacity decisions for August and September, and we'll adjust accordingly. Operator: Ladies and gentlemen, at this time, the Q&A queue is open to two media questions. [Operator Instructions] Our first question comes from the line of Alison Sider of Wall Street Journal. Alison Sider: Curious what you guys are seeing for World Cup bookings, and those are coming in as you'd hoped or if there's any kind of concerns about people not wanting to travel to the U.S.? Nathaniel Pieper: Allie, the World Cup event, actually, we're really excited about that. I personally am super excited. Just any event with a ball and a scoreboard is worth it but the globalization and with that event really means thrilled to be the official North American airline of the FIFA World Cup and something we can work on with Qatar Airways as well. We've got the best network in North America to get global fans where they want to go, huge loyalty benefits for us here as well. And we're really excited to see it. It's a great event because it's not focused geographically on one city like the Olympics, but you get the entire North America region with matches in Canada and Mexico, in addition to double-digit cities in the U.S. So really excited about the event and not seeing book away at this time. Operator: Our next question comes from the line of Leslie Josephs of CNBC. Leslie Josephs: My question is about demand with fares going up. Is it that you're seeing the same or growing number of bookings at a higher rate or fewer people booking, but the -- they appear to be willing to pay more to fly? And then my second question is about VFR travel. Whether you're seeing any change in that this year? Robert Isom: Leslie, thanks. Just in terms of demand, we've always been really sharp in terms of managing our load factors. And we see our loads keeping pace with the capacity adds and so that would suggest that we're seeing the real benefit in yields right now. And then from a VFR perspective, I don't have a lot of detail on that. But I'd tell you that we've held pretty true to where we have been historically. And I'd just tell you that VFR traffic, I'm really excited about what Nat mentioned with our return to Venezuela. My guess is that that's going to be a real factor in the development of that marketplace. Operator: Our next question comes from the line of Rajesh Singh of Reuters. Unknown Attendee: Robert, can you comment on reports of talks with Alaska to join your transatlantic and transpacific joint ventures? And how far those discussions have progressed and what scope you were considering? Robert Isom: Thanks for the question. We've got a great relationship with Alaska. We really look forward to building on a history that's dated back a long time, not just a OneWorld when we brought sponsored Alaska into OneWorld, but then develop the WCIA. And as their business has changed and ours has too. We look for opportunities going forward. I know that they've been fiercely independent, but at the same time, we have been able to cooperate for the good of consumers on a number of fronts, and we look forward to doing more with Alaska going forward. Unknown Attendee: And Robert, if I can just squeeze in one more question. You said that if there are any consolidation opportunities in looking at that. Is there anything out there that in you and you think that might be the best fit for American? Robert Isom: So a question regarding consolidation. Again, I appreciate that we're always on the lookout for opportunities, but right now, nothing to report. And American has long experienced in terms of making sure that we take care of our customers, our network, our company, and we've been really creative over the years in being able to do that, whether it was back -- the creation of today's American Airlines back in 2013, in the combination of U.S. Airways and American all the way to things that have worked really well like our relationship with Alaska and the WCIA or our joint businesses with IAG and JAL. And we'll continue to be creative and do what's right for our company and our customers. Operator: This concludes the Q&A portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir? Robert Isom: Thanks, Latif, and thanks, everybody, for listening in today. We're really encouraged by our revenue growth in the first quarter, anticipated growth in the second quarter. It's all due to what we're focused on, elevating our customer experience, growing our global network, driving premium revenue and leading in loyalty. We have a fantastic team. I'd just like to thank them for everything that they do. And I'm very encouraged by what we're projecting for the year with fuel prices up by over $4 billion, we're still anticipating to be able to produce a profit here. It gives testament to what we will be able to do when those fuel prices moderate in the future. So thank you for listening in, and we're going to get back to work. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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ROL 2026 Q1 财报电话会议

Operator: Greetings, and welcome to the Rollins, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Lyndsey Burton, Vice President of Investor Relations. Please go ahead. Lyndsey Burton: Thank you, and good morning, everyone. In addition to the earnings release that we issued yesterday, the company has also prepared a supporting slide presentation. The earnings release and presentation are available on our website at www.rollins.com. We have included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation as well as in our earnings release. The company's earnings release discusses the business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that have been made on this call, excluding historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially from any statement we make today. Please refer to yesterday's press release and the company's SEC filings, including the Risk Factors section of our Form 10-K for the year ended December 31, 2025. On the line with me today and speaking are Jerry Geoff, President and Chief Executive Officer; and Ken Krause, Executive Vice President and Chief Financial Officer. Management will make some opening remarks, and then we'll open the line for your questions. Jerry, would you like to begin? Jerry Gahlhoff: Thank you, Lyndsey. Good morning, everyone. I'm pleased to report Rollins delivered strong first quarter results. We saw sequential acceleration through the quarter and continue to see solid growth across all major service lines with total revenue growth of 10.2% and organic growth of 6.6%. Demand was a little slower to start the quarter, particularly given some unfavorable weather in January. But we exited with well over 8% organic growth in March. Spring spring quickly for our teams as we are experiencing healthy growth in recurring and onetime services. As expected, we continued our investments in incremental sales staffing and marketing activities ahead of peak season to ensure that we are positioned top of mind for the consumer as pest season begins. We are well staffed on the sales, technician and customer support front with our teammates onboarded, extensively trained and ready to provide an exceptional level of service for our customers. Earlier this month, we announced our acquisition of Romex Pest Control, a top 40 pest management company according to PCT Top 100 rankings. Romex provides us with entry points into new markets. while enabling them to further scale their operations and expand service offerings to their existing customer base. Most importantly, they have a strong people and customer-focused culture and we were thrilled to welcome our new Romex teammates to the Rollins family. As you know, we believe the combination of Orkin and our strong group of regional brands is a competitive differentiator for Rollins, giving us multiple bites at the apple with potential customers, while also providing some balance and diversification with respect to customer acquisition. The addition of Romex is another example of our successful M&A playbook in action. -- as we continue to add high-quality businesses to our premier portfolio of brands through a disciplined and strategic approach. On the commercial side of the business, we're encouraged by our momentum. Overall, we delivered solid commercial growth for the first quarter. Over the last year, we have strategically added resources to support our dedicated commercial division within Orkin. These resources are paying off. as Orkin Commercial continues to deliver new customer wins across key verticals. Beyond growth, our dedication to operational efficiency and continuous improvement is an important part of our strategy and culture. Kim will discuss in more detail, but we saw headwinds to profitability from higher insurance and claims as well as some pressure from head count given lower volume earlier in the quarter. As we discussed last quarter, it's important that we maintain healthy staffing levels ahead of peak season, so we aren't hiring, training and onboarding a large number of new teammates at the same time, seasonal demand ramps up. We've learned that extreme swings in hiring activity drives teammate turnover rates higher and have potential negative impacts on the customer experience. This hinders profitability in the short term but is the right decision for the business long term and sets us up to capitalize on peak season demand as evidenced by our performance in March. In closing, we're excited about where our business stands today. The year is off to a solid start and demand from our customers remain strong. Our teams in the field are ready to support our customers as peak season ramps up. And I want to thank each of our 20,000-plus team members around the world for their ongoing commitment to our customers. I'll now turn the call over to Ken. Ken? Kenneth Krause: Thank you, Jerry, and good morning, everyone. Diving into the quarterly financial statement and starting first with revenue. Revenue growth was solid to start the year. It was very encouraging to see an improving growth profile as we move throughout the quarter. In total, we delivered revenue growth of 10.2% year-over-year. Organic growth of 6.6% was negatively impacted by unfavorable weather, particularly in January, but we saw a very strong sequential improvement in each month moving through the quarter. We were especially pleased with approximately 12% total growth and over 8% organic growth in the month of March. Overall, organic growth of 6.6% in the quarter represents a 90 basis point improvement versus the fourth quarter of 2025. We realized good growth across each of our service offerings. In the first quarter, resi revenues increased 9.3%. Commercial pest control rose 9.6% and termite and ancillary increased by 13.5%. Organic growth was also healthy across the portfolio, with growth of 4.2% in residential, 7.7% in commercial and almost 10% in termite and ancillary. Turning to profitability and our gross margins. They were 50.8%, a decrease of 60 basis points. The lower volume in the first part of the quarter, coupled with higher insurance and claims activity or headwinds to quarterly margins. Looking at our 4 major buckets of service costs, people, fleet, materials and supplies and insurance claims. First and foremost, lower vehicle gains within our fleet line on the income statement created 50 basis points of headwinds to gross profit margin. We should see this start to improve as we go into the second quarter. Insurance and claims drove an additional 30 basis points of headwinds to gross margins, while service payroll costs provided 20 basis points of headwinds as we carry more technicians ahead of the start to peak season in March. Fuel costs represent approximately 1.5% of sales, and we saw a relatively neutral impact from fuel in the quarter. We currently expect fuel costs to continue to track below 2% of sales in 2026. We are seeing good receptivity on our recent price increase and expect price to contribute 3% to 4% of growth for the year, ahead of CPI, and we expect to be positive on price/cost for the year at that level of price realization. Gross margins are usually at their lowest point in Q1 given revenue seasonality, but we anticipate improving margins in our underlying operations as we move through peak season. Quarterly SG&A costs as a percentage of revenue increased by 70 basis points versus last year. Incremental selling investments provided 50 basis points of headwind while higher insurance and claims cost contributed 20 basis points of headwinds on the SG&A line. First quarter GAAP operating income was $145 million, up 2% year-over-year. Adjusted operating income was $153 million, up 4% versus prior year. First quarter adjusted EBITDA was $179 million, up 4.4% versus last year and represents a 19.8% margin. The effective tax rate was 21.3% in the quarter versus 23.5% and reflects the benefits of both the improvement associated with windfall tax benefits as well as the work our tax team has done to improve our effective tax rate. We expect our effective tax rate to come in under 25% for the year, down approximately 100 basis points from historical levels. Quarterly GAAP net income was $108 million or $0.22 per share. For the first quarter, we had non-GAAP pretax adjustments associated with acquisition-related and other items totaling approximately $7 million of pretax expense in the quarter. Accounting for these expenses, adjusted net income for the quarter was $113 million or $0.24 per share, increasing 9.1% from the same period a year ago. Turning to cash flow and the balance sheet. We delivered operating cash flow of $118 million and free cash flow of $111 million. Free cash flow conversion, the percent of income that was converted into cash flow was over 100% for the quarter. Cash flow performance was negatively impacted by the timing of tax payments associated with our tax credit planning strategy. This strategy has delivered meaningful benefits and is enabling very strong improvements in our effective rate. Also, our year-over-year cash performance was impacted by our transition to semiannual interest payments on our 2035 senior notes that we issued a year ago. Excluding these items, free cash flow would have increased 14% versus Q1 2025, and free cash flow conversion would have been approximately 140%, all very healthy. enabling us to continue our balanced capital allocation strategy. During Q1, we made acquisitions totaling $18 million, and we paid $88 million in dividends in the first quarter. We continue to expect M&A to contribute 2% to 3% of revenue growth for 2026. Our leverage ratio stands at 0.9x. Our balance sheet remains very healthy. Ladies and gentlemen, please stand by. It appears that our speakers have disconnected. Please stay on the line. [Technical Difficulty] I'll actually go back through and just redo my area [indiscernible] here and just just cover the areas, but just starting over here, diving into the quarterly financial statement and starting first with revenue. Revenue growth was solid at the start of the year. It was very encouraging to see an improving growth profile as we move through the quarter. In total, we delivered revenue growth of 10.2% year-over-year. Organic growth of 6.6% was negatively impacted by unfavorable weather particularly in January, but we saw very strong sequential improvement in each month moving through the quarter. We were especially pleased with approximately 12% total growth and over 8% organic growth in the month of March. Overall, organic growth of 6.6% in the quarter represents 90 basis points of improvement versus Q4 of 2025. We realized good growth across each of our service offerings in the first quarter. Residential revenues increased 9.3%, commercial pest control rose 9.6% and termite and ancillary increased by 13.5%. Organic growth was also healthy across the portfolio, with growth of 4.2% in residential, 7.7% in commercial and almost 10% in the termite and ancillary area. Turning to profitability. Our gross margins were 50.8%, a decrease of 60 basis points. The lower volume in the first part of the quarter, coupled with higher insurance and claims activity were headwinds to quarterly margins, looking at our 4 major buckets of service costs of people, fleet, materials and supplies and insurance and claims vehicle gains, lower vehicle gains with our fleet line on the income statement created 50 basis points of headwind to our margins and we should start to see this improve as we go into the second quarter. Insurance and claims drove an additional 30 basis points of headwind to the gross margin line, while service payroll costs provided 20 basis points of headwinds as we carry more technicians ahead of the start to peak season in March. Fuel costs represent approximately 1.5% of sales, and we saw a relatively neutral impact from fuel in the quarter. We currently expect fuel costs to continue to track below 2% of sales in 2026. We are seeing good receptivity on our recent price increase and expect price to contribute 3% to 4% of growth for the year, ahead of CPI, and we expect to be positive on price/cost for the year at that level of price realization. Gross margins are usually at their lowest point in Q1 given revenue seasonality, but we anticipate improving margins in our underlying operations as we move through peak season. Quarterly SG&A costs as a percentage of revenue increased by 70 basis points versus last year. Incremental selling investments provided 50 basis points of headwind, while higher insurance and claims costs contributed 20 basis points of headwinds. First quarter GAAP operating income was $145 million, up 2% year-over-year. Adjusted operating income was $153 million, up 4% versus prior year. First quarter adjusted EBITDA was $179 million, up 4.4% versus last year and represents a 19.8% margin. The effective tax rate was 21.3% in the quarter versus 23.5% reflects the benefits of both the improvement associated with windfall tax benefits as well as the work our tax team has done to improve our effective tax rate. We expect our effective tax rate to come in under 25% for the year. That's down approximately 100 basis points from historical levels. Quarterly GAAP net income was $108 million or $0.22 per share. For the first quarter, we had non-GAAP pretax adjustments associated with acquisition-related and other items totaling approximately $7 million of pretax expense in the quarter. Accounting for these expenses, adjusted net income for the quarter was $113 million, or $0.24 per share, increasing 9.1% from the same period a year ago. Turning to cash flow and the balance sheet. We delivered operating cash flow of $118 million and free cash flow of $111 million. Free cash flow conversion, a percent of income that was converted into cash flow was over 100% for the quarter. Cash flow performance was negatively impacted by the timing of tax payments associated with our tax credit planning strategy. That strategy has delivered meaningful benefits and is enabling very strong improvements in our effective rate. Also, our year-over-year cash performance was also impacted by our transition to semiannual interest payments on our 2035 notes that we issued a year ago. Excluding these items, free cash flow would have increased 14% versus the first quarter of 2025 and free cash flow conversion would have been approximately 140%, all very healthy, enabling us to continue our balanced capital allocation strategy. During the first quarter, we made acquisitions totaling $18 million, and we paid $88 million in dividends. We continue to expect M&A to contribute 2% to 3% of revenue growth for 2026. Our leverage ratio stands at 0.9x, our balance sheet is very healthy and it positions us well to continue to execute on our growth priorities while returning capital to our shareholders. As we look to the remainder of 2026, we remain encouraged by the strength of our markets, our recession-resilient business model and the engagement and execution by our teams. We are positioned extremely well to deliver on our financial objectives. We continue to expect organic growth in the 7% to 8% range for the year with growth from M&A up 2% to 3%. We remain focused on improving our incremental margin profile while investing in growth opportunities, and we anticipate that cash flow will continue to convert at a rate that is above 100% in 2026. With that, I'll turn the call back over to Jerry. Jerry Gahlhoff: Ken, that was much better the second time around. You really paid off on the Milligan [indiscernible] play. So -- thank you for that great recovery. We're happy to take any questions you have at this time. . Operator: [Operator Instructions] Our first question will come from Manav Patnaik with Barclays. Unknown Analyst: This is Ronan on for Manav. How should we think about -- how should we think about the sustainability of that March exit rate as we move through peak season? Does it primarily reflect normalization from the early quarter weather induced softness? Or -- is it underlying demand trends that suggest the higher organic base going forward for the rest of the year? Kenneth Krause: We feel good about the exit rate. We feel good about our business. The improvement of 90 basis points from Q4 to Q1, reaffirms the confidence we have in our outlook. Our outlook is rooted in that 7% to 8% organic growth. We remain committed to that level of growth and organic growth across the business. coupled with the 2% to 3% of M&A growth. When we think about our exit rate at 8.4% or so percent as we think about March, Yes, you had an extra day there, but you also just had a really good month, just really good demand. The residential area, which in the quarter, I think, grew at something around 4% to 4.2%. In the month of March, we saw over 7%. So -- so we continue to see good demand for our services, which gives us confidence in our outlook at that 7% to 8% organic growth, Ronan. Unknown Analyst: That's helpful. And then as volume ramps through into peak season, how should we think about the incremental margin flow-through relative to 1Q given the cost set up and the margin drivers and dynamics you described for the quarter. Kenneth Krause: Yes. Thank you for the question. And really, when we think about margins, Q1 is usually our low point just because of the seasonality of the business, and it came through in that manner. We fully expect improvements to start to -- we start to see improvements here as we ramp into Q2 and Q3. We should see improvements going into the second and third quarter here of 2026. So we remain committed to the outlook we have on our incrementals. The business is intact. And and provides us a sense of confidence in what we can deliver from an incremental margin profile. . Operator: Our next question comes from Sam Kusswurm with William Blair. Unknown Analyst: I think you just touched on this already, but maybe to help us bridge to that 7% to 8% organic growth for the remainder of the year. Can you just share how April has trended so far relative to exiting March here? Kenneth Krause: We're early, Sam, in April. But we really -- looking at our projections and forecasts that we continue to look at I mean we still have a lot of confidence in that 7% to 8% organic growth. And as I said before, the 2% to 3% of M&A growth. So we feel like business is very much intact, and should continue to deliver that sort of growth profile for our investors. . Unknown Analyst: Okay. That's helpful. maybe pivoting a little bit. We saw that the insurance and claims expense was 3.7% of sales in the quarter. This compares to the full year rates of 2.9% and 25% and 3.2% in 2024. I guess I'm curious how we should think about this expense line as we move through the remainder of the year. And if you're kind of expecting it to remain at this elevated level. Kenneth Krause: That's a hard one to predict. When we think about insurance and claims, it's an area with a lot of oftentimes volatility. We do our best every quarter to put the most accurate number on the financials, and that's what we did in Q1. We unfortunately had some claims that continue to mature and go through the maturation process. And that was a headwind for us. And -- but it's really hard to predict what that line will look like as we go forward. We're hopeful that we'll see it moderate as we go into the second half of the year and improve, but we also know that tax and circumstances change as we go through out each and every quarter. With that said, we still are -- we are still holding strong to our incremental margin profile as well as our ability to grow earnings in that double-digit range. And so we continue, despite having and facing some of those headwinds in insurance and claims have a -- continue to have an outlook that remains unchanged with respect to the incremental margin profile. Jerry Gahlhoff: And Ken, I would add that long term, how we approach safety and insurance and claims has to do with investments that we're making today and investments we made last year that are going to continue to pay off for us long run by reducing our collision frequency rate, our injury frequency rate, that long term should be able to help us drive our costs down. We're piloting a lot of programs making investments, especially in driving safety to avoid these types of situations that hopefully can begin to change the arc or the trajectory of that component on our P&L. . Operator: Moving next to Greg Parrish with Morgan Stanley. Gregory Parrish: Congrats on the quarter. Maybe I covered some of the big topics. Maybe just to touch on Romex you acquired a few weeks ago. Maybe you could touch on the strategic rationale, what attracted you to their culture of that business? And any early expectations for that? Jerry Gahlhoff: Yes, this is Jerry. We got to know the team at at Romex over some period of time and had a number of meetings with them and kind of as I've referred to it or described it as kind of a dating process for you, you just kind of get to know each other. And they've got some really talented people on the team that we had met, and we're very impressed with their operations, how they -- how closely they were aligned with us, how they treated people, how they approach customer service. They also operated in some very complementary markets to that were good markets that were -- they had some really strong positions in and continue to grow and expand. And plus we saw a great opportunity to leverage some of -- the things that we do as we add additional services to customers, they were focused pretty heavily on pest control, residential pest control, primarily and a little bit of ancillary service offerings and and we saw an opportunity to be able to leverage our knowledge and expertise to help them continue to expand their depth of relationship with their customers over time as well. So we're really excited about the team at Romex, especially the talent that we know is there. And that's oftentimes one of the -- if you look across our portfolio of brands, oftentimes when we add brands to our group we're getting super talented people, and that really helps shape our company and has formed who we are today. So we're really proud of that. Gregory Parrish: Great. And then I wanted to ask on fuel costs. I appreciate the additional disclosure that you gave. I know you talked about your exposure in the past as well, and it's fairly low exposure. But just remind us the limited exposure that you do have, is that hedged at all? And did that have any impact, albeit small on margin in the quarter? Kenneth Krause: On the fuel costs, Greg, just to double-click on that, we do not hedge that cost. It's a relatively minor cost in our P&L. It's about 1.5 points in terms of total exposure in the P&L. We will continue to evaluate it. But for now, we don't see a meaningful exposure that would require us to take extensive approaches outside of just making sure that our price increase reflects this volatility and challenging environment that we might be in. But with that said, we continue to enjoy a highly variable cost structure with a very low amount of exposure to the fuel area. . Operator: Moving on to Tomo Sano with JPMorgan. Tomohiko Sano: [indiscernible], you mentioned that residential organic growth in March was about 7%. Could you provide more detail on the trends you saw in March [indiscernible] segment as well Additionally, are there any notable differences in growth rates or demand recovery by region? Kenneth Krause: Now overall, Tomo, the business is very healthy in March. -- residential probably showed the greatest improvement. Commercial also was stronger relative to January and February in termite and ancillary hang in there -- hung in there. Our onetime business certainly benefited as we went throughout the quarter. If you recall, Q4 negatively was negatively impacted by a very weak onetime number. and we saw some improvements in that area as we went throughout the quarter. So all told, we feel good about where we are to start Q2 across all of our major service offerings. But it was probably residential that improved the most quarter-to-quarter, which makes sense as you get into season, it's usually going to be the residential side that pops more than the commercial side that is much more stable through the year. . Tomohiko Sano: And a follow-up you have continued to invest in people, service and infrastructure even during the periods of unfavorable weather and revenue softness to ensure continuity and improvement in customer service -- so when you look at the market today, do you see this as a strategy that clearly differentiates the rolling from competitors? Are there specific ways in which you approach to investment and service stance out versus peers? Jerry Gahlhoff: I don't -- I wouldn't comment about how it compares versus peers. I think this is our strategy. And -- when you look at the investments we make and the best example I can give you, when I started in this business a decade ago, this business was a lot simpler. And I did pest control, and I did termite work. And the options that we had to learn about and what I had to do, we're relatively simple 30 years ago. Today, you've heard Ken talk about having 9 shots on goal. And when you have to train people to be able to be experts and knowledgeable both on the service and the sales side for the complexity of all the things that our team does -- that takes time. It takes experience. It's harder and harder. You can't just get somebody up and running in a few weeks, like it was 30 years ago when I started in this business, so those are investments that we make that we do think probably differentiate us from -- from our competitors, but we do it because it's the right thing to do. It's the right thing to do for our customers to ensure that our -- that we have trained people that have been through a season and have been experienced so that when they're dealing with a problem in the month of April or the month of May, we're able to put more experience at the door to help them solve their problem. So that's a big part of our strategy. It has to do with how do we improve customer retention by ensuring that we have a better service delivery offered through some of these kinds of investments that we make because this is not the long game. It's about lifetime value of a customer. And the more that we can invest to improve the long-term value of the customers, the better off we are. Would you add anything to that, Ken? Kenneth Krause: Yes. The only thing I would add is when you look at industries, you might look at how people pare back head count quickly or change headcount. I mean, as Jerry had used the word, we take a long-term-oriented approach. We very much do. And so when we think about January, some may have decided to pare back and pulled back on headcount, we decided to hold in there because we were confident in the ability to drive growth in the business. We knew there was a temporary and transitory challenged with weather. We saw through that, and we kept our people, we invested in our people, and that's paying off now as we start peak season. . Operator: Next question comes from Curtis Nagle with Bank of America. Curtis Nagle: Just one, apologies have missed this. if you'd be able to break out the growth rate for recurring and onetime in the quarter? And then I'll just have a follow-up. Kenneth Krause: Yes. Overall, when you look at the recurring and onetime and you compare that to what we've seen historically, as we had talked during the call, January, February were weaker. We saw weakness in January, February. March was very healthy at that 7% sort of range on the recurring business. The onetime business continue to accelerate and improve as well. If you recall, in November and December, we were contracting in that area because of the challenging weather. And in January, we were flat we saw a nice strong improvement in March. And so it shows that, that business didn't necessarily go away, but we were able to go back and recover that. And we exited with a pretty healthy backlog. Ancillary, the more of the 9 shots on goal that I oftentimes refer to is double-digit solid growth in March. And so overall, all healthy -- all signs point to healthy a healthy portfolio across recurring onetime and the ancillary. Curtis Nagle: Okay. And then maybe, Ken, could you give an update on -- the efforts to improve your retention rates going into the spring season, both from just raw retention and then some of the cost savings you've talked about? Kenneth Krause: Certainly. When we think about retention, there's 2 aspects of retention. There's technician turnover and technician retention and then there's customer retention. On the technician turnover, it's more around short-term people that are coming in the business in the first year and how do we improve upon that. We're making great strides there. We're going to have an Investor Day on May 14. We're going to talk a lot about what we're doing around our culture and all the investments and the results we're seeing as well as the potential to move the needle when it comes to margins with spending less on onboarding because we're keeping our people through that first year. So continue to make progress there. And then on the customer side, we're also making changes there. We're putting leadership around that, and we'll talk more about that in Investor Day. We're not seeing any major changes in the quarter per se when it comes to customer retention. It's not precluding or prohibiting us from growing our business, but there's an opportunity there. We just lose way too many customers every year, and we're making investments in that as well. And Jerry and the team and all of us, we're going to speak to that in our Investor Day in May. Jerry Gahlhoff: Yes, the commercial side of retention remains very strong, very stable. We did make some modest improvements in the residential side, particularly across our business. as we exited the first quarter. So we were good to see that. But we still see that there's a lot of potential upside there and thus the investments that we've talked about making. . Operator: Moving on to Stephanie Moore with Jefferies. Stephanie Benjamin Moore: I wanted to ask on just the margin improvement opportunity as the year progresses. Maybe if you could just talk about what gives you confidence that you'll be able to see some improvement and maybe commenting on areas of opportunity outside of just inherent operating leverage as the volumes as the top line accelerates. Kenneth Krause: Thanks for the question, Stephanie. And when we think about it, when we look at the first quarter, you look at the incremental coming in at a pretty low point. But whenever you understand and whenever I took the time to really analyze and dig into the results, what I found was about 100 basis points in total of headwind was associated with insurance and claims and then the gains on sales that we had in the fleet. . We talked about the fact that if we excluded those 2 items, you would have had a closer to a 20-or-so percent incremental margin profile. And that's about what we would expect in Q1. I mean a lower volume, and that's -- that's the kind of performance we would expect to see come through the model in a lighter revenue quarter. When we think about those 2 areas, we talked about the fact that the sales on leased asset or gain on sale of assets should change and not be a headwind as we go into Q2, we should start to see some improvements there year-over-year. And so that certainly should help us regain some traction on the margin line. And the fact that we continue to see improvements in the overall growth of the business should also just yield solid results as we carried higher technicians and people into peak season. So considering those 2 or 3 points, I think it gives us a lot of confidence that in Q2, Q3 and Q4, we should see improvements in the margin profile to get us back into that range that we're targeting. Jerry Gahlhoff: When you look at how much we spend on our P&L basis on people, when the growth is there, you get leverage on the people side as well. And that's probably the biggest opportunity that we have going in the rest of the year. Operator: We'll go next to Peter Keith with Piper Sandler. Peter Keith: On the margin topic, I'll just stick with that. For the gross margin, I was curious because you quantified all the negatives at negative 100 basis points in some versus the 60 basis point decline. So -- what were the positives that offset and I'm assuming pricing played into that, but I was hoping you could answer the question. Kenneth Krause: Yes. No, thanks for the question. I mean we saw some good performance in the materials and service line. We also saw some improvements across a broad category of items that you normally would leverage like branch rent and professional services and and things like that, other cost categories, if you will. And so across those 2 or 3 areas, you had the materials and supplies and then you had the other areas, the 3% to 4% pricing allowed us to leverage those because they're not changing as much. They're not as maybe as variable as some of the other costs. And so we're able to leverage that through the P&L. Those are the things that produce the positive improvement in the gross margin, which was unfortunately fully offset by the items we talked about. Peter Keith: Okay. Helpful. And then secondly for me, just on the free cash flow, thanks for the details on the onetime items. I guess as we think about those items going forward on the timing of credits and the semiannual interest payments, what you experienced as headwinds on free cash flow in Q1 reversed in Q2 where now we should see abnormal year-on-year increase. Kenneth Krause: Yes. They will -- as you go throughout the year, they will. The interest expense certainly will, that's paid [indiscernible] annually. So Q2, you won't see that come through year-over-year and be a headwind. The tax payments -- we fully expect that by Q4, you'll see a nice improvement in the use of cash with respect to this. Some of this is front-loaded in the first half of the year. So you might -- you probably see improvement in Q2 and Q3 from where we are in Q1. You won't see it reach a full potential until Q4. But for the full year, that mid-teens sort of growth rate in cash is something that we continue to target and have a lot of confidence in delivering. . Peter Keith: Helpful. And congrats on that March exit rate? Kenneth Krause: Thank you, Peter. . Operator: We'll hear next from Josh Chan with UBS. Joshua Chan: Jerry and Ken, maybe for Jerry, I guess in prior years where the weather is tougher to start the year, and your experience, by what month does everything kind of normalize and then you kind of move past the slowness and maybe catch up, I guess, when the things going to get back to normal usually? Jerry Gahlhoff: Yes. So Ken and I were talking about this yesterday. There have been times where we've we've had slow marches and literally, it was right around this time of the year in April when it was suddenly break and business would pick up. We were very fortunate, I think, in March to have had very favorable conditions pretty -- by the end of the first week of March, it really popped. It felt like things were literally heating up. And -- but oftentimes, it's usually end of March, beginning of April that it starts to go. Sometimes that delayed like the third week of April, and we're really treating it when that happens. . And once in a while, it does. And you're just waiting -- and we can tell based on phone call volumes on a day-to-day basis, we know when that's when it's official, so to speak, and it happened. And really, that happened for us at the end of the first week of March. So that was really good. Joshua Chan: Okay. And then I think you mentioned earlier that you want to improve retention. I guess the retention in the industry has always been maybe not incredibly high. So I guess I wonder -- what is it that you think you could change about something that has been this way for a little while? Jerry Gahlhoff: Well, I guess that goes back to the mindset of continuous improvement that there's always something that that can be made better that we ought to be able to improve. I mean for example, I give a shout out to our team at Fox Pest Control. When we acquired Fox 3 years ago, their customer retention was what I would call normalsh. They have partnered with our -- with the HomeTeam brand, who has some best-in-class retention. And over the last 3 years, have moved their residential retention by 5 percentage points. That's big movement over a few year period of time. So that demonstrates to us that there's always room for improvement, always opportunity to get better -- and we're going to be pushing hard on that lever across all of our business units. Even if you're really good. The expectation is we need you to also make some modest improvements compared to maybe some of the territories or brands or parts of the business that are -- lag a little further behind others. So we see it as a huge opportunity -- it's an opportunity to also potentially accelerate our organic growth rate a little bit more. And so we'll probably unpack that. We'll definitely be unpacking that a little bit more for you at the investor conference in May. Joshua Chan: Great. Thank you both for the color today and look forward to the Investor Day. Jerry Gahlhoff: Thanks, Josh. Operator: Our next question comes from Ashish Sabadra with RBC Capital Markets. Unknown Analyst: This is David Paige on for Ashish. I had a question on commercial. It looks like some solid growth continued solid growth. You mentioned maybe some business wins and some other investments. So I was wondering if you could just click on how trends are going in commercial -- and then maybe as a follow-up, what is the competitive environment that you're seeing in commercial? Jerry Gahlhoff: We haven't seen any significant change in the competitive environment in commercial we still feel that we're positioned and just perfectly to have scale to be able to service customers anywhere in North America. And that creates great opportunity. We've continued to invest and feet on the street, looking at some reports recently. We began the year with almost 80 more commercial account sales managers than we had in the first quarter of last year, and they're putting wins on the board. So we see it in both in local sales -- those are the account managers that are more in the branches and the regions and the territories that they're working in. We also see it amongst our national accounts. Getting great growth out of both those channels, driving growth throughout different verticals that we know that we like to focus on and so we're really excited about that. And so those investments on the commercial side take a little longer to pay off, but it's one of the -- it's also one of the reasons we're so optimistic about the rest of the year because we know that the business coming in that's that have recently been sold as it turns into that organic recurring revenue growth throughout the remainder of the year. Operator: We'll go next to George Tong with Goldman Sachs. Unknown Analyst: You mentioned with insurance and claims that certain claims are going through the maturation process. Can you elaborate on whether this was from a specific vintage or period when claims activity was particularly high? And how quickly your safety investments translate into improved claims performance. Kenneth Krause: When you think about these claims, I mean, these claims have the potential to go back a number of years. I mean what you saw just generally across the business was post COVID, when people came back on the highways, accidents started to happen. And so you saw claims from that vintage. You also saw more near-term claims. And so it's not -- it's hard to pinpoint any specific period that these claims pertain to. They're across a number of years. And I mean when you think about the safety, I think it's already paying off. I mean, we're seeing great improvements in our safety experience. But what happens is it just takes time for that to see its way through the cycle. As I described, some of these claims are 3, 4, 5 years old. So as you think about it, you're probably going to continue to see experience like this in the next several years, hopefully, tailing off and trailing off as you move forward and make even more improvements in the safety experience. But this is probably something we're going to deal with for -- unfortunately, for a while. The lead indicators are positive. That's the good news. So when you're accident and injury frequency rates are coming down long term, that is the best predictor that we have for those volumes. But at the same time, we see the cost of insurance and kind of the crazy market that, that is has just been a headwind for us for several years now. Unknown Analyst: Got it. That's helpful. And then with respect to fuel costs, can you discuss what your strategy is to pass along the cost to customers? How real time can your prices adjust to changes in fuel costs? Kenneth Krause: So George, we have 2 ways of charging for cost in our business. And really, we don't think about -- we think about the value of our business there's there's just annual price increase that we always talk about. Then we have rate cards. And so as we go throughout the year, we have the ability to adjust the rate cards based upon what we're experiencing with -- in our cost inputs. And so that's something we -- I think we've done historically and we'll continue to do as we go forward. Jerry Gahlhoff: And I would add that for us, it's more about how do we avoid the fuel costs, I believe, for example, reduce idling time, how do we use apps that are installed on all of our phones that help direct us to the location nearest stuff that has the best gas prices. How do we leverage relationships our fleet team is doing a good job negotiating deals with large providers of fuel to get rebates on fuel use that runs through their systems. Those are the things that we're more focused on is about efficiency in our model and efficiency in our entire fleet system, and we'll let our normal price increase programs do their part to help us also offset. Kenneth Krause: Or even how we build out dense routes, like or we acquire businesses like Fox Sala or Romex who have very dense routes. And like those are really good points, Sherry, that you highlight. And it's not just about reacting, but it's how do we proactively do things to make our business better. Operator: Seth Weber from BNP Paribas. Unknown Analyst: This is Christina [indiscernible] for SEth Weber. So I wanted to touch a bit about how you guys target around 2% to 3% revenue growth from M&A. And after the acquisition revenue in the first quarter and the Romex acquisition, I was wondering if you guys expect this to -- this acquisition to push the full year M&A contribution above the 3%? And how does this change the overall M&A pipeline for the rest of the year? Kenneth Krause: Thank you for the question. In the first quarter, I think M&A contributed 3.6% of revenue growth for M&A. And we expect that to moderate as we go throughout the year. That was certainly bolstered last year by the the Sala acquisition. And so right now, we're solidly in that 2% to 3% range. There's an opportunity to go higher. There's probably very low likelihood that it would be below that. We are very confident in 2 to 3. We're not ready to raise it yet, but we also just know that we're very active and we have a very strong pipeline. And -- but right now, step 2 to 3 is probably the right range to be in. . Unknown Analyst: Got it. And as a follow-up, so termite and ancillary was up about 9% to 8%. So I was wondering what's actually driving this and if you guys are seeing any customer demand for bigger ticket ancillary services? And I guess how cross-selling is going for selling these services across the rest of the brand portfolio. Kenneth Krause: Going well. That will be a big topic that we talked about in May. The ancillary termite ancillary includes ancillary, which is this hockey season we're in here and playoff season, the 9 shots on goal. We continue to see great demand there. I think Ed Donahue will be joining us as part of a panel in May and he actually was really instrumental in developing our approach with Oregon and we've seen great improvements there. But it's a great business. We continue to see good levels of demand, and it's a huge opportunity across the portfolio because we have a number of brands that aren't doing much with that part of the business today. Jerry Gahlhoff: Yes, it's a great point, Ken. We moved Ed Donahue, who is VP of Sales for Orkin for many years. And we've moved him over to our non-Orkin brands this year and the group and brands has been moving the needle a great deal and adding services using our RAC, our in-house financing, teaching them how to -- and training them, how to how to leverage that throughout their businesses, and we've seen some really nice improvements in that regard very, very quickly, and we're excited about that. And like Ken said, you guys will see and meet at in May at the Investor Day. You'll hear more about that. Operator: Moving next to Jason Haas with Wells Fargo. Unknown Analyst: This is [indiscernible] for Jason Haas. We've heard that one of your competitors is being more aggressive with their marketing. So I'm wondering if you're seeing any change in the competitive environment and if you're adjusting your marketing strategy and response. Kenneth Krause: Not really. We're seeing great growth there and good performance. Jerry Gahlhoff: Yes. I don't -- we're continuing to focus on what we do, how we do it. spending our money efficiently, moving it to efficient channels and making adjustments. I'm sure that, that team has to monitor and see what a variety of competitors -- we have so many competitors in this space, all looking to gain the same customers. But the more we try to target, who our best customers are, what we're doing and the marketing team stays on brand and focused on getting the right types of customers to our brands, that's when we win. And we still feel very comfortable and confident in everything that we're doing from a marketing standpoint. . I mean the fact that we saw 90 basis points of improvement in organic growth from Q4 to Q1, and I think that stands out and shows that the investments we're making continue to yield really strong results in our markets. Unknown Analyst: That's helpful. And then as my follow-up, I'm curious within the residential segment, if the acceleration you saw in March was caused by any business from earlier in the quarter shifting into March? Or is all of that acceleration was just strong underlying demand? Jerry Gahlhoff: There may be a little bit of carryover from backlog in February into March. But based on what I saw in February was not nearly as tough as January was in terms of branch closures and a number of days that we really couldn't get the work done. So we carried probably more backlog into February than we did March. So -- but March was -- Mark, as I mentioned, by the first week, I mean it started going and the phone started ringing and things just picked up. So a lot of that organic was just coming at us right there in the quarter, and we also had time to get all of our work done that was scheduled to be done in the month. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to management for closing comments. Jerry Gahlhoff: Well, thank you, everyone, for joining us today. As a reminder, we will be hosting our Investor and Analyst Conference on May 14 at the New York Stock Exchange. We're excited about what we have to share and look forward to seeing many of you in person. Thanks. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

24天前Insight Analytics约5分钟阅读

ETTYF 2026 Q1 财报电话会议

Sandra Åberg: Good morning, and welcome to Essity's presentation of the Q1 2026 results. Here to take us through the highlights of the quarter, we have our CEO, Ulrika Kolsrud, and our CFO, Fredrik Rystedt. After their presentation, you have the opportunity to engage directly with us. [Operator Instructions] Now enough of me, let's get started. Ulrika, please take us through the quarter. Ulrika Kolsrud: Thank you, Sandra. And also from my side, welcome to this webcast. We started the year with organic sales growth coming from volume growth, and we continued to win the relative game, strengthening market shares in our branded business in retail. We furthermore strengthened our profit margins and delivered a strong cash flow. Then besides these solid results, we had 3 major events in the quarter, the decision to launch a new share buyback program of SEK 3 billion well in line with our ambition to have share buybacks as a reoccurring part of our capital allocation. We also completed our Feminine Care acquisition in North America, now more than doubling our Personal Care sales in the U.S. And we have the organizational change, meaning that we now report in our 4 new business units, Health & Medical, Personal Care, Consumer Tissue and Professional Hygiene. And let's start with Health & Medical, where we continued on our track record of consecutive growth in Medical Solutions. We were especially pleased in the quarter with the continued good growth in Wound Care across geographies. Q1 was, however, a weaker sales quarter for Incontinence Care in Health Care. Given the financial pressure that we see in health care systems and also the lower input costs that we have had, we held on to prices very well. So margins and profit delivery was as high as ever. However, the sales performance was different from market to market. And one region that performed very well in the quarter was North America. And we also supported the business going forward to grow even further in North America by upgrading the TENA ProSkin Briefs assortment. We now equip this with our latest and greatest technology when it comes to -- or technologies, I would say, when it comes to leakage security, dryness, fit and comfort. And we know that these products are highly preferred among professional caregivers. We also performed very well in incontinence care in North America in our retail channel. And actually, the good growth momentum and continued good growth momentum of incontinence care in retail was one of the key highlights in our Personal Care results. Two other key highlights were that we strengthened our share of market in 60% of our branded business and also the good growth in Feminine Care. I want to stay for a while on Feminine Care because we had some exciting developments in this category in the quarter. For one thing, as I mentioned, we completed the acquisition of the OB, Playtex, Carefree and Stayfree in North America. Now we start the integration, and it's now that the real work is starting. So our first priority is to secure business continuity to guarantee that we have uninterrupted customer execution, supply and operations during this transition period. Our second priority is to engage with in top-to-top customer meetings to now present the combined portfolio that we have and that we can offer from Essity. And then in parallel with this, we continue to work on supply chain, on branding and on innovation. So to capture synergies in supply chain to combine the 2 innovation portfolios to accelerate proven platforms and to apply our proven Essity brand-building capabilities and assets in a globally scaled and locally relevant way. The other event, I would say, or exciting development in the quarter in Feminine Care was in our leakproof apparel. So as you can see here behind me on the slide, leakproof apparel was contributing positively to the growth in Feminine Care. And this is one fast-growing segment within Feminine Care, and we have taken action to make sure that we capture the growth in this segment. So we have, for example, reduced our production and product costs in order to enable a competitive pricing in a more challenging consumer environment. We have also improved our efficiency in consumer acquisition in the D2C channel and broadened our distribution. Then with the new organization that we have put in place, we are consolidating our efforts to make sure that we drive learnings and synergies for our full portfolio in this area. Now innovation is as important for leakproof apparel as it is for all our other categories and segments. And in the quarter, we upgraded with a specific range for teens. And this is a super important target group for this segment and for feminine care in general because this is where we generate trial and get capture consumers at the point of market entry. These products are then specifically or tailored to the teen body. Also, they come with a day and a night variant, and they come with a Smart Protect concept. And some of you might remember that I talked about Smart Protect technology last quarter and that we equipped our [indiscernible] disposable feminine pads with this technology. Now we are reapplying this concept onto also leakproof apparel, which I think is a good example of how we can reapply strong concepts, of course, with the technical solutions that is fit for purpose that now secures that we have instant absorption and a good spreading of the liquid in the product. Continuing on innovation, we also launched an upgraded Libero offer in the quarter. More precisely, we made our soft Libero touch product even softer. And we know that this is highly appreciated by parents who really want soft products for the soft and delicate skin of their babies. So we have high reasons to believe that this will continue to support the very good momentum that we already have in this business because Libero had again a very strong quarter. We strengthened market shares and we increased volumes. When it comes to our retailer brand business in Baby, however, it was weaker. So overall, for Baby, we had a slight decline of organic sales. The other category where we're declining organic sales in the quarter was in Consumer Tissue. And that is the result of lower volumes and lower sales prices in Europe specifically. Latin America was doing good. Also, the good news is that we continue to perform very well in our branded business in Consumer Tissue, gaining market shares and growing volumes. And we will continue to support that profitable growth in our branded business on Consumer Tissue and by also continuing with our innovation agenda. In the quarter, we launched Zewa Wisch&Weg Smart. And what that is, is that we are reapplying our coreless technology on to household towels as well. So now we will have less waste in the kitchen moving forward. This is, first and foremost, of course, to bring convenience to our consumers, but it's also an innovation that is supporting our sustainability agenda. And that brings me to another initiative on our sustainability agenda in the quarter. Because in the quarter, we inaugurated a new biomass boiler in Kunheim factory in France. This is the second one. We have one in Le Theil since before. And I think this is a very good example of how we translate our net zero ambition into tangible industrial execution at the site level. And with this boiler, we are then covering for 70% of the steam needs at the plant. We are more than half our natural gas dependency in that plant and reducing carbon footprint by 40% or more than 40% in the paper machine. And this is also highly appreciated by our customers, which we could see also because we had a customer joining us in the inauguration. And in these times, I think it's worthwhile to mention that this is not only about sustainability by reducing our dependency on natural gas, of course, we also become more long-term cost resilient. Last but certainly not least, let's turn to Professional Hygiene. I have talked the past quarters about our strong development in strategic segments that we grow very nicely in strategic segments, which is important for us. And we continue with this positive development also in this quarter. A good example of that is that we grew Tork PeakServe more than 10%. We also grew Tork Skincare 5%. This quarter, we reported volume growth for the total Professional Hygiene as well. And that shows that the activities that we have put in place in order to fuel volume growth are starting to pay off. That's not the least true in North America, where we have gained some contracts in the fast food channel, but also work more expansive in the other channels beyond HoReCa. Then we were helped a bit by a stabilized market also in HoReCa in North America. And now to talk about the financial performance of Professional Hygiene and our other 3 business units, I hand over to Fredrik. Over to you. Fredrik Rystedt: Thank you, Ulrika. I will do my best to do exactly that. And I will start with our sales. And as you can see on the slide, we declined our sales with 5.1%. And this is, of course, just due to currency translation on the back of a stronger Swedish krona. In constant currency or using the same currency rate, we increased our sales with about SEK 0.5 billion or 1.5%. And as you can see on the slide or this bridge, 1.1% of that comes from the acquisition of the Feminine Care business in North America and the other 0.4% is related to organic sales growth. Now just to comment a little bit, it's really a bit premature perhaps to comment on the Feminine Care business from a financial standpoint. It's included as of February 2. So we've had very short experience from owning it. But so far, if you look at the full quarter, so to speak, also the period that we didn't own it, sales was roughly about comparable in comparison to last year. So, so far, as expected, pretty much. Now if I turn to volume, then you can see that we grew here with 1.1%. And we were particularly happy actually to see Professional Hygiene growing with close to 2% or 1.9%. And this is of quite a number of quarters with negative volume development for Professional Hygiene. This has been on the back of deliberate restructuring, but it's also been challenging markets. And as Ulrika mentioned, we see a bit of improvement in actually Southern Europe and North America on the market side, but we also see some good results of the initiatives. So again, a good development. And Personal Care, with 3.5% volume growth coming from a very strong or I should say, yet another very strong growth quarter for incontinence, good for feminine. And in fact, if you remember perhaps the previous few quarters that we've had relating to baby, where you see 4% to 5% of volume decline for baby, we have a much, much better situation this quarter with about 1% volume decline for that specific category. Now this is much better than before, and it's on the back of good performance in the northern part or our branded part in the Nordics, whilst the rest of the business pretty much performed in line with market. So a better situation for baby in general. When it comes to -- then to Consumer Tissue. Finally, we had a slight volume decline, so minus roughly about 0.5%. And this is, of course, just on mainly coming from the non-branded business, whilst as Ulrika mentioned earlier, the branded business actually performed super well, both from a market share perspective, but also positive volume growth. Turning to price/mix. This is all -- or I should say, mainly coming from Consumer Tissue, where we have deliberately lowered prices on the back of lower COGS. We also have -- and we reported on that before, we have selectively lowered some prices for certain SKUs in Professional Hygiene to get more growth in that area. But if you look at the combined price/mix for Professional Hygiene, it is actually slightly positive because we have a continued strong growth in our strategic products. So mix is actually bigger than the price decline. I'll go there from sales, I'll go to our margin development. And it's clear we have increased our margin with roughly 40 basis points. And all of our business areas with the exception of Consumer Tissue strengthened the margin or at least about the same margin. So a good development pretty much across the group. You can see here that there is a negative contribution margin-wise from the Feminine acquisition. And we -- if you look at that negative contribution for the group, it's roughly about 10 basis points and bigger for Personal Care. So if you look at the Personal Care margin, it has an impact of minus 70 basis points. Now we have -- if you look at the Feminine business in North America that we acquired, it has a positive operating margin, but it's very low as expected and the low margin has to do with, of course, transition costs plus service agreements that we have. And over the next 12 months, we are gradually going to take over both administration, sales and all of the other things and gradually, of course, also improve profit. So very much with the Feminine acquisition as expected. Now turning to gross profit. You can see that this is the source basically of our increase or our improved margin with 60 basis points. I already talked about volume price/mix. So of course, that contributes positively, but a lot of the improvement comes from overall lower COGS, and this is mainly related to currency actually, FX or positive currency impact, but we also have good savings. So typically, savings in COGS is quite low during the first quarter. And this quarter, we have SEK 130 million roughly in savings. So we're quite pleased with that number. So overall, 60 basis points in improved margin. We have talked a lot about investing more into growth. And of course, part of that exercise is more investments into A&P. And as you can see, we continue to invest more both from an absolute perspective, but actually also as a percentage of sales. And we compensated that partly with lower SG&A. So very much in line with our plans. Now you may think that this is possibly a consequence of our cost savings program. That's not the case. As we have reported earlier, pretty much all of those savings will appear late in the year, so more towards the third and fourth quarter and full run rate, as we have talked about at the end of the year. So savings is not really compensating so much at this point. This is other types of efficiency gains like low travel, like similar types of actions. So all in all, this was the increase of the 40 basis points. Now let me just take as a final remark on -- when it comes to margin, let me just give you a bit of an outlook for Q2. It's always -- we are in an uncertain environment. And of course, on the back of the geopolitical situation, we do expect COGS to be higher if we look at the Q2 of '26 versus Q2 of '25, so higher COGS. We also expect higher SG&A, and this is partly -- or this is all of it, I should say, due to salary -- just common salary inflation and a bit of higher IT cost. We will have a little bit of savings in compensating for that from the cost saving program. But as I said, it will be small also in Q2. Good. So turning then to the cash flow. So seasonally quite strong, SEK 4.4 billion. And if we look at our net cash flow or I should say, cash flow after finance net and taxes, SEK 3 billion. So it was a good start to the year from a cash flow perspective. And with a reasonable, I should say, working capital performance. We just -- we still think we've got more mileage to put it that way, in our working capital performance, but we were reasonably okay, I think, in the first quarter. And as partly as a consequence of that, we continue to strengthen our balance sheet even further. Now you might have expected our balance sheet to -- or net debt, I should say, perhaps to increase a little bit since we did actually acquire the Edgewell Feminine business in the quarter. And so that was, of course, a negative drain in terms of debt with approximately about SEK 3 billion, and that was fully compensated by the cash flow. But we also had a couple of other things like share buybacks of SEK 600 million and some currency impact. But we also had one thing that was quite special for the quarter, which was a reduction of our debt in our pension liabilities of a bit over SEK 3 billion. So that contributed quite a lot to that lower net debt. And all in all, as you can see, the net debt is now SEK 24.5 billion with a net debt-to-EBITDA ratio of 0.96 or 1.0 as it says on this slide. Finally, and Ulrika has already mentioned it, so let me just give the technical details around the share buyback program, SEK 3 billion, and it will start May 11, 2026, and it will go on up until the most 2027, the AGM. And you have said it, the ambition is to continue share buybacks as a recurring part of our capital allocation. And with those words, I'll leave over to you. Ulrika Kolsrud: Thank you, Fredrik. And to summarize the quarter then, we delivered volume growth. We strengthened our market shares. We strengthened our profit margins. We completed our M&A. We also strengthened our balance sheet and launched or decided on a new share buyback program. Then moving forward, we will continue our efforts to accelerate profitable growth. And important focus for us is to continue to grow market shares, supported by innovation. And when we talk innovation, it's both about raising the bar and improving differentiation in our premium assortments as well as to secure that we are competitive across the different price tiers, and we are steering our innovation agenda accordingly. Then, of course, we continue to execute our SG&A cost saving program in order to be able to reinvest in growth initiatives. And we also continue to save -- to drive savings in COGS. Now of course, looking at the situation now that we have that Fredrik talked about that we expect to have some higher costs in the coming quarters, starting with fuel and energy, we have to rebalance our pricing. As you heard from Fredrik, we are -- we have had now selective price adjustments. We are adapting to a lower input cost, but also then to fuel growth. And needless to say, that has to be rebalanced as we move forward. So we will, as we always do, compensate cost increases with price increases over time. Then the other priority that we have that we have talked about here is also then to integrate our acquisition. And we have the ambition to do that as fast as possible, so full speed ahead or you could also say off to the moon. And actually, in the quarter, we were on the back side of the moon with parts of our portfolio, namely the jobs, the compression therapy. We have a long-standing contract as an official supplier of compression therapy garments with NASA. And the fact that Astronauts are relying on JOBST, I think, is really -- it really underscores Essity's expertise in compression garments and that we have a good performance also under very challenging conditions. So as the fantastic Artemis II crew ventured around the moon and really push boundaries for what's possible, we at Essity are very proud to be a small but meaningful part of journeys like this, helping people to perform at their very best on earth and beyond. Sandra Åberg: Thank you, Ulrika. Thank you, Fredrik. Interesting. Great products off to the moon. Now we are ready to take your questions. [Operator Instructions]. And we have a good lineup of questions already. Are you ready to start to open up for questions? Ulrika Kolsrud: We are. Sandra Åberg: Perfect. Our first question comes from Aron Adamski from Goldman Sachs. Aron Adamski: I was keen to hear your thoughts on margins. I think consensus currently projects about 13.8% EBITDA margin for 2026, which would be broadly similar to what you have done in Q1. But as you said during the presentation, COGS was still a tailwind in this quarter. So given the acceleration we've seen in pulp, I think some petrochemicals have also moved higher and also the FX backdrop, do you feel comfortable with that market expectation? And then the second question, very brief on finance costs, which were lower than expected. How should we think about the level of these expenses for the remainder of the year? Sandra Åberg: I look at Fredrik. Fredrik Rystedt: Yes. I mean, Aron, thanks for the questions. First of all, if you look at the margin outlook, we -- as you very well know, we just don't give that. We can only refer to, of course, our long-term financial target when it comes to margins of more than 15%. So over the longer term, of course, our margin aspirations is quite clearly spelled out. When it look -- when you look at the short term, of course, it's always more tricky to talk about and we just don't give that forecast. Generally, we strive, of course, to continue to improve. The geopolitical situation, as Ulrika very clearly explained, is a bit tricky. And of course, exactly how that will play out is difficult to say. So we can't really give much more. I don't know if you want to add something. And then when it comes to finance net, they were a little bit lower. You should actually expect lower cost as we go forward on the back of net debt, but we also see actually a bit higher interest rates. So if anything, more stable and slightly higher if you go forward. Sandra Åberg: I hope that's perfect. Aron Adamski: That's very clear. Can I just ask a very quick follow-up related to the delay, is there any sort of time lag effect that we should consider between your COGS stepping up in Q2 versus Q1? And then are you able to surcharge that immediately on to customers? Or is there a little bit of a lag effect like we've seen in the past? Ulrika Kolsrud: If I start, I mean, there are different cost elements that have a different lag effect. So if you take the oil-based raw materials, that has a lag effect of 4 to 5 months before it is shown up in our P&L and you have everything in between there. And we have already in -- for example, in Latin America, we have already raised prices. And in some parts in Europe, we have also announced price increases. And in some parts, we are working on finding the best way now to make sure that we continue to fuel volume growth while we compensate for cost increases to come. So we are doing all of these different elements. Sandra Åberg: Let's move to the next caller, Niklas Ekman, DNB Carnegie. Niklas Ekman: Can I ask about volumes, very strong in this quarter after, as you said, there's been a couple of quarters with flat or declining volumes. Was there any impact of phasing in this quarter, either relating to the weak Q4 or if there's been any pre-buying ahead of Q2 that's impacted that number? Ulrika Kolsrud: Not that we are aware of, no pre-buying. Niklas Ekman: Okay. Very good. And just following up, when I look at the input costs, I have pulp prices for your grades up more than 20% in the last 6 months. Oil is up almost 50% in the last couple of weeks, energy costs up almost 20%. Do you recognize these figures? And how worried are we? I assume that this will not be so much an impact for Q2, but far more so for H2. And I'm just wondering, given the kind of weak consumer environment we've seen in the last few quarters, how able or how receptive the market is to price hikes? If you could elaborate a little bit on this. Ulrika Kolsrud: Maybe you start with the first part and I answer the second. Fredrik Rystedt: Yes. I'll be happy to try. I mean we -- it's exactly as you say. If you look at the numbers you were quoting there, they're observable market numbers. So from that perspective, you're right. And of course, we also know that these things tend to change every day. So I can't really have a view on what the numbers will be eventually. We talked about the lag impact. So exactly to your point, there is not going to be everything in the books of the second quarter, it will be more in the third and the fourth quarter. So that's the point. When it comes to the ability to price, let me just say -- repeat maybe, and then I'll leave it to you, Ulrika, that we always compensate, and you know that, Niklas, we always compensate in the longer run because the price elasticity from a consumer standpoint of what we do is quite low. So of course, our products are needed. But again, of course, there is a time lag, but I guess. Ulrika Kolsrud: No, that is exactly it. And I think we have proven in previous situations that we have pricing power. And that is, of course, important when we move into this type of situation. And again, I talk a lot about innovations, but there is a reason for that. And it's not only about driving growth. It's also about securing our pricing power moving forward. So to have strong assortments gives us a good foundation for being price agile. So otherwise, it's exactly as Fredrik said. Niklas Ekman: And just a quick follow-up there because I note that in the last 2.5, 3 years, your margins have been a lot more stable compared to what they were, say 4, 5 years ago when there was significant margin volatility. Is this at least to some extent, a reflection of you pushing forward cost increases more quickly than you have in the past? Or are there other dynamics behind the more stable margin? Ulrika Kolsrud: Well, maybe starting with mentioning 3 of them. One is that we have become more agile in our pricing. So we have a higher operational flexibility, and therefore, we have worked really with making sure that we can compensate with price as quickly as possible. And we have done that both in, for example, Consumer Tissue as well as in Health & Medical, where we have a more regulated environment with longer contracts. So we've increased our agility across the different business units when it comes to pricing. Then secondly, we have reduced our volatility by reducing our exposure to changes in pulp cost and energy by, for example, divesting Vinda that we did now a few years ago or a year ago. So that is 2 things. And then thirdly, I would come back to this with superiority and how important innovation is. As we talked about last quarter, we had record high levels of superiority, and we are continuously strengthening our assortment and that helps then the pricing power as well. Sandra Åberg: Let's move to [ Johannes Grunselius ] at [ SVB ] Markets. Unknown Analyst: It's Johannes here. Yes, I have a question on your attempts to hike prices. You said you've been successful in Latin America. You're now announcing in Europe. Can you elaborate a bit on what type of price hike we are talking about the magnitude and which products? Is it like across the board? So to give some color on that would be very helpful. Ulrika Kolsrud: The color that I can give on that is that it looks very different depending both on assortment, business unit as well as geography that we're talking about. But overall, we -- as you probably know, we are fastest in compensating with prices in our Consumer Tissue business. So that is also where we have materialized or have announced price increases. at this point in time. Whereas, as I mentioned, in the more regulated area, it takes a bit longer time. So there is other mechanisms, so to speak. Unknown Analyst: Yes. So the magnitude in the product categories where you hike prices the most, can you just give an indication what magnitude we're talking about? Fredrik Rystedt: We don't do that, Johannes, for commercial reasons as you -- I'm sure you appreciate. But as we have discussed many times, we will adjust as much as it takes to restore profitability, and we've always done that. So this is not just something we say. I think we have actually showed that in various forums that over time, we have always compensated. So we are able to do that with the pricing power. This is, of course, not just us. This is the sectors we're in, if you like. But of course, particularly for us, this has been a reality. So we will do it this time as well. So -- and of course, giving you an exact number is incredibly difficult given not least that things do change. We just don't know exactly what kind of impacts we will face in the next few quarters. So it's very much about kind of doing as much as it is relevant, so to speak. Sandra Åberg: Next up is Oskar Lindstrom, Danske Bank. Oskar Lindström: Very good to hear about the price increases already being announced and in some cases, already pushed through. I wanted to ask you about volume growth in this quarter and the outlook for next quarter. We saw that it was, to a large extent, driven by the Personal Care business area. Is there any reason why we should expect this not to continue going into Q2? Was there some one-off effect or that you had a special push in this quarter that's not going to be repeated in Q2 or in coming quarters? Ulrika Kolsrud: The short answer is no. I mean this was the result of our continuous efforts and operations. Oskar Lindström: Excellent. I'm going to stick to one question. That's fine. Ulrika Kolsrud: Thank you for giving you such a short answer on that one question. Sandra Åberg: Then we will move to Charles Eden from UBS. Charles Eden: So just a couple of things for me on the raw materials, please. Firstly, can you just remind us the sensitivity, for example, when we look at, say, propylene for watching superabsorbents or polypropylene for nonwoven. Clearly, there's a sensitivity that means that what you're paying is not the same magnitude of moves we're seeing in those 2 derivatives. Could you just remind us those, please? And then just secondly, in terms of hedging, just remind us in terms of policy on energy and the raw material hedging that you've got in place for both Q2 and then, I guess, for the rest of '26. Fredrik Rystedt: Yes. Ulrika Kolsrud: I look at you. Fredrik Rystedt: Right. Yes, I'm not sure how to answer your question. Let me just say that about -- if you look at our operating expenses, Charles, it's about SEK 120 billion, just to kind of use a number. And of that, if you look at the plastic products, which I believe that was what you were asking, it's about a bit over 10%. So you get approximately the sensitivity there. Now I mean, oil-based products or plastics is, of course, sensitive to oil, but not fully because you got processing costs. So if you actually try and make some sort of estimate as to what happens to the oil or plastic products, the cost of that, depending on what happens to oil, a rule of thumb is that roughly about 2.5% or a bit less actually than a bit over 2%, you can say, of the oil price actually flows through to the plastic products. So this gives you a rule of thumb. But of course, it's not an exact science because if you have a sharp spike, as an example, in some of these raw materials like oil, then, of course, the impact will be very, very little. If you have a prolonged period, then gradually cost of plastic products will also go up. So it's a bit difficult to give you an exact answer to your question, Charles, more than that. Sandra Åberg: And on energy? Fredrik Rystedt: In energy and maybe also raw material, I think you asked. And if you look at the hedging, if you look at the rest of the year, it's about 60% we're hedged and the rest is open to spot price movement. We typically don't hedge really raw material other than energy. So we're openly exposed to pulp and to plastic materials or other types of input costs. And of course, there is a, you can say, implicit hedge through the lag impact that we talked earlier, but there are no physical hedging of any kind of any raw material. So energy is that's where we hedge. Charles Eden: That's helpful. And I appreciate it's maybe a question for your procurement team more than you. But I guess given the volatility, and we don't know quite how long or the severity of the fluctuations in oil in respect to derivatives. But is it fair that I guess it's in no one's interest for prices to shoot up 40, down 40, up 40. Is there a sort of degree of smoothing of this price with your suppliers? Or really, is it sort of you take what you see in terms of the price? I'm just trying to understand the dynamics of how this works in real world rather than perhaps behind the spreadsheet. Ulrika Kolsrud: Maybe, Fredrik, you can talk to that later. But one thing is that we have, of course, different tools when it comes to our pricing as well. I mean there's everything from surcharges to lowering our promotional efforts to having list price changes and other tools as well. So it's also about using our toolbox when it comes to pricing in a smart way in order to exactly, as you say, to not raise prices permanently when that might not be the -- what is the right thing to do in order to balance volume and margin in a good way. So there, we have a lot of tools in our toolbox. Fredrik Rystedt: Yes. I don't have anything to add. I think your question was also relating to if we make arrangements with our suppliers as to smoothing of the price. And I think that's generally not the case. But to be fair, I actually don't really know exactly that. I can't give you an exact answer there. I can check that for you, Charles. Sandra Åberg: Now we have a question from Diana Gomes from Bloomberg. Diana Gomes: Just I believe, a follow-up from Charles' question. I'm not sure if I understood correctly in terms of the arrangements with suppliers on your comments. For the pulp and other raw materials that you are not hedging, for instance, I'm assuming there are some type of fixed contracts that you would have with your suppliers. Could you give us some more color in terms of the time lines of those, for instance? And related to that, there are reports of some potential concerns or constraints on supply of materials such as plastic packaging. Are you seeing any pressure on that side already? Ulrika Kolsrud: When it comes to contracts, as Fredrik said, I mean, we do not really talk about the details of our contracts, both I would say we don't necessarily have all the details of it, but also it's for commercial reasons. Then when it comes to supply, we have so far not seen -- we've not had any disruptions, and we have not had any indications of disruptions either or shortages either at this point in time. But of course, it's something that we follow very closely. Diana Gomes: And if I could squeeze just one follow-up on the cost savings. You pointed to the fact that it was higher in the first quarter than typically is. Should we see that as a more structural change in terms of the phasing of the cost savings through the year? And it seems that there could be some sequential impact from that when we come into the second quarter with less of a buffer from the cost savings. So just to understand a little bit more on the margin impact as we go through the year. Fredrik Rystedt: Yes. Thanks, Diana. No, you shouldn't interpret it in that way. We have given an outlook for the year as -- and we're talking about just to be super clear now on the productivity or COGS savings. So not the SG&A savings, but COGS savings. My comments were relating to that. And I mentioned that we had in the first quarter savings of SEK 130 million. Typically, we have a bit of lower cost savings in the first quarter. And of course -- so we felt good with that number. This is not a change to our outlook for the year, which is in the range of SEK 500 million to SEK 1 billion for the full year. So again, a good start and our outlook for the year or our estimates or aspirations for the year of SEK 500 million to SEK 2 billion remains. Sandra Åberg: Now we have a new question from Aron Adamski. Aron Adamski: I was just wondering, you mentioned the leverage was lower than we all expected. And so in the context of your balance sheet being quite healthy, I was wondering how do you assess the current M&A landscape out there in your priority categories? And are there any interesting assets that you're currently in the process of looking at? And should we expect any both on acquisitions and also over the next 12 months or so? Ulrika Kolsrud: But we always have a very active M&A agenda. So we continuously look for opportunities and assess opportunities, and that we continue to do. And our priorities when it comes to acquisitions is in the areas that we've talked about before, Incontinence Care, Wound Care, Feminine Care and strategic segments in Professional Hygiene. And I think the acquisition that we now completed in the quarter is a very good example of being an acquisition in Feminine Care also in an attractive geography in North America. So that work continues. And as you say, we have a strong balance sheet. So we have the opportunity to, of course, act on M&As when they are value creating. Sandra Åberg: We will move to Mikheil Omanadze from BNP Paribas. Mikheil Omanadze: One question from me, please. I wanted to ask about volumes. I know you don't guide as such, but if I were to think directionally, are there any factors in the comp that you would call out for Q2 and the remainder of the year? And also, would you say it is fair to start factoring in some negative elasticities as you start taking pricing actions? Ulrika Kolsrud: No specific factors. And of course, our ambition is to compensate with the cost increases with price increases while fueling volume growth. So that is our clear ambition. That's what we work for. Sandra Åberg: Perfect. Are you happy with that answer? Or do you have a follow-up question to that? Mikheil Omanadze: No follow-up questions. Sandra Åberg: Okay, perfect. [Operator Instructions]. I think that we have actually answered all the questions now. Let's give you a few seconds to ask questions if you like. But I think we're done with questions. Thanks a lot for your questions. Then before we end, I would like to hand back over to you, Ulrika, for closing remarks. Ulrika Kolsrud: Yes. Well, thank you all for joining this webcast and for a lot of questions here. And again, we start the year with volume growth, with strengthened profit margins and not the least with winning the relative game with strengthening our market shares, which is very important. And our work, as you saw here in short-term priorities, it's about continuing to accelerate profitable growth through our different initiatives that we have. Now we talked more about the near-term priorities in this call. I hope that you want to hear about our mid- and long-term priorities and initiatives as well. And to do so, please join us in our Capital Market Day on the 7th of May in Gothenburg. Looking forward to seeing you there.

24天前Insight Analytics约5分钟阅读

VC 2026 Q1 财报电话会议

Chris Doyle: Good morning. I am Chris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for 2026. Before we begin this morning's call, I would like to remind you that today's presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled Forward-Looking Statements in our earnings material for more detail. Presentation materials for today's call were posted this morning on the Investors section of Visteon Corporation’s website. Joining us today are Sachin S. Lawande, President and Chief Executive Officer, and Jerome J. Rouquet, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour, and we will open the lines for questions after Sachin’s and Jerome’s prepared remarks. Please limit your participation to one question and one follow-up. Thank you again for joining us. Now I will turn the call over to Sachin. Sachin S. Lawande: Thank you, Chris, and good morning, everyone. Visteon Corporation delivered a solid start to the year with first quarter sales coming ahead of our expectations. Net sales were $954 million, up 2% year over year, despite lower industry and customer vehicle production. New product launches and customer recoveries more than offset the anticipated headwinds from lower BMS volumes and vehicle discontinuations at Ford. Growth over market in the quarter was 3%. Adjusted EBITDA was $104 million, broadly in line with our expectations. During the quarter, we saw elevated semiconductor costs, while the associated recoveries from customers are expected to be weighted more to the later part of the year. Adjusted free cash flow was negative $23 million, primarily driven by normal seasonality and higher inventory levels. We continue to maintain a strong balance sheet with net cash of $385 million, providing ample flexibility to execute our capital allocation strategy. New business wins were just over $1 billion, led by cockpit domain controllers and digital clusters. A key highlight was our high-performance compute win with SAIC in China, a third customer for AI-based smart cockpit systems, reinforcing our first-mover advantage in this emerging technology, similar to our early leadership with SmartCore. Q1 was a busy quarter for operations: 20 launches across 11 automakers, including on several high-profile vehicles, underscoring our continued execution excellence in a dynamic supply chain environment. Finally, we continue to return capital to shareholders. During the quarter, we returned $40 million through share repurchases and dividends. Overall, the quarter reflects a good start to the year with strong execution across all parts of our business and continued progress on our strategic priorities. Sachin S. Lawande: Turning to page three. This page shows our Q1 sales performance by region, representing a solid start to the year with balanced global customer demand. In the Americas, demand for cockpit electronics was strong, driven by ramp-up of recently launched products, including new display programs with Nissan and GM. We also benefited from one-time customer recoveries related to prior EV volume declines. Offsetting these were the anticipated headwinds from vehicle discontinuations at Ford and lower BMS volumes due to changes in EV policies and incentives. In Europe, we benefited from strong ramp-ups on several successful vehicle programs. Key contributors included a curved panoramic display referred to as a digital stage combining a 12-inch digital cluster and a slightly larger central information display on the Audi Q3, digital clusters and displays on the Renault 4 and 5 EVs, and digital clusters on the new Nissan Qashqai and Juke. These programs supported Q1 sales growth despite a weak vehicle production environment. The engineering services acquisition from last year also contributed modestly to our sales in Europe. In Rest of Asia, India was a strong market for Visteon Corporation, with ramp-ups of a new SmartCore system for Mahindra and a digital cluster for TVS, a leading two-wheeler OEM. We also launched new digital cluster programs with Nissan and Mitsubishi for Japan and ASEAN markets, offsetting a Mazda program roll-off. In China, policy reset and demand pull-forward late last year led to lower Q1 vehicle production, particularly in the price-sensitive segments. Our sales were in line with expectations, supported by greater exposure to higher-value segments that are less affected by policy changes. We also benefited from several recently launched programs including a new cockpit domain controller with Zeekr, an upgraded digital cluster on the Toyota Corolla, and a new digital cluster on the Toyota Frontlander. The year-over-year decline in our sales has reduced significantly versus prior quarters and is now tracking more in line with customer production volumes. Looking ahead, we have multiple launches in the second half that are expected to drive modest growth in China this year, followed by a more meaningful step-up in 2027. In summary, we started the year very well with stable global demand for cockpit electronics and new product launches offsetting the expected headwinds, primarily from lower BMS volumes. Sachin S. Lawande: Turning to page four. Q1 was a busy launch quarter with 20 new products launched with 11 carmakers, and on some strategically important vehicles for our customers. This page highlights a few key programs. We marked a significant milestone with our first launch with Toyota’s Lexus brand, with the fully redesigned Lexus ES, a flagship model leading the next-generation electrified lineup for Lexus. Our driver display is standard on all trims globally, reinforcing Visteon Corporation’s role in advancing premium in-cabin experiences with Toyota and contributing to our growth with this customer. We also launched a digital cluster on the first-ever Infiniti QX65, a midsized luxury SUV from Nissan for U.S. and Middle East markets. This new vehicle is a key part of Nissan’s turnaround strategy in the U.S. Our 12-inch digital cluster comes standard in all trim lines of this vehicle. In China, we launched a driver display for the new electric Ford Bronco developed specifically for that market. The automotive market in China is evolving beyond electrification to highly specialized segments with focus on technology and lifestyle applications, and the electric Bronco is significant for Ford in China, designed to compete directly with local EV manufacturers. India is one of the fastest growing auto markets, and in Q1, we launched multiple products including a digital cluster with Hyundai, infotainment with Tata, and the center information display with Renault. Hyundai and Tata are already well positioned in India as number two and number three players, and Renault has recently made India a cornerstone of its strategy. India today represents nearly 10% of our total sales, and these launches position us to grow alongside our customers in what will be a key growth market going forward. In summary, we had a solid start in Q1 with new launches that laid the foundation for growth in the coming quarters and underscored Visteon Corporation’s role in automakers’ go-to-market strategies worldwide. Sachin S. Lawande: Turning to page five. We secured approximately $1 billion in new business during the quarter. As expected, customer sourcing in Q1 was somewhat lighter following a strong finish to last year, and some display opportunities were shifted into the second quarter. Our product portfolio remains well aligned with key industry trends, and our new business opportunity pipeline is strong for the rest of the year. Based on current visibility, we remain on track to achieve our full-year target of $6 billion. I would like to highlight a few of the key first-quarter wins on this page. In China, we secured our third customer for an AI-capable cockpit system with SAIC Motor for its IM brand. SAIC Motor is one of the largest carmakers in China, and IM is the new brand targeting the premium car segment. Automakers in China are rapidly adopting agentic AI-enhanced in-cabin experiences, driving demand for high-performance cockpit systems capable of running LLMs and video language models, or VLMs, using the latest silicon, such as Qualcomm’s fifth-generation Snapdragon chips. These high-performance systems also enable greater integration, accelerating the shift towards centralized domain architectures. Importantly, Visteon Corporation has established an early-mover advantage with three OEM wins in the space, more than any other tier-one supplier, positioning us very well to take advantage of this emerging trend. Mainstream vehicles will continue to use conventional cockpit domain controllers for affordability reasons, with premium vehicles transitioning to AI-based cockpits. In India, we secured a SmartCore domain controller win with a European OEM for their vehicles for India and other emerging markets, our first SmartCore win with this customer. The system will power three cockpit displays and support advanced infotainment and entertainment features. Similar to recent SmartCore launches in China and India, beyond strong product-market fit of SmartCore, speed was a key competitive differentiator and the main reason for this win, as the start of production of the vehicle is under 12 months. We also expanded our commercial vehicle business by adding a new customer for digital clusters with a U.S. manufacturer of purpose-built vehicles for defense, delivery, and fire and emergency markets. The 12-inch cluster will feature on their next-generation delivery vehicles, with production starting in early 2028, reflecting the growing adoption of digital cockpits in all kinds of commercial vehicles and not just for heavy-duty trucks. In two-wheelers, we expanded our digital cluster program with Honda to additional models representing an incremental $100 million of lifetime sales, further strengthening our engagement with the world’s largest two-wheeler OEM. In summary, our Q1 performance was highlighted by strategic wins in key markets, reinforcing our technology leadership and supporting a strong pipeline that keeps us on track for our $6 billion full-year target. Sachin S. Lawande: Turning to page six. China, the world’s largest auto market, is also the most competitive, with intense pricing pressure in budget and mainstream segments, which Visteon Corporation has strategically avoided to protect profitability. Above mainstream, the market is now evolving beyond electrification into more specialized segments centered on intelligence, luxury, and lifestyle. A key area of growth is the emerging premium tech segment, as traditional OEMs compete with tech-first players such as Tesla, Xiaopeng, and Li Auto with vehicles that combine luxury with advanced technology. OEMs such as Geely, Chery, and SAIC, who are among the largest in China, are defining their premium brands around the convergence of premium design, immersive digital experiences, and, most importantly, artificial intelligence. The cockpit is at the center of differentiation, with agentic AI enabling a new level of in-cabin intelligence. Unlike traditional command-based systems, AI-powered smart cabins can understand user intent, reason through complex tasks, and act proactively on behalf of the user. For example, instead of manually entering a destination, the system can anticipate and suggest it based on context or what it hears from conversation. It can also translate incoming messages in real time, draft responses with minimal input, and answer open-ended questions about surroundings—what the driver may be seeing outside the window, for example—delivering a far more intuitive and personalized cabin experience. This level of intelligence requires a step-change in computing power to run AI workloads far beyond what current cockpit domain controllers can provide. Visteon Corporation was the first tier-one supplier to develop a high-performance version of SmartCore using the newest fifth-generation chip from Qualcomm. We also developed the first cockpit-specific agentic AI software framework, Cognito AI, to enable the development of use cases like I just mentioned. Our early investments in AI helped establish Visteon Corporation as a preferred partner for carmakers in China for their AI-enabled cockpit systems. These next-generation systems carry significantly higher content value, and the business booked with the three OEMs thus far is already over $1 billion in value. We expect more vehicles to be added to the programs after the initial launches, which are happening this year. While China is leading adoption of AI, we see this as a global inflection point. AI will also become a competitive must-have in other parts of the world, accelerated by the international expansion of Chinese OEMs, and drive the next phase of growth for Visteon Corporation. Sachin S. Lawande: Turning to page seven. Before wrapping up, let me briefly discuss our outlook for the remainder of the year. Since issuing our guidance, S&P has lowered its global light vehicle production forecast for our customers by approximately 1.5 percentage points, with most of the impact in the second half of the year, the main reason being the Middle East conflict, and there could be further downside if the hostilities persist for longer than anticipated. Production for our key customers is now expected to decline in the mid-single digits year over year. On the supply side, memory remains constrained. Strong demand from AI and data centers limits availability for automotive. Automotive continues to rely on older memory technologies that suppliers are phasing out in favor of newer nodes, creating a structural supply-demand imbalance and driving pricing pressure and tightness in supply. We expect this environment to persist through 2027 before easing as new capacity starts to come online. In this environment, we are proactively managing supply by working closely with existing suppliers and qualifying additional sources. We were able to secure sufficient supply in Q1 through proactive actions, ensuring no impact on our customers. We expect supply to remain tight throughout the rest of the year, with incremental supply from new sources starting to become more meaningful in the second half of the year. On the positive side, customer demand has remained resilient, with Q1 coming in ahead of expectations and Q2 schedules indicating a continued trend. Importantly, our key launches remain on track. Taking all this into account and based on current data, we are reaffirming our full-year sales guidance despite incremental headwinds in the broader market. We will continue to closely monitor macro and supply conditions and provide updates as the year progresses. Now I will hand it over to Jerome to discuss financials in more detail. Jerome J. Rouquet: Thank you, Sachin, and good morning, everyone. We delivered in Q1 a balanced set of financial results in what continues to be a dynamic operating environment. For the quarter, sales were $954 million, a 2% increase from the prior year. We continue to see strong growth with new product launches and benefit from solid commercial execution, partially offset by lower customer production and expected headwinds, including lower BMS sales with GM and the discontinuation of several car lines at Ford. Growth over market was 3%, in line with our full-year expectations of low single-digit outperformance. Adjusted EBITDA was $104 million, representing a margin of 10.9%. As we indicated on the prior call, we expected Q1 to be the low point for EBITDA, with improvement throughout the year as we make progress on customer recovery agreements and cost initiatives. In the quarter, we were impacted by elevated semiconductor costs and the timing mismatch of customer recoveries. Adjusted free cash flow was negative in the quarter, primarily driven by an increase in working capital, particularly inventory, and a 2025 incentive compensation, which was paid in Q1. We continue to execute on our capital allocation strategy, returning $40 million to shareholders, with $30 million in share repurchases and $10 million in dividends. We ended the quarter with a strong balance sheet and net cash of $385 million, providing flexibility to deploy capital while navigating the current market environment. Jerome J. Rouquet: Turning to page 10. Sales for the quarter were $954 million, an increase of $20 million year over year. Customer production volumes were down 4%, while growth over market was 3% when excluding pricing and currency. Compared to our internal expectations a couple of months ago, we benefited from higher customer volumes, better pricing dynamics, and additional benefits from EV program commercial settlements. As Sachin already provided details on customer volumes in the quarter, let me provide some additional color on pricing and EV commercial settlements and how they impacted both sales and EBITDA. First, pricing was a headwind of $5 million in the quarter, which was lower than what we typically see. As a reminder, pricing in this environment is influenced by several moving pieces. These include annual and discrete price changes with customers, the unwinding or maintaining of surcharges put in place during the prior semiconductor shortage, and, more recently, customer recoveries related to memory cost increases. During the first quarter, we were able to mitigate a portion of the elevated semiconductor cost through short-term commercial pricing agreements, while we continue to work towards longer-term recovery arrangements. We are making good progress on these longer-term agreements, and we expect that incremental cost will be offset by more permanent recoveries as we move throughout 2026, consistent with the assumptions embedded in our guidance. From an EBITDA perspective, the lower pricing we achieved with customers in the first quarter, combined with supplier cost reductions and value engineering activities, allowed us to partially mitigate the elevated cost from memory and resourcing actions. The net impact of these commercial activities was a headwind of just over $15 million. Second, the additional benefit to sales from one-time settlements primarily related to EV programs was approximately $20 million, while the EBITDA was approximately $10 million, as we closed out supplier settlements as well. As a reminder, our full-year guidance included $10 million of expected one-timers from program settlements, which was achieved in Q1. With this context, let me provide more color on our year-over-year Q1 EBITDA bridge. First, let me remind everyone that prior-year results included approximately $15 million of one-time items, which impacts the year-over-year comparison. Second, as just mentioned, the negative impact from all commercial activities, including customer and supplier pricing, was a headwind of $15 million. This was partially offset by the benefit of EV settlements that I also highlighted. The remaining year-over-year decline in EBITDA of approximately $5 million was driven by lower volume and unfavorable FX and slightly higher freight and logistics, partially offset by ongoing cost initiatives, including vertical integration and engineering productivity. Jerome J. Rouquet: Turning to page 11. Adjusted free cash flow for the quarter was negative $23 million, reflecting the typical seasonality of our business, with Q1 generally being one of the lower quarters for cash flow. In 2026, this dynamic was more pronounced for a few reasons. First, EBITDA in the quarter was at the low point for the year, as expected. Second, we increased inventory levels during the quarter due to normal seasonality, inflation, and as a deliberate action to manage supply chain risk and market volatility. And third, the annual incentive compensation payout is in Q1, reflective of the strong performance last year, and is reported in the line Other Changes. As it relates to the remainder of cash flow items, cash taxes were slightly lower year over year, primarily due to lower profitability in the quarter and timing of payments last year. Interest income continued to offset interest expense. Capital expenditures were in line with the prior year and continue to support new program launches. Jerome J. Rouquet: Turning to capital allocation. We deployed $40 million in the quarter through share repurchases and dividends. We ended the quarter with $385 million in net cash and expect to continue deploying capital in a disciplined and balanced manner. Jerome J. Rouquet: Turning to page 12. Turning to our outlook. We are reaffirming our full-year guidance across all key financial metrics, as the strong start of the year will help us offset a softer-than-expected market setup in the second half of the year. Starting with sales, we continue to expect revenue in the range of $3.625 billion to $3.825 billion, which represents a low single-digit growth over market. This reflects the strength of our product portfolio, strong customer demand in the first half of the year, and the continued ramp of recent launches, despite the softer-than-anticipated second-half production environment Sachin outlined. Moving to profitability, we continue to expect adjusted EBITDA in the range of $455 million to $495 million, which corresponds to a margin of approximately 12.8% at the midpoint. Compared to the first quarter, we expect margins to improve as the year progresses. This is primarily driven by higher customer recoveries as well as the continued impact of our cost initiatives, including product costing actions, vertical integration, engineering productivity, as well as resource rebalancing across our global footprint. On free cash flow, we continue to expect adjusted free cash flow in the range of $170 million to $210 million. That said, we are currently trending towards the lower end of this range. This reflects our plan to maintain higher levels of inventory as we proactively manage supply constraints, especially around certain semiconductor and memory components. Importantly, our strong balance sheet provides us with significant flexibility to navigate these dynamics. Maintaining financial strength continues to be a core pillar of our capital allocation philosophy, enabling us to invest in the business and return cash to shareholders while managing near-term volatility. We plan to provide a more comprehensive update on our longer-term capital allocation priorities at our upcoming Investor Day. Jerome J. Rouquet: Turning to page 13. Visteon Corporation continues to be a compelling long-term investment opportunity. We have spent the last couple of years rebuilding our growth algorithm while executing operationally and commercially throughout a dynamic environment. We remain confident in our long-term opportunity, and we look forward to sharing more with you at our upcoming Investor Day on June 25 in New York City. Thank you for your time today. We would like now to open the call for your questions. Operator: At this time, if you would like to ask an audio question, please press star then the number one on your telephone keypad. Again, that is star and the number one. Your first question comes from Mark Trevor Delaney with Goldman Sachs. Mark Trevor Delaney: I was hoping to start with a question on the demand and production environment. The company spoke in its prepared remarks about S&P lowering its forecast for 2026 driven by the Middle East conflict, and Sachin, you said that at least for the first half, customer schedules have actually been solid, if not even a bit better than expected. Could you speak a bit more on what Visteon Corporation is seeing with respect to LVP? And as you look into the second half, are you seeing any softening in your own customer conversations? And maybe clarify what you are trying to bake into guidance for the year and the 1H to 2H trajectory? Jerome J. Rouquet: Thanks, Mark. Let me take that question. We are maintaining our full-year guidance for sales and for EBITDA. Let me give you a little bit of color by quarter. Q1 came in a little stronger than what we had anticipated. We were also positively impacted by some EV settlements, about $20 million. It is important to make sure that we do not annualize that $20 million. Q2, even with the Middle East conflict, has a pretty strong setup. We have good visibility on our orders, and I would say that Q2 looks similar to what we had in Q1 from an order standpoint—so a pretty robust first half of the year. As far as the second half is concerned, we are using S&P revised numbers and dropped the second half of the year for us by approximately 2%. So a softer setup as we go into the second half, but we do have strong launches that are supposed to come in line in Q3 and Q4, mostly around Toyota as well as the HPC launches. Overall, a strong H1 with a little bit of a softer H2, which allows us to stay on guidance for the full year. We still have got a fairly large range this year on sales for the guidance—$100 million each way—so it allows us to have some leeway up and down versus the midpoint. Mark Trevor Delaney: That is helpful, Jerome. And just to clarify, when you talk about the softening in 2H and basing it off of what S&P has projected, it does not sound like you have actually seen a change in your own customer schedule. Is that correct? You are deriving it from market data? Jerome J. Rouquet: That is correct for Q2. We have normal visibility for the next three months. Mark Trevor Delaney: And then another question on memory. The company’s guidance had assumed you would substantially recover the increasing cost in your full-year guidance. You spoke a bit around progress you are making there in the first quarter. Maybe talk about how far along you are in securing those recoveries. And are you still expecting to substantially recover all of the higher semiconductor memory costs for this year? Jerome J. Rouquet: That is a good point. Maybe before we even talk about recovery, we should probably talk about supply because if supply is an issue, recovery may be an issue, which is not our case. I will hand over to Sachin, and then I will talk again about recoveries. Sachin S. Lawande: Thanks, Jerome. I think this is a point that we need to make sure we express clearly. The situation with supply has implications on our ability to recover as well. There are two factors really driving the supply situation. One is the higher-than-expected demand for memory driven by AI—data centers, smartphones, etc. But, very importantly, many of our traditional large memory suppliers are shifting away from the older tech nodes that have been used by automotive to newer tech nodes, which reduces capacity for auto. This has created an imbalance between supply and demand, which has lowered availability of memory for industries like auto and others as well. The impression we should have is that there is no segment of the industry that is going to get enough memory in the short term, and that has resulted in higher prices. As smaller suppliers look at this environment, they see an opportunity to enter the market for auto—smaller fabs in particular. We are working with some of them to bring them into our supply base and, in fact, have managed to secure some supply already for this year. About 10% of our total full-year demand this year, for the first time, would be met by some of these emerging suppliers. One more point I would like to add is that, unlike in the prior semiconductor crisis where the lead times for new capacity to come online were fairly long—two-plus years—in this case, with memories, it is shorter. If there is clean room space available, new capacity can come online in about a year, which is helpful. We believe with more suppliers coming in, this situation will probably last into the middle of next year, maybe towards the end of next year, and start to get better from there. That can also help in terms of driving the prices down as more supply comes into the market. We have done a very good job of ensuring that none of our customers are impacted in terms of their production for Q1, and we anticipate with all of the measures we have in place, working closely with our current suppliers and the new ones, we will be able to mitigate the situation. Although it is going to be tight, we should be in a position to meet customer demand. Jerome J. Rouquet: On the recovery, costs came in in line with expectation in Q1, slightly higher than $20 million, as we had indicated during our last call. In terms of progressing with customers in negotiations, we have done pretty well so far. In Q1, we reported an outflow of $15 million on what we call our commercial items—the net between our supplier savings and what we give to our customers. We had anticipated some level of leakage in Q1 as we were working on long-term contracts. For Q1, we executed very short-term commercial agreements with some of our customers that helped us mitigate some of these additional costs. Overall, progression is going well with negotiations, and we are expecting most of the negotiations to be closed by Q2. We will see as a result some level of catch-up in the second quarter, and we are expecting our commercial business equation to be neutral in the second quarter, as some of the improvement that we have with some suppliers comes online. Overall, for the full year, we are maintaining our guidance in terms of recovery. We are still expecting to have some level of leakage, largely because of the timing issues for the full year. Operator: Thank you. Your next question comes from Colin M. Langan with Wells Fargo. Colin M. Langan: Thanks for taking my questions. Just to follow up on this issue: you have a bit over $20 million in costs but $15 million of recoveries. You got something close to 75% recoveries already, and then you expect to have that caught up in Q2. Does that mean we get a little additional boost in Q2 from recovery timing? Jerome J. Rouquet: Correct. We have had this $15 million leakage, and we like to combine what we are giving to customers versus what we are getting from suppliers. We look at this holistically. We are negotiating with customers the full pricing package, which includes not only the annual price reduction; it includes the legacy recoveries from prior chip shortages as well as the new memory cost increases that we are passing on to customers. We are expecting this leakage of $15 million to be neutral in the second half of the year and then slightly improve in Q3 and Q4 so that we have a minimum leakage for the full year, per our guidance. Colin M. Langan: I think I had that wrong. So it is $15 million leakage—you have about a third recovered in the quarter—but you expect that all to jump back? Does that $15 million become a positive in Q2? Jerome J. Rouquet: It does. It becomes positive in Q2, and it will improve slightly in Q3 and Q4 for a slight negative for the full year. Colin M. Langan: Got it. And then the guide for the year is low single-digit growth over market. You made it clear that the first half was going to be really tough with roll-offs and the BMS, but you still did 3% in Q1. Why not mid-single now as we go through the year, given you have highlighted pretty strong second-half launches? Jerome J. Rouquet: Q1 came in pretty close to our expectations. We had not given guidance per quarter, so 3% was generally in line with the low single digit for the full year. We are expecting to hold that performance throughout the year, and we are expecting all regions to perform well, maybe with the exception of the Americas, largely because of the BMS situation. Overall, a pretty consistent growth over market throughout the year. Operator: Your next question comes from Emmanuel Rosner with Wolfe Research. Emmanuel Rosner: Thank you. I appreciate all the color on the memory supply and trying to derisk the outlook. As we start looking into next year and you speak to OEMs about trying to mitigate the risk of disruptions, are there any conversations around potential decontenting or using solutions that use less memory? And on the pricing side or the recovery side, would the longer-term agreements you are working on with the OEMs allow ongoing pass-through even into next year if DRAM costs keep rising? Sachin S. Lawande: Let me take that. We are not seeing any interest in decontenting. The discussions have been mostly around how we secure enough supply for 2027. Most of the time thus far has gone into securing supply for this year, and there is still a lot of activity. As we start to think about 2027, we are working with all of our suppliers—traditional suppliers plus the new ones we are bringing online. Supply next year will largely depend on our ability to secure enough quantity of parts from these newer suppliers that are emerging, largely because many of the existing larger suppliers to automotive are shifting their technologies to newer technologies. That dynamic has to be managed first and foremost, and that is what we are focused on. We expect that over the course of this year, maybe towards Q3, we should be in a position to have supply secured for next year. In terms of pricing negotiations, they are different by customer. Some are signing up for a multiyear pricing agreement, so it goes into the piece price essentially, and some prefer to have annual pricing negotiations. It varies by customer. Emmanuel Rosner: Understood. And then can you talk a little bit more about the expected ramp-up in launches in the second half? How should we think about this in relation to S&P’s outlook for weaker volume? Do you have a good sense this should not really affect your revenue curve? Sachin S. Lawande: I think so, because—as was evident in Q1—a lot of our performance was driven by new launches, not so much the underlying vehicle production environment. A lot of our high-value launches this year are in the second half and are ramping up in Q4. In terms of the total number of launches, this year looks a lot like last year—I would say even a few more launches this year. But there are some that are very consequential, especially the ones with Toyota and the HPC launches we discussed in our prepared remarks. Those are high value, although their real ramp-up begins in Q4, so contribution this year is still relatively small but meaningful. This helps offset what we have seen thus far as the reduction in vehicle production. If the environment stabilizes, especially in the Middle East, and the underlying vehicle production holds up, that could be a potential benefit to us. It has been a really good start to the year; Q2 looks pretty strong. For the second half, we will have to wait and see how it develops. Operator: Your next question comes from the line of Winnie Dong with Deutsche Bank. Winnie Dong: Hi. Thanks so much for taking my question. My first one is on the new business win of $1 billion for the quarter. For context, would you mind giving us some color on whether this is typical of seasonality or whether you are seeing any sort of pushout of decisions in terms of wins? And secondly, in terms of the growth drivers in 2027 and beyond, perhaps you can tease your Investor Day in June a little bit and outline some big buckets of drivers we can look forward to. Thank you. Sachin S. Lawande: The first quarter was expected to be a little lighter given that we had a very strong finish to last year, and we also had a few display opportunities pushed out into Q2, about $300 million to $400 million worth. Even with that, it might be considered a little light but pretty normal for a first quarter in terms of seasonality of new business wins. Looking at the pipeline for the remainder of the year, much like new product launches, new business wins also look very similar to 2025 in aggregate, but with a different product mix and regional mix. In 2025, we had an even number and value of events for displays and cockpit electronics. This year, we are seeing more opportunities for cockpit electronics and also more in Asia, and the display opportunities this year are more evenly spread between Europe and the Americas. Overall, we are pleased with what we see as new business opportunities in this environment, and we expect this year to look similar to last year in total value of business wins. On your second question, the main drivers are going to be the new products that we have won and are launching—displays will have a very big role to play in our growth given the high wins in the last few quarters; HPCs, simply because of the very high content value, will also have a meaningful impact; and then other growth drivers we have talked about—Toyota as a targeted customer, and then two-wheelers and commercial vehicles. Our growth profile is not relying on just one or two things; we have a number of areas that are all growing, which gives us confidence. Operator: Thank you. Your next question comes from Joseph Robert Spak with UBS. Joseph Robert Spak: Thanks, everyone. Sachin, sorry to go back to memory, but one more point on this. My understanding is some of that additional supply that is coming online is from China. I want to make sure your customers are okay with that. And I thought I heard you mention that you already secured about 10% of this year’s supply from these new sources. Why would it not be at least at that level, if not better, for next year? Sachin S. Lawande: To answer your second question first—absolutely, we expect it to be better, and the question is by how much and to what extent. To give you some sense of the number of different memory chips that we buy: we buy about 60 different types of chips that go into the DRAM category. Then there are also NAND flash, eMMC, and UFS, as well as NOR. There are many different types of memories and different densities that we need. Typically, very few of these suppliers are able to offer all of the parts we need, so we have to have a mix of suppliers. They tend to have their strengths in specific categories. We have been identifying these suppliers, building relationships, starting supply so that we can test their parts, qualify them, and then introduce them in our customers’ production. Regarding your first part of the question—customers’ views on new sources coming online from China and other places—in this environment, where there is a shortage of parts, there is absolutely no problem with that. The first priority is to make sure we have production secured. Obviously, customers would like it to be non–China based if there is availability, but in this environment, we do not see that as a problem. Joseph Robert Spak: Second question, Jerome, on capital allocation. I know you said more details on the long-term plan at the Analyst Day. You bought back $30 million this quarter. I think that means you have about $45 million left on the authorization. You said last quarter you could do about $100 million, and you also earmarked about $300 million for M&A. Is there any change to that thinking with comments you made about free cash flow or the pipeline or the current share price? Could we expect an increase in authorization because it seems like you are coming to the end there? Jerome J. Rouquet: Generally, no—nothing has changed. We had highlighted up to $300 million for M&A and up to $150 million for share repurchases. With the cash balance we have at the end of Q1, even with potentially tracking towards the low end of the range for adjusted free cash flow this year, we could still do everything. We are still very focused on M&A and will continue to return cash to shareholders in a non-linear manner with share repurchases, as well as continue our dividends. Nothing has fundamentally changed in terms of our philosophy. Operator: Your next question is from Dan Levy with Barclays. Dan Levy: Hi, good morning. Thanks for taking the question. First, on growth dynamics—we saw negative growth in China in the first quarter. Maybe you could unpack some of the mix dynamics, where I would have assumed that with the lower end of the market underperforming, the higher end outperforming, that would help you. And is the view that you can still get positive growth for the full year with the launches ramping and bringing you up to positive growth? Sachin S. Lawande: In China, as you mentioned, there was lower growth in vehicle production in the more price-sensitive segments, and a better performance, but not necessarily a lot of growth, in the upper end of the market. That is more helpful to us. I also want to mention the headwind of market share loss of the global OEMs that is still ongoing—so it is not all good news. The new launches so far have largely offset what we saw as declines with our traditional global OEMs. Therefore, for Q1, it was even in terms of outperformance versus vehicle production. As we go forward, especially with the HPC launches, I believe we will start to see growth relative to production in China, with more of a step function next year as those launches ramp. Dan Levy: As a follow-up on DRAM: is there any ability for you to transition your products to DDR5 to address some of the supply issues, or will the newer suppliers be enough to offset the large suppliers that are phasing out DDR4 so that, longer term, this issue will be addressed by these other smaller suppliers? Sachin S. Lawande: DDR5 is not backwards compatible with DDR4. These memories are interfaced to a micro or an SoC, and that micro or SoC needs to have the capability to be interfaced to DDR5. The majority of the micros used in the industry for the cockpit are not capable of being interfaced with DDR5. The evolution of the micros and SoCs used for cockpit—which come from suppliers such as Qualcomm or NXP and others—has to occur before we can move. That typically requires a bigger change and longer time in automotive. What we are seeing is that the higher-end CDCs and HPCs already use DDR5. This may push the industry faster towards higher-end CDCs and HPCs simply because of the shift in the underlying technologies. DDR5 will come at a density that is fundamentally a step higher than DDR4, enabling more processing and memory, which I think will accelerate the trend towards more integrated cockpit domain controllers and eventually central domain controllers like the HPC. We believe this trend will push the industry to adopt more content simply because it will be cheaper to do it that way than to stay with older technologies with more function-specific implementations. Operator: Your next question is from Luke L. Junk with Baird. Luke L. Junk: First question, Sachin, on your early-mover advantage in HPC/AI. I think you said your three wins are more than any other tier-one supplier. Could you double click on the competitive landscape on a relative basis, and then, given the award this morning launching within about 12 months, the near-term pipeline for adding additional awards, including additional vehicles with your current customers? Sachin S. Lawande: We have three customers launching this, and they are all launching initially on their flagship vehicles, but at the same time lining up vehicles following that initial launch, which will extend this business. One of the new learnings for us is that we initially thought it was more limited to just the top-end flagship vehicles, but the competitive dynamics in China—especially with the emerging premium tech segment—are driving more volume to adopt AI as a key foundational capability of the cockpit. We see the market growing rapidly starting in China, and because of exports, we expect that technology to start to make an impact in other regions, probably starting with Europe before it comes to other parts of the world. Luke L. Junk: Jerome, hoping to calibrate the launch cadence in the back half. First, for the high-compute launches, any initial demand indications? And then you made the comment about the fourth-quarter inflection. Was that mainly a Toyota-related comment, or is there some China color as well? Jerome J. Rouquet: We are using IHS for the HPC launches, and these have been holding pretty well compared to what we initially guided to—no major changes. Sachin S. Lawande: In general, there has been no change in the launch plans or the volumes. We have been very focused on ensuring we have supply of components because the lead times, especially with this third win, have been extremely short. For now, the focus is on ensuring we can launch and achieve the ramp of volume we have for this year, which has remained steady. If anything, depending on availability of supply, there may be the ability to increase, but given lead times, that would be a challenge. Operator: Next question is from Tom Narion with RBC. Tom Narion: Two quick follow-ups. First, on the $300 million M&A, in the past you have said this is likely tuck-ins. Is there a reason why this is being prioritized now? Is it because you are seeing deals at attractive pricing? Is it something that works well with what you are trying to achieve now versus later? And then I have a follow-up. Sachin S. Lawande: Yes, in some parts, but it is really more driven by how we see trends emerge in the industry. There is a big trend towards software-driven, more integrated domain controllers for vehicles, which requires that you have all of the software capabilities to implement those features. That is the primary driver of trying to secure those capabilities, which would allow us to offer more integrated domain controllers. Eventually, we see a certain level of ADAS also getting integrated with cockpit as features like AEB become mandated in all jurisdictions. It is already a mandate in Europe; in 2028 and 2029, China and the U.S. will follow. As standard requirements, OEMs will not be able to price for them; they will be part of standard equipment. We expect more features to get standardized or required and therefore integrated, and cost will be a prime driver that will drive greater levels of integration. Second, all of these technologies are emerging rapidly from mainstream tech industries and impacting automotive faster than ever before. We see opportunity for offering services—outsourced R&D services, expert services—to help OEMs define how to use those technologies in their vehicles. We are finding companies that have a lot of depth of expertise but do not necessarily have the scale. We believe we can provide that scaling ability to these companies, help the OEMs, and in turn help make our platform more future proof. Engaging in advanced technologies with OEMs helps us understand how to keep our platforms competitive and in time for market introduction. Third, vertical integration has always been a driver of our M&A. We have been successful with that so far, and we want to continue to take it forward as we see opportunities to bring more of the manufacturing value content into our plants, rather than relying on an extended supply chain, which also helps us address customer requests to be less dependent on China and other parts of the world where we are perhaps more exposed today. Tom Narion: Thanks for the robust answer. And then, Jerome, to clarify, guidance is maintained despite the S&P cutting. Was Q1 coming in ahead of your expectations the main driver of being able to do that? Jerome J. Rouquet: Correct—along with good visibility and robust orders we see for the second quarter. But you are absolutely correct. Chris Doyle: Thank you. This concludes our earnings call for 2026. Thank you for participating in today’s call and your ongoing interest in Visteon Corporation. Operator: This concludes Visteon Corporation’s first quarter 2026 results earnings call. You may now disconnect.

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LOB 2026 Q1 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the Q1 2026 Live Oak Bancshares, Inc. Earnings Conference Call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press 0 for the operator. Also note that this call is being recorded on Thursday, 04/23/2026. I would now like to turn the conference over to General Counsel Gregory Seward. Please go ahead, sir. Gregory Seward: Thank you, and good morning, everyone. Welcome to Live Oak Bancshares, Inc.'s first quarter 2026 earnings conference call. We are webcasting live over the Internet, and this call is being recorded. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investor.liveo.bank and go to the Events and Presentations tab for supporting materials. Our earnings release is also available on our website. Before we get started, I would like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from our expectations are detailed in the materials accompanying this call and our SEC filings. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliations of those measures to GAAP measures, can also be found in our SEC filings and in the presentation materials. I will now turn the call over to our Chairman and CEO, Chip Mahan. Chip Mahan: Good morning, everyone. Team Live Oak is excited to tell you about our performance for the first quarter. Things are a little bit different today. Our President, BJ Losch, is a bit under the weather and, predictably, he is dialing in remotely. He will start us off with a few overarching comments, and we will hand it over to Walter Phifer, our CFO, for some numbers, and all of us, including Michael Cairns, our Chief Credit Officer, will be available for questions at the end. BJ, over to you. BJ Losch: Great. Thanks, Chip. Good morning, everybody. Thanks for joining us. Let us get started on slide four. Our plan to create more sustainable earnings momentum is really working, as you can see in our earnings trends, with reported EPS of $0.60 for the quarter and even stronger performance from the core operations. Our lending businesses continue to put up strong numbers, our credit trends are stable to improving, and we are continuing to ramp up small-dollar SBA lending. Checking is having a meaningful impact on our results with far more to come. And as you would expect from Live Oak Bancshares, Inc., we are continuing to find ways to innovate and stay at the forefront of technological changes. Turning to slide five, you see the earnings momentum continues. And as proud as I am of our loan production results, what matters most is how you translate that into profitable operating leverage and strong credit quality. As you can see on slide five, those results are outstanding, with adjusted PPNR up 30% over this time last year and adjusted EPS almost doubled from this time last year. On slide six, you can see our credit trends over ten years relative to all other SBA lenders, and while default rates have moved higher over the last two years, Live Oak Bancshares, Inc.'s performance has been modestly improving despite a difficult backdrop for small businesses. The steady improvement in our provision, reserve coverage, and past dues reflects this. Over the last several quarters, we have been sharing with you progress on two key initiatives: checking and Live Oak Express, our small-dollar 7(a) program. Both of these efforts launched in early 2024, and in just 24 months, our teams have made significant gains in winning customer checking relationships and serving more small business borrowers. That sounds great, and it is. But why is it so important to us? Two big reasons. Number one, if we are going to be America's small business bank, we have got to offer all the primary products they need. And number two, they are both highly accretive to our earnings profile and will provide a long-term tailwind to our earnings. We started with virtually no noninterest-bearing accounts two years ago. We now have over $400 million and growing. That means we do not have to raise $400 million of market-rate savings, CDs, or brokered deposits to fund our growth. If you do the math on that cost of funds impact, it is meaningful. And we are only at 4% of noninterest-bearing to total deposits. Our goal is over 10%. On a current $14 billion deposit base, that is a huge opportunity to be the primary bank for our customers and significantly improve our funding profile. With Live Oak Express, we are serving more small businesses that need capital to grow, and these smaller loans are highly desirable on the secondary market, with premiums in the 9% to 13% range. As you can see on slide eight, we have sold $140 million of these so far. Our goal at cruise altitude is to produce at least $750 million of loan production in these small-dollar loans annually. Again, if you do the math on that kind of volume with those kinds of premiums, the earnings impact is substantial. I am very pleased with our results and momentum, and as always, a big thank you to all Live Oakers. I could not be prouder of how our people are taking care of customers, making our operations better, and profitably growing our company. With that, Walt, how about running through some of the financial highlights? Walter Phifer: Thanks, Vijay. Morning, everyone. Outlined on page 11, our first quarter continued to highlight the strength of our core earnings profile. Diluted EPS was $0.60 in Q1, approximately a 3x increase compared to the prior year, and adjusted EPS was $0.70, up 8% from Q4 and 94% from Q1 last year. Driving this EPS accretion was an outstanding 18% year-over-year growth in revenue, while expenses only grew 6%. As a result, our Q1 reported PPNR of $60 million was 43% higher than 2025, while adjusted PPNR was $66 million, up 30% year over year. On the balance sheet front, our loan book grew 2% quarter over quarter and was up 14% compared to March 2025. Customer deposits grew 3% linked quarter and 13% year over year, and as Vijay mentioned, we continue to be proud of the growth in our noninterest-bearing checking balances, increasing 9% linked quarter and 47% year over year. Lastly, credit trends were stable with provision expense improving slightly to $20 million, better than market expectations. The key takeaways for the quarter are that core earnings were sharper, year-over-year revenue growth was fantastic and mostly driven by recurring net interest income, expenses were well controlled, credit trends remain stable, and our key growth initiatives—checking and small-dollar SBA lending—continue to move in the right direction. Now let us get into the details on the following pages. Page 12 highlights another strong quarter of diversified loan originations with broad-based contribution across our lending teams. We originated approximately $1.4 billion of loans across 35 industries in Q1, which speaks to both the breadth of our platform and the consistency of the demand in the market. Our pipeline is currently at an all-time high, which continues to support our confidence in the forward growth outlook. While page 12 focused on loan production, page 13 illustrates the strong, durable growth on both sides of the balance sheet. Loans ended the quarter at approximately $12.6 billion, up 2% linked quarter and 14% year over year. Our portfolio mix remained very consistent, with 64% of our loan book in our small business lending segment and 36% of our loan book in our commercial lending segment. As a reminder, 30% of our loan book is government guaranteed, a key differentiator of our balance sheet versus the industry. Customer deposits ended at approximately $9.9 billion, up 3% linked quarter, roughly in line with our loan growth. The reported loan growth rate was a little more muted than the underlying production would suggest and was primarily a timing function of elevated payoff activity during the quarter related to some larger loans across three verticals and was largely anticipated. We view this level of paydowns as an outlier and not as something that should persist at the same rate going forward. Our net interest income and margin trends are detailed on page 14. In Q1, net interest income was approximately $119 million and our net interest margin was 3.27%. While we mentioned in our Q4 2025 earnings call that we expected our net interest income in March to step down following the 50 basis points of prime loans repricing on January 1, both our net interest income and margin outperformed expectations. More importantly, from a year-over-year perspective, net interest income is up 19%, while net interest margin is up seven basis points, illustrating strong recurring revenue growth and improved pricing discipline. As detailed on the roll-forward on the bottom right of the page, the linked-quarter move was really a function of several offsetting items. One item to note here is the negative $2.5 million impact from day count in Q1, which is just a product of seasonality. Normalizing the number of days between 2025 and 2026, the extent of compression would have been muted. Ultimately, I think our net interest income profile remains very healthy and year-over-year growth is strong. If the forward curve holds true, a flat interest rate environment should be a good backdrop for our net interest income and NIM profile in 2026. Moving over to guaranteed loan sale trends on page 15, from an absolute performance standpoint, this was a good quarter. Gain on sale was up 25% linked quarter and in line with 2025, as we guided in Q&A during our last earnings call. SBA premiums remain steady, and Live Oak Express continued to be a meaningful contributor. Our gain on sale has remained between 10% to 13% of our total revenue over the last 12 quarters, generally with a slight stair-step upward trajectory throughout the year. We expect 2026 to be no different. Bottom line, gain on sale was up linked quarter, in line with Q1 of last year as we guided, we expect a slight stair-step up each quarter as the year progresses, and we continue to see strong contribution from Live Oak Express. Expense and efficiency trends are detailed on page 16. Total noninterest expense was approximately $85 million in Q1, down from $89 million in Q4, while our Q1 efficiency ratio was 59%, which is about seven points better than Q1 of last year. Our focus on operating leverage continues to be the primary driver of our efficiency improvement year over year. Since Q1 of last year, revenue growth has outpaced expense growth by about 3x. That is exactly the trend line that we want to see. We are continuing to invest in growth, technology, and innovation opportunities across the business, but we are doing so in a way that is driving better scale, better efficiency, and a stronger earnings profile over time. Turning to credit on page 17, the key message on this page is that we view our credit trends as stable and our reserve position remains healthy. As you see highlighted at the top of the page, our unguaranteed allowance for credit losses to unguaranteed loans and leases held for investment ratio is 2.14%. Provision also moved down to approximately $20 million compared to approximately $22 million in Q4 and $29 million in 2025. From an underlying credit trends perspective, the over-30-day past due ratio improved to four basis points, which is an excellent result and below our typical assumed range of 10 to 30 basis points. The nonaccrual ratio was 102 basis points, up modestly quarter over quarter, with 27% of the nonaccruals being derived from verticals that we have since exited over time. Lastly, the net charge-off ratio was 63 basis points for the quarter. While the underlying credit trends are important leading indicators, they do not quite illustrate the true risk as things like collateral and already established reserve coverage on the underlying loans are not reflected within these ratios. However, all of these metrics and underlying factors are considered collectively within our ACL coverage, and the fact that our coverage ratio along with our provision expense trends have been relatively stable to improving over the last five quarters supports our portfolio stability sentiment. We are, of course, monitoring macro developments closely, but sitting here today, we feel good about the health of our portfolio, the low level of delinquencies, and the reserve position we have built. Capital levels remain healthy and robust as shown on page 18, with quarter-over-quarter risk-based capital ratios improving approximately 10 basis points while our Tier 1 leverage ratio remains stable. As highlighted on the left side of this page, we also continue to think the maintenance ratio is a very helpful way to frame the strength of our differentiated balance sheet, as approximately 40% of our assets are in cash, government-guaranteed investments, or government-guaranteed loans. In Q1, our Tier 1 capital plus allowance for credit losses and fair value marks—our maintenance ratio—totaled 16.7% of unguaranteed loans and leases. That is strong capital coverage against the true risk on our balance sheet. Just to recap the quarter, we view Q1 as another step forward in building sustainable earnings momentum. The core performance of the quarter was strong, our key growth drivers continue to build, credit and capital remained stable to improving, and we remain very focused on executing against the opportunities in front of us. Thank you to the Live Oak team for another strong quarter. With that, I will turn it back over to BJ. BJ Losch: Great. Thanks, Walt. Let us go to the questions. Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you have any questions. Thank you. First will be Eric Spector at Cantor Fitzgerald. Please go ahead, Eric. Eric Spector: Hey, good morning, guys. This is Eric dialing in for Dave. Thank you for taking the questions. Maybe just starting off on the NIM. With the Fed on hold, could you walk us through the key drivers of what would allow NIM to stabilize near term and then improve later in the year? And then just talk us through the dynamics of specifically how much is coming from growth, wider loan spreads, or funding mix improvement. Walter Phifer: Great question. Hey, Eric, this is Walt. A flat Fed environment helps stabilize our NIM and net interest income and ultimately benefits our profile, as it allows loan growth to become the primary driver, not Fed action. To put that in context for 2026, keeping consistent with commentary from our last call, assuming those flat rates, we would expect margin to stabilize here in the near term and then allow the loan growth levels to influence the level of expansion as the year progresses. If you think through the different factors, with a flat rate environment, loan yields can stabilize because you are not getting that downward repricing pressure that we saw in Q1 and at the end of last year. The deposit market is competitive. That is an area that we spend quite a bit of time monitoring and making sure that our flows make sense and are supporting our growth, but we feel really good about our positioning in that space as well. From a growth perspective, the vast majority of any expansion in NIM going forward will be highly growth-driven. If you have followed our story, growth for us is pretty impactful from a margin standpoint, and we expect that to continue. You can look at prior years’ flat interest rate environments to get a sense of what the impact would be. Eric Spector: Great, that is helpful. And then maybe switching gears to loans. I know you mentioned pipeline levels are at all-time highs, and it remains strong and diversified. Can you help us think through how much of the pipeline strength is translating into near-term production, and do we see enough visibility to support low to mid-teens growth in a stable rate environment? And then maybe help us think through the cadence of growth throughout the year. Walter Phifer: I will start. Again, Eric, this is Walt. Our pipeline today is about $4.5 billion. With that equation from a production standpoint, they have to move through and then they have their expected closing timelines. I would expect our production to be very in line with, or better than, Q2 of last year here in the near term. Some things will push to the right, some things will come in a quarter earlier than we anticipated. In the last earnings call, we talked about low to mid double-digit loan growth year over year. I still think that holds true, given what we are seeing in the pipeline and how those deals are coming through, so I would not move off of that. Eric Spector: Okay, that is great. And then maybe on deposits, you highlighted the continued momentum in business checking and the longer-term goal of getting the NIB over 10% of deposits. Can you talk us through the progress you expect over the next few quarters and where you are driving success? Walter Phifer: Yeah, I will start—oh, go ahead, Vijay, you start. BJ Losch: I will take that one. I am excited about this. We are building a lot of customer relationships. When I got to Live Oak Bancshares, Inc. about four and a half years ago, only 3% of our customers had both a loan and a deposit account. Today, that is 23%. Over the last two years, we have been anchoring that with checking accounts, and now when we open a loan account, one out of every three of those has a checking account. I am incredibly excited about what we can do to build customer relationships that are stickier over time. Over the last couple of years, we have been getting our lenders more comfortable with the notion of selling deposits, because we had not done that for the first 15 years of our existence. Our lenders are doing an excellent job, and our treasury management team and our deposits team are doing a fantastic job taking those leads and moving those into actual active accounts. Over the next three years, I would expect us to be in the 10%+ range simply by doing more of what we are doing today—selling checking accounts with the new loans that we are opening. We are looking at different partnerships with affinity groups. We are introducing merchant services, which is obviously very important to many small businesses and commercial customers. That is in launch now, and it is going to accelerate our ability to build our checking deposits. A 10% target is not really heroic. If you look at the industry, it is at 20% to 25%. For us to get to 10% or more is very achievable, and it is going to have a meaningful impact on the stickiness of our relationships and our funding profile. Eric Spector: Great, that is helpful color. I will step back. Thanks for taking the questions, and congrats on a good quarter. BJ Losch: Thanks. Operator: Next question will be from Janet Lee at TD Cowen. Please go ahead, Janet. Janet, can you please unmute your line? Getting no response, we will move to Timothy Switzer at KBW. Please go ahead, Tim. Timothy Switzer: Hey, good morning. Thanks for taking my question. The first one I have is the trajectory of SBA loan sale volume over the rest of the year. Was there any holdback at all this quarter? It is still up year over year, but did you intentionally retain some loans again this quarter? Held-for-sale loans went up, and I am just trying to get an idea of what the pace of loan selling could look like over the rest of 2026. Walter Phifer: Great question. Hey, Tim, this is Walt. We did not intentionally hold back. What we did see was quite a bit of production come through in the last week and a half to two weeks of the quarter. Typically, anything that comes through at that point in time, you cannot sell and settle within the current quarter, so it gives you a nice head start as we go into the next quarter. I think that is what you are seeing in the held-for-sale loan volume. As far as the trajectory, I mentioned it in my prepared remarks. We have shown this over the years where Q1 is our lowest, and then we have a slight stair-step in Q2 and Q3 and Q4, and then we normalize again in Q1 and start that stair-step again. If you look back at prior years, that will give you a sense of what that stair-step could look like. Timothy Switzer: Okay, interesting. Any color you can provide on what drove the 1% increase in the gain-on-sale premium? Walter Phifer: This is Walt again. It is really a function of mix. We did see a little bit higher Live Oak Express origination in Q1, as you saw in the deck. As BJ mentioned, Live Oak Express gets 9% to 13% premiums—that helps. USDA loans, the guaranteed portion, we were able to sell quite a few more of those again in Q1. They have been getting a nice premium as investors buying those loans start to think of potential downward rate protection, so there is a little bit more demand for that paper right now as well. Broadly, that 106% to 107% range from a premium standpoint, as we have averaged over the last five quarters, I will maintain that going forward. Timothy Switzer: Got it. And then the last one for me—how has Live Oak Express been trending versus your expectations? You talked about the $750 million annual target. Previously, you mentioned $1 billion as kind of an aspirational goal. Has that changed, or is it more just the timeline to achieve these? BJ Losch: I think we are just being conservative, Tim. I do expect to go past the $750 million production. Timothy Switzer: Got it. So you are seeing the demand that you were expecting so far. BJ Losch: Yes, for sure. If you look at the slide, the SBA changed the SOP back in 2025, which essentially went back to what the rules had been before. They had loosened the rules for smaller-dollar loans, then tightened them back up, which caused a little bit of a backup in our ability to generate those loans efficiently. As you can see, we are on the rise again. I feel highly confident in our ability to generate that kind of volume. We are now in pilot with an AI-native loan origination platform, which is huge. Once that is fully rolled out, it is going to make it simpler, easier, faster, and more efficient for our people to serve our customers and for our customers to get the capital that they need. With the changes in the SOP and competitors dropping out of the market, particularly on the lower end because of credit quality issues, we are finding more opportunities to do more business in the $500 thousand and below. I think that number is going to reaccelerate sooner rather than later. Timothy Switzer: Great. That is good to hear. Thanks for all the color. Operator: Ladies and gentlemen, a reminder to please press star 1 if you have any questions. Thank you. Next, we will hear from David Feaster at Raymond James. Please go ahead, David. David Feaster: Hey, good morning, everybody. I wanted to go back to the credit side for just a second. You talked about how over a quarter of the nonaccruals are in verticals that you have exited. What verticals are those? How much remaining balance do you have in those verticals? And what led you to exit those? Is it risk that is structurally too high in those segments, we did not have the right team—just curious if you could touch on that. Michael Cairns: Good morning. Michael Cairns here. Happy to talk about that. One of the advantages of being in different specific verticals and having industry expertise is that we have insights to headwinds—we see things coming early. That is a big part of what my job and our credit team is focused on: working with the servicing team, working with the lenders out in those industries, and assessing what is going on. That is an ongoing process for us. Over the years, we have made the decision to exit several verticals, adjusted verticals, and added new verticals—that is an ongoing process. The vertical, or segment of a vertical, that we are really highlighting in the increased small uptick in nonaccrual percentage for the quarter is the whiskey distillery segment, which is a niche component of our former wine and craft beverage lending group. It is a really small segment of our balance sheet, but it is disproportionately impacting the nonaccrual percentage this quarter, and that was the big mover. That is not a vertical that we decided to exit this quarter; we exited some time ago when we saw the issues there—the primary driver being a consumer preference change and demand for whiskey and an oversupply in that product coming out of COVID. We saw that coming and made the adjustment. This quarter, we had to move some of those loans to nonaccrual as we are working through our workout strategy. Our special assets team has been all over this for some time, as has our servicing team. Again, it is a small component of what we do and something we are working through. On nonaccruals as a whole, those loans are individually assessed by our special assets team and our credit team on an ongoing basis. Once you are classified as nonaccrual, we are pegging a potential loss there, and that is built into our reserve coverage. You can look at components like nonaccruals and past dues, but when you look at the larger picture and you want to know how management and credit feel about the portfolio going forward, the ACL coverage is a pretty good indication of how we feel, and we feel good. Our portfolio is very stable at this point. David Feaster: That is helpful. You talked about an AI origination platform. I know you have a lot of investments ongoing, through Canopy and other things you are developing. You are always early to leverage new technologies, and importantly, you have the culture and expertise to do so. Where else are you seeing opportunities to utilize AI? We have talked about embedded finance. What are some of the exciting things on the horizon in both of those areas? BJ Losch: Hey, David. It is BJ. Our biggest platform is lending, and a year and a half ago, we started on this journey to get on an AI-native platform because we saw the future coming. I feel like we are going to be quite a bit ahead of others by moving quickly. Having our most important platform in an AI-native world is going to be really good. The way we are approaching AI may be different—it is how we are doing it. We wanted to start with a bottoms-up way of introducing AI to our people. We made AI capabilities and tools available to all 1 thousand of our employees right away and asked them—Chip charged them in our town hall—to start iterating, start playing with AI, start doing it in your individual work and in your teams to make it better. Today, we have over 300 AI agents that have been built by our people, not necessarily by our technology team, but by our people themselves, because they are curious. Starting with a bottoms-up approach to make it accessible and not just some scary thing has been a big deal. Ultimately, we are going to be an AI-native bank. We are going to put everything we can on an AI platform in our operations. Over time, everybody is going to do that. Our end goal is not just to be AI-native. Our end goal is to make it better for the customer and create a customer experience using AI—partnered with our people—that nobody else can match, and to have an engine in our back office that is streamlined in the most effective and efficient way possible with AI. There is a lot going on—use cases like everybody else—but we are going department by department to create the most unique customer experience we possibly can while building an AI-native franchise. David Feaster: Maybe last one for me, another high-level one. You have a lot going on. This is all going to support growth, operating leverage, and profitability. How do you think about a longer-term profitability target for the bank, assuming we get a larger NIB contribution and more checking account growth, Live Oak Express does $750 million plus in production, growth remains low to mid-teens, rates stabilize, and AI starts to really materialize? How do you think about the profitability profile of Live Oak as this all starts to hit stride? BJ Losch: Fifteen and fifteen. That is what we talk about all the time, David. A 15% return on equity with 15% earnings per share growth. I think we are on the precipice of being able to do that. Our credit quality is getting better. Our key initiatives are accelerating. Our lending engine continues to be one of the strongest in the industry. Our expenses are well controlled. I feel like we are about to hit our stride, and the plans we put in place over two years ago to make that happen are starting to happen. Hitting a 15% return is one thing. Having 15% earnings growth in one year is one thing. Being able to do it over a sustained period is something pretty unique, and that is exactly what we are trying to build. We are constantly looking for things that will augment our core lending engine and add on to it so that over time, we always have something next to drive the next generation of our growth. I firmly believe we have it right now with checking and Live Oak Express carrying us over the next several years. We are still working on embedded banking, which we are very excited about, and we have endless possibilities with AI. Live Oak Bancshares, Inc. is better positioned than we have been in years to generate top-tier returns. David Feaster: That is pretty exciting. Thanks, everybody. Operator: Next question will be from Janet Lee at TD Cowen. Janet Lee: Morning. Could you talk to us a little bit more about where you think we are in the small business credit cycle? It looks like you are pointing to some improving and stable small business default trends. The non-guaranteed NPAs ticked up a little bit—maybe a lot of that is driven by the verticals that you exited. Where do you think we are in the process? Is it getting better, or because of the macro uncertainty we are in, are you seeing a little bit more pressure, if at all? Michael Cairns: Michael again here to take that question. I will go back to the slide that BJ walked us through where you can see the industry trends. The industry is still grappling with some headwinds, whereas we have been flat for some time. I credit that to being proactive in addressing and recognizing the environment we were in. The driver of that credit cycle was really about rapidly rising interest rates on our customer base. We underwrote loans in record low interest rates and then experienced really high interest rates. For Live Oak Bancshares, Inc., that component of this cycle is largely behind us. Eighty-five percent or more of our portfolio was underwritten at interest rates that are higher or at least on par with where we are today. We have gotten past that interest rate risk that was a big component of the cycle. On economic uncertainty, every morning there is a different headline. We are having conversations with our customers on the front end and in our portfolio about fuel costs and how that can impact their business. If this is prolonged, it will impact the small business community across operating expenses. We do not have verticals that are focused in industries heavily dependent on fuel costs as a big component of their operating expenses, so it will be an indirect impact. We underwrite to higher debt service coverage covenants and build in that cushion because we know inflationary events will happen—that is a big part of what our underwriting and credit team do. I am watching it closely, we are talking about it a lot, but I feel pretty good about where we sit now. Chip Mahan: Michael, you will remember, if you look at slide six, that in the previous administration the SBA loosened the rules. There were a lot of lenders that took advantage of that and the gain-on-sale dollars. We stuck, as always, to our guiding principles of soundness, profitability, and growth. That is part of the reason for that slide being there. Janet Lee: Got it. Thanks for all the color. For the first quarter, expenses came in much better than where the street was, despite some typical seasonal headwinds. You are also investing into your franchise, and you talked about the AI initiatives. Can you speak to any updated thoughts on your expenses, how the expense trajectory should look for the rest of 2026, or whether there is an efficiency ratio target? How should we think about that aspect? Walter Phifer: Hi, Janet. This is Walt. I think you hit the nail on the head. In Q1 expenses, we had some things internally that we were working through at the end of last year that helped bring that down here in Q1. If they average over the last five quarters, it has been just above $85 million. That is kind of in line with what you see here in Q1 as well. That is a good run rate moving forward for us, with maybe slight upticks here and there as we think about potential areas where we can invest. There is always a balance. We are an innovative, high-growth company, so we want to make sure that we are supporting growth across our key initiatives, especially Live Oak Express and business checking. The way we evaluate potential investment in that space is, what can we do to accelerate that, because, as Vijay mentioned, there is quite a bit of earnings accretion that those two initiatives specifically can drive. As we invest in that space, there are always opportunities to get more efficient in other spaces, and that is where AI comes into play. Largely through 2026, I think that balances out. Expenses kind of stay where they are now, plus or minus, on a quarterly basis through the rest of the year. Coupled with revenue growth, we will see our efficiency ratio trade down to the low to mid-50s. That is exactly the trend we have been positioning ourselves to achieve, and hopefully we continue that past 2026 and into 2027 and beyond. Janet Lee: Got it. Thank you. Operator: At this time, we have no other questions registered. I would like to turn the call over to Chairman and CEO, Chip Mahan. Chip Mahan: That is a wrap, guys. We enjoyed it. See you next quarter. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time we ask that you please disconnect your lines. Enjoy the rest of your day.

24天前Insight Analytics约5分钟阅读

AXP 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 2026 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramachandran. Please go ahead. Kartik Ramachandran: Thank you, Darryl, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results; and then Christophe Le Caillec Christophe, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve. Stephen Squeri: Thank you, Kartik. We had a very strong start to the year. Revenue in the quarter grew 11% or 10% on an FX-adjusted basis and EPS was $4.28, up 18% over the prior year. Card member spending grew 10% on a reported basis, and this is the highest quarterly growth in 3 years, driven by strong growth across both Goods and Services and T&E. We continue to see strong demand and engagement with our premium products across our customer base. Within our U.S. Platinum portfolio, we're seeing accelerated spend growth following the refresh while maintaining high retention rates after the fee increase went into effect. Millennial and Gen Z spending growth continues to be robust and globally over 70% of new accounts are on fee-paying products. International remains our fastest-growing segment with billings up double digits for the 20th consecutive quarter on an FX-adjusted basis. And consistent with what we've seen for several years, our credit performance continues to be excellent and best in class. Based on our strong results to date and our confidence going forward, we've decided to increase our investments in marketing and technology to capitalize on key growth opportunities and build on our momentum. Looking ahead, we're reaffirming our full year 2026 guidance of 9% to 10% annual revenue growth and EPS of $17.30 to $17.9. While the macro and geopolitical environment remains uncertain, we believe we are well positioned to continue delivering strong results, given our focus on premium customers, our spend in fee-centric model and very strong portfolio quality. Our performance once again demonstrates the power of our growth strategy as we continue to execute our proven playbook. A key part of the playbook is the ongoing investments we're making to enhance our differentiated membership model, which is fueled by our high-spending Card members, the value added by our world-class partners and the innovations and service delivered by our talented colleagues. One of the most compelling features of Amex membership is the unique experiences and access we offer our card members in dining, sports, entertainment and more. Sports are a powerful engagement engine across our customer base. In Q1, we announced several agreements that added to the relationships we have with over 50 top-tier leagues, teams, venues and events around the world. In March, we announced a multiyear global partnership with the NFL, making American Express the League's official payments partner beginning with the 2026 season. This broad-based sponsorship includes exclusive card member experiences, ticket access, on-site activations and other perks at high-profile league events, including the NFL Draft and the Super Bowl. We're very excited about the opportunity to join with the NFL as they expand internationally. With our large global footprint, positioning us well to support their growth while engaging Amex card members around the world. We also announced new multiyear sports and entertainment agreements with MetLife Stadium, Mercedes-Benz Stadium and teams in play there. And we renewed our sponsorship with the NBA, along with several agreements with NBA teams across the country. In addition to our sports sponsor partnerships, we continue to enhance Amex's membership with recent openings and plans for new or expanded airport lounges in Las Vegas, Boston, Charlotte, Dallas Fort Worth and New Delhi. And the expansion of our fine hotels and resorts and hotel collection programs with an additional 300 properties recently accepted into the program out of an approximately 1,400 who apply. Another key element of our strategy is the ongoing innovation of our product value propositions, and we continued our progress on this front as well. In the quarter, we announced a road map for a series of commercial products and solutions that we're planning to roll out in the U.S. In 2026 for businesses of all sizes, starting with the launch of our new Graphite Business Cash Unlimited card. The road map includes plans to release 8 newer enhanced products, benefits and capabilities including a corporate cash back card and expense management software, making this the most significant 1-year commercial product expansion in the company's history. Together, these new offerings will give our business customers what they want, card products that combine high spend capacity and great value plus an integrated suite of tools that will help to manage expenses and cash flow, gain insights from their spending and automate day-to-day tasks, all backed by American Express' world-class global customer service. In addition to these announcements, we further the development of our AI capabilities in the quarter. As I said in my recent annual letter to shareholders, while it's still early days, we are embarking on a new era of commerce, where AI-powered agents can make autonomous decisions on behalf of consumers and businesses. But in addition to offering speed and convenience, Agentic Commerce brings added complexity and risk. This plays directly to the strengths of our -- to our strengths of trust, security and service. Given our closed-loop network that provides an end-to-end view of transactions, and supported by the investments we've been making in our technology and risk capabilities, we are well positioned to deliver intent-driven authorizations, enhanced fraud protection and strong security features to help protect our card members and merchants. Earlier this month, we introduced the Amex Agentic Commerce Experiences or ACE Developer Kit, which will enable the integration of American Express cards into AI-powered transactions with trust and control. Along with the kit, we announced Amex Agent purchase protection, an industry-first commitment to back our card members by protecting registered agent purchases. We have more AI-powered products and capabilities under development that will roll out this year to help transform and grow our business. This includes upcoming announcements with leading AI companies to make our membership assets discoverable and actionable on their platforms and building proprietary AI-powered experiences across our own platforms. In summary, our business continues to perform at a high level, exhibiting continued momentum from executing our proven strategy and making meaningful progress on the strategic use of AI to drive long-term growth and efficiencies. With our loyal premium customer base, our talented customer-focused colleagues and a differentiated business model, we are confident in our ability to deliver long-term sustainable growth. Now I'll turn it over to Christophe for more details about the quarter, and then we'll take your questions. Christophe Le Caillec: Thanks, Steve, and good morning, everyone. Q1 was a very good quarter. Revenue growth accelerated to 11% or 10% FX adjusted, with broad-based growth across revenue lines. Spend growth stepped up to 10% or 9% FX adjusted, the highest level we've seen in 3 years, and we continue to see healthy demand for our premium products with over 70% of new accounts acquired on fee-based products. Credit performance remains excellent with both delinquency and write-off rates still below 2019 levels. And we continue to invest across marketing, technology and our premium value propositions to support long-term growth. We delivered very strong returns in the quarter with EPS of $4.28, up 18% year-over-year. Turning to Billed business on Slide 4. Overall spend was up 10% FX reported this quarter. That momentum reflects an acceleration in U.S. Platinum spend following the refresh last year and the benefit of our global footprint, with tailwinds from FX and high growth in international markets. These results demonstrate the strength of our premium focus and our diversified business. Spend growth was about 1 percentage point higher than Q4, driven by T&E spending, up 9% FX adjusted, while goods and services growth remained stable, up 8% FX adjusted. Retail spending kept up its momentum, up 11% FX adjusted, and spending of luxury retail merchants was up 18%, reflecting the continued strength of our premium customer base. Restaurant spending was up 9% once again this quarter. At the same time, airline spending picked up, growing 8% -- growing 8%, sorry, driven by higher growth across consumers, SMEs and large corporates. These trends sustained throughout most of the quarter, but we did see airline growth soften in the last few weeks of March and into April, driven by travel disruptions from the Middle East conflict. In the U.S., we continue to see strong demand and engagement on platinum following the refresh last year, with accelerated spend growth on the portfolio, high retention rates and continued strong new customer acquisition. And we continue to capture a high share of the spin wallet from both new and tenured platinum customers. The refresh is also driving high levels of engagement with our membership assets by U.S. consumer card members. Lodging spend on our fine hotels and resorts and hotel collection programs is up 50% year-over-year. And in dining, spin at U.S. resi restaurants is up 20%. Looking at our international business, ICS had another strong quarter, up 13% FX adjusted, including the impact of the weaker dollar, spend growth was up 20%. Looking at New Card acquisition, we acquired 3.1 million new COGS in the quarter with continued momentum in acquiring younger customers and attracting new customers onto our fee-paying products. Turning to balance growth. First, a quick note on presentation. The metrics shown on Slide 13, which we previously referred to as total loans and card member receivables is now labeled total balances. Starting this quarter in our financial statements, we have combined card member loans and card member receivables into a single line called card balances, reflecting the evolution of our products through lending features like pay over time. This is consistent with how we've been presenting balances in our earnings slide for the past few years. Total balances increased 7% year-over-year FX adjusted, largely in line with spend growth. As a reminder, there is about a 1 percentage point impact on balanced growth from the small business co-brand held-for-sale portfolios again this quarter, as we previously disclosed. As we exit this portfolio over the course of this year, we will see impact of certain metrics at the consolidated level and within the Commercial Services segment. Most notably, we expect a low single-digit impact to spend growth in SME starting in Q2 until we lap the portfolio exits. At the same time, we expect a negligible impact to pretax income. These impacts were incorporated in the guidance we provided for the year. Turning to credit on Slide 14. Credit performance remains very strong and stable. Delinquency rates were flat to last quarter while write-off rates were slightly down. These results are consistent with our expectations for generally stable credit metrics throughout 2026. Overall provision expense of $1.3 billion included a reserve release of $24 million. The reserve release this quarter was mostly driven by lower ND card balances versus Q4. Our reserves also reflect uncertainty in the macroeconomic environment. Turning to revenue on Slide 16. Revenue was strong this quarter, up 11%. We saw momentum across revenue lines with net card fees, NII and service fees and other revenue, all growing at double-digit rates again this quarter. Net card fees continue to be our fastest-growing loan, up 16% FX adjusted, in line with Q4. We expect card fee growth to pick up as the year progresses as we see the impact from Platinum refresh exiting the year in the high teens. Importantly, about 1/4 of the overall U.S. consumer Platinum portfolio has been built for the higher annual fee, and we have seen no change to our very high retention rates relative to pre refresh. Net interest income was up 12% FX adjusted again this quarter, growing faster than balances. Notably, we are driving strong growth in NII, while growing balances, largely in line with spending, and while maintaining best-in-class credit results. In fact, write-off dollars are up by only 4% year-over-year, while NII is growing at double-digit risk pace. We also continue to see strong demand for our deposit products with high-yield savings and direct CD balances up 9% year-over-year. As we see -- as we see with our premium card products, our savings products is resonating with millennial and Gen Z customers, which make up over half of the accounts and about 1/3 of the balances. Looking ahead, we expect NII growth to continue to outpace growth in balances for the year. Turning to expenses. The VC to revenue ratio was 44.7% this quarter, in line with our expectations. There is some quarterly variability in the ratio given seasonality. For the full year, we continue to expect the VCE to revenue ratio to be lower than Q1, around 44%. The step-up versus the first half of last year reflects the investment we made in the value proposition of our U.S. Platinum cards when we refreshed these products last year. Marketing spend was $1.5 billion this quarter, flat to last year. Given the strong performance we saw in Q1 and our confidence in the balance of the year, we plan to increase our marketing investments to support long-term growth. We now expect marketing expenses to grow in the mid-single digits for the full year. Moving on to capital. We returned $2.3 billion of capital to our shareholders including $0.7 billion of dividends and $1.7 billion of share repurchases. We continue to deliver very strong returns with an ROE of 35% this quarter. Our strong ROE enables us to return high levels of earnings to our shareholders around 75% over the past 3 years. And this quarter, we increased our dividend by 16%, demonstrating our confidence in the sustainability of earnings generated by our model. As we think about our capital requirements, we view the recent Basel proposals as an improvement from the prior proposal. Under the rules as proposed today, we expect the impact of capital requirements to range from neutral to modestly positive. As we evaluate the proposal in the CapEx or other regulatory considerations, we are encouraged by the first discussion of modernizing the tailoring framework and resulting bank category designations. We remain focused on maintaining a strong balance sheet and capital position. We plan to continue to return the excess capital we generated to shareholders while supporting growth and we do not expect a material change to our capital management approach in the near term. That brings me to our 2026 guidance. We feel really good about our momentum starting the year and our first quarter results. We are seeing stronger earnings than expected, and we have decided to increase investments in marketing and technology. As a result, we are reaffirming our full year guidance of revenue growth of 9% to 10% and earnings per share between $17.30 and $17.90. With that, I'll turn the call back over to Kartik and we'll take your questions. Kartik Ramachandran: Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just 1 question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Ryan Nash with Goldman Sachs. Ryan Nash: Congratulations on all the new partnership wins. Hopefully, it results in more victories for the giants and jets. Maybe, Steve, to kick off, clearly, we're seeing really strong performance in overall spend. I guess for starters, do you think the momentum that you're seeing in the business is enough that we could start to trend towards that aspirational 10% revenue growth, is that on the table for the year? And you talked about increased marketing and tech spend. Can you maybe just talk about what that's offsetting in terms of where was performance tracking better than expected? And where are you using that to offset? Stephen Squeri: Yes. So I don't know about the jets and the giants, but we -- that will have to play itself out. As we think about -- and let me go -- let me look at this at the beginning here. But as we think about sort of the year and we think about the spending, it continues to be strong. And look, we just had the strongest quarter of spending that we had in the last 3 years. And obviously, spending will drive higher revenue. When you look at -- and I laugh a little bit about sort of the aspirational 9% to 10%, if you look at the last few years, whether it's FX reported or it's reported or FX restated, we've kind of hit the 10%. And our guidance this year is 9% to 10%, and we've just delivered a quarter of 11%. So you can make your own judgment on that. But we feel really good about that aspiration. If we didn't, we wouldn't put it down. So I think what you're seeing is momentum that I believe if it continues, will allow us to achieve that. When you look at the increased investment in technology and marketing, you have regulators in this business. And one of the regulators is making sure that we return what our shareholders are looking for. And so every year, as we go through our processes, we have ROI cutoffs. And we believe what I would say are really good investments on the table. And so when you have an [indiscernible] delivery like we just had in the first quarter, it gives us that confidence that we can move those ROI thresholds down and continue to hit within our guidance range. And as I think about this business, the way I think about this business is, I don't think about it for this year, I think about it the next year and the year after. And what I'm trying to do and what we're trying to do as a company is to build and continue to build on that momentum. And so for me, I look at where we are today, it's a function of the decisions that we've made in the past and those decisions that we made in the past are reinvesting in the business versus just always dropping into the bottom line. And so that's how we said it. As far as technology goes, we've been very fortunate with some of the results we're seeing from an AI perspective and that we're getting about 30% benefit with our programmers from a coding perspective and testing perspective. But what that has done is allowed us to get to more stuff. And when you have a company like ours in so many different areas, whether it's the many countries we're in, the merchant business, the network business, the consumer business, corporate or small business, there is just a huge appetite for technology. And so the overperformance we've had gives us an ability to get to those things a little bit quicker, combined with the AI that we've had -- the AI efficiencies that we're seeing. So look, I feel really good about where we wound up this quarter and against a backdrop of an unstable world at this point. But against that backdrop of an unstable world, we saw record billings Christophe mentioned luxury spending in retail up 18% in front of the cabin is up 12%, and we're seeing great engagement from our platinum refresh. So I feel pretty confident about the rest of the year. Christophe? Christophe Le Caillec: So maybe I can take the second part of your question, Ryan, around the offset in terms of this incremental investment. So you might remember the conversation we had at the end of the quarter, right? We had lot of spend momentum. One of the questions, one of you asked is like how are you thinking about 2026 and say, we'll see. We don't know. We're seeing that we're maintaining momentum. We even have stronger momentum when you look at billings. So that's the check. The other thing is that when you study the P&L, there were also a few unexpected items either on operating expenses. I'll mention 2 that went in our favor. One is a core decision regarding VAT in Europe. So we booked that. And there was also a gain that we registered as we completed the acquisition of the half of the joint venture we had in Switzerland. So that allowed us to book a small gain. So the completion of that acquisition, the court case in France give us a little bit of more confidence in terms of expenses and releasing investment capacity on marketing and technology. Operator: Our next question comes from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani: I guess I have a follow-up on the bill business trends. It is quite remarkable how strong they were in the midst of all this geopolitical activity in the backdrop. I know Christophe, you mentioned there is some softness in airline spending that you've seen over the last few weeks. I'm just curious, is there a way to quantify that? And sort of is it material enough that -- it doesn't sound like it, but that it could deter some of the upside? And then I'm just wondering, is there any other impacts that you've seen across the spending cohorts as a result of the higher fuel prices? And then I guess offsetting that is the momentum you have in platinum. So I'm just trying to think about the interplay between these 2 factors? Christophe Le Caillec: So on airline softness, I mean, yes, we saw definitely noise towards the end of March, beginning of April. And where it was the most visible is in the volume of refunds that were still being processed. It's always hard to know exactly what happened with these refunds is that people booking on a different schedule, different airline, but we definitely saw a spike in terms of customer reform. This being said, the impact is not that large. And I don't think that it is something that you should worry too much about. I'll take advantage of that to mention as well that this is where our assets, both in terms of TLS or the benefits we offer in airports really were valuable to our card members. We were able to rebook I think, something like 18,000 of our customers who have tickets to the Middle East and we also saw a spike in terms of engagement with our partner, clearer at the airport. So definitely, I don't think this is something that should create an impact to our overall billing trends. In terms of fuel, yes. I mean we saw the average ticket price go up, and we definitely saw an increase in terms of the fuel spend. Now fuel is less than 2% of the overall bill business. So the impact is just not very visible on the overall bill business, and it's really, really hard as well to see if there is any offset anywhere. And when we study that at the different product levels, cohort levels, geography, we don't see any discontinuity. And we see as you mentioned, strength, momentum, stability across the board and across the portfolio. Operator: Our next question comes from the line of Don Fandetti with Wells Fargo. Donald Fandetti: Steve, can you talk a bit about your confidence in enhancing the expense management offerings for the middle market SME customers? And I guess, is this an area of focus in terms of the sort of incremental investment? Stephen Squeri: Yes. So thanks, Don. Yes, look, we'll -- in the next few months, we'll relaunch or launch center. And it certainly has been an area of focus for us. And I think when you look at that expense management software. If you take the commercial business and break the commercial business into 3 parts, small business, middle market and large corporate and global, I think where we're seeing a lot of strength is truly in small business and in large and global where the expense management, I think, will really come in is in those middle market companies, especially those small businesses transitioning to middle market. And that's somewhere that we will release, I think, will help us solidify our position that we have there. Additionally, to the software, and you may have seen, we just acquired a company called HyperCard, we brought in a group of people who we've been working with for a number of years who are really in expense management space and we have a lot of expertise in expense management agents and we'll be integrating those into center. And so as we think about our overall corporate commercial portfolio, it's a combination. It's 8 new products, benefits and enhancements that we're releasing through. So it has been and continues to be an area of investment because we still see it as an area of opportunity for us. I mean, we're known for small business, middle market and corporate, still a leader in that space, but we are investing now significantly in that, obviously, with the center acquisition over a year ago with the HyperCard acquisition and just the investment that we're making. So it's an area of focus and will continue to be an area of focus for us. Operator: Our next question comes from the line of Erika Najarian with UBS. L. Erika Penala: I just wanted to make sure that your investors are taking away sort of the right message on the revenue and expense dynamics. And I know Ryan tried to get into this in his question, but it sounds like from everything, Steve, that you said that your -- you've hit 11% revenue growth. Clearly, you're trending above that 9% to 10%. And given that you are at the top or a little above that revenue range, then you're reinvesting that back to the company, and that's why you're reiterating the EPS. In other words, the key takeaway from this quarter is really that sort of upside to revenue. Is that sort of the correct message that your investors should be taking away? Stephen Squeri: Well, I think you have a couple of things. I think the message our investors should be taking away is that we're reaffirming guidance of 9% to 10%. I think while we had the 11% growth this quarter, one thing I will point out, as the year goes on, the Amazon and the Lowe's book will roll off. That will have a slight drag on revenue, zero impact on PTI. And so I think what you should take away from this is that we're reaffirming the 9% to 10%, and we're taking the over delivery from an EPS perspective and investing that back into the business. Operator: Our next question comes from the line of Mark DeVries with Deutsche Bank. Mark DeVries: I appreciate that it was a relatively modest acceleration in build business and commercial services. But are you seeing any green shoots there that give you optimism about a bigger recovery and just kind of the organic spend there? And what kind of incremental tailwind might you get from this kind of record year of product launches across the commercial suite? Stephen Squeri: Well, I think that one of the green shoots that we're seeing is organic is not as stressed as it has been in the past. And while we had a minor uplift sequentially, we think that as you think about the product enhancements that we've been doing is that, that will play out a little bit more over the longer term as opposed to this year. So those products take some time to get into the marketplace. We just launched the cashback product from a small business perspective. We've got the cash back better from a corporate -- cash back product from a corporate perspective, which comes out later this year. So I think as we go into next year, we expect that to give us a bit of a tailwind into next year, not as much of an impact for this year. Operator: Our next question comes from the line of Craig Maurer with FT Partners. Craig Maurer: I wanted to ask about the Platinum Refresh for a second. It's -- we're going to lap that in September. And I'm curious if you can -- if you can separate perhaps how much lift you got in spend from that refresh from existing card members versus new customers? I'm trying to get my hands around how much of a decel we might see as you grow over that in terms of billed business growth later in the year? Christophe Le Caillec: So it's a good question. I guess you're looking at the -- one of the slides that we have with U.S. consumer platinum accelerating by 6 percentage points. The majority of that, given the size of the portfolio is coming from tenure card members. Although we're very pleased with new account acquisition, the majority of that 6% lift is coming from the back book, and that's a very strong sign. As you think about projecting that into 2027, we'll see what happens. But I don't think at this stage, we should expect like a further acceleration in 2027. I expect that step-up to maintain into 2027. But I don't think that you should expect to see another one. So we're going to lap that at some stage in '27. Operator: Our next question comes from the line of Rick Shane with JPMorgan. Richard Shane: Look, a really big part of the journey in American Express over the last decade is reinvigorating your products and penetration to younger cohorts, and it's been a big part of the success here. I am curious as we think about sort of a more uncertain, more volatile economic environment. If you think about that younger cohorts, are they more sensitive to changes that we see, whether it's in terms of spending pattern credit? Is there greater sensitivity sort of beta to the cycle in their behavior versus your more seasoned cohorts? Stephen Squeri: I think ultimately, there'll be less, not more. And I'll tell you why. I think the younger generation is more equipped for the changing dynamics in the world today that, in fact, maybe more middle-aged people, maybe more people, Christophe and my age, I think they're more adaptable, more technology savvy, more into what's going on in the marketplace today. So I feel a lot more comfortable having a card base that is actually skewed a little bit younger than one that would be what you used to see 10 years ago. I think the other thing that's really important is to understand that when you look at our -- when you look at the millennials and you look at the Gen Z that's in our card base, it's not every millennial and Gen Z. It's the creaming the crop. And we show the slide a quarter ago, 2 quarters ago, where our millennial and Gen Z credit performance is better than the industry is Gen X and baby boomer credit performance and is significantly better than the industry's millennial and Gen Z performance is. So one of the things that we've seen with the millennials over time is we get [indiscernible] high share of their -- we get a high share of their wallet right out of the gate. But what we've seen with millennials is as time goes on, that high share translates into even more spend as they continue to move through their lives and continue to be successful, so forth and so on. So I actually feel a lot more comfortable with the SKU of our base today, then if you would have asked me this question, if my base hasn't skewed because I'd be more concerned with my GenXers and my boomers. I mean the reality is when you look at it, and we showed a slide on the consumer, you see the Gen Z is up 38%. The millennials are up 13%. Our GenX are actually really strong at 8%, but then you look at the boomers up about 4%. And so I think we're -- we will continue to depend on that for our growth and just look at our card acquisition. So I feel very confident on who we're acquiring because of the characteristics that they possess and the characteristics that they have to deal in an ever-changing world. So that's how we think about it. Christophe Le Caillec: Maybe I'll have one data point, Steve. And I mentioned it in my remarks, but if you look at like in terms of like the quality of the GenZ and millennials that we attract to the franchise, one interesting data point is to look at the profile of the high cell customers. And I mentioned that half of these customers are actually Gen Z and millennials. Of course, they represent 1/3 of the balances or they have lower balances. But if you had asked me a few years ago, where are the balances going to come from, where are the account is going to come from. I wouldn't have told you that I'm confident it's going to come from the younger cohorts. And -- but that's what we're saying, right? So it tells you something about the profile of these younger customers that are joining the franchise. They have savings. Operator: Our next question comes from the line of Rob Wildhack with Autonomous Research. Robert Wildhack: I wanted to ask about the relationship between spending growth and balance growth. Back in January, I think the commentary was for balances to grow in line with spending. And I know you've got the co-brands rolling off there. But if we could normalize for that, how do you think about balanced growth if the acceleration in spend from this quarter continues, would you expect to grow balances concurrently? Or do you kind of like the balance growth at the level that you laid out back in January? Christophe Le Caillec: Yes. I think first, I like it when I see spend accelerates. And the fact that balances are growing at a slower pace, like 7%, some of it is just rounding. So I would not interpret it too much. The other thing is that typically balance lag. The final thing is that we're not chasing balance growth. We're chasing customers who are going to spend with us. And if they feel the need to revolve, then we're going to put in front of them the best possible products so that they can revolve at the pace they want, including pay over time, which typically has shorter revolve durations. And so that's the kind of revolve that we like. So I'm not too concerned about that. And you've seen that 7% kind of like stable over the past few quarters. What you've seen as well is, over the last few quarters, NII outgrowing that balanced growth, and I think has been stable in that 12% range as well. And some of it is coming from what I just mentioned a few minutes ago, we are successful at funding those balances with either high-yield savings accounts that are a cheaper funding source for us, and that's helping the NII growth as well. So the dynamic is very stable and consistent over the past few quarters. Operator: Our next question comes from the line of Jeff Adelson with Morgan Stanley. Jeffrey Adelson: I just wanted to follow up on Rick's question. I appreciate all the color and understand, obviously, that you've got a healthier consumer in there. You view the Gen Z more adept at handling these changes in technology. But just given the market focus on AI jobs-related displacement. Just curious if you're seeing any sort of impact in the customer base today? Or just if you have any sort of views on what that trend might look like for you over the next few years? Stephen Squeri: Yes, we're not seeing any impact at all on this at all. And maybe I'll just make a couple of comments. I think technological change over the years, no matter what it has been, whether it's been the Internet, the cell phone, what have you and even eliminating the word processor and going to desktop PCs has always brought a plethora of new jobs, number one; and number two, has fuel GDP. Now will AI lose some jobs? Yes, it would. But who would have thought about influencers, podcasters, web developers, AI programmers years ago. Probably nobody. And if you think about the jobs that are out there today, and where these jobs are, can I think more Gen Z and millennials are going to be more trained for this and more ready for this. And so will jobs go away. Yes, jobs will go away. A number of the service jobs will go away. I mean, even at American Express today, if you look at our volume increase and you look at our ratio of volume to how many people we have on the phones, it's decreased. Not as many people want to talk on the phones and plus we're making the people that are answering the phone is more efficient because they have AI tools at their disposal, whether that's for travel or whether that's for card servicing. We'll always have a representative there that you can call up and talk to, that's never going to go away from American Express. We're always going to be able to serve our customers how they want to be served. But I think from an AI perspective, yes, you'll see a bunch of jobs go away, but I think you'll also see a tremendous creation of new jobs. And I think this cohort will be much more likely to fill those jobs and create new jobs, new opportunities. The last thing I'll say is a lot of people talk about white collared workers. Our base is not just white collared workers. Our base is premium consumers and premium small businesses that from a consumer perspective, want access to experiences and want access to service and special offers and things like that. And that runs the gamut. I mean, that runs the gamut for the individual entrepreneur to the TikToker and to the influencer and to the podcaster, to as well as people that are research analysts, investors and hedge funds and everything else. So I think that will be there, and we'll see how it all plays out. But again, technology has, over time, fueled GDP, not crush GDP. Operator: Our next question comes from the line of Darrin Peller with Wolfe Research. Darrin Peller: Steve, you recently launched your Agentic Commerce Experience developer kit, I know you wrote about it at length in your letter. So just given our checks are indicating in general across AI and agentic, if there's been more fraud on some of these transactions. It's early days, but you're still seeing some of the questions on that. And then just structural questions around networks in an increasingly agentic world. Just I'd love to hear how you would think about through all your closed loop data [indiscernible] these transactions? Stephen Squeri: Yes. I mean, look, I mean, I think from my perspective here is that in an agenetic world, data is king. Data is a king from a service perspective, an identification perspective, a fraud perspective, a credit perspective, data is king. And when you look at our -- when you look at our business model, we have the card member, we have the network and we have the merchant. And we have a free flow of information and it's a perfect information as you're going to get in this model. And so when you think about Agentic eCommerce and you think about a lot of the early forays into it, yes, it is -- can be fraught with fraud and it can be fraught with -- it's a lot riskier environment that you're dealing in. In a normal e-commerce world, in a normal bricks-and-mortar world, off-road is significantly less than the competition, significantly less. And why is that? Because of data. And so while agentic commerce, that story is yet to be written. We're at the -- I would -- I think we're warming up at a bull pen. I wouldn't even say we're in the first [indiscernible] here of agentic commerce, but we're warm enough in a bull pen but it will take off fast eventually. And so as we released our ACE developer kit, one of the things that we did were a developer kit is we said, look, to control the transaction to understand what's going on, what we want to do is have the agentic declare intent, and we want to match that intent with what was actually purchased. And so we want data from an intent perspective, all the way to a completion perspective. We don't even have that today in a normal bricks and mortar world. It would be hard to do. But in an e-commerce genic world, we can get that data. And so I think it's going to make our fraud and our risk capabilities and our ability to detect fraud and our ability to back our card members even better than we would in a brick-and-mortar world or in a traditional e-commerce world, which is why we came out with Amex agent protection. It basically says if the developer and the agent register with us and we see the intent and we see what the purchase was and our card member is left holding the bag, we'll back our card member and we'll figure it out on the other side. So I think -- and as I wrote in the shareholder letter, I think this sets us up a lot better than our competitors because of the closed loop network and the amount of data that we have. And I think anybody that talks to you about large language models will basically say to you, the model is as good as the data that it has. And so what we're trying to do is get as close to perfect data as you can in agentic transaction. And that's how we're thinking about it. Operator: Our next question comes from the line of Mihir Bhatia with Bank of America. Mihir Bhatia: You mentioned that you're reinvesting the 1Q upside in technology and marketing. I think you've talked about technology investments a little bit on the call and even the commercial side investments. But maybe just a little bit more on the marketing. Where are you investing on the marketing side? Is it to support the commercial? Is it just more programs across the board to brand marketing and like what is the payback period on these like business drive faster growth in '27? Just maybe more on the marketing investments you're making? Christophe Le Caillec: Yes. Mihir, thank you for the question. You simply said, it's going to go again our acquisition efforts, like new card acquisition efforts. As Steve said previously, at any point in time, we have a series of marketing ideas. We call them investment opportunities that are not funded. We rank order them, and we start when we run out of capacity. These marketing ideas are ready to be executing, and that's what we're going to do with those incremental dollars. So what we're trying to do is take advantage of the opportunities we're seeing. We expect the returns to be very strong, and that's why we're directing this incremental performance towards this investment opportunities. Operator: Our next question comes from the line of Terry Ma with Barclays. Terry Ma: Just wanted to touch on commercial. You just announced a pretty major expansion, which probably involves some level of investment. So I'm just curious, like should we expect some impact to the BCE from that kind of launch going forward? Christophe Le Caillec: Terry, on VC, you should not expect any impact, at least for the reason that, as Steve said previously, either those new product and capabilities that we are going to roll out, it will take time before they flow through the P&L before we see a lift in terms of volume. So I don't think you should expect to see a change to VCE ratio, and 44% is still the right number for the full year. Stephen Squeri: Yes. And I think if you look at the -- what we've just announced, you look at those -- they're more -- not a lot of additional benefits on those cards. It's more about capabilities here. I mean we have the OpenAI, ChatGPT benefit and the cash backlog will be the reports piece of it. But I think as Christophe said, it will be benign. Operator: Our final question will come from the line of Chris Kennedy with William Blair. Cristopher Kennedy: I just wanted to follow up on your prior comments. Steve, in your letter, you kind of mentioned how new technology can accelerate growth at American Express. Is there a way to frame kind of the opportunity today with data in agentic relative to prior innovations, such as e-commerce or mobile payments? Stephen Squeri: Yes. I think it's a little bit too early. And I think the company is so big at this particular point, as I said just before, I think it was so early stages. I think if you would ask me that question when e-commerce first started, I would have probably given you the same answer. And I don't think anybody could have imagined what the phone -- what the phone would have ultimately represented, right? I mean everybody thought the phone was for making phone calls. And the reality is nobody makes phone calls with the phone anymore. I mean you're doing a lot of commerce on the phone. It's been -- Uber has shown how you put private capital into the public market by having drivers out there. So I think it's -- our sense it will be an accelerant. I just think it's really hard to quantify it at this early stage. Kartik Ramachandran: With that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you. Operator: Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at (877) 660-6853 or (201) 612-7415, access code 13759550 after 1:00 p.m. Eastern Time on April 23 through April 30. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

24天前Insight Analytics约5分钟阅读

ENEKF 2026 Q1 财报电话会议

Operator: Welcome to the Enea Q1 Presentation 2026 during [Operator Instructions]. Now I will hand the conference over to the CEO, Teemu Salmi; and CFO, Ulf Stigberg. Please go ahead. Teemu Salmi: Thank you, and good morning to everyone, and welcome to this Investor Call for Quarter 1, 2026 Enea. This is Teemu Salmi speaking, CEO of Enea. I'm very happy to be with you here today. During the next 20 minutes, we'll take you through the results and some comments about quarter 1. And at the end, as usual, we leave some time for questions and answers. Let's dive straight into it. First of all, we are very happy and pleased to report that we have solid 12% net sales growth in the quarter when counting in constant currencies from -- in fixed currencies from quarter 1 last year. That equals 5% growth in reported numbers. So a good solid start of the year. And with that, we're also reporting a very strong improvement in our profitability, adding up at an adjusted EBITDA level of SEK 75 million or 34% which is the highest in many years when it comes to the first quarter. And also, EPS jumps up quite significantly since quarter 1 last year, ending up at SEK 0.98. On top of that, we also have a very good momentum for our strategy execution at the moment, and I will come back to that in just 1 second. As said, the growth here in the beginning of the year was quite a lot fueled by our business development mainly in our firewall business that had a great successful start of the year, where we signed many deals, many significant deals predominantly in Europe and North America. So that has been fueling our development in the quarter. And we also have a strong momentum in our growth portfolio. And you'll see now, I'll come back to that a little bit later on in the presentation that starting quarter 1 this year, we will also start reporting our sales a bit differently than last year. I have been getting a lot of questions and feedback about the transparency of our product portfolio and how it is developing. So actually starting this year, we will report our sales development in 5 product groups instead of the 2 areas we were reporting last year, Networks and Security. Now we will have 5 product groups where we will report our sales against. And I will come back to the structure in just a bit, so hang with us. But basically, these 5 product areas, we have one growth part of it, and we have one as we call classic part of it, but we've had a very good momentum in our growth portfolio and with our products that are part of that portfolio. Enea more relevant than ever. I mean we see that the need of secure solution and increased security in general is pushing our business in the right direction. We -- the government sector for us is showing good progress, and we have a very healthy pipeline that keeps on growing. So there's a lot of opportunities for us to close in that. So we are staying strong and growing in the telco sector and also in the CPaaS sector, now complementing that with the government sector, giving us another leg to stand on when it comes to our future business development. So that is good to see. And also during the first quarter, we have participated in Mobile World Congress in Barcelona, which is one of the biggest telco or telecom communication fairs in the world. Even though we had the breakout of the war in Iran, which meant that no Middle Eastern customers were able to travel to Barcelona. We still had a very good result out of that, and we are pleased with our participation there. Saying that, the war in the Middle East has also, of course, had an impact on our business slightly. I mean, some deals we were anticipating to close in quarter has now been postponed into the future due to our customers having other priorities in quarter 1. So not losing any business, but we see a slight shift of business into the future. Momentum is picking up again in Middle East, and we're looking forward to catch up on that in the quarters to come. We also made during the quarter press release about one customer of ours, Liberty in Costa Rica where we have deployed our messaging firewall in that in combination with the threat intelligence service that we are providing, we are combating cybercrime. And the results for our customer in Costa Rica were really outstanding. And in just 3 weeks, we were able to together with them to decrease 99% of the spam and the scam that was going through their network. And on top of that, our customer could block over 30,000 scam domains that were used for scam bursts. So not only do we have the good and right products, but they also have a short time to value with our customers once we are deploying them. On top of that, also in the quarter, we have -- not only do we have good traction on the market with our customers, but we're also winning awards when it comes to our products and offerings. We have won 5 awards -- global awards in the quarter. 3 in the firewall space, 1 for traffic management solution and 1 also for our embedded security Qosmos product in the quarter. And then when it comes to the strategy execution, it is moving on according to plan. I'm super happy to announce that we, in the quarter, also have now recruited our new Chief Commercial Officer, Mathias Johansson. He has started 1 month ago and he's now going to take charge of accelerating 1 of our 3 pillars in our strategy, which is the market acceleration. And speaking of the market acceleration, we have also hired new sales capabilities in the security domain to push our security and government business in the right direction. And we are continuing to execute on our market acceleration activities as part of the strategy by also together with Business Sweden, being part of one joint event in Taiwan later on in the quarter because that is also one of our focus markets in Asia Pacific. And we are continuing to execute on the other activities just as we have commented since we launched the strategy in November. So good start of the year. We are more relevant than ever, and our strategy execution is going as planned and also started to show some good payoffs and pay back already now. All in all, if we look at the numbers for the quarter, our net sales ended up in reported numbers, SEK 222 million, which is 12% growth in fixed currency, 4% in reported currency. Our EBITDA margin, 34% or SEK 75 million in absolute numbers. Our net debt has increased slightly, and you can also see that our operating cash flow is slightly going down. We see the operating cash flow decrease here in the quarter. The short-term part of that, where we anticipate that the capital that we are tying up now in quarter 1, a lot of that capital we -- well a big part of that capital will actually transfer into cash flow already in Q2. so there's very short-term spikes in the working capital. There is, however, the investments we made in Middle East and Africa is tying up a bit of capital that we expect to be starting decreasing over the year of 2026. Earnings per share ended up at SEK 0.98 per share. And our R&D investments, they continue to be on stable levels as we have presented in previous quarters as well, around 24%, 25%. Yes. I've already covered most of the things on the slide here. I think the thing that I want to stress is that we had a tough year in our firewall business last year, and our business can be a bit spiky over quarters because we sell the business models we have. We sell quite a lot of perpetual licenses, which means that 1 quarter can have a lot of sales other quarters can have a little bit of less sales. But we have a very strong start of the year for our firewalls where we actually have signed 3 major deals in the quarter with one of the largest network operators in the world and also with some -- 1 of the big CPaaS players globally as well, which we are happy for because it's just showing the relevance and importance of our portfolio. And before I now hand over to Ulf for more details about the financials of the quarter. I want to come back to what I said earlier about how we will now report our sales going away from the Networks and Security split that we have had in our sales in the previous year. This year, we will report our sales in these 5 product groups, as we call it. If we start to the right, there is an old traditional known segment or group -- product group, Operating Systems, which we have said for many years, is a structural decline. We will continue to report Operating Systems, Sales and Development separately. And then the former Network and Security portfolio, we have divided in 4 product groups: Network Performance and Intelligence, Signaling and Messaging Security, Embedded Network Insights and Security and Network Access Control. So if we start in the top left corner with the network performance and intelligence, basically, we have our traffic management and our real-time database Stratum there as the products, main products in that product category. In the Signaling and Messaging Security, we have our firewalls. That's our firewall business that we reported separately in one product group. We have our Embedded Network and of course, sorry, with the Signaling and Messaging Security, we also, of course, have our threat intelligence service that we are selling included and reported as part of sales in that product group. In the Embedded Networks and Insights and Security, we have our Qosmos product, basically our Embedded Security business that we are selling. And then Network Access Control is the more classical CSP-related products that we're selling, like the AAA and the ENUM DNS et cetera, in that product category. And as you can see, there's a color coding behind all these product groups as well. There are the ones, Network Performance Intelligence, Signaling messaging, Embedded Network Insights, they are part of the growth portfolio. And we have the Classic portfolio, which is then containing Operating Systems and Network Access Control. And the reason we are doing this is the products in these product groups have a bit of a different dynamic where, obviously, the growth portfolio is the portfolio that's going to fuel the growth of Enea for the future, where the Classic portfolio have the dynamics of being focusing on profitability and generating bigger profits than the growth portfolio in the short term. And in quarter 1, I can say that the net sales split between growth portfolio and Classic portfolio was 80-20. So 80% of our top line is coming from the growth portfolio and 20% of our top line is coming from the Classic portfolio. And this is the way you can expect to see Enea reporting our sales moving ahead. With that, I would like to hand over to Ulf Stigberg for more details about the financials in quarter 1. Ulf, please? Ulf Stigberg: Thank you, Teemu. So a little bit more in detail. We see a 12% growth in net sales in fixed currency and what we're very proud of this quarter is that we can see also a change in growth over the rolling 12 months measurement going from last year 12 months plus 1% and adjusted for currency, plus 4%. We report a 34% adjusted EBITDA margin amounted to SEK 75 million for the quarter compared to SEK 52.6 million previous year. This takes us to a level of 34% compared to 25% previous year. Reported EBITDA margin is 23% for the quarter. We have a development of cost that's almost in line with the previous year. The operating expenses spend is about SEK 175.9 million compared to SEK 189.7 million, and the variation can mostly be explained by SEK 13.4 million lower cost in relation to currency adjustments. Going over to the EBIT. We report an EBIT of 9%, corresponding to SEK 2.2 million compared to 1% previous year and SEK 1.6 million. This also drills down to earnings per share by to SEK 0.98 compared to minus SEK 0.94 in previous year, and this is a great, I mean, development from last year. So going into the reporting structure, we now have presented a net sales split by product group. And also, we have the split by revenue category in the bars, you can see 3 different tones of colors. This corresponds to service, support and maintenance and software license. And over the quarters, you can see that the net sales in each of the group varies and the variation depends mostly to software license revenues in the quarter. And we have different development and sales efforts, of course, in different portfolios here that creates a little bit of different performance in the different groups. You can see that we have a high share of software license revenue in our growth portfolio to the left. And we have also a high share of service revenues in the Signaling and Messaging Security product group and the second group from the left. And the two classic product groups to the right, as Teemu mentioned here, represent 20% shows some variations over the quarters. And with the development of stable and a little bit of a decline in the operating system product group. Going into the details for the quarter, we can see we had a good development within the Signaling and Messaging Security group. Growing by 48% and by 56%, if we adjust for the currency. So a very good growth within that group, of course. The growth within the Network Performance and Intelligence product group was 6% and 25%, if adjusted for currency the Embedded Network Insights and Security grew by 5% adjusted for currency and reported figures even on compared to the previous year. The same measurement that over 12 months makes a little bit more sense maybe if you look at the Growth. The Growth portfolio growing by 4% or 12% in FX-adjusted measurements. And the Classic portfolio actually had a decline in reported figures by 7% and adjusted for currency by minus 5%. One area that we have been working with during the last 12 months is our exposure to financial variations and this shows that we have less exposure in financial net for this quarter. The total financial net for quarter 1 2026 was SEK 2.6 million compared to SEK 21.7 million previous year. And finally, we see the cash flow analysis here with the improved profit on the first line going from SEK 1.6 million to SEK 20 million, we have improved the financial net from minus SEK 21 million to minus SEK 2.6 million. We have the items of noncash and taxes increasing in this quarter mainly related to a provision that was made in the quarter by SEK 25.7 million. And also, we see the change in working capital related to mainly deals that we have closed in the quarter 1. And the main part of this increase in the quarter will translate to cash within quarter 2 this year. We have some investments on the SEK 29 million, and we have the result of financing by SEK 4.1 million. This takes us to a net cash flow of total SEK 10.6 million negative. We can see the debt -- net debt have increased over 12 months. And the main explanation of this change is that we have more exposure to the business in Middle East and Africa region, which have a little bit longer project lead times compared to previous. And finally, we have a healthy levels of equity ratio and net debt to EBITDA. And for the buyback program, we have bought 243,000 shares in the quarter for a total consideration of SEK 15.6 million and all activities are related to the AGM mandate that AGM gave the Board a year ago in May. And the Board have now almost used the SEK 50 million frame that we decided to utilize in that mandate. All right. Over to you, Teemu. Teemu Salmi: Very good, Ulf. Thank you so much. We will start wrapping up this and leave some minutes for questions and answers at the end. Coming back to key takeaways from the quarter, once again, a great start of the year with a solid growth of 12% in constant currencies. Great improvement in our profitability and EPS, and we have good momentum for our strategy execution. So we feel that we have a good start of the year, and we're also well positioned for the execution of the rest of the year. And that gives us a short-term outlook that we say that, I mean, our market remains stable to moderately positive. That is exactly what we have said before. And we see that it is in that vicinity still. We are super relevant still for the market and the government sector is growing well. And I hope and I think looking at how the development now has been in quarter 2 that this quarter 1 will be the last quarter with these heavy headwinds we have had predominantly from the U.S. dollar in 2025. Quarter 2 should give us a bit of leeway when it comes to the pressure of the FX headwind that we have been experiencing throughout, I would say, the full 2025. That given for the 2026 guidance, we leave it unchanged we believe we will have a single-digit organic growth. We will end up north of 30% in adjusted EBITDA margin, and our investments will accelerate the growth. And then also the reason why we're saying that we will also increase our cost a bit in the year is that we are investing in our strategy. And that's also why we're saying that our EBITDA margin will be above 30%. We report 34% right now, which is good, and we have a good buffer now to 30%. And we will continue to invest in the quarter -- or sorry, in the year for the strategy execution, which will have a slight impact on our cost as well. Long-term ambition stays as we communicated as part of our strategy launch last year. We have the ambition that over the next 3 years, '26, '27, '28 that we will grow in average 10% each year in that period. And that our profitability will end at the end of 2028 above 35% measured in EBITDA. So we leave this also unchanged. So both long-term and short-term guidance remains as before. With that, I think we are done with our presentation, and we go over to questions and answers. Operator: [Operator Instructions]. Teemu Salmi: Right, just waiting if there is a verbal question coming through. I don't think so. Well, please feel free. As the operator said, Meanwhile, we will jump over also to the written questions here. Starting with the first one around a white paper on the utility of our software in drone application. And the question, are you recognizing revenue today from this end market, how many such projects are you involved in. Good question. We are not recognizing any revenue from these applications yet. We have many ongoing projects, engagement discussions. And actually, we are submitting today or tomorrow an RFP with content of drone applications as well. So it's still a very early market. It's a developing market. We are on the ball. We have relevant solutions for it. And let's see now this first RFP that we're submitting might give us, if all goes well, also the first revenues with that application. Next question, Rasmus, Redeye. How should we think about the quarterly variations between the business segments? How should we think of growth in the longer term between growth in Classic? And is there anything that sticks out in the business segments including the CPaaS deal that drives the solid organic growth in the quarter. Ulf, do you want to take these? Ulf Stigberg: Right. I think the quarterly variations between the business groups or the product groups are expected and this is a result of more transparency now basically, you can say that the 4 groups have in previous years also compensated a little bit if a group is lower, doesn't close a large deal in one quarter one other group will. So it's some kind of even out the exposure. But what we see in the longer term, of course, we expect the growth product groups, the 3 groups growing more than the classic. And of course, our long-term strategy targets 10% over 3 years. So that will be north of 10% if we're going to meet that target, of course. If anything sticks out I'm not sure about that. Do you want to comment on that. Teemu Salmi: No. No, I think it's been a solid development in the quarter. Of course, in the firewall business, we had an exceptionally good quarter. and we communicated the CPaaS deal, but there are many other deals that builds up the quarter, not only for the firewall business, but for the other segments as well. And as you could see, Ulf showed that if we look at the growth segment, it has had a very good development year-over-year. And I think it's incremental development of the business that we are doing and also of course, the relevance of our products and our footprint that is growing on the market. So I would say that there's nothing else. It's just organic growth, I would say that we are working with and developing, Rasmus, we can talk more later, of course, as well regarding this. Next question regarding AI. Can you elaborate on what solutions you're developing or selling that specifically protects against AI hacker attacks. Well, let's -- yes, we have several. I mean, let's start with messaging, for instance. I mean in our messaging portfolio, we have been awarded this quarter as well for our AI-based restricted image detection solution. So basically messaging -- I mean our customers, they handle millions of messages every hour, right? And you cannot parse messages manually. But you need to have a mechanism that scans the message before you approve and read them through and it becomes an SMS or MMS or whatnot in your phone when you receive it, right? Obviously, AI solutions there. We've had those in place. We have different -- many different AI solutions in place already. But one of the latest now released this is AI-based restricted image detection, where it's easy to, in a message to go through text and find a bad language or you can find words that would make our customers block that message from being sent, but pictures have been harder, of course, to evaluate. Now we have a solution where with the help of AI, for instance, also can look at pictures and determine is this picture according to what is according to the policy that can be sent through or is it something that has a criminal intent or other malicious intent, so to say. So that's one of our latest solutions. And we actually got several awards for that solution in the quarter 1 this year. And we have many AI capabilities already live in many of our product offerings. Next, congratulations on nice progress. Thank you, Matthias, lots of EU grants for critical infrastructure are you relevant of any of these. Ulf, do you want to comment on that? Ulf Stigberg: I mean this is an area that we are working into gradually. And definitely, we will look into the EU grants, and we will be able to take benefit of such grants if available, but we cannot share any specific at this stage. Teemu Salmi: Thank you, Ulf. And I think now, at least what I see the final question here from David. Q1 '26 effective tax rate was 5.6%. What tax rate should we expect for the longer term of Enea. Ulf Stigberg: Good question. And tax area, we are a business group in many different legal entities and is a challenge for us, but we are working on this. I don't have a figure to share as of now, but it varies a little bit between the quarters. So we have to come back to that. Teemu Salmi: All right. It's actually on the hour I don't see any more questions in the question space. Thank you for listening, and I and Ulf, we wish you a great day ahead. Thank you, and bye-bye.

24天前Insight Analytics约5分钟阅读

BKNIY 2026 Q1 财报电话会议

Laurie Goodroe: Good morning, and welcome to Bankinter's First Quarter 2026 Results Presentation. Financial statements were posted with market authorities earlier this morning, and all materials can be found on our corporate website. Please refer to the disclaimer in the presentation and note that this call is being recorded. Today, we welcome our Chief Executive Officer, Gloria Ortiz; and our Chief Financial Officer, Jacobo Diaz. Gloria, over to you. Gloria Portero: Thank you, Laurie. Let me start with the key highlights for the quarter, which confirm the strength of our business model, disciplined volume growth, continued margin improvement, a diversified and resilient income base and best-in-class efficiency and risk metrics. In volatile markets and in an environment of geopolitical uncertainty, that combination is not a nice to have. It is what protects earnings power through the cycle. This quarter, we delivered it once again with growth that is both profitable and controlled, supported by high-quality balance sheet. First, customer volumes increased by 6.5% with customer lending up 5%, retail funds up 1% and assets under management growing by 17%. This is balanced growth. We are growing where we see attractive risk-adjusted returns, and we are doing so without compromising the quality of the franchise. Second, on margins, we continue to demonstrate strong pricing discipline with customer margins at 2.68% and NIM at 1.76%. In other words, we are not buying growth. We are growing selectively with strict pricing discipline. Third, our income sources are increasingly more diversified and resilient. Net interest income grew by 5.5% and net fees by 8%, driving gross operating income growth of 6.5%. Finally, operational excellence and balance sheet strength remain key defining features of Bankinter. We continue to improve our management ratios with the cost-to-income ratio declining towards 35%, NPL ratio below 2% and strong capital levels. All of this translates into profitability and value creation. Net profit reached EUR 291 million, up 7.6% with RoTE at 20%. Let's now go into some detail behind these figures. Customer volumes grew across the franchise, increasing by EUR 14 billion year-on-year. Growth was led by lending and assets under management with deposits stable and improving in mix. Geographically, Spain remains the core growth engine, while Portugal and Ireland continue to add faster momentum off a smaller base. On Page 7, you can see the quality of our core revenue growth. 1/3 of core revenue growth comes from fees, which now represent 26% of core revenues, a clear signal of higher-value client base and a more diversified business model. This is not cyclical growth. It reflects structurally more diversified core revenues and margin management that sustains net interest income even in shifting rate environments. Page 8, key management ratios reinforce the quality of execution behind our results. Improving efficiency, strong asset quality and strengthening capital all confirm that growth is disciplined, risk is tightly controlled and profitability is sustainable through the cycle. Let me now turn to milestones for the first half of the year -- first part of the year. Portugal is a clear success story for Bankinter. Since launching in 2016, we have delivered high-quality growth, doubling our client base, tripling business volumes and transforming efficiency from over 120% to the low 30s. Profitability has scaled strongly on the back of a disciplined and diversified model built on a fully integrated operating platform with strong internal capabilities, reinforced by joint ventures and strategic alliances with partners such as Mapfre, Sonae and Generale. None of this would have been possible without the team. So today, Bankinter Portugal has 884 employees, around 70% of whom have been with us since 2016, complemented by more than 150 new recruits from a younger generation who will help fuel the next phase of growth. Together, they underpin a genuinely scalable and sustainable model supported by digital transformation, applied AI and a clear focus on value creation. On Page 10, earlier this month, we announced 2 complementary and clearly strategic corporate transactions to scale our business in alternative investments. First, we merged our alternative investment fund manager with premium partners to strengthen leadership in direct alternative investments, expand sector expertise and reinforce capabilities. As a second step, we will take a significant economic stake in Access Capital Partners, accelerating our Pan-European expansion through scale, specialization and greater product breadth across investment strategies and geographies. Together, these 2 transactions directly enhance our value proposition while broadening access to alternative products where we already distribute today to more than 15,000 private banking and retail clients across Iberia. Overall, the strategic decision strengthen a high-value capital-light recurring fee franchise, deepening long-term client relationships. And having just reviewed 10 years of growth, delivery and profitable success in Portugal, I have the strong convictions that Bankinter investment is on the same path, building scalable long-term growth and delivering strong value creation for our shareholders. And before handing over to Jacobo, let me briefly frame my view of the current environment. While geopolitical uncertainty has increased in recent weeks, our assessment remains that this will not, in the near term, translate into a contraction in consumption in our core markets. What we are seeing is greater prudence rather than a deterioration in underlying demand supported by solid private sector fundamentals. In this context, our geographic diversification across Spain, Portugal and Ireland continues to provide stability and quality to our earnings profile. And these markets are expected also to be less impacted and to perform better than the European average. So this is all from my part, and it is now over to you, Jacobo. Thank you. Jacobo Díaz: Thank you very much, Gloria, and good morning, everyone. Let me briefly summarize the income statement. Net profit reached EUR 291 million, up 4% quarter-on-quarter and 8% year-on-year, driven by resilient net interest income, solid fees, disciplined cost control and lower provisions. I'll now walk through the key drivers behind each of these lines in more detail on the following pages. Net interest income continues to progress well. NII reached EUR 571 million in the quarter, up 5.5% year-on-year and around 2% quarter-on-quarter on an adjusted day count basis. This is driven by volume growth and improving customer margins and special due to the improvement in deposit cost, which declined by 6 basis points during the quarter, supported by better deposit pricing and mix. On Page 14, let me take a minute to talk about our deposit strategy. Our approach to deposit growth remains disciplined and margin focused. We are actively managing the mix toward higher quality, more stable retail funds while maintaining tight pricing discipline. This focus has meant prioritizing the management of the cost of our deposit base rather than maximizing volumes. During the quarter, we continued to optimize pricing, including actions on digital accounts and a review of deposit spreads for treasury and fixed term deposits. Retail funds declined by EUR 3 million due to a -- EUR 3 billion due to a seasonally softer first quarter as well as active margin management actions. We continue to optimize our funding mix with a lower share of price-sensitive term deposits and a greater share of current accounts supported by our digital strategy. This translates into lower deposit beta, lower funding costs and improved margin resilience through the cycle. Consequently, average retail deposit cost for the quarter continued to decline, reaching 81 basis points. At the same time, digital accounts continue to perform very strongly, increasing by almost EUR 2 billion during the quarter to over EUR 13 billion. This clearly demonstrates that our campaigns remain effective and customer engagement is strong even after the price reductions implemented on digital accounts during this quarter. This is fully consistent with the year-on-year trend shown on the slide, a structurally healthier and more stable retail funding mix with growth in current accounts and a continued reduction in term deposits. On Page 15, turning to fees. This grew 8% year-on-year to EUR 203 million, driven by wealth management activity as well as a strong growth in insurance activity. Q4 '25 included some one-off items, so sequential comparability is not fully like-for-like. Our underlying mix is increasingly value-added and recurring, strengthening revenue resilience. On Page 16, on other operating income and expenses, this also shows solid growth. Equity method, trading and dividend income increased by a combined 18% year-on-year, reflecting the continued diversification of revenues from business such as Bankinter investment, our insurance joint ventures as well as with our partnership with Sonae in Portugal through Universo. Overall, this further reinforces the quality, diversification and resilience of our earnings base. On expenses, Bankinter is well known for its best-in-class efficiency levels, and we want to underline that the improvement we are delivering today is structural, recurring and still has room to improve. Business growth continues to be absorbed without creating structural pressure on the cost base. At the same time, efficiency is not being achieved by underinvesting. We continue to invest in people and technology with applied AI and simplification initiatives already delivering tangible productivity gains. This allow us to grow, invest and keep improving profitability at the same time. And that leads directly to the next slide, which shows how we are maximizing the potential of AI. Our approach is very pragmatic and built on a dual framework. On the one hand, we have toned down CEO-driven priorities, applying AI across software development, commercial process and day-to-day operations. On the other hand, we are pursuing a bottom-up approach, equipping our employees with an increasingly accessible AI tool set embedded in their daily workflows. Together, this supports higher productivity per employee in front and back offices and a lower cost to serve as volumes grow. In short, AI is not a future promise. It is already reinforcing cost efficiency and strengthening the scalability of our operating model and will continue to be a key driver of efficiency improvements in the coming years. Next page on credit costs remains low and well controlled at 32 basis points in the quarter. Other provisions also performing well, down to 7 basis points. Profit before and after tax grew by 8% year-on-year with net profit at EUR 291 million, confirming the resilience of our profitability and our ability to create value through the cycle. Asset quality remains strong and clearly differentiated. NPLs are low, coverage is prudent, and we continue to outperform the sector across all geographies with risk metrics stable, well controlled and with no signs of deterioration. On Page 22, CET1 ratio closed at 12.96%, above our target range and well above minimum requirements. Strong earnings generation comfortably offsets risk-weighted assets growth, giving us flexibility to support organic growth and allocate capital to strategic opportunities like the alternative investment transaction that Gloria referred to in the introduction. Next page. Customer volumes grew by 6%, supporting a 6% increase in gross operating income with well-diversified contribution across geographies. Loan growth remains disciplined and continues to outperform the market, especially in Portugal, Ireland and business banking in Spain. Regarding Spain, Spain continues to see strong revenue growth with pretax profits rising by 10%. While retail volumes softened this quarter due to seasonal effects and tighter mortgage pricing, corporate lending and off-balance sheet wealth management have remained resilient despite market volatility. Regarding Portugal, Portugal marks, as it was mentioned, its 10th anniversary. Growth remains robust. Year-on-year movements in cost of risk largely reflect the one-off gain from an NPL sale last year in the first quarter. Excluding this effect, underlying performance remains solid and well controlled. Ireland also continues to deliver strong growth momentum with volumes up 20%, improving profitability and exceptional asset quality. The NPL ratio remains just at 0.3%. On Page 26, corporate and SME banking continues to grow well above the sector. Lending in Spain is up 8% versus 3% for the market with very strong momentum in international business, where growth reached 17%. In Page 29, in retail banking, our approach remains disciplined and margin focus on both the asset and liability sides of the balance sheet. New account activity continues to be robust with salary and digital account balances growing by close to 50% over the past year, reflecting solid customer acquisition and engagement. New mortgage origination in Spain was lower during the quarter, reflecting pricing discipline in a tight margin environment with compressed risk-adjusted returns. This is consistent with our focus of allocating capital where returns are more attractive, such as in Portugal, where mortgage growth reached 8% and in Ireland, where it grew by 37%. Overall, retail banking continues to prioritize profitability and balance sheet quality over volume at any price. Next page, despite Wealth Management, despite heightened market volatility driven by recent geopolitical tensions, our Wealth Management business continues to prove resilient. Customer wealth increased by EUR 18 billion, up 13% year-on-year, supported by net inflows and a growing high-quality client base. Even in volatile markets, our clients remain invested and continue to allocate savings, reflecting the strength of our franchise and the quality of our customer base with flows that remain resilient through the cycle even in periods of elevated uncertainty. Next page, you can see the same trend with double-digit growth in both AUMs and AUCs, reinforcing the resilient and recurring nature of this business. Finally, let me take a moment to review our ambitions for the year. This first quarter of '26, we have delivered a solid quarter and results fully aligned with our previous guidance, following a disciplined execution with excellent quality of results supported by recurring sources of revenues. The recovery of client margin level to close to 270 bps in Q1 and the improvement of efficiency levels towards our ambitions are the supportive levels of another successful year. Despite the ongoing uncertainty in the market environment, our expectations and guidance for '26 remain broadly unchanged and current levels of profitability are expected to be sustained in coming quarters. We will consider changes to our guidance in the next results presentation with more visibility of our impact on macro scenario of current geopolitical events. We continue to anticipate stable volume growth in line with our initial assumptions while maintaining our disciplined and balanced approach to liquidity and risk. On the lending side, we expect volumes to grow at mid-single-digit rates, supported by a still positive macro environment for all geographies where we operate by a selective origination and a strong focus on risk-adjusted returns. Deposit volumes will be actively managed to preserve comfortable liquidity ratios and balance sheet resilience. Deposit to loan above 100% or loan-to-deposit below 100% are levels that have been committed in the past and will continue to be in the future. Across the group, we expect growth trends to remain broadly consistent with '25 levels and year-on-year for the first quarter, with Portugal and Ireland continued to deliver a strong performance and Spain maintaining solid momentum, particularly in corporate banking. With respect to NII, the continued volatility in interest rates means that visibility over the coming quarters remains still limited. However, current levels of forward curves anticipate potential rate increases that are supportive for NII in coming quarters. We continue to manage customer margin towards the 270 basis points or above. In this context, rather than providing new guidance on NII levels, we remain focused on the levers that we can actively control, which are pricing discipline of the assets and liability, customer margin management and prudent balance sheet optimization. As a result, NII should continue to be driven primarily by volume evolution rather than by changes in pricing or margin assumptions. We expect quarter-on-quarter NII growth during the quarters in 2026. Beyond NII, we remain confident in our ability to deliver high single-digit growth in fee income, supported by our diversified business model and strong customer engagement. Recent corporate transaction on the alternative investment front is a good example of our strategic focus on recurring growth on the wealth management business. At the same time, we remain fully committed to delivering positive operating jaws in 2026 with a cost-to-income ratio expected to decline below 35% for the year, supported by simplification of our business organization and the combination of talent and technological investments. In terms of asset quality, our outlook remains stable. We do not see any signs of deterioration in credit quality, and we expect the cost of risk to remain around current levels. In this quarter, we keep improving our capital position, maintaining strong levels of capital buffers and MREL ratios. And finally, we expect return on tangible equity to remain above 20%, reflecting the underlying strength of our business model and supporting continued attractive value creation for shareholders. Now Gloria, back to you, please. Gloria Portero: Thank you, Jacobo. Well, this final slide captures the essence of this quarter, resilient performance and sustainable value creation. Even in volatile geopolitical and uncertain macro environments, our returns remain high and sustainable, supported by best-in-class efficiency, strong asset quality and solid capital ratios. RoTE stands at 20%. Shareholder value continues to build with dividends up 25% year-on-year. This consistency is not cyclical. It reflects a deliberate way of running the bank, prudent risk management, capital allocation based on risk-adjusted returns and continued investment in efficiency and organic growth. Together, these elements explain why our model delivers consistently and support our confidence in continuing to create sustainable value in 2026 and the years ahead. Well, thank you, and it is back to you, Laurie, so that we can kick off the Q&A. Laurie Goodroe: Thank you both, Jacobo and Gloria. We'll now initiate our live Q&A session. [Operator Instructions] Laurie Goodroe: Our first caller we have is Maks Mishyn from JB Capital. Maksym Mishyn: Two questions from me. The first one is on deposit growth. There was a notable slowdown in the quarter despite several digital campaigns that you've launched. I was wondering what was the reason and how you see the remainder of the year. And the second question is on your expectations for customer spreads for the remainder of the year. If you could just walk us through loan yields and deposit costs for the next quarters, that would be super useful. Gloria Portero: Hello, Maks. I will answer you the first question, and then Jacobo will answer the second one regarding customer spreads. Well, listen, we have very -- the first thing is that we have very comfortable liquidity ratios, as you might have seen in the presentation. I think, in the annex, we have an LCR over 200%. And well, we have a loan-to-deposit ratio below 90%. We have given priority this quarter to actually accelerate the change in mix in our retail funds. You have seen there is quite marked decline in deposits. So we have been reducing the duration of our deposits. And also giving greater weight to more atomized and less sensible deposits. So we feel very comfortable with the liquidity ratios we have. We will continue to work on the cost and sensibility of our deposits in future months. So we will obviously maintain, as Jacobo has said during his presentation, we will maintain our commitment to have a loan-to-deposit ratio below 100% and solid LCR ratios. Jacobo Díaz: Good morning, Maks. Taking your question on the evolution of the customer spread. I guess, first of all, the commitment to reach an average this 270 bps or above client margin spread for the year. And the trends in the lending yields are, I would say, positive in the sense that with the current levels of rates and the expected level of rates, definitely, there is a tailwind in positive repricing. First of all, in our -- in the corporate banking activity that tends to reprice faster. And then, of course, in the mortgage activity in the mortgage book that reprices with a little bit slower, but in a positive way. So in the sense of the lending yield, we should see a slight recovery or a slight growth over the following quarters. In the sense of the customer -- of the -- sorry, of the deposit cost, deposit cost, we've ended the quarter with 80, 81 basis points. We think this is a quite reasonable level where we can be. There might be a little bit room still for reduction, but this volatility in rates might be a little bit challenging for at least the second half of the year. We need to wait and see the evolution of rates. But again, our target is to ensure levels of 270 bps of customer spread. We know that the lending yields are going to be supportive, and then we will manage proactively pricing in the deposit cost to ensure that we achieve this level or even above following or monitoring the current level of rates and the expected rates. Laurie Goodroe: Our next question comes from Francisco Riquel from Alantra. Francisco Riquel Correa: My first question is a follow-up on customer funds. I see that salary and online deposits are up EUR 9 billion year-on-year. Total deposits are up just EUR 1 billion. So that means probably strong outflows in corporate deposits. If you can please comment on the pricing actions, both in retail and in corporates. And also, if you can also comment on net new money flows into wealth management because I don't see that outflows out of term deposits are retained within the bank. And my second question is if you can please elaborate more on the strategy and the return on investment that we should expect from your recent corporate transactions in alternative investments. Gloria Portero: I will answer you the first question because probably it wasn't clear enough. Well, regarding net new money flows, there has been a very strong commercial activity, over EUR 1 billion transformation in -- from deposits to our loans. But obviously, you don't see that movement because the market has detracted more or less the same amount. So this is why there is no movement from December to March. But as I've mentioned, the -- I don't have the exact figure here, but it's between EUR 1 billion and EUR 1.5 billion of net new money in funds in off-balance sheet funds. So -- and with respect, you're right, I mentioned that we are -- what we are doing -- you're right, there has been a drop or outflows in corporate funds because we are prioritizing smaller amount with less sensible to interest rates. So basically, we are growing in payroll accounts. We are growing in SMEs in transactional accounts and also in medium-sized companies in transactional accounts. So we are giving, as I've mentioned, priority to these type of accounts that are transactional and therefore, less sensible to interest rates. But there has been an important outflow as well to off-balance sheet funds of around EUR 1 billion, EUR 1.5 billion. I think -- I hope I've answered. Jacobo Díaz: [ Paco ], taking your second question, I'm not sure if it's -- I took the right way. But basically, I mean, definitely, this business of alternative investment fund is a business that generates a quite high and sustained return on equity. This is a quite attractive business from our perspective. We -- as we had mentioned in the presentation, we want to be the leader of alternative investment in Iberia. Definitely, this will provide sustained high level of fees in the long term. We think there is a huge opportunity in Iberia to progress in the development of these type of products. We provide access to investment of real assets to Spanish and Portuguese people in terms of retail clients. Of course, this is not a product for everybody, but we think there is a huge evolution and a huge potential in this business. Taking these strategic transactions, we are bringing all the know-how from our partners into the company, into the bank, and that provides us the full potential of building and developing new type of investment funds in the short, in the medium and the long term. And I think this is a huge opportunity to bring on board capabilities that the bank doesn't have today and to ensure that we can build and distribute this type of products. We are, as you know, investing in renewables, in infrastructures, in spaces, in everything. And these 2 partners are one of the leaders in Europe in these type of assets, and that's why we are achieving transactions with them. I hope I have answered. If not, I will talk later. Laurie Goodroe: Our next question comes from Alvaro Serrano from Morgan Stanley. Alvaro de Tejada: A couple of questions from me, please. Gloria, I think you said at the beginning that you're not expecting an impact on consumption, but you're seeing some prudence. Can you maybe talk us through what you saw -- what we've seen during March and maybe early April. I don't know if it's sort of deposits movements, appetite for loans or fees, maybe what you were referring to around that prudent statement? And then the second question related is when I'm thinking about the potential updates or changes to guidance that you referred to Jacobo in Q2. Are we thinking about sort of fees impact? Or can you give us a sense of in an IFRS 9 world, what the sensitivity could be to provisions if, I don't know, 50 basis points change in GP or something along those lines that gives us a sense of direction. Gloria Portero: Alvaro, when I'm saying prudence, actually, what I refer is that probably the consumption will continue to grow, but not at the same pace it has done. So it will not contribute in the same way to overall economic growth. We are not seeing really any signal in the reduction of the appetite for loans or for lending and not really any changes from last quarter. But when I say prudence is what I see in the streets and what the statistics start to say. So I don't think there is any alarm sign or anything at all. And my prediction is that consumption will grow, but not at the same pace as last year, and therefore, the contribution in GDP growth will be a bit lower than it has been. But GDP growth will still be robust and I think enough, of course, to deliver our targets. Jacobo Díaz: Good morning, Alvaro. Yes, just to clarify, I mean, we think that in 3 months, so many things have happened in terms of volatility in the market that it's probably not very prudent to change our guidance so soon. But my words were oriented to the rate environment and the volatility of rates that we are currently under expectations of potential interest rate rates in the coming months. And that is my comment about. We are not expecting for the time being any changes in fees. I think I've been very clear in terms of efficiency and in terms of cost of risk. And obviously, my comment is related to the NII guidance and the possibility to have more tailwind in coming quarters if rates continue to be high or stay high for longer. Laurie Goodroe: Our next question comes from Marta Sanchez Romero from JPMorgan. Marta Sánchez Romero: So my question is on capital. You're building capital at a faster pace than expected. I understand there will be seasonality in Q2 and Q4. But could you give us a sense of the capital generation you expect after funding growth and a 50% ordinary dividend? And related to this, can you remind us about your capital allocation priorities? You will be spending roughly 20, 25 basis points on the olds acquisition in Q4, but still that leaves you space to do more things, considering that you want to stay at around 2.4%, 2.5% core equity Tier 1. So can you remind us on your priorities, any bolt-ons that you could consider, what areas, businesses, et cetera? And when, if any, time would you consider to repay surplus capital to shareholders? Gloria Portero: Marta, yes, actually, there has been a very strong capital buildup this quarter because, as you know, traditionally, the first quarter has some seasonality in credit. Actually, we have done a much better quarter than we thought we would do taking into account the seasonality in the past. So we have done better in credit. So regarding our -- and you are right, sorry, that we will have to allocate 25 basis points next quarter to this -- well, next quarter or when it is -- when we have the regulatory go ahead, which will be, I think, in the next quarters rather probably next or the other, the following. Where are we allocating capital? We are allocating capital in the geographies where we see there are profitable opportunities like, for instance, in Ireland. As you can see, we continue to grow at double digit at 20%, 23%, 27% in mortgages. And we will continue to grow at that pace. In Portugal, we think we have opportunities to continue to grow also at double digit. And we think we will do better in corporates and enterprises than this quarter. So this means a little bit more capital allocation following quarters. And in Spain, given the situation in mortgages, where we see that the prices continue to be below -- well, below cost, cost of risk and not only cost of credit risk, but also including everything that has to do with maturity mismatches and interest rate risk. We are actually investing heavily in enterprises and corporate banking, where you have seen we are growing at a very -- I mean, at a higher digit than usually. Said that -- so we think that we will be -- we will have a comfortable management buffer. For the moment, we are not changing our dividend policy, which you know it is cash 50% of net profit. But don't forget that we have the main shareholders sitting at the Board of Directors. So if there is excess capital, obviously, we will give it back to our shareholders as we've done in the past. I mean, remember that Linea Directa deal was actually an extraordinary dividend. So well, this is more or less, I think I've answered. So I don't know if you want to add up anything, Jacobo? No. Okay. Jacobo Díaz: I think you've been clear. Laurie Goodroe: Our next question comes from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. So my first question would be on the customer margin versus NIM. We've all been very focused on the customer margin, and we saw a significant improvement this quarter, but the NIM was very flat quarter-on-quarter. So could you just kind of discuss what the delta is and why the NIM didn't improve this quarter and how we should think about the NIM improvement going forward? And related to that, could you also discuss your rate sensitivity and how we should think about kind of higher rate impact on your net interest income, but also on the customer margin and NIM? And then my second question would be on kind of cybersecurity. We have seen headlines about some of these AIs that can kind of penetrate banks very quickly. What are you doing to ensure that your cybersecurity is top notch? Jacobo Díaz: Thank you, Sofie. I'm going to start with your last question in terms of cybersecurity. I know this is a hot topic with latest news about Claude and Mythos. Basically, here, what has fundamentally changed I mean, Mythos does not represent a fundamentally new category of risk, but there an acceleration of existing cyber threats through AI automation. So what really changes is the speed, not the nature of the attack. So the point here is in order to react, it's just basically with the same tools, trying to be much more agile and much more quick in the execution of the responses. So basically, the bank, ourselves or other banks, what they need to do is to move faster in the responses. So from manual responses to automated responses, behavior-based defense to integrate AI into security operations, of course, maintain human side. But basically, this is the type of reaction. And I think also the type of reaction is not just a bank on bank individual type of reaction. I think this topic needs to be faced in a much more global approach in approach of an industry, of a country of an entire Europe because all these threats, all these threats is not just a threat to the banks. It's just to the whole economy. So basically, this AI threat just changed the tempo of the cyber risk, not these fundamentals. And the right response is just basically make sure that there is a coordinated automated defense from all the industries and countries and basically reinforce resilience. So the tool may be a new tool for the attackers, but it's also a new tool for the defenders. So I'm sure that everybody will accelerate this -- the use of this new technology to accelerate the execution of the defense. Okay. So related to the sensitivity. Sensitivity, we are around 3% for an increase of 100 basis points. I think that was your question. And in terms of NIM, it's just basically an activity on -- it's trading activity that has increased the volumes of non-client activity has increased volumes in the asset side and in the liability side, and that has increased a little bit volumes and therefore, maintain the NIM at current levels. But the most important thing for us is that the customer margin has been recovery, that the weight of the client activity in our balance sheet tends to be one of the highest, if not the highest. And for us, that is really, really important. So we -- as I mentioned before, we continue to expect quarter-on-quarter growth in NII for the coming quarters until the end of the year. Thank you. Laurie Goodroe: Our next question comes from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: I just have 2 questions. One is on Ireland. If you could please give us a bit of an update on your views in the country? And what should be the opportunities that you could see now after the corporate transaction and corporate movement announced by Bawag last week? And also if you could update us on the deposit strategy and the capacity to gather deposits there, when we should see a pickup on deposit growth coming from Ireland. And the second topic, it's on the ALCO. I have seen that you have increased slightly the ALCO in the quarter. If you could just remind us a bit what will be the expected contribution for the year. And also, what would be the capacity to increase that from here onwards? Gloria Portero: Ignacio, I will take your first question. In Ireland, we continue to see a lot of opportunity going forward. Basically, actually, there was very -- as I've always said, the competition, it's not as a competitive market as it is in Spain, let's say it this way. Actually, the margins, for instance, in mortgages are much higher. We are allocating more capital into this business. The recent transaction of Bawag acquiring PTSB actually is another great opportunity in the sense that PTSB needs a very heavy restructuring. And as we have seen in the past here in Spain and many other -- also in Portugal, when a bank is restructuring, clients are not served properly and therefore, the customer attrition is higher. So we will take advantage of that situation in the next months. With regard to deposits, we have been testing deposits since I think it was late 2025. And with existing clients by invitation because we wanted to test because we have a completely new platform overall and obviously, a new product. And we also wanted to test all the marketing processes as well. We launched it to open market in February, I think, but also with very little or almost no, I would say, marketing expense. We have around EUR 50 million in deposits at present. And what we want to test is the system at maturity of the of these deposits before we enter in the market in a mass mode. So this will be in the next -- because most of these deposits have been signed 3 or 6 months, max. So this will be in the coming quarter. We have also -- now we are testing a simple current account, which have already constructed. And we will probably by the summer or maybe probably after the summer because the summer is not the right month to launch these things, we will launch it to the market. When we have current accounts, it is when we will launch a more aggressive deposit-taking value proposition. So for the moment, you will just expect these little amounts to grow by a great percentage, by a low amount because what we're doing is testing our systems and also our marketing processes. Jacobo Díaz: Good morning, Ignacio. Regarding the ALCO portfolio, the ALCO portfolio, as you know, has a volume which is limited to 2.5x our equity. So since our equity keeps growing quarter after quarter, there is an opportunity to grow a little bit the ALCO portfolio. So just -- we don't expect to go far away or above that limit. So whatever increases in the ALCO portfolio, they should be expected to be some sort of limited. The current yield is around 2.5%. Expectation is that we can continue to have this level or even a little bit higher during the coming quarters, but no basic changes in the structure of the type of assets that is in the ALCO portfolio. Laurie Goodroe: Our next question comes from the Cecilia Romero from Barclays. Cecilia Romero Reyes: My first one is on asset quality and credit risk. I mean, SME lending has been an important growth engine for Bankinter. And now as macro uncertainty has increased, how do you see credit risk evolving within the SME book? And are there any particular sectors where you are becoming more cautious? And my second question is on cost. I mean you have highlighted a medium-term ambition to move cost-to-income ratio towards 30% over the next 3 to 4 years, which I don't think is reflected in consensus. Is this still realistic given higher inflation environment? And what -- could you explain us what are the key levers that will get you there? Gloria Portero: Cecilia, thank you for your question. For the moment, we are not seeing any warning signs in asset quality in any of the business segments actually. Nevertheless, the situation is such that, obviously, there could be some economic contraction -- I mean, some economic impact of all these geopolitical events that are happening. And therefore, we are being very cautious, and we've already told you, I think, in past webcast with consumer credit and particularly what we call open market, which is not within our franchise of clients banking there. So there, we are being very, very cautious. We are actually reducing exposure. With respect to SMEs, you're right, it is also one of the weakest parts of the economy. And what we are doing is actually also being very cautious. In SMEs, below EUR 2 million of turnover. And we are focusing our growth in companies above EUR 30 million of turnover and also increasing a little bit our exposure to the public sector because actually, most of -- a lot of the investment in the economy is done by the public sector at present. So just to wrap up, we don't see signs of asset quality deterioration, but we think it is wise to be prudent with consumer credit in open markets and also in smaller SMEs. Jacobo Díaz: Regarding your second question about the cost-to-income ratio and the ambition, we definitely -- this is our ambition. And of course, we do expect that the combination of talent and technology allow us to provide year after year the enough space between the growth of income and the growth of cost to achieve this target. So we keep maintaining our positive jaws during the following years. As you've seen in the P&L that in this quarter, there is more than 3 points of difference between the growth of income and the growth of the cost. So this is something that we believe we can sustain. Of course, investment in technology, but also the organizational simplicity is a key driver of this achievement. Organizational simplicity from a legal perspective, of course, but also the limited number of branches that we have and the enhancing of the digital business also is a great opportunity to achieve this. You mentioned inflation. So we do expect some inflation, as you know, but some temporary inflation. We do not expect inflation to stay at current levels for a long period of time. So we can basically deal with it. And yes, I mean, it's our ambition, and we think it's absolutely achievable. Laurie Goodroe: Moving to our next question from Carlos Peixoto from CaixaBank BPI. Carlos Peixoto: A couple of questions from my side. One of them would be a follow-up on the interest rate sensitivity that you mentioned, so 3% for 100 basis points rise. I was just wondering, this is in a 12- or 24-month period? And maybe if you could give us just some highlights on the assumptions behind those -- that sensitivity. Finally, particularly on deposit costs and all of that. And then the second question on the cost side as well. So this 3% increase that we saw in total cost in the first Q., should we take it as a reference for the full year? Do you think costs might accelerate throughout the year? Just a bit of a view on how you see that evolving? Gloria Portero: With respect to costs, we are targeting lower increases year-on-year in 2020 -- this year. So you should expect a reduction of the pace of growth in costs. And I think you can make a point on your -- the rate sensitivity he's asking. Jacobo Díaz: And regarding the rate sensitivity, yes, good question, just to clarify my comment. So the rate sensitivity is around, as I mentioned, 3% for 100 basis points increase in 12 months. So if we were to measure this in 24 months, it will be close to 7%. Laurie Goodroe: Our next question comes from Borja Ramirez from Citi. Borja Ramirez Segura: I have 2. Firstly, on the deposits. Could you please remind me of the -- regarding your digital account deposits, which were the volumes and the average cost as of March? And also on this point, could you update on the competitive dynamics in the digital deposit market in Spain. So for example, who -- where are you seeing greater push on this side? And then my second question would be on rate sensitivity. If you could kindly provide a bit more details on the floating rate loans because I think you have a greater portion of floating rate loans. And within corporate and SME, I think given the fact that it's more focused on short-term working capital loans, I think it reprices faster than peers. So if you could kindly provide more details. Gloria Portero: Borja, thank you for your question. And I will be answering the one regarding deposits. Well, the digital organization where you have all online deposits, whether they are the ones coming from EVO or the ones that we acquired with the digital organization the last year already has EUR 11.7 billion in deposits. The average cost of all of this EUR 11.7 billion is 1.39% and it's going down. Competitive dynamics. Well, this quarter, we didn't launch a major campaign with high marketing costs. Obviously, we have always ongoing campaigns. So what we see are the higher competitors this quarter have been in the traditional banks, ING and probably, I would say, Sabadell also had a campaign this quarter. Also Openbank from Santander. And then you have the digital banks or the neobanks. But the major -- I would say, our major competition at present, the ones that take or to whom we take deposits are traditional banks. Jacobo Díaz: Regarding the rate sensitivity, you mentioned the floating rates levels in credit in -- or sorry, in SMEs or corporate. Let me just clarify. I mean, of course, working capital facilities tend to be short-term funding or lending that, I mean, in 90 days might change the rates. So that has a faster repricing. But in lending, for example, in SMEs, there is a strong level of real estate guarantees, which tends to be mortgages. So I would say that the corporate banking book has a faster repricing than the SME book. I guess that this is your question. Of course, we have the floating rate mortgages, as you know, and everything related to credits that tends to reprice faster. But for example, in the SME activity, we have at least almost 3/4 of the lending book tends to be guaranteed with real estate positions. And that means these are mortgages, and that means that it takes longer the repricing of the SME book. Laurie Goodroe: Our next question comes from Pablo de la Torre from RBC Capital Markets. Pablo de la Torre Cuevas: The first one would be a bit of a follow-up on the alternative investment transaction. And sorry to go back to the topic, but it would actually be quite useful to understand a bit more of the kind of line-by-line financial impacts of the transaction that you expect in coming years, both on the revenue and the cost side. And then the second one would be a bit of a follow-up as well on some comments that I believe Gloria made last quarter. I think, Gloria, you mentioned you were working with some of your insurance partners to improve or review some of your agreements at that time and see how you could impact -- how could you change your current agreements. So I just wanted to know if there had been any updates on that side of the business on insurance income. Gloria Portero: Yes. I mean, actually, I -- we have signed, I would say, an agreement with Generale in Portugal for non-life insurance, and this will be fueling growth in insurance in Portugal in the next months. So yes, yes, we have made progress there. And we are working in Ireland. That is also one of our strategic lines. For the moment, we are not commercializing insurance, but also to be commercializing insurance to our clients in the future. And in Spain, well, I think that we are doing quite well, growing, most of the growth that you have seen in the presentation, this 8% growth in insurance actually has to do most of it with the Spanish market. Jacobo Díaz: Coming back to your question of alternative investment. We are pretty active on this type of business. So once all -- we get all the authorizations for the transactions that they might be finalized by the end of the year, what we do expect is to start generating around EUR 1 billion of new volumes every year in the future. As I mentioned before, this is a quite good business in terms of the level of fees and the stable level of volumes that we can manage. So this is a great opportunity for us to build up a very good business. In fact, we just launched a new product in Spain called FIL, F-I-L, which is an alternative investment fund to reach retail type of clients that can be switched or moved from fund to fund. So it is a great opportunity. We have similar levels of ambitions with this new product that we've launched. Again, this is a clear message of the focus that we want to put in this type of business in wealth management in general, but in this type of business, we think Bankinter has a great opportunity and plenty of new income to come with a great return on equity. Laurie Goodroe: Thank you. Let's move to our last calls, and we have 3. First is from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: First one is if you can give us the stock of the treasury deposits at the end of Q1, the one which is embedded within your side deposits that are remunerated. And if we should be expecting additional reductions in coming quarters on this deposit book? And then the second one is a follow-up to Cecilia's question on costs. I mean, how do we need to think about kind of logical evolution of headcount levels alongside the implementation of AI in the bank? Are you expecting a gradual reduction of staff personnel levels? Or do you think actually you're going to have to be replacing people leaving with new hires? Gloria Portero: Ignacio, with respect to treasury accounts, we have around EUR 11 billion. And this quarter, it has gone down by EUR 1 billion. We don't expect major reductions in this line around maybe 10% or something like that because we have already done quite of the work that needs to be done in that portfolio. So -- and with the other thing with respect to headcount. Listen, we are increasing headcount in Ireland, and we are increasing headcount in Portugal. In Portugal, for 2 reasons. We were keeping the same commercial workforce that we had in 2016. So obviously, there is a moment if we want to continue to grow and maintain the quality levels, we need to enforce, we need to reinforce the team, the commercial team. The second in Ireland, it's obvious. We are expanding our activities to be a full-fledged bank. So obviously, we need to increase also the headcount there. We are talking around 30 per country, where we are seeing that the headcount is stagnating is in Spain. We don't foresee reductions of headcount, but we don't see either increases as the business grows. So we think that much of the efficiency will come from -- in the Spanish operations. Laurie Goodroe: Our next question comes from Hugo Cruz from CBW -- KBW, sorry. Hugo Moniz Marques Da Cruz: I was wondering if you could just give a bit more color on your loan growth dynamics by product over the rest of the year. You're growing 5% year-on-year, but with the macro potential, we could see a slowdown even if you keep at mid-single digits. So if you could give a bit more color. Gloria Portero: We keep our commitment to grow this mid-single digit around this 5-ish percent. And we think we still have opportunities to grow in profitable business lines, like I've mentioned, mortgages in Portugal, mortgages in Ireland, but also enterprises in Portugal and a lot in Spain in greater -- for companies over EUR 30 million turnover and also a bit more in the public sector. Laurie Goodroe: And our last question comes from Britta Schmidt from Autonomous Research. Britta Schmidt: Just quickly coming back to the deposits. Could you give us the split of the deposits into corporate and retail where they are now and where they would be, for example, by year-end. And you mentioned that you're changing the mix to more atomized deposits. How do you think that would impact your deposit beta? It peaked at something more than 50%. If we were to see rate rises, do you think the deposit beta would be substantially lower, slightly lower. And even with these changes that we're seeing, do you still prefer to manage your NII sensitivity at around the 3% level for 12 months? Or could we see that improving? Jacobo Díaz: Now regarding the beta, as you know, it depends how you make your calculations. Today, we are around 80 bps with the current level of 2% in ECB rates that gives you a ratio of around 40%. So we do estimate this 40% to keep going down in coming quarters. So whatever increase in rates that might happen, we estimate that no more than 10% of that increase in rate could be -- could potentially impact the cost of deposits. So beta is going to continue to go down over the next quarters. Gloria Portero: With respect to the mix, I don't really have what the mix is between big corporates and because what we call retail includes also SMEs. So I don't have the exact figure. I think, yes... Jacobo Díaz: We'll come... Gloria Portero: We will come back to you later with. But yes, I mean, you can expect a reduction in bigger corporates and you can expect an increase in what we call retail or transactional accounts, which include, obviously, SMEs and also retail. Laurie Goodroe: Thank you. Thank you, everyone. Thank you, Gloria and Jacobo. And that now concludes our session. And on behalf of the entire Bankinter team, we thank you again for your interest and participation in the webcast. Everyone, please have a great day. Jacobo Díaz: Thank you very much. Bye. Gloria Portero: Bye.

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NOKIA.HE 2026 Q1 财报电话会议

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's First Quarter 2026 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. Today with me is Justin Hotard, our President and CEO; along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency and portfolio basis and other financial items will be relating to our comparable reporting. Please note that our Q1 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages for the quarter. Marco will then go through the financial performance, and we'll then move to Q&A. With that, let me hand over to Justin. Justin Hotard: Thank you, David, and good morning, everyone. Our first quarter gave us a solid start to 2026. Net sales grew 4% to EUR 4.5 billion with an operating margin of 6.2%, and we delivered a free cash flow of EUR 629 million in the quarter. Gross profit was EUR 2 billion and gross margin expanded 320 basis points, supported in part by the absence of a onetime charge in mobile infrastructure in the prior year. It also benefited from strong performance in Optical Networks as we began to see the synergy benefits from the Infinera acquisition. Operating profit was EUR 281 million, with operating margin expanding 200 basis points. We saw strong momentum with AI and cloud customers. Net sales grew 49%, and we received EUR 1 billion in new orders, particularly driven by Optical Networks. At the group level, book-to-bill was above 1. And in Network Infrastructure, it was well above 1. I'm proud of Team Nokia's execution in Q1. The focus now is on delivering through the year and maximizing the growth opportunity in front of us. At our Capital Markets Day last November, we outlined our view of the AI super cycle and the market opportunity for Nokia. Since then, demand has accelerated. At the time, expectations were for the largest hyperscalers to spend around $540 billion in CapEx in 2026. Now, those expectations have increased to over $700 billion. This reflects the pace at which our customers are scaling infrastructure for AI. Today, AI-driven traffic is estimated at around 20% of total network traffic, which is roughly 80 exabytes per month and is still primarily human to machine. As we move deeper into agentic AI adoption and ultimately physical AI adoption, machine-to-machine traffic will become the primary driver of traffic, and that will lead to a step change in network traffic. We already see this demand in AI factories, both in data center interconnect and inside the data center in routing and switching. Increasingly, this is also driving demand in transport networks across metro and long haul, and we believe this is a structural shift in the market, which will sustain for multiple years. We now expect our AI and cloud addressable market to grow at a 27% CAGR between 2025 and 2028, up from the 16% we shared in November. This implies the addressable market for network infrastructure growing at a 14% CAGR compared to 9% that we shared in November. This is already benefiting Nokia in orders and in revenue. In March, we introduced several new products at OFC. These launches reflect our focus on accelerating innovation following the Infinera acquisition. The industry is scaling from hundreds to thousands of fibers between data centers. To address this demand, we introduced our next-generation hyperscale multi-rail solution, which will begin shipping later this year. It scales fiber capacity without expanding physical infrastructure, delivers an 8x increase in density and is 25% more dense than competing products announced recently. In addition, we also shared that we're evolving how we bring optical solutions to market. Our road map moves to a building block architecture with 4 optical engines that are embedded in multiple form factors compared to the 2 engines per generation previously. The architecture allows us to bring 13 application-optimized solutions to market. For customers, this means simplified deployment and a reduced total cost of ownership of up to 70%. These products will begin sampling in the first half of 2027 and will ship in volume in the second half. In Q1, we also saw strong growth in our IP networks pipeline as we build deeper engagements with our AI and cloud customers on switching and routing. We were awarded new design wins and continue to build a strong pipeline of further opportunities. We expect this to translate into new orders over the coming quarters. We've also increased our investment in optical networks and our new indium phosphide manufacturing facility in San Jose, California is on track to begin ramping production later this year. As a result, we are increasing our growth assumptions for network infrastructure in 2026. We now expect growth between 12% to 14%, up from the 6% to 8% we communicated in January. For Optical and IP networks combined, we expect growth of 18% to 20%, up from 10% to 12%. Turning now to Mobile Infrastructure. This new segment began operating in January, and the team is focused on aligning our road map to customer needs, streamlining the integrated business to improve productivity and delivering on the KPIs we outlined at our Capital Markets Day. Core software had another strong quarter, growing 5% and gaining market share. In the quarter, we delivered 6 competitive swaps. Our customers are modernizing their platforms with cloud-native solutions, adopting new security features and driving end-to-end automation with a focus on reducing operating expenses. Radio networks also delivered on our expectations. We signed several deals in the quarter, including with Virgin Media O2. At Mobile World Congress, we introduced a new generation of radios that are AI RAN ready. Our Doksuri remote radio heads deliver a 30% improvement in power efficiency and up to a 25% reduction in weight. In addition, we continue to make good progress on AI RAN in partnership with NVIDIA, and we are on track to begin field trials by the end of the year. Technology standards continue to perform well across its markets. The business continues to deliver stability, and we expect largely flat net sales for the full year with improved profit generation year-over-year. With that, I'll hand over to Marco. Marco Wiren: Thank you, Justin, and hello from my side as well. As Justin mentioned, we had a solid start to the year with EUR 4.5 billion in sales, growing 4% with growth in both operating segments. Gross profit was just over EUR 2 billion with a gross margin of 45.5%, a 320 basis points improvement on year-on-year. Operating profit was EUR 281 million, with an operating margin of 6.2%, and this is up 200 basis points compared to the previous year. Free cash flow was EUR 629 million, and the quarter ended with a net cash of EUR 3.8 billion. Network Infrastructure sales grew 6% in quarter 1. Optical Networks had another strong quarter with 20% net sales growth, and this is mainly driven by AI and cloud customers. We also grew in telecom as operators invest to meet increasing demands on transport networks. IP Network sales grew 3% with growth in AI and cloud, offset by softness in other customer segments during the quarter. We expect growth in IP Networks to start to accelerate in quarter 2 as we ramp shipments tied to new design wins with AI and cloud customers. Fixed Networks declined by 13%, reflecting our portfolio strategy to focus on higher-margin products. Sales of our optical line terminal products were largely stable in the quarter. And looking ahead, we expect the sales trend to improve as the year progresses. We see a supportive demand environment, especially in the U.S. with fiber deployments remaining a key investment focus for Tier 1 operators. Gross margin in Network Infrastructure was 43.4%, increasing 150 basis points. The increase was driven by a higher gross margin in Optical Networks, benefiting mainly from Infinera integration synergies and scale. We continue to expect some gross margin headwinds through the year as a result of product mix. Operating margin was 6.7%, a 30 basis points below the previous year as we had a full quarter of Infinera expenses compared to 1 month last year. For the full year, we do expect to slightly increase the Network Infrastructure operating margin. However, our focus this year is on investing to capture the long-term growth opportunity in the market. In Mobile Infrastructure, net sales grew by 3%. Core software sales grew 5%, while Radio Networks sales were flat. Technology Standards sales grew by 10% as a result of signing several deals in consumer electronics and multimedia, which contributed catch-up sales in the quarter. Gross margin increased by 430 basis points to 48.5%, in line with our long-term target for mobile infrastructure gross margins. The increase was mainly related to EUR 120 million contract settlement, which negatively impacted the previous year. We expect Mobile Infrastructure gross margins in the second and third quarters to be somewhat weaker and then much stronger in quarter 4. And this is consistent with the typical seasonality in the business. Operating margin was 8.9% in the quarter, an increase of 380 basis points, reflecting the settlement impact and lower operating expenses supported by the ongoing cost-saving program. If we then turn to look at our sales growth by customer segment, AI and Cloud grew 49%, mainly driven by Optical Networks. Mission-critical Enterprise and Defense grew 19% and Technology licensing grew 10%. These growing markets offset a 2% decline in telecom to deliver 4% growth for the group. The decline among telecom customers was partly related to some of the portfolio decisions we are taking in Fixed Networks. Overall, we continue to see the telecom market as relatively flat. The quarter 1 was a strong quarter for free cash flow generation, which amounted to EUR 629 million. We saw the typical working capital unwind in the first quarter related to the receivables buildup at the end of '25 from a strong quarter 4 sales seasonality. For your models, remember that quarter 2 is typically a seasonally low period for cash as we pay employee cash incentives in that quarter. Finally, to our '26 guidance assumptions. Our group level financial outlook remains unchanged, and we are currently tracking somewhat above the midpoint of the range for comparable operating profit, which is between EUR 2 billion and EUR 2.5 billion. Justin has already mentioned the 2 key assumptions for the full year that have changed. We now target to grow faster in Network Infrastructure this year with 12% to 14% growth, up from the previous assumption of 6% to 8%. And specifically in Optical and IP Networks, we now target 18% to 20% growth, up from the previous 10% to 12% growth. Then regarding quarter 2, we currently assume a 5% to 9% sequential increase in net sales. For operating profit, we expect quarter 2 to account for between 12% and 16% of the full year based on the comment I already made that we are tracking somewhat above the midpoint of the full year range. This would equate to H1 being between 24% and 28% of the full year operating profit, consistent with 2025. And this is mainly due to the growth-related investments we are making to support the long-term opportunities in the business. And with that, let me hand back to David for Q&A. David Mulholland: Thank you, Justin and Marco. As usual, for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to 1 question and a brief follow-up. Sherry, could you please give the instructions? Operator: Yes, sir. Thank you. We will now begin the question and answer session. [Operator Instructions] I will now hand it back to you, Mr. David Mulholland. David Mulholland: Thanks, Sherry. We'll take our first question today from Fredrik Lithell from Handelsbanken. Fredrik Lithell: Congrats, a great report. I would like to step into the world of Optical Networks and ask you your raised assumption for the year. Is that based on that you see more positively on getting better traction on sort of production capacity throughout the year, so earlier than you anticipated before? Or is there something else in there that gives you the opportunity to raise that guidance? Justin Hotard: Yes. Thanks, Fredrik. So I think 2 things I would touch on. I think one is a little bit more confidence on supply. And obviously, the fab is one component. There's also the other -- the components of the optical subsystems, the DSPs, obviously, that's in pluggables. Obviously, as you think about our larger systems, there's multiple different elements to that. So it's a bit more supply confidence on optical from -- obviously, as we said, demand is strong -- demand continues to be strong on optical. And then it's also related to some of the traction we're starting to see in IP networking. And as we've talked about in the past, the IP networking business has been a little bit lumpy as we drive the growth, but we're starting to see more visibility for the year, and that's a part of what's driving the growth. David Mulholland: Did you have a follow-up, Fredrik? Fredrik Lithell: I'm fine with that. David Mulholland: Thanks Fredrik. We'll take our next question from Janardan Menon from Jefferies. Janardan, please go ahead. Janardan Menon: Just wanted to dive into the design wins and the EUR 1 billion that you've reported saying most of that or the bigger portion of that is from Optical. Are these still on the 800 gig side? You had put out a very impressive portfolio of products at the 1.6T, 2.4T, 3.2T at OFC, which you said would be starting to come through by late 2027. So are you already seeing some order intake on those? Or is it too early for those kind of more leading-edge products to be -- or next-generation products we're seeing orders right now? And I have a small followup. Justin Hotard: Yes. First of all, thanks, Janardan. So I think if you look at the demand that we're seeing -- the demand that we're fulfilling, I should say, for this year, I really see that momentum on the back of our 800-gig pluggable and then the associated line systems and the platforms that we have available and shipping today. A key thing that I maybe didn't touch on in my comments, I'll just emphasize is that the road map we launched at OFC, I touched on the fact that it's largely oriented towards 2027. But a key note there is that road map was designed with a real focus on AI and cloud customers and designed in collaboration with some of those customers. So we talk a lot about that customer collaboration. I talked about it at CMD a little bit. We talk about it quite a bit internally, and that's a good example. And then as I would just kind of give you macro broad brush orders, I think what we see in orders generally is some elongation in orders in terms of a desire for a longer-term commitment on orders. And that's, of course -- that's also something we're seeing in terms of our demand back into the supply chain, providing longer-term commitments. And I think that's very normal with the kind of demand expansion we're seeing in the lead times. And I think if you look at other -- our peers or other players in our ecosystem in this space, they're all saying similar things. So I would say that, that's very consistent for us as well. Janardan Menon: Understood. And I know you don't want to talk about growth in Networks and Optical separately, but it's been quite a big increase in -- it's quite a big increase in your guidance from 10% to 12% to 18% to 20%. Is most of that from Optical? Or are you going to see a meaningful acceleration in your IP side from Q2 onwards, which could, say, take you towards the double-digit 10% kind of growth rates there by the end of the year? Justin Hotard: Yes. I would say that the optimism we have on the 18% to 20% is across both sides of the business right now. David Mulholland: We'll take our next question from Artem Beletski from SEB. Artem, please go ahead. Artem Beletski: I would like to ask on AI and cloud-related orders. So I think book-to-bill was around 3 in the quarter. And when do you actually expect some catch-up to be seen in terms of deliveries? And could you maybe talk still about some potential delivery constraints what you have in this area? Justin Hotard: Yes. I think, Artem, first of all, I'd say right now, I'm focused on maximizing the opportunity that we see. And I don't see the book-to-bill is something I need -- we need to catch up to. Our focus right now is on just maximizing the demand. As I said as well, we are starting to see some elongation of the order cycle, which is normal in these. And then in terms of constraints, I mean, I won't get into too much detail, but I think it's -- generally, it's -- there's a fair amount of constraint in the semiconductor ecosystem in general. We don't talk about it, but if you think about the kinds of lead times you hear across the semiconductor manufacturers, the leading players, I think that gives you a pretty good indication of what lead times are, and then obviously, in other areas, at the scale that we're building indium phosphide as an industry, obviously, that's driving demand back into the supply chain that we need to build capacity for. And so we're working on that as well. And that gets a little bit to the point on investment. As you think about investment, I would think about it in optical in a few ways, right? One is investing and scaling the capability and capacity. We're obviously bringing on the second fab, but it's scaling production capability into the supply chain. And then, of course, continuing to invest in the product portfolio to make sure we're maximizing the coverage of the portfolio against the market demand that we see. David Mulholland: Thanks Artem. Did you have a quick follow-up? Artem Beletski: Yes, I had actually. So just relating to fixed networks. So you do highlight some headwind coming from consumer premise fiber business that is not seen strategic. Is it something that should be prevailing throughout this year or how we should think about it? Justin Hotard: Yes. I think it's something that is going to -- we're going to continue to be disciplined throughout the year. And there's probably two things to consider here. One is the macro market on fiber, particularly with what's happening in the U.S., we talked about some of this last year with the CapEx builds of the Tier 1 and Tier 2 operators, obviously, beat us some tailwind. So we feel good about the underlying business, but we want to make sure that we're focused on the right type of business for us long term. And so we expect that we'll have -- continue to have some headwind on the CPE side as we become more disciplined in that space and focus on the areas where it's valued. We also think this is a business that has good long-term prospects in data center. And we launched at OFC. I didn't touch on it, but at OFC, we launched an out-of-band management solution oriented towards data center. So we really like this business and we realized it was a bit of a tough quarter. It's just a situation where we're going through what I think is a very intentional transition to making sure the business has a long-term sustainable growth profile, not just in top line, but more importantly, in gross margin and operating profit. David Mulholland: Thanks Artem. We'll take our next question from Simon Leopold from Raymond James. Simon Leopold: Thank you, David. So the first thing I wanted to touch on was, in the past, you've floated this idea of growing the switching business by on the order of EUR 1 billion into hyperscale opportunities. I'm wondering with -- given sort of the commentary today and the wins you've had, could you update us on really the current opportunities in the sales funnel and longer-term prospects for this business unit? Justin Hotard: Yes. I don't -- Simon, I'm not sure there's much more that we'll say than what we described, but maybe just to kind of break it down a little bit. Good design wins in Q1. Those don't show up meaningfully in orders. They're in pipeline, but they're not in orders in Q1. So we expect to see some of that start to flow in, in Q2. And as you likely know, these businesses are more design win driven. And what I mean by that is it's not a procurement event where you kind of -- you have a procurement, and then if you're awarded that, you win that procurement, then you go to the next procurement. It's more about getting designed into a specific use case and application. And so that means that the sales cycle is a little bit longer, but encouraged by the progress that we're making here, and we'll continue to update you as we see the longer-term forecast. But I'm really pleased with the work that the team is doing and the progress we're making. Simon Leopold: And then as a quick follow-up here. It does seem as if the press release cadence in the mobility business has stepped up a bit. And you didn't talk that much about it today, but I just want to get a better feeling. You mentioned the field trial for the AI RAN. Wondering if there's any movement change in your view on how this particular business unit in mobility RAN might be trending, particularly relative to how you talked about it last quarter. Justin Hotard: Yes. I think, first of all, Simon, a couple of things. One is, and we touched on this a little bit in our -- well our segment performance shows it, and I think we touched on it. Overall, the telecom market is flat. I think what we realize is that strategically, this is a market where we need to find new sources of value, and those can come either from enabling new services for the telcos to monetize or a business that's less CapEx intensive. And I think we fundamentally believe that the future is much more of an evolution and is software-driven. We've talked about that in a number of forums. What I'm very pleased about right now is that the AI-RAN trials and the engagement around a model that will fundamentally be different for the baseband because we'll start to detach software innovation. And what I mean by that is not just features, but actual performance enhancements from the underlying hardware, just like you see model performance gets better in AI with GPUs, but you continue to see model performance improve even over the life of the same GPU. It's one of the benefits of that architecture. We see that same thing coming in this part of the business. And so I'm really pleased that we're seeing such strong interest from the industry. And I think this is a business as we -- as I said at CMD, our focus is not on making the business necessarily a growth business because the underlying market is not growing, but to make it one that's much more profitable and delivers an attractive return on invested capital. And that's our focus. I'm very pleased with the start the team has coming together in MI. Obviously, a lot more work to do and a big milestone later this year with NVIDIA. David Mulholland: Thanks, Simon. We'll take our next question from Rob Sanders at Deutsche Bank. Rob, please go ahead. Robert Sanders: Maybe just a question around profitability in optical. I think originally with the Infinera deal, you were looking at double-digit operating margin. But clearly, you're stepping up your investment. So I was just wondering if you're still sort of on track to hit that target maybe by next year? The second question would just be around hiring and OpEx. Given the opportunity is clearly growing, what is your view around OpEx growth this year? Justin Hotard: Do you want to take those? Marco Wiren: Yes. When it comes to the Optical, just like when we announced the deal in Infinera deal, we said that we aim for double-digit operating margins, and this is something we are still believing in. We've seen a very good synergy work that the teams have been doing, and we are on track or actually ahead of our targets when it comes to synergy captures. So we're very pleased with that work. And also when it comes to -- if you look the combination of these 2 companies, how well they actually complemented each other. And this has been extremely successful among our customers as well. So we have had very good design wins. We were very fast to decide on the road map. And this is one reason why we've seen these good wins on the Optical side. So there's a lot of positive things that we've seen, thanks to that integration and acquisition. Yes. And when it comes to OpEx, we've just said that we invest in capturing these opportunities in Optical side. And just like Justin mentioned earlier, supply is constrained. So we are investing in securing that we get the supply that is needed. So we focus on that. Otherwise, we don't guide any specific OpEx numbers. David Mulholland: Thanks Rob. We'll take our next question from Ulrich Rathe from Bernstein. Ulrich, please go ahead. Ulrich Rathe: I have 2 questions. The first one would be, so you're maintaining the group EBIT outlook with this higher growth in Optical, IP and you're explaining that you want to secure growth with higher investments. Could you talk a little bit more about the mix of these costs? Is this more R&D? Is it more sales and marketing? Is it more into production? Just more color on that cost increase would be helpful. That would be my first one. Justin Hotard: I think, first of all, Ulrich, and I'll let Marco add if he needs to. But just to remind you, we always provide a range, and we give you some direction on the range, right? So we're not changing our guidance, which is the range. What we -- and we said we're slightly above -- we're guiding somewhat above the midpoint, right? So the key thing here for us is as we look at the business, we're making investments, and you touched on a number of them. It's R&D, obviously, sales and marketing and production. And Marco just touched on some of that, right? It's -- there's obviously -- there's CapEx with the work that we're doing around the fab. But there's also investment in OpEx and scaling capability and manufacturing. And if you just think about what's happening in this part of the business, particularly around Optical, we're also going through a massive step function in volume as an industry. And so that means that we actually have to do work to mature the supply chain, mature the production capability as an industry, and we're not immune to that. So we're investing to make sure that we're successful in that and that we can capture the fullness of the opportunity around us. Marco Wiren: I think this is pretty much the same actually, if you look also the whole industry in Optical side. So the whole supply chain is doing the same as well to secure that we actually can capture those demand opportunities. But still, there's more demand than supply. So that's why it's important that we invest in capturing these opportunities. David Mulholland: Did you have a follow-up, Ulrich. Ulrich Rathe: Yes, a quick follow-up maybe. On this guidance upgrades and for the Optical growth, there still seems to be a relative dearth of customer announcements with hyperscalers. Could you talk about the reasons? You talked in the past about that you don't actually care that much, you'd rather care about the business. But is there possibly a hesitation on the side of the hyperscalers to talk about Nokia given Nokia is not a U.S. company? Or are there any other specific reasons why you wouldn't have sort of more meaningful announcement that tell us what you're doing with which hyperscaler and these kinds of questions? Justin Hotard: Yes. I think, Ulrich, you probably have to talk to our customer or perhaps through who they are, but you could ask customers about us. From my perspective, that's not my priority. My priority is making sure we're partnering with them effectively. We're delivering what they need, and we're helping them execute on their strategies. That's my focus. And obviously, we're capturing our share of the opportunity that's out there. So that's where I spend my time. Obviously, I think what's a little bit different about us than some of the U.S. players more broadly is that we also don't have a concentration dynamic because the business is more diversified. And so that may be also something, but there's no indication that I get that there's any kind of geopolitical dynamic to this. David Mulholland: Thanks Ulrich. We'll take our next question from Richard Kramer from Arete. Richard Kramer: Justin, you mentioned the elongation of the order book. Can you tell us how much of that EUR 1 billion of new contract orders is firm, i.e., that you have purchase orders against it versus long-term sort of frame contracts, just to understand the timing of realizing that additional incremental EUR 1 billion of orders. Justin Hotard: Yes. Actually, Richard, this is a great question. So just to clarify, we have -- actually across the business, including with our telco customers, we have multiyear frame agreements. And sometimes we announce some of those. But the only thing you see in orders is firm purchase orders with delivery dates. What we haven't dimensionalized for you is anything kind of above a certain lead time. But we are -- one thing we are seeing is some of that elongation. But I see that as a net positive because I think it's tied to the demand -- the underlying demand for the products, and it helps us with predictability and capacity planning. So for me, it's a positive in terms of how we're managing and scaling the business. David Mulholland: Did you have a quick follow-up, Richard? Richard Kramer: For Marco -- yes, please. A quick one for Marco. Given the working capital buildup, the employee incentives, the EUR 750 million to EUR 850 million of pending CapEx to your EUR 900 million to EUR 1 billion expectation, restructuring and so on, will year-end cash be materially lower than what we see now? It just feels like you have a lot of cash constraints or drains on the business in the next 2 to 3 quarters. Marco Wiren: Yes. Thank you. Yes. Just like you said, we had a very good cash generation in quarter 1 and quarter 2 is lower. But we do generate cash continuously year-by-year as well, and we are also securing that we have a very good cash position to have the freedom to make decisions that we need to do, of course, always allowing us to follow the capital allocation principles that we have in the company, that first priority is on R&D. And then secondly is to find other investments inorganic that could support our growth and then dividend. And if we deem to have excess capital, then we can consider share buybacks as well. But we are quite confident about our cash position. David Mulholland: Thanks Richard. We'll take our next question from Felix Henriksson from Nordea. Felix Henriksson: Congrats for a strong order quarter. Given the unprecedented demand in AI and cloud, and also the supply-constrained market environment across the sector, is pricing something that's contributing to your guidance upgrade in Optical and IP? Are you starting to see support from raising prices for that? Justin Hotard: Yes. Felix, thanks for that. Maybe I'll comment, Marco, you may want to add. But I think in general, what we see is if you look at Optical, you've actually got -- structurally, you've got a cost curve that's probably coming down, which is enabling scaling. And so I would say, in general, we don't see -- is not a contribution on pricing, it's much more unit volume. What I will say is that I think we acknowledge that there are some cases where pricing is going up. I mean memory has been talked about quite a bit as a structural pivot. And that's a place where we have some exposure across the business. And obviously, we're working with customers on that because in our minds, that's something that's structural that we're -- in some cases, we're passing on. In other cases, we're also working on things like redesigning our products, right? But again, those are focuses that we're working on mitigating. And then -- but in general, I would say, if you look at the growth, it's much more volume driven than it is price driven. Marco Wiren: And just building on that, if you think the new launches that we introduced also in the OFC, the main focus is power of the bid. So how can we improve the power of the bid for our customers because that's one of the main KPIs they have, so helping them to improve their cost base. David Mulholland: Did you have a quick follow-up, Felix? Felix Henriksson: Yes. Just a quick one. I'm not sure if I missed it already, but can you just comment on how long the lead times between getting the order to actual revenues in Optical are at the moment? Just trying to get a sense of the EUR 1 billion incremental AI and cloud orders for Q1, whether or not those will already support 2026 or more so for 2027? Justin Hotard: Yes. I don't think we gave you a specific one, Felix. But I think dimensioning probably for this -- for the broader demand that we see is like in this -- in the Optical space is 12 to 18 months. I mean there's -- as you know, there's always exceptions in these things where some things might be sooner depending on the specific product, but that's probably a good way to think about the broader lead times we're seeing today. David Mulholland: Thanks, Felix. We'll take our next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead. Sandeep, we can't hear you. Operator: I just find this, perhaps your line in on mute. Sandeep Deshpande: My first question is regarding the switching business of Nokia. You -- on the Optical side, you probably have all the hyperscalers as customers at this point. You announced in the past few quarters wins on switches at multiple hyperscalers. Would you suggest at this point that you have a fairly broad exposure in terms of at least what is the future design win activity or future shipments at all the hyperscalers? Or is it still very limited to 1 or 2 hyperscalers in terms of your switching business? Justin Hotard: I don't know if I'll give you that much dimensioning, Sandeep, but I would say that as you look at the AI and cloud customer base -- the macro AI and cloud customer base, there's quite -- there's a set of different strategies that each one pursues. And I'd say the places where we get traction is where our portfolio fits our strategy is probably the best way to give you the answer. David Mulholland: Did you have a quick follow-up, Sandeep? Sandeep Deshpande: Is it broader today than it was, say, a year ago, the customer base? Justin Hotard: Yes. I think it's -- yes, I guess I don't quite measure it that way. I'm looking more at the design wins in the footprint. And I think that's certainly broader based on what we see today than it was a year ago. Sandeep Deshpande: And I have a quick follow-up on the financials. Marco, I mean, well before your time, I mean, Nokia in the past in terms of merger, M&A has -- in terms of integration has had problems. Clearly, at this point, you have tremendous growth. So that is helping the top line very significantly. But has the company got a structured process in place such that in terms of the integration with Infinera that this underlying doesn't have any issues going in the mid- to long term? And then secondly, given that there is a new fab ramping up as well later this year, are there any risks associated with that later in the year, given typically with semiconductor fab ramp-ups that can have issues? Marco Wiren: Yes. First of all, if you look at the integration, as I mentioned earlier as well that we are tracking extremely well on that compared to our own targets and also what we guided the Street. And we've been actually doing it better than we expected. So the team is extremely focused on securing the integration, and speed is extremely important here. So I understand your comment on the past perhaps, but this is definitely going well, and we're extremely happy with the progress. Do you want to... Justin Hotard: Yes, maybe I'll just add on that. I would just say, Sandeep, two things. One is, I think if you look underneath this, even if you took the growth out, I think you'd see very solid execution on the integration. I think the team has done really well. One of the most important things in integration that's a driver of outcome is cultural. And when you -- one thing that was clear to me when I went to OFC was, I could not -- everybody was Nokia -- was a member of Team Nokia. There wasn't an Infinera Nokia team, it was one team. That's hugely important, right, for being successful. The two other comments I'll make here is one acquisition, as you well know, does not a trend make in terms of successful execution and integration. So we have more work to do before we decide we're effective at this. And it's something that with the focus we put under the Chief Corporate Development Officer, Konstanty, obviously, one is making sure we find the right business for -- the right place for our portfolio businesses. Two is obviously being smart with how we think about capital allocation in terms of M&A where we believe that's accretive to our strategy. And then three is making sure we actually execute the integration. So that's a place where I'm pleased with the work that he and the team are doing, obviously, in close partnership with Marco, with our Chief People Officer, with all the key functions and the business presidents. But there's a journey here. And I think the net here is Infinera has been a good one. We need to get the learnings on that and then make sure we also don't forget the lessons from some of the challenges we've had in the past. Marco Wiren: And then when it comes to the manufacturing, remember that Indium phosphide is quite different compared to silicon manufacturing. So this is, first of all, much lower CapEx needed, but also it's faster. And I think that our team is working extremely well and understanding based on the learnings also from the Fab 1, we are transferring those into the Fap 2 and very good learnings from Fab 1. I don't know, Justin, if you want to say something more. Justin Hotard: Yes. I would just say our guide -- the only thing I would add is I think our guidance is risk balance understanding -- contemplating that ramp. And the reality is Fab 2 is a fraction of the ramp for '26, it's much more material to the longer term. David Mulholland: Thanks Sandeep. We'll take our next question from Jakob Bluestone from BNP Paribas. Jakob, please go ahead. Jakob Bluestone: So I had a question on the sort of margin progression as your IP revenues scale. I mean you've put through a sizable increase in your revenue guidance for some of the components for NI, but it's a sort of more modest change in your language at the group level. So if you can maybe just help us understand for IP in particular, as that business starts to accelerate, is it a bit like what we've seen on Optical, where initially it's perhaps not quite as accretive to margins? And then as that business starts to gain scale, it becomes a lot more margin accretive as well. So just if you can help us sort of understand the drivers there. Justin Hotard: I think the way I think about it, Jakob, is -- I think probably like any business, there's a scaling effect, right? I guess for me, the big focus right now is on capturing the opportunity and making sure it's accretive profit into the company. that's the priority. I don't know, Marco, if you'd add anything. Marco Wiren: No, it's -- always when you're starting with the new products, it takes some time to get the profitability up, and that's why we also mentioned that we see some impact of that in NII for first half of this year. But just like Justin said, that these are definitely accretive to our operating profit, and we see good opportunities there. Jakob Bluestone: As like San Jose... David Mulholland: Thanks Jakob. Go ahead Jakob... Jakob Bluestone: So I just had a quick follow-up. Just on the San Jose fab, can you maybe just help us understand, I don't know if there's any way to quantify whether that will cover your internal needs from the outset or not? Justin Hotard: Yes. I mean I think as we've talked about, San Jose gives us support. Certainly support for the growth that we see and expansion capacity for us as well beyond the portfolio that we have today and the volume that we see in the market. So that doesn't mean that we won't look at ways to accelerate -- further accelerate capacity because as we said, we think long term, this is a structural market, and we're pretty uniquely positioned as one of the few manufacturers with indium phosphide manufacturing capability at scale. But we think that too gives us -- certainly gives us the runway for the near term. David Mulholland: Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler. Sébastien, please go ahead. Sébastien Sztabowicz: The main opportunity for Nokia remains get across with optical line system and your pluggable optics. But I'm just curious, have you seen any specific opportunity building up around co-packaged optic or near package optics because the market seems to be quite bullish or there are a lot of demand building up these days. Justin Hotard: Yes. I think on that side, we've not made any announcements there. We've demonstrated -- at OFC, we demonstrated some technology development, but no announcements at this time. Sébastien Sztabowicz: Okay. And a follow-up on Infinera and the synergies. Previously, you were talking about maybe generating the EUR 200 million synergies in 2026 instead of '27. Are you still on track with that? And attached to this question, given the accelerated investment, is it fair to assume still a nice improvement of margin in Optical Networks this year or not? Marco Wiren: Yes. Thank you, Sébastien. Yes, the synergy, as I said earlier, we are tracking very well and a little bit ahead of our schedule. We originally said that it will take 3 years from the closing. And we said that we are tracking somewhat better than that. And we see the impact of synergies already in our quarterly reports as well. Just like in quarter 1, we mentioned that Infinera acquisition synergies are benefiting Optical business, and we will see those throughout the year as well. David Mulholland: Thanks Sébastien. We'll take our next question from Oliver Wong from Bank of America. Oliver, please go ahead. Oliver Wong: I had a question on -- going back to the Q1 AI orders and just your backlog and AI orders in general. I guess, so you mentioned that the lead times in Optical and I think IP are 12 to 18 months currently, but you also significantly increased your growth assumptions for this year for Optical and IP. So I was wondering, are these orders even though the lead times are up to 18 months are -- is much of this still quite kind of near-term loaded? And also in terms of the IP growth expected this year, I presume that most of that is from switch business. But you mentioned kind of big design wins and then that translating into orders starting next quarter. So are a lot of these design wins expected to kind of translate into revenues this year? Justin Hotard: I think as we touched on some of the design wins will start ramping this year. And yes, and I should clarify, we talked a little bit about Optical being 12 to 18 months. I think you've heard other peers in the industry talk or some of the players -- the ecosystem peers talk about being sold out over multiple years. I think that's probably a pretty good indication of where we see the Optical side. IP is a little bit shorter, but I would say there's parts of that supply chain that have constraints. And so obviously, we work closely with customers on forecasting and planning. And as we said, the only thing we register are the actual purchase orders themselves. That's what you'll see translated to orders. David Mulholland: Thanks, Oliver. We'll take our last question this morning from Emil Immonen from DNB Carnegie. Emil, please go ahead. Emil Immonen: So, I have a question on... David Mulholland: We can barely hear you. Your line is very hard to hear. Emil Immonen: Can you hear me now? David Mulholland: Yes, that's a bit better. Emil Immonen: Yes. So the growth you're saying the 27% market growth that you're now seeing instead of 16%. Could you comment on, is that volume or is that price-driven? Justin Hotard: It's volume driven. Emil Immonen: Okay. In that case, given the Fab 2 coming online at the end of this year, does that mean that you're building a third fab maybe? Because I think previously, you said that you were planning your current capacity to the earlier growth you were seeing in demand. Justin Hotard: Yes. I think one thing we've -- maybe just to clarify in case we haven't clarified in the past, Fab 2, when we shared in November, what we talked about was Fab 2 being able to be sufficient to meet the demands of the guidance we provided, and there was additional capacity on top. Obviously, we're not making any announcements about additional manufacturing capacity at this time. But that's the way I would think about it is that in the prior guidance, there was excess capacity and ability to build. I would take the -- if you kind of stitch the conversation together, I'll stitch it together for you. We're making additional investments that probably means that we're -- part of what we're doing there is investing in ramping Fab 2 at scale. And again, it's not just the fab, it's all the components of the supply chain because that fab produces a critical component, which is the optical component, but there's also a DSP, there's other components in our pluggables, and there's also many other components in our subsystems from the ecosystem. So all of that factors into this. David Mulholland: And thank you, ladies and gentlemen, for joining us today. This concludes today's call. I would like to remind you that during the call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your devices.

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DNB.OL 2026 Q1 财报电话会议

Even Westerveld: Good morning, everyone. Welcome to the presentation of the first quarter results for DNB and also welcome to everyone following the stream. Just for information, the emergency exits are in the front and also in the back, and there are no planned drills this morning. Spring is here. The sun is shining, and we are really eager to present the results for you. CEO, Kjerstin Braathen, will kick off and then our CFO, Rasmus Figenschou, will continue with the details. And there will be time for questions afterwards. Kjerstin, the floor is yours. Kjerstin Braathen: Thank you so much, Even, and a particularly warm welcome, we can say, since it's spring, as Even said, and the sun outside is shining. That, nonetheless, does not mean that there are calm waters around us in the world because this quarter, the turbulence around geopolitics has continued certainly with the increasing conflict and the war in the Middle East. This is something that has led to high and very volatile energy prices and the level of uncertainty is, as we have seen now for several quarters and years, higher than what we have been used to. Despite the geopolitical backdrop and despite energy prices being higher, the market reactions overall, we would qualify as relatively benign. And the Norwegian economy continues to be resilient in this environment. Business activity overall across the Nordic markets, which does represent the majority of our activity, we would consider at healthy levels and the Norwegian households are robust. So despite a turbulent environment, we are relentless in our focus, which remains with our customers, focusing on giving them good customer experiences contributing with value creation and focus on the business short term and longer term. As always, I would like to start also with the customer and demonstrate how we are working towards our mission, which is really to simplify life and help our customers prosper. In terms of simplification, we have this quarter launched a new equity trading platform in our digital savings app, Spare. This was launched in March. And already in the month of March, we saw that 1 out of 4 trades in shares were actually done on the platform, and I don't think we can get better feedback from our customers than that, that this is actually contributing both to simplicity and efficiency. We continue to see that our customers are putting their trust in us with their savings and their investments, and this is demonstrated by a record net inflow in our Asset Management business this quarter of NOK 20 billion. Making it easier for the young children and adolescents to become customers is also something that we've done this quarter. Now young people below the age of 18 can become a customer with DNB in less than 2 minutes. For our Sbanken customers in chat, we have introduced an all AI -- generative AI chatbot, meaning it's not a chatbot that we have trained, it trains itself. And this has rapidly taken over 75% of the responses in chat and inquiries from our customers in Sbanken with very good customer satisfaction. Across Large Corporates and DNB Carnegie, we continue to see a confirmation of our strengthened position and the offering. First, from Prospera in the Grand Total survey for Norway, where we are qualified as the leading bank in terms of customer satisfaction. And for DNB Carnegie this quarter in equities, where individually, we are #1 in each of the 4 Nordic countries and also with the overall number 1 position. And as always, I am very proud of the efforts that our team put in every day for our customers. On to the results. The return on equity comes in at 14% this quarter, 15.5% on a rolling 12-month basis. This does represent a solid contribution from all our customer segments and also the macroeconomic development with lower rates than we saw this time last year. We do see profitable growth both in loans and deposits, a stronger development in deposits than loans this quarter. And the growth is offset by repricing effects and also a fewer number of interest days in the first quarter. And NII as a result of this is down by 5.4% compared to the previous quarter. Net commission and fees is up by 18%. Contributions materially from all various product areas, the strong point, again, I would highlight is Asset Management, where we see a strong net inflow. We see assets under management grow despite values coming down. And we also see a record flow for the past 12-month period. The portfolio in a turbulent environment, again, remains very robust and well diversified. We do not see any structural changes or any negative migration in the portfolio as such. We do book impairments of NOK 644 million in the quarter in all its -- not in all its entirety, but primarily related to customer-specific events and no systematic development in the portfolio. Capital position remains solid, 18.1% core equity Tier 1 ratio, 170 basis points headroom to the required and expected level and a strong earnings per share, we believe, with NOK 6.5 in the first quarter. The Norwegian economy is impacted by what goes on around us in the world. We are an open economy. We are an economy that trades with others. As a net exporter of oil and gas, we are partly benefiting also from higher energy prices and somewhat less impacted by inflation stemming from higher energy prices than other countries, but we emphasize that there is an increased uncertainty in the environment around us. This has led to growth estimates for the year coming somewhat down, but to what we would still qualify as healthy levels with an expected GDP growth in the Mainland economy of 1.4% this year and 0.9% next year. Unemployment is something that we follow very clearly and talk to you about every quarter, still a stable level. We would qualify it with 2.1%, and we expect it to stay low and relatively stable in the time ahead of us. We do expect yet again this year to see real wage growth for consumers. This leads to increases in disposable income, and it does support consumption as a key driver for economic growth. Given the development in inflation that has been more sticky than expected, I think, by both the Norwegian Central Bank and markets, we have seen a shift in the outlook for interest rates during this quarter, both in the messaging from the Central Bank as well as in the messaging from our own team in DNB Carnegie. The outlook for rates is now an expectation that we will see 2 rate increases this year, each by 25 basis points up to the level of 4.5% for the key policy rate, and rates are expected to come down by the similar amount in the year 2027 and stabilize around 4%. So again, in an uncertain world, the robustness of the Norwegian economy continues to be demonstrated as well as the resilience in households, and we do qualify this as a very healthy environment for us to run a sustainable business in. A few highlights on the customer segments. And I would underline that we continue to see a very solid underlying performance across all of our customer segments in a competitive environment. The growth platform we've talked about in Norway as well as outside of Norway continues to deliver, and we see strongest growth on the lending side in Large Corporates. And in this quarter, the nominal growth in Large Corporates is offset by a somewhat stronger Norwegian kroner. We see a very healthy deposit growth across Personal customers as well as Corporate customers in Norway. In Large Corporates, we are more, I would call it, opportunistic. We qualify pricing towards the cost of funding in treasury and the volumes develop accordingly. For Personal customers, we see that the activity in the housing market is somewhat more muted this quarter, but I would highlight the very strong results that we see in our brokerage business in Personal customers. I would like to highlight the pace of innovation that we experienced from the team in Personal customers as well as a strong cost control development in this area. In Corporate customers Norway, last quarter, we talked to you about some larger transactions that were closed towards the end of the quarter in commercial real estate and the plan to syndicate and distribute these. This has been done successfully, both in terms of syndicating to other banks as well as taking out parts of the volume in the bond market. This has impacted volumes along a more stable development of volumes also across the SME market and volumes are slightly down in Corporate customers Norway. We do note a strong growth in other income in Corporate customers Norway compared to the same quarter last year, and this reflects not only an increased level of activity with DNB Carnegie, but also the systematic effort over time to work broadly on cross-selling in this area. Large Corporates that delivers the strongest growth this quarter comes in at 2.3% for the quarter, 9.1% if we look at the year overall currency adjusted. We are working and making progress in terms of strengthening the team in Sweden, and we are getting positive feedback from that process and also how the cooperation is developing with the team across DNB Carnegie. And we see that half of the growth that we deliver is outside of Norway. And again, I reiterate the robustness and the strong quality of the portfolio and that we do not see other systematic risk outside of customer-specific situations. So all in all, a robust development we see for our customer segments. We continue to talk about our activity across DNB Carnegie and across wealth management as the key growth drivers in our business going forward. And we saw a very strong start to the year that has been somewhat -- has been somewhat impacted by more turbulence towards the month of March. But despite this, we continue to see that the level of revenue growth both in DNB Carnegie and our Wealth Management business. One year now after closing the Carnegie transaction, the integration is progressing well, and we continue to reap the benefits from having an improved and more competitive and broader offering towards our customers. We saw a very strong start to the year again across all product areas, I would say, in Investment Banking. With the conflict in the Middle East, we have seen and experienced that some of our clients naturally have decided to postpone some of their investment activity and activity related to stock listing and others, but we have not yet seen this leading to any cancellations of any plans. So the pipeline in the business remains strong going into the second quarter. On Asset Management, again, I would highlight the strong point being net flows, NOK 20 billion for the quarter, NOK 65 billion for the year. This last quarter, more than NOK 5 billion stems from the retail market. And this is an effort we are systematically working on to grow that part of the business as it's more sticky, more recurring. And we have seen that customers are changing their positions, but they are more comfortable remaining in their investments in the market compared to what we saw during the turbulence that stemmed from Liberation Day during 2025. So all in all, a robust quarter. And with that, I will hand over to my excellent CFO, Rasmus, who will take it from here. Rasmus Aage Figenschou: Thank you, Kjerstin. I will now take you through the Q1 results in more detail. And please keep in mind that for 2025, Carnegie's results were included in 1 month of the first quarter. We note continued high activity across all segments with FX-adjusted loan growth up 0.3%. Looking at the Retail Personal Customer segment, the growth is up by 0.2%. As mentioned by Kjerstin and as mentioned last quarter to the market, the growth in the commercial real estate was -- had a planned syndication of -- in Q1 and has been taken out with other banks as well as in the bond markets and thus leading to a volume reduction of 1.2%. Within the Large Corporate area, FX-adjusted volumes were up by 2.3%, driven by increasing volumes across industries and across geographies, mainly in low-risk customers. And we see that more than 50% of the growth comes from our international growth platform. Currency-adjusted deposits were up by 2.6%, driven by positive development both in the Personal customer segment and Corporate customers in Norway. We maintain a strong deposit-to-loan ratio within the customer segment of 73.8%. As in every -- almost every first quarter, activity is slower. This naturally impacts net interest margin, which was down by 7 basis points, ending at 174 basis points. The reduction reflects narrowed combined spreads and other NII not included in the customer segments. Combined spreads in the customer segments were down by 5 basis points, driven by repricing effects, product portfolio mix effects and margin pressure and continued strong competition. NII is down 5.4% in the quarter. We note that spreads are down by NOK 449 million, where roughly 1/3 stems from the full effects of the most recent repricing in November, roughly 1/3 comes from portfolio and product mix effects and slightly less than 1/3 comes from stronger competition. Higher average volumes during the quarter increased -- offset this with NOK 231 million and then having a negative FX effect of NOK 86 million. The reduction of 2 fewer interest days in the quarter was -- came in at NOK 248 million. Amortization effects and fees are down by NOK 176 million, reflecting lower activity, as mentioned in the quarter. No treasury effects in other NII of roughly NOK 150 million. Moving on to commission and fees. Our fee platform is strong and well diversified in total, up 18% from the corresponding quarter last year. Real estate broking was up 3%, reflecting strong performance in a slower market where fewer properties were sold compared to Q1 last year. Investment Banking Services was up by 38%. We note strong development despite of market uncertainties. Our pipeline remains strong, as mentioned by Kjerstin, noting though the transaction in recent months have been postponed. Asset Management and custodial services was up by 34% and assets under management were down 1.2% due to high volatility and negative market developments. However, and more importantly, we noted the positive net flow of NOK 20.4 billion this quarter, a record high, but also a record high when looking at the last 12 months of NOK 65 billion, well balanced between the retail and institutional investors. Money transfer and banking services were down by 17%. We note high customer activity, offset by costs related to payment services and use of credit insurance related to corporate exposures, which is part of our OAD model, driving profitability for the group as a whole. Sale of insurance products was up by 19%, supported by positive development from the non-life insurance commissions and continued strong income from defined contribution in our life insurance business. In addition to what can be seen on this slide, we also note positive momentum in other income with strong results from our life insurance company, DNB Liv, and our non-life insurance provider, Fremtind. Operating expenses are down by NOK 920 million compared to Q4, of which NOK 51 million is currency effects. The reduction reflects seasonally lower activity as well as a persistent cost culture to drive efficiency. Activity is exemplified by the decrease in expenses related to variable salaries and IT and the nonrecurring effects booked last quarter of NOK 200 million. Low return on the closed defined benefit pension scheme is related to market development contribution and that contributes to lower cost this quarter. The scheme is partly hedged and reflected in our financial instruments. Due to seasonality, the second quarter generally carries higher activity-related costs and as well -- compared to the first quarter as well as the effects from the annual salary increases adjustment from May 1. Now moving on to portfolio quality, which remains robust and well diversified with 99.4% being in Stages 1 and 2. In the Personal customers portfolio, which accounts for approximately 50% of our exposure, remains strong. We continue to note record low request for installment holidays and fewer loans with interest only compared to last quarter. Impairment provisions in the Personal customer segment is affected by a model adjustment on inputs on consumer finance and the underlying portfolio remains solid. For the Corporate customer, impairments totaled NOK 556 million. The portfolio remains robust and well diversified across industries and geographies. There is no structural change to our portfolio or general negative migration to note. The impairments in Stage 3 are related to customer-specific situations, and these are typically exposures we've been following over time. And most are -- recent are industries that have been challenging for some time, such as construction. We remain comfortable with the quality of our portfolio. Now moving over to capital. Our CET ratio -- CET1 ratio remains strong at 18.1% with 170 basis point headroom to the regulatory expectations. It was positively affected by the profit generation in the quarter as well as ordinary dividend of NOK 1.9 billion from DNB Liv. In line with previous years, the AGM on Tuesday gave the Board of Directors authority to buy back up to 3% of outstanding shares and an application has been sent to the FSA for approval. The leverage ratio remains strong at 6.5%, well above the regulatory requirements of 3% and combined with a CET1 ratio of 18.1%, our capital position remains strong and enables us to continue to deliver on our dividend policy and continue to support our customers. Summing up, we delivered a strong set of results in the first quarter, having return on equity coming in at 14%, cost/income ratio of 38.7% and an earnings per share of NOK 6.5. We also mentioned that for 2026, tax rate is expected to be 22%, but our long-term guiding remains unchanged at 23%. With that, I thank you for your attention, and we open up for questions. Even Westerveld: Thank you so much, Rasmus and Kjerstin. We have a few microphones in the room, please. Yes, Roy Tilley from Arctic. Roy Tilley: A couple of questions from me. Just on the -- touch upon the margin side, just on the competitive picture on retail, in particular. Have you -- has it changed anything recently? Or is it kind of still the same pressure? And is there anything similar on the corporate side? That's the first question. And then a question on funding. So money market rates have come up quite significantly in the last few weeks. So on the funding side, you've already got a rate hike in your funding cost, I guess, and spreads have also widened somewhat. So I was just wondering, are you able to mitigate any of that on pricing on the asset side? I guess, repricing mortgages will be difficult until we get an actual rate hike, but have you done anything on deposits? And then the third one, just on buybacks. Have you sent an application to the FSA? And if you have, when would we expect an answer? Kjerstin Braathen: Thank you, Roy. I can do the first and Rasmus, the 2 following. Competition is fierce. I would say it's gradually intensifying. We've seen that over the past year. It does reflect that there is ample capacity in the market that surpasses the credit demand overall. It is fierce in Personal customers. It's definitely fierce also in Corporate customers in Norway, including in the commercial real estate sector that we usually see when there is capital looking for employment across the market. Still, we are very pleased to see that there is a high activity and interest coming into the business as such. In particular, we are focusing on our position towards young people. We have 12,000 people buying their first home, young people buying their first home during the course of last year. We continue to see stable to growing volumes even in a competitive market. For us, it's a demonstration of the performance in our team overall, and we are able to continue to grow at sustainable levels, and that continues to be a priority for us, and it will be. But overall, the market is impacted by competition, yes. Rasmus Aage Figenschou: Very good. And on the funding side, of course, there is -- when there is volatility, I'm very happy that we have a strong set of treasury team that plans ahead. So for us, we are not affected by the day-to-day developments in that funding. And I will not go into detail of when we move in the market, but we are well funded. And we, of course, when the whole key policy -- well, when the market has moved in total, we are, of course, affected by that, and then that will feed on to our customers. But the volatility that you're referring to, we are funding our way through it, so to speak. When it comes to the FSA application, we have applied similar to -- as previous years for 1%, and we'll refer to the market when we have their answer. Kjerstin Braathen: And just as Rasmus is saying very correctly, we have -- our team has funded a bit early in terms of expecting market development to be more volatile. But do keep in mind that relative to the LIBOR and the money market rate, our position is more or less stable. And this is in view of how our assets and liability size are matched in terms of margin-related exposure to customer versus what we are funding in the third-party market. So there is a slight impact from rate movement. But really, overall, I think you should see that more or less stable. And then what matters beyond that is, of course, the level of spreads. And coming into the year, we saw the lowest risk premiums that we've seen in a long time. They have come out somewhat, but not to a very large extent. And our goal is always to fund ourselves better than our peers. That increases our competitiveness towards customers, and we continue to see that we get very, very competitive funding. Even Westerveld: Thank you. Herman Zahl from Pareto. Herman Zahl: Just following up on competition. Could you say something about what kind of peers are driving competition in Norway Corporate segment, specifically? Since it seems like both larger savings banks and your Nordic peers have stepped up a bit. Kjerstin Braathen: I think we have a clear principle that we'd rather talk about our performance and not so much specifically about others. I think what we can contribute and shed light on is that it's a broad specter of players that are active in the market. Changes that have been made to capital structures that has improved the position of standard banks as a more general example has taken an impact. We can see that, that has made that category of banks more competitive. Otherwise, there is a larger number of players who are very actively driving competition in the market. Herman Zahl: Yes. And then just on some of the core banking fees, I think you mentioned some margin changes in guaranteed on the slides and money transfer fees as well. Is there something structural we should bear in mind there? Or is it mix effect? Kjerstin Braathen: It's an element impacting over the past 4 or 5 quarters or so, where we have more actively engaged in ensuring part of the exposure that we provide for some of our clients in larger corporates. So it's an added tool in the toolbox to originate and distribute. So when we look at that on a transaction per transaction basis, the return on the transaction and the customer and then to the group is improved because we have less exposure, but the cost related to this does appear in the commission and fee part of the book and has an impact there. Even Westerveld: Thank you. Thomas Svendsen, SEB. Thomas Svendsen: First, a question to commercial real estate. Now that the hope for interest rate declines have diminished and rates are going up, one could imagine that impacts the cash flow and the liquidity for these companies. So how do you look at commercial real estate? Kjerstin Braathen: We continue to remain comfortable with commercial real estate, Thomas. But as you know, of course, rates are very important in that sector of activity, and we have followed it closely. And I would say since rates topping out the last time around, there has been a restructuring and a shift in values that now is more or less 2 years back in time where some players that needed to reposition have positioned. We are now going back to interest rate levels we were at not too long ago, at least that's the expectation in the market. We do not see this as a particularly concerning factor related to our commercial real estate exposure overall. Keep in mind that it is 10% of our book, and it's limited to that. 72% of the exposure is in low-risk customers. It is a diversified exposure across geographies, but mainly concentrated in the larger cities in Norway, and it's diversified across offices, across hotels, across the shopping malls and others. And there is no particular concern that we would like to highlight in view of rates coming somewhat back up again. Thomas Svendsen: Okay. And just a second question on your latest CMD, you said you were targeting NOK 3 billion in gross cost cutting. Now that more than 1 year has passed, how are you according to this target? And should we expect it to be sort of linear over the planning period? Rasmus Aage Figenschou: So we are progressing according to plan on that. And we are -- as our cost slide represented, we are working adamantly on the cost efficiency in the bank, and we see numerous specific targets or areas that we're working on. We're not going into detail on that, except that we are progressing according to plan. Kjerstin Braathen: But I think roughly, we can share that we feel that we are more or less on track. Our cost-income ratio this quarter is somewhat north of 38%. So it's higher than what you've seen in previous quarters. This is an expected impact from the Carnegie acquisition. We have bought a meaningful piece of business that has a higher cost income component, but an improved return for the business overall. And of course, we acknowledge that it's more difficult for you to follow gross cost-saving initiatives, but you have seen us taking several initiatives in terms of restructuring and making changements to our staff. We are working in areas such as digitization and automation, but I would also add innovation in terms of simplifying and reinventing value chains. And of course, AI is a very important tool for us in this area. Also simplifying business, increasing the magnitude of straight through processing in more complex processes. I talked about a couple of examples in simplifying life for our customers, and we like doing that. But of course, simplifying life for customers also means improved efficiency for us. So we are on plan. It's not necessarily linear. Of course, we will also see what can be done with AI. That is a moving picture. But I think it's hard to give you sort of any guidance in terms of how you will see it being linear or not. Even Westerveld: Thank you. Any questions from the online audience? Yes, if we can pass the mic to Rune? Rune Helland: We have a question from Markus Sandgren from Kepler Cheuvreux. Nordea recently highlighted that Norwegian saving banks are currently competing quite aggressively, particularly on pricing. Are you seeing and sharing this view? And how is this affecting your ability to grow volumes without sacrificing margins? More specifically, how should we think about the trade-off between defending market share and protecting net interest margin in the current environment? Kjerstin Braathen: Thank you. I think we've touched upon parts of this question already, and it is a very important question. We recognize that there is competition in the market. I don't think we would limit it to a specific category of banks. I think we see it more broadly. But we also see that our team continues to perform and that we are able to continue to do profitable and sustainable business. Our growth platform stems across all of our customer segments. This is part of the strength that we have highlighted both in Norway and outside of Norway. And across the sectors, we will continue to prioritize growth. And I think we have proven that in periods if growth is somewhat slower in Norway, we are able to leverage other parts of that growth platform to deliver profitable growth in the area of 3% to 4%, which we continue to target. Growth in the previous 12-month period has been 3.5% in terms of lending, non-currency adjusted. Currency adjusted, I believe it has been somewhat stronger. And we have seen a growth in Personal customers of 1.6%. We have seen in Corporate customers, 5.6% and then Large Corporates, 5% noncurrency adjusted for the year as a whole. And I think this demonstrates also in what has been a competitive market, our ability to deliver growth. The priority remains very firm also on profitability. Even Westerveld: Thank you. Any more questions, Rune? Rune Helland: No. Even Westerveld: I think we will close the session, if I don't see any more hands. Management will be available for members of the press, like we always are in the couch area afterwards. And I wish you all a very nice Thursday.

24天前Insight Analytics约5分钟阅读

CNP 2026 Q1 财报电话会议

Operator: Good morning, and welcome to CenterPoint Energy's First Quarter 2026 Earnings Conference Call with Senior Management. [Operator Instructions] I will now turn the call over to Ben Vallejo, Vice President of Investor Relations and Corporate Planning. Please go ahead. Ben Vallejo: Good morning, and welcome to CenterPoint's Q1 2026 Earnings Conference Call. Jason Wells, our Chair and CEO; and Chris Foster, our CFO, will discuss the company's first quarter 2026 results. Management will discuss certain topics that will contain projections and other forward-looking information. and statements that are based on management's beliefs, assumptions and information currently available to management. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on various factors as noted in our Form 10-Q, other SEC filings and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statements other than as required under applicable securities laws. We reported $0.48 per diluted share for the first quarter of 2026 on a GAAP basis. Management will be discussing certain non-GAAP measures on today's call. When providing guidance, we use the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. For information on our guidance methodology and a reconciliation of the non-GAAP measures used in providing guidance, please refer to our earnings news release and presentation on our website. We use our website to announce material information. This call is being recorded. Information on how to access the replay can be found on our website. Now I'd like to turn it over to Jason. Jason Wells: Thank you, Ben, and good morning, everyone. On today's call, I'd like to address 4 key areas of focus for the quarter. First, I'll walk through our strong first quarter financial results. Second, I'll provide an update on our load outlook for Houston Electric, including yet another significant increase in our firmly committed load forecast to 12.2 gigawatts of new industrial load. Third, I will cover how our continued and accelerating growth in the greater Houston area to provide incremental capital investment opportunities and further support customer affordability. And lastly, I'll touch on our growing optimism for transformational load growth opportunities for our Indiana electric service territory, which would similarly provide for incremental capital investment and support customer affordability. I will start with our strong first quarter financial results. This morning, we reported non-GAAP EPS of $0.56 for the first quarter of 2026. Chris will walk through the details of these results, but I want to highlight that our execution through the first quarter positions us well for the remainder of the year. With that said, we are reiterating our full year 2026 non-GAAP EPS guidance of $1.89 to $1.91, which, at the midpoint, would represent 8% growth over actual 2025 delivered results. As a reminder, we rebase our long-term earnings guidance from each year's actual results. This approach provides our investors with the direct benefit from compounding effect of the earnings we have consistently delivered. In addition, this approach helps contribute to the durability of our earnings profile, underscoring our commitment to delivering value through disciplined execution and sustained growth each and every year. Over the long term, we continue to expect to grow non-GAAP EPS at the mid- to high end of our 7% to 9% annual guidance range through 2028 and 7% to 9% annually thereafter through 2035. I would now like to provide an update on the accelerating growth our Houston Electric business continues to experience and our strong execution, which enables us to take advantage of the growth in the near term. As we shared on the fourth quarter call, we have meaningfully accelerated our load growth outlook, bringing forward our forecast for a 50% increase in peak demand by a full 2 years. Our conviction in that accelerating time line was grounded in 7.5 gigawatts, a firmly committed load that we expected to be energized by 2029, including 2.5 gigawatts that was already under construction as of our last update. Since then, we have made significant progress in executing against our prior forecast, while adding additional customers. As a result, we now have clear line of sight to 12.2 gigawatts of firmly committed load. With the team's disciplined execution, we have already secured ERCOT approval for 3.2 gigawatts of this load. 2.5 gigawatts was approved since our last earnings call alone and within less than 80 days of filing for approval. We expect to submit the remaining 9 gigawatts of projects to ERCOT for approval within the next few weeks. Importantly, this firmly committed load is highly diversified, spanning more than a dozen unique customers across nearly 20 distinct projects. We believe these projects are manageable in size with 90% representing 0.5 gigawatt of demand or less. That, along with our utilization of existing capacity and our customer selection of project sites near substation allows for quick and efficient interconnections. Our focused execution over the last few months has also provided us with a clear path to energization. Notably, we are positioned to energize approximately 8 gigawatts of this firmly committed load by 2029, which is 80% of our 10 gigawatt increase we originally forecasted to be energized by the end of 2031. This diversified growth and economic development has another key benefit to the Greater Houston area, which helps us keep electricity delivery charges affordable. The Greater Houston area is no longer an emerging destination to site new data centers. It is now firmly established as a location of choice for some of the world's largest hyperscalers and developers. However, this is only one facet of Houston's multidimensional growth. The region's growth is being propelled by significant investments in life sciences, energy, energy exports and advanced manufacturing. With this growth comes new jobs in an influx of new residents, which has fueled a 2% annual residential growth, the areas experienced for the last few decades. The expansion of the economy and increase in population have significant affordability benefits for our customers. Notably, we expect that utilizing 10 gigawatts of existing system capacity to provide approximately $4 billion in aggregate savings for Texas residential and commercial customers over the next 10 years. supporting affordability and creating headroom for future customer-driven investments. This affordability profile is one that very few areas in the country can offer as our charges are 11% below the national average and the lowest in ERCOT. Looking ahead, we believe this growth will continue for years to come, requiring the further expansion of our system to support growth beyond the near term. We are making steady progress on a refresh load study that will inform our transmission planning process. and we expect to complete the study later this year. In Indiana, we are increasingly confident in our ability to secure potentially transformational opportunities to support local economic growth and address affordability. We continue to make considerable progress in our conversations with a large load customer on a project that would represent our single largest load in our Southern Indiana service territory with substantial upside for additional growth. Beyond the significant economic development benefits this opportunity would bring to the local community, it represents a powerful lever to enhance affordability for our customers. We estimate that this initial incremental load could enable $250 million in savings to our residential customers over 15 years, meaningfully reducing customer bills with the opportunity for even greater savings as potential upside for growth materializes. In closing, we continue to believe we have one of the most tangible and executable long-term growth plans in the industry. We are uniquely positioned to move at the speed of business to execute on near-term customer-driven opportunities. while also delivering our service affordably. We are laser-focused on making longer-term investments to enhance growth across all of our service territories while also improving customer outcomes. With that, I'll turn it over to Chris to cover the financials in more detail. Christopher Foster: Thanks, Jason. This morning, I will cover 4 areas of focus. First, the details of our strong first quarter financial results and how they position us for the rest of the year. Second, I'll provide a brief regulatory update and our progress with respect to timely recovery of our capital investments through the filing of our interim capital trackers. Third, I will touch on our planned capital deployment in 2026, which is right on track as we target to invest $6.8 billion this year for the benefit of our customers and communities. And finally, I will provide an update on our derisked financing plan, balance sheet health and credit metrics. Now starting with our strong financial results on Slide 6. On a GAAP EPS basis, we reported $0.48 for the first quarter of 2026. On a non-GAAP EPS basis, we reported $0.56 for the quarter. Our non-GAAP EPS excludes the impacts from the tax gain and other expenses related to the sale of our Ohio LDC, which is on track to close in the fourth quarter of this year. In addition, we continue to exclude the impacts of removing our temporary generation units from base rates as they are no longer part of our regulated utility business. As a reminder, we expect to start marketing these units for either a sublease or sale later this year in anticipation of getting those units back no later than spring of next year. Taking a closer look at the drivers of our first quarter earnings. Growth in rate recovery contributed $0.11 when compared to the same quarter last year. driven by a full quarter impact of updated rates, reflecting the interim filing mechanisms that went into effect late last year. Weather and usage were $0.02 unfavorable when compared to the comparable quarter last year, driven by milder weather across our Texas and Indiana service territories. Additionally, higher interest expense was $0.04 unfavorable, reflecting new issuances, slightly offset by lower commercial paper balances and favorable pricing on the convertible debt we issued during the quarter. O&M was flat for the quarter as we continue to accelerate our peer-leading vegetation management program to enhance the customer experience, and improve customer outcomes during severe weather events. Lastly, the absence of earnings from our Louisiana and Mississippi businesses post divestiture resulted in $0.05 of unfavorability when compared to the first quarter of 2025. The divested rate base has already been replaced by the acceleration of investments in our Texas businesses. These results reinforce our confidence in delivering on our full year 2026 non-GAAP EPS guidance range of $1.89 to $1.91. The accelerated growth that Jason highlighted and the work we've done to derisk our financing needs and more efficiently execute are additional tailwinds that further position us well to deliver and could continue to provide upside as we move through the year. Over the long term, we continue to expect to grow non-GAAP EPS at the mid- to high end of our 7% to 9% long-term annual guidance range through 2028 and 7% to 9% annually thereafter through 2035. Now turning to a broader regulatory update. As a reminder, we continue to recover approximately 85% of our investments through capital trackers, several of which we filed this quarter. I'll start with Houston Electric. In February, we submitted the first of our 2 permitted filings of our Distribution Capital Recovery Factor, or DCRF, and our Transmission Cost of Service tracker or TCOS. The DCRF filing requested a revenue requirement increase of approximately $108 million, capturing incremental distribution investments over the last 6 months. I'm pleased to share that we entered into a settlement agreement earlier this month and requested new rates to be effective in June, ahead of our planned timing. The TCOS filing requested a revenue requirement increase of approximately $36 million, incorporating transmission investments made between July and December of last year. During this quarter, the filing was approved and new rates went into effect just last week. Turning now to Texas Gas. In February, we also filed our annual capital investment recovery mechanism, or GRIP, requesting a revenue requirement increase of approximately $62 million, capturing capital investments made through 2025. Pending approval, we expect these investments to be reflected in customer rates in June. Lastly, as a reminder, we plan to file rate case applications for our gas businesses in Minnesota and Indiana later this year, which in the aggregate, represent less than 20% of the earnings power of our consolidated base. Next, I will touch on our continued execution against our planned capital investments for 2026 as shown on Slide 7. We invested $1.2 billion in the first quarter for the benefit of our customers and communities. The quantum of capital deployed in the first quarter is consistent with the seasonal timing of our capital plan as we expect larger construction and resiliency projects to ramp throughout the year. In short, we remain firmly on track to execute the $6.8 billion of planned work this year as we continue to make investments to strengthen our system, improve customer outcomes and build the most resilient coastal grid and safest gas systems in the nation. Beyond our base 10-year $65.5 billion plan, we will continue to fold in the over $10 billion of incremental capital investment opportunities as we gain better clarity on project costs currently embedded in our plan. as well as line of sight to new projects required to meet the unprecedented load growth across our service territories. And in addition, we'll potentially discover more capital investment opportunities as we refresh our transmission planning later this year, which we are targeting to complete in the second half of this year. These additional investments will continue to provide upside to our over $65 billion base plan through 2035, further increasing the earnings power of the company. Lastly, I want to touch on our credit metrics and balance sheet. As of the end of the first quarter, our adjusted FFO to debt ratio based on Moody's rating methodology was 12.5%. This metric reflects temporary timing pressure from opportunistically pulling forward planned debt issuances in the quarter to take advantage of attractive market conditions. As that capital is deployed and financing normalizes, we expect this impact to reverse over the course of the year. And as a reminder, we expect to end the year at the high end of our targeted cushion in light of the corporate AMT revised guidance. Importantly, we have filed for a refund of some of the previous paid cash taxes and expect to receive a refund later this year. We expect to incorporate the impacts of this favorable guidance into our financing plan later this year. Overall, from a financing standpoint, we have completed nearly 70% of our planned 2026 financing needs, significantly derisking this year's financing plan. I also want to highlight that the $650 million convertible debt issuances we executed in February has allowed us to reduce near-term exposure to floating interest rates. I would like to highlight that our commercial paper balance at the parent at the end of the first quarter was 0 compared to our normal average balance of approximately $1 billion. In summary, we are confident in our ability to execute in the near term and beyond given the derisked nature of our plan. We are reiterating our 2026 non-GAAP earnings guidance targeting at least the midpoint of $1.89 to $1.91. At the midpoint, this would represent an 8% increase over 2025 delivered results. Looking ahead, we expect to grow non-GAAP EPS at the mid- to high end of our 7% to 9% range from 2026 through 2028. And over the long term, we expect to grow non-GAAP EPS at 7% to 9% annually through 2035. We remain committed to investing to improve customer outcomes and enabling growth across the states that we have the privilege to serve. And with that, I'll now turn the call over to Jason. Jason Wells: Thank you, Chris. In closing, with our focus on disciplined execution, we have made meaningful progress in enabling more growth faster. -- particularly in our Houston and Indiana electric service territories. We believe that our ability to attract and serve large load customers will unlock the potential to transform the communities we have the privilege to serve. This growth, combined with our delivery of strong and consistent results in our proactive efforts to significantly derisk our regulatory profile and financing plan. increases our conviction that we have one of the most compelling affordability profiles and one of the most tangible and executable long-term growth plans in the industry. Ben Vallejo: Thank you, Jason. Operator, I'd now like to turn it over for Q&A. Operator: [Operator Instructions] Our first question coming from the line of Shahriar Pourreza with Wells Fargo Securities. Shahriar Pourreza: Just first, just there's obviously more specificity around the Houston Electric load, including the 12 gigs of firmly committed demand and the 8 gigs of data center load expected online by 29. Can you just help us bridge how much of that committed load is already embedded in the current plan versus what could represent incremental upside and of the projects not embedded. I guess what are the gating items to include it in plant? Jason Wells: Thanks for the question, Shar. The model in ERCOT is a little bit different than the rest of the country. We just provide transmission and distribution service. From a CapEx standpoint, the incremental system modifications, switchyard and substations that are needed to connect these customers timely are paid for by the large load customer. So I wouldn't look at this as necessarily a direct impact to the CapEx plan. There are 2 though tailwinds to the financial plan that I think are important. The first is despite the fact that there is not significant CapEx again, the customer is paying for the modifications in the interconnection, it does represent a significant amount of incremental demand charges, Probably the way to think about this is it's about -- for every 1 gigawatt of industrial load that we add to our system, it's about $6 million a month of incremental demand charges. So that provides a pretty significant tailwind both from an earnings standpoint but also a customer affordability benefit. And then indirectly related to CapEx is the need to replace that capacity on the system. And that's what we've been highlighting in terms of the trendy working through right now. That will result in the second half of this year in incremental projects to effectively replace the capacity and make sure the system is able to accommodate future load growth. So again, I wouldn't think about the 12 gigawatts of firmly committed load is directly driving CapEx. What it does is it directly drives demand charges that are outside of the plan. So that's a tailwind from an earnings and an affordability standpoint, and then indirectly supports the need for future CapEx that we will roll into the plan later this year. Shahriar Pourreza: Got it. Got it. And then just maybe just kind of correlated to the first question is just with ERCOT's new preliminary long-term forecast that projects now like 278 gigs of total demand by 29% and $3.68 by 2032. But both obviously ERCOT and PUCT have indicated that those forecasts likely overstate. I guess, remind us how you're using this kind of in your planning process? And should we think about it as mostly supportive of Houston's growth or as something that could ultimately drive incremental wires investment above what is already embedded in your current plan through '26? Jason Wells: Yes. As we've highlighted on previous calls and what you've seen in our ERCOT emissions, we are much more disciplined in terms of load that we submit to ERCOT for planning purposes. The loan that we submitted to ERCOT in this most recent study was effectively consistent with the load that we have under construction. We submitted about 3.6 gigawatts. And as we're reporting today, we have 3.5 that we're actively under construction in terms of committing. We will be filing with ERCOT, as I said, another 9 gigs in the coming couple of weeks. From a CapEx standpoint, again, I think the real opportunity here is replacing the capacity for future growth. And so in the second half of this year, you'll see an update from us where we articulate the new projects that will be needed to support future growth, the dollars associated with those. And then I think this continues to be a tailwind for the continued buildout of the 765 kV system on what I would call more of a medium-term, longer-term opportunity. So again, the growth is fantastic and the fact that it provides significant customer affordability benefits by effectively spreading the fixed cost of our system out over a much larger customer base provides near-term opportunities for earnings for incremental demand charges and then sets us up for incremental transmission projects that likely will need to be executed before the end of the decade and again, supports the buildout of the 765 KV system early into the next. Operator: Our next question coming from the line of Steve Fleishman with Wolfe Research. Steven Fleishman: Just wanted to go to the commentary on Indiana, and it sounds like things are maybe getting closer there. Could you talk to -- I think you've talked in the past about the potential to turn your CT into a CCGT? And I don't know if there's other investments if you were to land this customer. Could you give us some sense of the investment opportunity there, both physically and then also in dollars? Jason Wells: Yes.. No, absolutely. Steve, happy to provide that color. So if you've looked at the MISO Q, we have a transmission project that we've filed for to provide incremental capacity in that region. And in our integrated resource plan filing that we that we recently filed with the commission, we've got a scenario that supports the potential for a large load customer. Effectively, we've got existing capacity on our system today. We can enhance that with the new transmission investments that are articulated in that MISO Q. We can also then as you mentioned, provide incremental capacity by converting our simple cycle to a combined cycle facility up there. All of that unlocks at least 1.5 gigawatts of incremental capacity for a large load customer because we have existing capacity because we have the simple cycle plant already, Bill. I would think about this as more around about $1 billion opportunity as opposed to several billion dollars just to put some scale around the incremental CapEx. Again, this is I think an incredible opportunity for our customers up in that region. It allows us to provide customer affordability benefits that will be significant. It will provide incremental earnings from those sales and it will provide tailwinds around about $1 billion of incremental CapEx. Outside of that initial $1.5 billion -- 1.5 gigs, we are continuing to evaluate the opportunity to support future large load customers and that could result in even more incremental CapEx down the road. Steven Fleishman: Would the $1 billion opportunity be kind of by 2030 or after 2030? Jason Wells: No, no. This is all -- Yes, definitely within '27, '28, '29. Steven Fleishman: Okay. And then I guess just on the -- I just want to clarify on the ERCOT. So that number that we got from ERCOT last week on demand, that huge number. Your what the numbers that you have for your region territory within that, they're consistent with what we heard today? Or is there like a bigger number based on however they ask the data to be given to them, that matches up with their total number? Jason Wells: Yes. Our total submission as part of that process for large loads was roughly 4 gigawatts. That was included in those reported tables. Outside of -- and that was effectively the large load customers that we were currently and actively constructing transmission modifications, interconnection facilities. Outside of the number that was picked up on that table, we also filed a large load study that incorporated continued residential growth, the potential for large load customers. And that was a little bit more than 11 gigawatts. Those weren't picked up in ERCOT's numbers, but were filed with ERCOT. Today, what we're doing is updating those numbers. So this is in excess of what ERCOT just reported. We felt that given the methodology that ERCOT asked us to submit the customers, the 9 gigawatts that we will be filing for in a couple of weeks didn't meet that criteria back earlier this year. But certainly, we made a significant amount of progress in these 9 gigawatts that we will be filing in the coming weeks, meet all of the related commitments under the batching process for ERCOT, and we feel confident our committed load firmly to be low customers. So this is an incremental amount to what was reported by ERCOT. Operator: Our next question coming from the line of Richard Sunderland with Truist Securities. Richard Sunderland: Just circling back to this transmission commentary, I want to understand what you're studying for that 2H update it sounds like if I was following you earlier that the transmission need is all this decade. Could you maybe frame what's in flight now and what it's doing for capacity that's being utilized by this new load and what that might mean for this next batch of transmission out of the study? I'm just trying to think about total dollars that might come this decade that aren't reflected in the plan right now. Jason Wells: Yes. As we've been talking about on previous earnings calls, we think probably the most important aspect to focus on for large load is existing hosting capacity. These large load customers need to connect in any power timely. For us, we have existing capacity on our system of roughly 10 gigawatts. We also have about 9 gigawatts of generation that wants to connect it, is in the process of connecting to our system here in Houston. We're using that capacity to satisfy those customers that we talked about today. Part of the transmission plan that we have outlined in our $65 billion includes projects to make sure that we have the existing capacity where we need it. So think about that as sort of like intra-regional investments to move power around the greater Houston region. Also in the $65-plus billion CapEx plan, we have increased import capacity, primarily through the 765 kV lines that really will start to come online in '31 and '32. And so this transmission study that we've been alluding to really seeks to kind of fill a gap around '29, '30 and '31, where we see existing capacity being exhausted and before those new 765 kV projects provide incremental import capacity. So again, it will be increasing our capacity at the tail end of this decade and then there will be incremental projects to move this load around the Houston region to where it's needed. And there will likely be system stability investments to make sure that the system can accommodate the number of large load customers that are being proposed here. So it should be a fairly significant set of new transmission projects that we'll be able to highlight in the second half of this year. Richard Sunderland: Understood. That's very helpful commentary. And then I realize [indiscernible] was briefly referenced in the script, but just thinking high level here with all of this load commentary you've been offering today, how are you thinking about the market opportunity around those units as it stands now versus, say, a year ago? . Christopher Foster: Sure. We are in the market actually on the -- some of the smaller units at this stage and already seeing very strong market receptivity. As you can imagine, when we first took these units under lease, this was back in 2021. So you can imagine just how much of the demand has changed since then. So we're really seeing directionally almost double the original lease rates that we had in place. So the way to think about this at a high level for those larger units, as you know, those are currently serving the San Antonio area. At this stage, the back-end data when they return to the company from when we could start to market those units would be by the end of March 2027. So at this point, our focus would be on getting ready, being prepared ahead of that to make sure that we can take advantage of what would probably be a cash upside to the company's plan. Operator: Our next question is coming from Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to kind of go to the credit side, if I could. I was just wondering if you might be able to expand a bit more on the timing of the trajectory of the credit metrics here and how you expect to exit '26 at this time? Christopher Foster: Sure thing. This is purely [indiscernible], a function of timing. So we're still highly confident that we will end the year at the high end of the cushion that we talk about relative to the Moody's methodology. So it's 150 basis points of cushion. And so the why behind that is a couple of things. First, from a timing perspective, we pulled forward a substantial amount of debt issuances in the plan. So now we've got 70% of our planned 2026 financing needs taken care of. The other attribute I would remind you of is just that -- just before our prior earnings call, there was a treasury related announcement associated with the corporate alternative minimum tax. And there, there's a very good outcome, right? We'll have the opportunity to no longer be a cash taxpayer, which was previously on the order of roughly $150 million a year. So we'll get that benefit, right, in the form of a refund that will occur here in the next few months. Beyond that, what I think is also less appreciated is that we will also pursue some prior period recoveries, which would allow for even more cash improvement once we see those refunds. So those elements really give us good confidence at a year-end again, we will be at the high end of that range. Jeremy Tonet: Got it. That's very helpful. And I just wanted to expand the conversation a little bit. A lot has been talked about data centers here. But just wondering, I guess, if you could talk a bit more on traditional large load drivers in the Gulf Coast and Houston area. And I guess, maybe how you see that trending? Jason Wells: Absolutely. Look, I think a lot of this has been oriented to data centers, but really when we talk about the large load customer updates today, it includes both advanced manufacturing and data centers. As you know, as we've talked about on previous calls, [indiscernible] is becoming kind of an epicenter for advanced manufacturing, basically manufacturing almost the entirety of the equipment, except for the chips that are going into these data centers. There's also advanced manufacturing on the life sciences front. These types of facilities are heavy users of electricity and power, they themselves run their own data centers to tune their advanced manufacturing facilities. And so while it's not data centers for the market, they're heavy users of electricity for their function. So we see this growth really driven again by advanced manufacturing data centers. We continue to see significant activity on the energy and energy export side of things. Really, I want to continue to underscore, I think the diversity of economic and load growth drivers is really what sets this region apart. We don't see any slowdown in any of the large industries that are driving propelling Houston's economic development. Operator: Our next question coming from the line of Bill Appicelli with UBS. William Appicelli: Just a question on the batch study review process or COD. And maybe you could just expand on how the firm load commitments you guys have fit within that framework that they are in the process of reviewing? Jason Wells: Yes. So as I mentioned, we've got about 3.2 gigawatts already approved through the ERCOT process that will likely show and qualify for the baseline concept. The 9 gigawatts that we're filing for will likely qualify for batch 0. There's effectively 2 load studies that we have to have approved by ERCOT to qualify for Baxter, one of those 2 need to be approved to the steady state load study. We're on track to have those submitted to ERCOT. In a time period that would allow ERCOT to again, approve those to be included in bags. As I've mentioned, we have had very successful approvals of our previous submissions anywhere from 55 days to just under 80 days. So outside of kind of the interconnection and load studies that are required, the customers here have the land they're prepared and ready to pay all of the associated fees. We have the equipment, all of the long lead time equipment, in particular for us, this is the high voltage breakers and transformers, customers that will actually utilize the power or signed up. And so all of the definitions that are going to be required to be either a baseline or back 0 customer. William Appicelli: Okay. And then shifting gears a little bit, I mean -- what are you guys seeing in terms of the penetration of battery storage in your service territory and what kind of impact is that having from your view? I know you realize that you're responsible for on the T&D side, but just curious, you've seen a big uptick in storage in ERCOT broadly. And so just curious from your perspective what the impacts are and the outlook there? Jason Wells: It has been -- I mean -- and you know the numbers, a significant level than battery investment in the state that is all but sort of changed the summer peak pricing in the ERCOT market as batteries have helped really kind of smooth that summer peak demand. What we see kind of going forward, as I mentioned, from our vantage point, we've got about 9 gigawatts of incremental generation that is connecting to our [indiscernible] Greater Eastern region. And that is largely solar and batteries almost exclusively. We continue to see a high degree of interest in -- for the solar projects in particular to qualify for the tax credits before they expire. As a result, many of -- most of these projects are co-locating batteries. And so we continue to see batteries as effectively a tailwind to keeping energy costs low for customers for at least the next couple of years. And then we know that there are some incremental gas development that will really help after the tax credits expire and potentially, we see sort of a slowdown in the solar and battery build-out as we approach sort of the end of the decade. So we believe that strongly the generation is going to be there for this growth. Battery is going to help moderate the cost of electricity for customers, and we continue to see a robust pipeline connecting to the system over the next 2 years. Operator: Our next question is coming from the line of Julien Dumoulin-Smith with Jefferies. I'll move on to the next questioner. Our next question coming from the line of Anthony Crowdell with Mizuho Group. Anthony Crowdell: I know Julian does 3 calls at once, so he's probably a little tied up. Just -- I don't believe it's apples-to-apples. Apologies for the question. Just when I look on Slide 4, and you talk about the 8 gigawatts of data center load expected to be energized by 2029. Is that the same 8 gigawatts that in fourth quarter slide deck you guys are focused on getting that on by year-end '28. I mean -- my question is that load getting pushed back a year or it's actually not an apples-to-apples comparison? Christopher Foster: Anthony, let me just go and lay off for you. In the prior quarter, we had talked about 7.5%. That number is now going to 8%. And it's by the end of 2028 is the way to think about it. So apples-to-apples, that's the number from 7.5% to 8%. What we provided this morning, though, is that the firmly committed top line number is actually going to 12.2 gigawatts. Anthony Crowdell: Perfect. Great. And then just lastly, a quick follow-up on -- you talked about -- I think you going to file Minnesota and Indiana gas cases later this year. Any -- is it just infrastructure investment that's driving that filing or anything else in those -- in either of those 2 filings? Christopher Foster: Sure. Pretty straightforward. Definitely, it's really about replacement CapEx in Minnesota on a very straightforward program to focus on safety and reliability. As it relates to Indiana, there, what I think is important that we have already signaled is our focus on affordability. In particular, we are evaluating actually, Anthony combining what are currently 2 gas rate cases up there into 1 which we would likely file in Q4 of this year. By combining the cases, we're likely to see a customer build benefit explicitly for those customers that we serve in Southwest Indiana as a result of the cost allocation changes. And so excited to be able to put those forward. Both of those, I think you should anticipate for Q4 of this year, both Minnesota and Indiana. Operator: Our next question coming from the line of Andrew Weisel with Scotia Bank. Andrew Weisel: First question is you've talked about the utilizing 10 gigawatts of existing system capacity around Houston to generate those $4 billion of savings, but you now have over 12 gigawatts of committed mode -- obviously, no 2 projects are the same, but do you have a rough ballpark number of what would be required or cremental gigawatt of demand going forward? I know you alluded to some new transmission projects that may be you'll announce later this year. I'm asking more like a sensitivity in terms of assets and CapEx needs and then what kind of impact would that have on the rest of the customer base? Would it bring further customer benefits? Or should we think about it more like net neutral going forward? Jason Wells: Yes. Ultimately, I think about it as further customer benefits. I think we have been in a very unique position in holding our rates relatively constant since 2014. And and that largely has been a function of the economic growth in Houston. I can't size for you kind of $1 per gigawatt for incremental because it is going to be so unique. What's the cost of and the length of the import lines, where specifically are the intra-regional lines needed what's needed from a system stability standpoint. Those are all the things that we're evaluating as part of the transmission study. This will create incremental capacity at a cost, but -- the way that I would think about it is it unlocks the benefit of future economic growth for the region. And just as we've invested in capacity in the past, that's been utilized and kept our rates flat. The same will happen here. And ultimately, the single biggest lever for affordability of utility service is economic development. and we are laser-focused on continuing to make sure that we support the greater Houston region, Indiana and Minnesota's economic development opportunities. Andrew Weisel: Okay. directionally helpful. Then second, in terms of the balance sheet, on cash taxes, I know you mentioned you'll be getting some refunds and you expect to see lower cash tax outflows going forward. Do you see that as being meaningful enough to reduce the guidance calling for $4 billion of common equity. Obviously, that will depend on CapEx, which is constantly rising. But all else equal, would that be meaningful enough to impact equity? And then please remind me, was the convertible already embedded in the assumptions? Or could that also imply some downside? Christopher Foster: Sure. So thanks for the question. On the convert, you can imagine that helped reduce kind of near-term floating rate pressure. So that was a nice add to the plan. As I think about the corporate alternative minimum tax benefit, what we had shared is that not only will you get the refund improvement for this year, right? So just think about that as roughly in line with that $150 million a year of cash tax payments that would go away, you would keep that benefit, right, as you go forward, right? So that roughly $150 million a year. So what we've shared actually is that can provide us the equivalent of adding an incremental $1 billion of CapEx to the plan with no incremental equity. And so as you can hear from what Jason has shared this morning, certainly, there are multiple opportunities. So that's how we've tried to share that. Actually, we've got even more CapEx we can add to the plan without adding incremental equity. Operator: I see there are no further questions in the queue at this time. Ladies and gentlemen, this concludes CenterPoint Energy's First Quarter 2026 Earnings Conference Call. Thank you for your participation, and you may now disconnect.

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ESSITY-B.ST 2026 Q1 财报电话会议

Sandra Åberg: Good morning, and welcome to Essity's presentation of the Q1 2026 results. Here to take us through the highlights of the quarter, we have our CEO, Ulrika Kolsrud, and our CFO, Fredrik Rystedt. After their presentation, you have the opportunity to engage directly with us. [Operator Instructions] Now enough of me, let's get started. Ulrika, please take us through the quarter. Ulrika Kolsrud: Thank you, Sandra. And also from my side, welcome to this webcast. We started the year with organic sales growth coming from volume growth, and we continued to win the relative game, strengthening market shares in our branded business in retail. We furthermore strengthened our profit margins and delivered a strong cash flow. Then besides these solid results, we had 3 major events in the quarter, the decision to launch a new share buyback program of SEK 3 billion well in line with our ambition to have share buybacks as a reoccurring part of our capital allocation. We also completed our Feminine Care acquisition in North America, now more than doubling our Personal Care sales in the U.S. And we have the organizational change, meaning that we now report in our 4 new business units, Health & Medical, Personal Care, Consumer Tissue and Professional Hygiene. And let's start with Health & Medical, where we continued on our track record of consecutive growth in Medical Solutions. We were especially pleased in the quarter with the continued good growth in Wound Care across geographies. Q1 was, however, a weaker sales quarter for Incontinence Care in Health Care. Given the financial pressure that we see in health care systems and also the lower input costs that we have had, we held on to prices very well. So margins and profit delivery was as high as ever. However, the sales performance was different from market to market. And one region that performed very well in the quarter was North America. And we also supported the business going forward to grow even further in North America by upgrading the TENA ProSkin Briefs assortment. We now equip this with our latest and greatest technology when it comes to -- or technologies, I would say, when it comes to leakage security, dryness, fit and comfort. And we know that these products are highly preferred among professional caregivers. We also performed very well in incontinence care in North America in our retail channel. And actually, the good growth momentum and continued good growth momentum of incontinence care in retail was one of the key highlights in our Personal Care results. Two other key highlights were that we strengthened our share of market in 60% of our branded business and also the good growth in Feminine Care. I want to stay for a while on Feminine Care because we had some exciting developments in this category in the quarter. For one thing, as I mentioned, we completed the acquisition of the OB, Playtex, Carefree and Stayfree in North America. Now we start the integration, and it's now that the real work is starting. So our first priority is to secure business continuity to guarantee that we have uninterrupted customer execution, supply and operations during this transition period. Our second priority is to engage with in top-to-top customer meetings to now present the combined portfolio that we have and that we can offer from Essity. And then in parallel with this, we continue to work on supply chain, on branding and on innovation. So to capture synergies in supply chain to combine the 2 innovation portfolios to accelerate proven platforms and to apply our proven Essity brand-building capabilities and assets in a globally scaled and locally relevant way. The other event, I would say, or exciting development in the quarter in Feminine Care was in our leakproof apparel. So as you can see here behind me on the slide, leakproof apparel was contributing positively to the growth in Feminine Care. And this is one fast-growing segment within Feminine Care, and we have taken action to make sure that we capture the growth in this segment. So we have, for example, reduced our production and product costs in order to enable a competitive pricing in a more challenging consumer environment. We have also improved our efficiency in consumer acquisition in the D2C channel and broadened our distribution. Then with the new organization that we have put in place, we are consolidating our efforts to make sure that we drive learnings and synergies for our full portfolio in this area. Now innovation is as important for leakproof apparel as it is for all our other categories and segments. And in the quarter, we upgraded with a specific range for teens. And this is a super important target group for this segment and for feminine care in general because this is where we generate trial and get capture consumers at the point of market entry. These products are then specifically or tailored to the teen body. Also, they come with a day and a night variant, and they come with a Smart Protect concept. And some of you might remember that I talked about Smart Protect technology last quarter and that we equipped our [indiscernible] disposable feminine pads with this technology. Now we are reapplying this concept onto also leakproof apparel, which I think is a good example of how we can reapply strong concepts, of course, with the technical solutions that is fit for purpose that now secures that we have instant absorption and a good spreading of the liquid in the product. Continuing on innovation, we also launched an upgraded Libero offer in the quarter. More precisely, we made our soft Libero touch product even softer. And we know that this is highly appreciated by parents who really want soft products for the soft and delicate skin of their babies. So we have high reasons to believe that this will continue to support the very good momentum that we already have in this business because Libero had again a very strong quarter. We strengthened market shares and we increased volumes. When it comes to our retailer brand business in Baby, however, it was weaker. So overall, for Baby, we had a slight decline of organic sales. The other category where we're declining organic sales in the quarter was in Consumer Tissue. And that is the result of lower volumes and lower sales prices in Europe specifically. Latin America was doing good. Also, the good news is that we continue to perform very well in our branded business in Consumer Tissue, gaining market shares and growing volumes. And we will continue to support that profitable growth in our branded business on Consumer Tissue and by also continuing with our innovation agenda. In the quarter, we launched Zewa Wisch&Weg Smart. And what that is, is that we are reapplying our coreless technology on to household towels as well. So now we will have less waste in the kitchen moving forward. This is, first and foremost, of course, to bring convenience to our consumers, but it's also an innovation that is supporting our sustainability agenda. And that brings me to another initiative on our sustainability agenda in the quarter. Because in the quarter, we inaugurated a new biomass boiler in Kunheim factory in France. This is the second one. We have one in Le Theil since before. And I think this is a very good example of how we translate our net zero ambition into tangible industrial execution at the site level. And with this boiler, we are then covering for 70% of the steam needs at the plant. We are more than half our natural gas dependency in that plant and reducing carbon footprint by 40% or more than 40% in the paper machine. And this is also highly appreciated by our customers, which we could see also because we had a customer joining us in the inauguration. And in these times, I think it's worthwhile to mention that this is not only about sustainability by reducing our dependency on natural gas, of course, we also become more long-term cost resilient. Last but certainly not least, let's turn to Professional Hygiene. I have talked the past quarters about our strong development in strategic segments that we grow very nicely in strategic segments, which is important for us. And we continue with this positive development also in this quarter. A good example of that is that we grew Tork PeakServe more than 10%. We also grew Tork Skincare 5%. This quarter, we reported volume growth for the total Professional Hygiene as well. And that shows that the activities that we have put in place in order to fuel volume growth are starting to pay off. That's not the least true in North America, where we have gained some contracts in the fast food channel, but also work more expansive in the other channels beyond HoReCa. Then we were helped a bit by a stabilized market also in HoReCa in North America. And now to talk about the financial performance of Professional Hygiene and our other 3 business units, I hand over to Fredrik. Over to you. Fredrik Rystedt: Thank you, Ulrika. I will do my best to do exactly that. And I will start with our sales. And as you can see on the slide, we declined our sales with 5.1%. And this is, of course, just due to currency translation on the back of a stronger Swedish krona. In constant currency or using the same currency rate, we increased our sales with about SEK 0.5 billion or 1.5%. And as you can see on the slide or this bridge, 1.1% of that comes from the acquisition of the Feminine Care business in North America and the other 0.4% is related to organic sales growth. Now just to comment a little bit, it's really a bit premature perhaps to comment on the Feminine Care business from a financial standpoint. It's included as of February 2. So we've had very short experience from owning it. But so far, if you look at the full quarter, so to speak, also the period that we didn't own it, sales was roughly about comparable in comparison to last year. So, so far, as expected, pretty much. Now if I turn to volume, then you can see that we grew here with 1.1%. And we were particularly happy actually to see Professional Hygiene growing with close to 2% or 1.9%. And this is of quite a number of quarters with negative volume development for Professional Hygiene. This has been on the back of deliberate restructuring, but it's also been challenging markets. And as Ulrika mentioned, we see a bit of improvement in actually Southern Europe and North America on the market side, but we also see some good results of the initiatives. So again, a good development. And Personal Care, with 3.5% volume growth coming from a very strong or I should say, yet another very strong growth quarter for incontinence, good for feminine. And in fact, if you remember perhaps the previous few quarters that we've had relating to baby, where you see 4% to 5% of volume decline for baby, we have a much, much better situation this quarter with about 1% volume decline for that specific category. Now this is much better than before, and it's on the back of good performance in the northern part or our branded part in the Nordics, whilst the rest of the business pretty much performed in line with market. So a better situation for baby in general. When it comes to -- then to Consumer Tissue. Finally, we had a slight volume decline, so minus roughly about 0.5%. And this is, of course, just on mainly coming from the non-branded business, whilst as Ulrika mentioned earlier, the branded business actually performed super well, both from a market share perspective, but also positive volume growth. Turning to price/mix. This is all -- or I should say, mainly coming from Consumer Tissue, where we have deliberately lowered prices on the back of lower COGS. We also have -- and we reported on that before, we have selectively lowered some prices for certain SKUs in Professional Hygiene to get more growth in that area. But if you look at the combined price/mix for Professional Hygiene, it is actually slightly positive because we have a continued strong growth in our strategic products. So mix is actually bigger than the price decline. I'll go there from sales, I'll go to our margin development. And it's clear we have increased our margin with roughly 40 basis points. And all of our business areas with the exception of Consumer Tissue strengthened the margin or at least about the same margin. So a good development pretty much across the group. You can see here that there is a negative contribution margin-wise from the Feminine acquisition. And we -- if you look at that negative contribution for the group, it's roughly about 10 basis points and bigger for Personal Care. So if you look at the Personal Care margin, it has an impact of minus 70 basis points. Now we have -- if you look at the Feminine business in North America that we acquired, it has a positive operating margin, but it's very low as expected and the low margin has to do with, of course, transition costs plus service agreements that we have. And over the next 12 months, we are gradually going to take over both administration, sales and all of the other things and gradually, of course, also improve profit. So very much with the Feminine acquisition as expected. Now turning to gross profit. You can see that this is the source basically of our increase or our improved margin with 60 basis points. I already talked about volume price/mix. So of course, that contributes positively, but a lot of the improvement comes from overall lower COGS, and this is mainly related to currency actually, FX or positive currency impact, but we also have good savings. So typically, savings in COGS is quite low during the first quarter. And this quarter, we have SEK 130 million roughly in savings. So we're quite pleased with that number. So overall, 60 basis points in improved margin. We have talked a lot about investing more into growth. And of course, part of that exercise is more investments into A&P. And as you can see, we continue to invest more both from an absolute perspective, but actually also as a percentage of sales. And we compensated that partly with lower SG&A. So very much in line with our plans. Now you may think that this is possibly a consequence of our cost savings program. That's not the case. As we have reported earlier, pretty much all of those savings will appear late in the year, so more towards the third and fourth quarter and full run rate, as we have talked about at the end of the year. So savings is not really compensating so much at this point. This is other types of efficiency gains like low travel, like similar types of actions. So all in all, this was the increase of the 40 basis points. Now let me just take as a final remark on -- when it comes to margin, let me just give you a bit of an outlook for Q2. It's always -- we are in an uncertain environment. And of course, on the back of the geopolitical situation, we do expect COGS to be higher if we look at the Q2 of '26 versus Q2 of '25, so higher COGS. We also expect higher SG&A, and this is partly -- or this is all of it, I should say, due to salary -- just common salary inflation and a bit of higher IT cost. We will have a little bit of savings in compensating for that from the cost saving program. But as I said, it will be small also in Q2. Good. So turning then to the cash flow. So seasonally quite strong, SEK 4.4 billion. And if we look at our net cash flow or I should say, cash flow after finance net and taxes, SEK 3 billion. So it was a good start to the year from a cash flow perspective. And with a reasonable, I should say, working capital performance. We just -- we still think we've got more mileage to put it that way, in our working capital performance, but we were reasonably okay, I think, in the first quarter. And as partly as a consequence of that, we continue to strengthen our balance sheet even further. Now you might have expected our balance sheet to -- or net debt, I should say, perhaps to increase a little bit since we did actually acquire the Edgewell Feminine business in the quarter. And so that was, of course, a negative drain in terms of debt with approximately about SEK 3 billion, and that was fully compensated by the cash flow. But we also had a couple of other things like share buybacks of SEK 600 million and some currency impact. But we also had one thing that was quite special for the quarter, which was a reduction of our debt in our pension liabilities of a bit over SEK 3 billion. So that contributed quite a lot to that lower net debt. And all in all, as you can see, the net debt is now SEK 24.5 billion with a net debt-to-EBITDA ratio of 0.96 or 1.0 as it says on this slide. Finally, and Ulrika has already mentioned it, so let me just give the technical details around the share buyback program, SEK 3 billion, and it will start May 11, 2026, and it will go on up until the most 2027, the AGM. And you have said it, the ambition is to continue share buybacks as a recurring part of our capital allocation. And with those words, I'll leave over to you. Ulrika Kolsrud: Thank you, Fredrik. And to summarize the quarter then, we delivered volume growth. We strengthened our market shares. We strengthened our profit margins. We completed our M&A. We also strengthened our balance sheet and launched or decided on a new share buyback program. Then moving forward, we will continue our efforts to accelerate profitable growth. And important focus for us is to continue to grow market shares, supported by innovation. And when we talk innovation, it's both about raising the bar and improving differentiation in our premium assortments as well as to secure that we are competitive across the different price tiers, and we are steering our innovation agenda accordingly. Then, of course, we continue to execute our SG&A cost saving program in order to be able to reinvest in growth initiatives. And we also continue to save -- to drive savings in COGS. Now of course, looking at the situation now that we have that Fredrik talked about that we expect to have some higher costs in the coming quarters, starting with fuel and energy, we have to rebalance our pricing. As you heard from Fredrik, we are -- we have had now selective price adjustments. We are adapting to a lower input cost, but also then to fuel growth. And needless to say, that has to be rebalanced as we move forward. So we will, as we always do, compensate cost increases with price increases over time. Then the other priority that we have that we have talked about here is also then to integrate our acquisition. And we have the ambition to do that as fast as possible, so full speed ahead or you could also say off to the moon. And actually, in the quarter, we were on the back side of the moon with parts of our portfolio, namely the jobs, the compression therapy. We have a long-standing contract as an official supplier of compression therapy garments with NASA. And the fact that Astronauts are relying on JOBST, I think, is really -- it really underscores Essity's expertise in compression garments and that we have a good performance also under very challenging conditions. So as the fantastic Artemis II crew ventured around the moon and really push boundaries for what's possible, we at Essity are very proud to be a small but meaningful part of journeys like this, helping people to perform at their very best on earth and beyond. Sandra Åberg: Thank you, Ulrika. Thank you, Fredrik. Interesting. Great products off to the moon. Now we are ready to take your questions. [Operator Instructions]. And we have a good lineup of questions already. Are you ready to start to open up for questions? Ulrika Kolsrud: We are. Sandra Åberg: Perfect. Our first question comes from Aron Adamski from Goldman Sachs. Aron Adamski: I was keen to hear your thoughts on margins. I think consensus currently projects about 13.8% EBITDA margin for 2026, which would be broadly similar to what you have done in Q1. But as you said during the presentation, COGS was still a tailwind in this quarter. So given the acceleration we've seen in pulp, I think some petrochemicals have also moved higher and also the FX backdrop, do you feel comfortable with that market expectation? And then the second question, very brief on finance costs, which were lower than expected. How should we think about the level of these expenses for the remainder of the year? Sandra Åberg: I look at Fredrik. Fredrik Rystedt: Yes. I mean, Aron, thanks for the questions. First of all, if you look at the margin outlook, we -- as you very well know, we just don't give that. We can only refer to, of course, our long-term financial target when it comes to margins of more than 15%. So over the longer term, of course, our margin aspirations is quite clearly spelled out. When it look -- when you look at the short term, of course, it's always more tricky to talk about and we just don't give that forecast. Generally, we strive, of course, to continue to improve. The geopolitical situation, as Ulrika very clearly explained, is a bit tricky. And of course, exactly how that will play out is difficult to say. So we can't really give much more. I don't know if you want to add something. And then when it comes to finance net, they were a little bit lower. You should actually expect lower cost as we go forward on the back of net debt, but we also see actually a bit higher interest rates. So if anything, more stable and slightly higher if you go forward. Sandra Åberg: I hope that's perfect. Aron Adamski: That's very clear. Can I just ask a very quick follow-up related to the delay, is there any sort of time lag effect that we should consider between your COGS stepping up in Q2 versus Q1? And then are you able to surcharge that immediately on to customers? Or is there a little bit of a lag effect like we've seen in the past? Ulrika Kolsrud: If I start, I mean, there are different cost elements that have a different lag effect. So if you take the oil-based raw materials, that has a lag effect of 4 to 5 months before it is shown up in our P&L and you have everything in between there. And we have already in -- for example, in Latin America, we have already raised prices. And in some parts in Europe, we have also announced price increases. And in some parts, we are working on finding the best way now to make sure that we continue to fuel volume growth while we compensate for cost increases to come. So we are doing all of these different elements. Sandra Åberg: Let's move to the next caller, Niklas Ekman, DNB Carnegie. Niklas Ekman: Can I ask about volumes, very strong in this quarter after, as you said, there's been a couple of quarters with flat or declining volumes. Was there any impact of phasing in this quarter, either relating to the weak Q4 or if there's been any pre-buying ahead of Q2 that's impacted that number? Ulrika Kolsrud: Not that we are aware of, no pre-buying. Niklas Ekman: Okay. Very good. And just following up, when I look at the input costs, I have pulp prices for your grades up more than 20% in the last 6 months. Oil is up almost 50% in the last couple of weeks, energy costs up almost 20%. Do you recognize these figures? And how worried are we? I assume that this will not be so much an impact for Q2, but far more so for H2. And I'm just wondering, given the kind of weak consumer environment we've seen in the last few quarters, how able or how receptive the market is to price hikes? If you could elaborate a little bit on this. Ulrika Kolsrud: Maybe you start with the first part and I answer the second. Fredrik Rystedt: Yes. I'll be happy to try. I mean we -- it's exactly as you say. If you look at the numbers you were quoting there, they're observable market numbers. So from that perspective, you're right. And of course, we also know that these things tend to change every day. So I can't really have a view on what the numbers will be eventually. We talked about the lag impact. So exactly to your point, there is not going to be everything in the books of the second quarter, it will be more in the third and the fourth quarter. So that's the point. When it comes to the ability to price, let me just say -- repeat maybe, and then I'll leave it to you, Ulrika, that we always compensate, and you know that, Niklas, we always compensate in the longer run because the price elasticity from a consumer standpoint of what we do is quite low. So of course, our products are needed. But again, of course, there is a time lag, but I guess. Ulrika Kolsrud: No, that is exactly it. And I think we have proven in previous situations that we have pricing power. And that is, of course, important when we move into this type of situation. And again, I talk a lot about innovations, but there is a reason for that. And it's not only about driving growth. It's also about securing our pricing power moving forward. So to have strong assortments gives us a good foundation for being price agile. So otherwise, it's exactly as Fredrik said. Niklas Ekman: And just a quick follow-up there because I note that in the last 2.5, 3 years, your margins have been a lot more stable compared to what they were, say 4, 5 years ago when there was significant margin volatility. Is this at least to some extent, a reflection of you pushing forward cost increases more quickly than you have in the past? Or are there other dynamics behind the more stable margin? Ulrika Kolsrud: Well, maybe starting with mentioning 3 of them. One is that we have become more agile in our pricing. So we have a higher operational flexibility, and therefore, we have worked really with making sure that we can compensate with price as quickly as possible. And we have done that both in, for example, Consumer Tissue as well as in Health & Medical, where we have a more regulated environment with longer contracts. So we've increased our agility across the different business units when it comes to pricing. Then secondly, we have reduced our volatility by reducing our exposure to changes in pulp cost and energy by, for example, divesting Vinda that we did now a few years ago or a year ago. So that is 2 things. And then thirdly, I would come back to this with superiority and how important innovation is. As we talked about last quarter, we had record high levels of superiority, and we are continuously strengthening our assortment and that helps then the pricing power as well. Sandra Åberg: Let's move to [ Johannes Grunselius ] at [ SVB ] Markets. Unknown Analyst: It's Johannes here. Yes, I have a question on your attempts to hike prices. You said you've been successful in Latin America. You're now announcing in Europe. Can you elaborate a bit on what type of price hike we are talking about the magnitude and which products? Is it like across the board? So to give some color on that would be very helpful. Ulrika Kolsrud: The color that I can give on that is that it looks very different depending both on assortment, business unit as well as geography that we're talking about. But overall, we -- as you probably know, we are fastest in compensating with prices in our Consumer Tissue business. So that is also where we have materialized or have announced price increases. at this point in time. Whereas, as I mentioned, in the more regulated area, it takes a bit longer time. So there is other mechanisms, so to speak. Unknown Analyst: Yes. So the magnitude in the product categories where you hike prices the most, can you just give an indication what magnitude we're talking about? Fredrik Rystedt: We don't do that, Johannes, for commercial reasons as you -- I'm sure you appreciate. But as we have discussed many times, we will adjust as much as it takes to restore profitability, and we've always done that. So this is not just something we say. I think we have actually showed that in various forums that over time, we have always compensated. So we are able to do that with the pricing power. This is, of course, not just us. This is the sectors we're in, if you like. But of course, particularly for us, this has been a reality. So we will do it this time as well. So -- and of course, giving you an exact number is incredibly difficult given not least that things do change. We just don't know exactly what kind of impacts we will face in the next few quarters. So it's very much about kind of doing as much as it is relevant, so to speak. Sandra Åberg: Next up is Oskar Lindstrom, Danske Bank. Oskar Lindström: Very good to hear about the price increases already being announced and in some cases, already pushed through. I wanted to ask you about volume growth in this quarter and the outlook for next quarter. We saw that it was, to a large extent, driven by the Personal Care business area. Is there any reason why we should expect this not to continue going into Q2? Was there some one-off effect or that you had a special push in this quarter that's not going to be repeated in Q2 or in coming quarters? Ulrika Kolsrud: The short answer is no. I mean this was the result of our continuous efforts and operations. Oskar Lindström: Excellent. I'm going to stick to one question. That's fine. Ulrika Kolsrud: Thank you for giving you such a short answer on that one question. Sandra Åberg: Then we will move to Charles Eden from UBS. Charles Eden: So just a couple of things for me on the raw materials, please. Firstly, can you just remind us the sensitivity, for example, when we look at, say, propylene for watching superabsorbents or polypropylene for nonwoven. Clearly, there's a sensitivity that means that what you're paying is not the same magnitude of moves we're seeing in those 2 derivatives. Could you just remind us those, please? And then just secondly, in terms of hedging, just remind us in terms of policy on energy and the raw material hedging that you've got in place for both Q2 and then, I guess, for the rest of '26. Fredrik Rystedt: Yes. Ulrika Kolsrud: I look at you. Fredrik Rystedt: Right. Yes, I'm not sure how to answer your question. Let me just say that about -- if you look at our operating expenses, Charles, it's about SEK 120 billion, just to kind of use a number. And of that, if you look at the plastic products, which I believe that was what you were asking, it's about a bit over 10%. So you get approximately the sensitivity there. Now I mean, oil-based products or plastics is, of course, sensitive to oil, but not fully because you got processing costs. So if you actually try and make some sort of estimate as to what happens to the oil or plastic products, the cost of that, depending on what happens to oil, a rule of thumb is that roughly about 2.5% or a bit less actually than a bit over 2%, you can say, of the oil price actually flows through to the plastic products. So this gives you a rule of thumb. But of course, it's not an exact science because if you have a sharp spike, as an example, in some of these raw materials like oil, then, of course, the impact will be very, very little. If you have a prolonged period, then gradually cost of plastic products will also go up. So it's a bit difficult to give you an exact answer to your question, Charles, more than that. Sandra Åberg: And on energy? Fredrik Rystedt: In energy and maybe also raw material, I think you asked. And if you look at the hedging, if you look at the rest of the year, it's about 60% we're hedged and the rest is open to spot price movement. We typically don't hedge really raw material other than energy. So we're openly exposed to pulp and to plastic materials or other types of input costs. And of course, there is a, you can say, implicit hedge through the lag impact that we talked earlier, but there are no physical hedging of any kind of any raw material. So energy is that's where we hedge. Charles Eden: That's helpful. And I appreciate it's maybe a question for your procurement team more than you. But I guess given the volatility, and we don't know quite how long or the severity of the fluctuations in oil in respect to derivatives. But is it fair that I guess it's in no one's interest for prices to shoot up 40, down 40, up 40. Is there a sort of degree of smoothing of this price with your suppliers? Or really, is it sort of you take what you see in terms of the price? I'm just trying to understand the dynamics of how this works in real world rather than perhaps behind the spreadsheet. Ulrika Kolsrud: Maybe, Fredrik, you can talk to that later. But one thing is that we have, of course, different tools when it comes to our pricing as well. I mean there's everything from surcharges to lowering our promotional efforts to having list price changes and other tools as well. So it's also about using our toolbox when it comes to pricing in a smart way in order to exactly, as you say, to not raise prices permanently when that might not be the -- what is the right thing to do in order to balance volume and margin in a good way. So there, we have a lot of tools in our toolbox. Fredrik Rystedt: Yes. I don't have anything to add. I think your question was also relating to if we make arrangements with our suppliers as to smoothing of the price. And I think that's generally not the case. But to be fair, I actually don't really know exactly that. I can't give you an exact answer there. I can check that for you, Charles. Sandra Åberg: Now we have a question from Diana Gomes from Bloomberg. Diana Gomes: Just I believe, a follow-up from Charles' question. I'm not sure if I understood correctly in terms of the arrangements with suppliers on your comments. For the pulp and other raw materials that you are not hedging, for instance, I'm assuming there are some type of fixed contracts that you would have with your suppliers. Could you give us some more color in terms of the time lines of those, for instance? And related to that, there are reports of some potential concerns or constraints on supply of materials such as plastic packaging. Are you seeing any pressure on that side already? Ulrika Kolsrud: When it comes to contracts, as Fredrik said, I mean, we do not really talk about the details of our contracts, both I would say we don't necessarily have all the details of it, but also it's for commercial reasons. Then when it comes to supply, we have so far not seen -- we've not had any disruptions, and we have not had any indications of disruptions either or shortages either at this point in time. But of course, it's something that we follow very closely. Diana Gomes: And if I could squeeze just one follow-up on the cost savings. You pointed to the fact that it was higher in the first quarter than typically is. Should we see that as a more structural change in terms of the phasing of the cost savings through the year? And it seems that there could be some sequential impact from that when we come into the second quarter with less of a buffer from the cost savings. So just to understand a little bit more on the margin impact as we go through the year. Fredrik Rystedt: Yes. Thanks, Diana. No, you shouldn't interpret it in that way. We have given an outlook for the year as -- and we're talking about just to be super clear now on the productivity or COGS savings. So not the SG&A savings, but COGS savings. My comments were relating to that. And I mentioned that we had in the first quarter savings of SEK 130 million. Typically, we have a bit of lower cost savings in the first quarter. And of course -- so we felt good with that number. This is not a change to our outlook for the year, which is in the range of SEK 500 million to SEK 1 billion for the full year. So again, a good start and our outlook for the year or our estimates or aspirations for the year of SEK 500 million to SEK 2 billion remains. Sandra Åberg: Now we have a new question from Aron Adamski. Aron Adamski: I was just wondering, you mentioned the leverage was lower than we all expected. And so in the context of your balance sheet being quite healthy, I was wondering how do you assess the current M&A landscape out there in your priority categories? And are there any interesting assets that you're currently in the process of looking at? And should we expect any both on acquisitions and also over the next 12 months or so? Ulrika Kolsrud: But we always have a very active M&A agenda. So we continuously look for opportunities and assess opportunities, and that we continue to do. And our priorities when it comes to acquisitions is in the areas that we've talked about before, Incontinence Care, Wound Care, Feminine Care and strategic segments in Professional Hygiene. And I think the acquisition that we now completed in the quarter is a very good example of being an acquisition in Feminine Care also in an attractive geography in North America. So that work continues. And as you say, we have a strong balance sheet. So we have the opportunity to, of course, act on M&As when they are value creating. Sandra Åberg: We will move to Mikheil Omanadze from BNP Paribas. Mikheil Omanadze: One question from me, please. I wanted to ask about volumes. I know you don't guide as such, but if I were to think directionally, are there any factors in the comp that you would call out for Q2 and the remainder of the year? And also, would you say it is fair to start factoring in some negative elasticities as you start taking pricing actions? Ulrika Kolsrud: No specific factors. And of course, our ambition is to compensate with the cost increases with price increases while fueling volume growth. So that is our clear ambition. That's what we work for. Sandra Åberg: Perfect. Are you happy with that answer? Or do you have a follow-up question to that? Mikheil Omanadze: No follow-up questions. Sandra Åberg: Okay, perfect. [Operator Instructions]. I think that we have actually answered all the questions now. Let's give you a few seconds to ask questions if you like. But I think we're done with questions. Thanks a lot for your questions. Then before we end, I would like to hand back over to you, Ulrika, for closing remarks. Ulrika Kolsrud: Yes. Well, thank you all for joining this webcast and for a lot of questions here. And again, we start the year with volume growth, with strengthened profit margins and not the least with winning the relative game with strengthening our market shares, which is very important. And our work, as you saw here in short-term priorities, it's about continuing to accelerate profitable growth through our different initiatives that we have. Now we talked more about the near-term priorities in this call. I hope that you want to hear about our mid- and long-term priorities and initiatives as well. And to do so, please join us in our Capital Market Day on the 7th of May in Gothenburg. Looking forward to seeing you there.

24天前Insight Analytics约5分钟阅读

STC 2026 Q1 财报电话会议

Operator: Thank you for your continued patience. Your meeting will begin shortly. Hello, and thank you for joining the Stewart Information Services Corporation First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask a question; instructions will be given at that time. Please note, today’s call is being recorded. It is now my pleasure to turn today’s conference over to Kathryn Bass, Director of Investor Relations. Please go ahead. Thank you for joining us today for the Stewart Information Services Corporation first quarter 2026 earnings conference call. Kathryn Bass: We will be discussing results that were released yesterday after the close. Joining me today are CEO, Frederick Eppinger, and CFO, David C. Hisey. To listen online, please go to stewart.com to access the link for this conference call. This conference call may contain forward-looking statements that involve a number of risks and uncertainties. Please refer to the company’s press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ. During our call, we will discuss some non-GAAP measures. For reconciliation of these non-GAAP measures, please refer to the appendix in today’s earnings release, which is available on our website at stewart.com. Let me now turn the call over to Frederick. Frederick Eppinger: Thank you for joining us today for the Stewart Information Services Corporation first quarter 2026 earnings conference call. Yesterday, we released the financial results for the first quarter. I will kick off today’s call with an overview of our results and our current macro housing outlook, followed by a review of our results and strategic direction by business line. After my remarks, I will turn the call back over to David so he can further cover our results for the quarter. I am very pleased with the results in the first quarter this year. As you know, the first quarter is typically the most impacted by seasonality, and on top of that, the residential transaction activity continued to be at historically low levels. In that environment, we delivered one of the best quarters in the company’s history with adjusted EPS of $0.78 and revenue growth of 28%. In the first quarter, each of our businesses showed strong revenue growth and improved earnings as we executed on our strategic priorities. Though first quarter existing home sales were muted, our direct operations, agency services, and national commercial services benefited from strong commercial growth. Our Real Estate Services segment also delivered strong results year-over-year, bolstered by our recent acquisition of MCS. In the first quarter, along with 28% adjusted revenue growth, we delivered adjusted net income growth to $24 million, up from $7 million in the same quarter last year, and we delivered a 4.3% margin for the quarter, up from 1.8% in 2025. On our last call, I shared that we expected existing home sales to improve around 6% to 8% in 2026, beginning our journey back to a more normal existing home sales environment. While we anticipate some growth in the housing market, we foresee the potential for growth to be a bit more muted this year given the broader macro and geopolitical conditions and where we have seen interest rates move as a result. We anticipate that we will continue to maintain our business momentum in the second quarter, but we could see the residential market continue to bounce along the bottom of around 4 million existing if ongoing geopolitical tensions prolong. In the first quarter, housing signals were mixed. As mentioned, existing home sales were relatively flat, down 1% compared to 2025. Median sale price growth was a bit weaker than in the past few quarters; however, it was positive, up just under 1% for the quarter. The pricing story currently varies significantly by market, and we are seeing more price negotiations, which may be helping homebuyers to balance rates. Interest rates remain a critical gauge for homebuyers entering the market. And though we were confronted by difficult weather across the country in January, early in the quarter, we saw rates move closer to 6% and felt momentum in both purchase and refinance activity. March, however, saw the impact of rising global tensions, and rates exited the month around 6.3%, cooling activity a bit due to the increase itself but also because of the quick shift in rate and sentiment. We do anticipate some momentum will continue into the second quarter as rates remain at or below 2025 levels heading into the spring selling season. All in, our view of the residential market growth will be closer to 3% to 5% for the year. We believe commercial, on the other hand, will remain more resilient and can continue to have solid growth. Turning to our business line results. Our direct operations business grew 10% in the first quarter compared to the same timeframe last year. The growth came from improved transaction activity. We have not deviated from our longstanding focus on gaining share in target MSAs through organic and inorganic efforts. We continue to see positive momentum in our strategic initiatives to grow commercial business out of direct operations, which we often refer to as Main Street Commercial. In the first quarter, our direct operations grew Main Street Commercial by more than 20% year-over-year. Looking forward, we believe we will grow this operation in part through targeted acquisitions, and we have seen a pickup in opportunities in our pipeline for direct operations as well as opportunities that benefit our other business lines. We are thoughtful in our assessment of opportunities and expect to continue to grow the company in part by being acquisitive. Our national commercial services business delivered another impressive quarter of results. Energy continues to be our largest asset class, but other notable gainers in the quarter were our industrial site development, data center, and retail asset classes. In total, we grew national commercial services by 40% in the first quarter. We remain focused on growing all of our asset classes through geographic expansion and acquisition of leading industry talent. Our agency services business delivered a very strong first quarter with revenues up 25% compared to 2025. Our agency partners confront the same housing headwinds as we do, so we consider this growth to be especially solid considering conditions. We are focused on growing this business through ramping up new agents and wallet share expansion of existing agents, with an emphasis on 15 target states. We saw strong progress towards our goals this quarter with solid year-over-year premium gains across most of our states. In addition to geographic growth, we are focused on expanding our commercial offering for agents, and we are seeing success there, growing 46% in the first quarter compared to last year. This goes along with 15% residential growth as well. We will continue to build on the momentum we have made in recent years for our agents to differentiate our service and better our offerings for our agent partners. Our Real Estate Solutions business grew revenues by 66% in the first quarter compared to last year. Our recent transaction of MCS helped to strengthen our results for the first quarter. However, all of our other operations combined grew over 20% when compared to the first quarter of 2025. The addition of MCS allows us to further our strategic priority for this segment, which is to win more share across the top 300 lenders and further our cross-selling efforts across our expanded product lines with existing customers. In the first quarter, we added to our Real Estate Solutions segment once more, Appraisal Network into Stewart Valuation Intelligence. Our appraisal company, National Appraisal Network, also known as NAN, helped strengthen our appraisals both in scale and deepen our talent base. In the first quarter, we delivered 12.5% adjusted margins, up from 9% last quarter. For the full year, we fully expect to improve margins and deliver in the low-teens range for this segment and expect that our recent acquisition of MCS will help us improve our historical margin outlook. Moving to our international operations. We are focused on broadening our geographic presence in Canada, increasing our commercial penetration as well. In the first quarter, we grew our non-commercial revenue by 9% and our commercial revenue by 14% in a very challenged housing market. We believe we can build on our strong position in these markets and continue to grow share. As an enterprise, we are dedicated to being the premier titles and service real estate services company. We are focused on strengthening the company for lasting success through targeted multi-pronged growth plans by business to further fortify our position. We thank our customers and agent partners for your trust and dedication to Stewart Information Services Corporation. We are committed to doing our best to continually improve our services for your benefit. For the Stewart Information Services Corporation team, thank you for your dedication and focus on growing this company together. We are able to execute at this level because of your steadfast commitment to our journey. In the first quarter, we celebrated our inclusion on the Forbes America’s Best Large Employers list. We thank our employees for this recognition and are committed to being a destination for industry-leading talent. I am very proud of the progress we have made on our journey and feel that progress is visible in the results we delivered this quarter in spite of both macro and housing headwinds. David, I will turn it over to you to provide the update on our results. Operator: We will now turn the call over to David C. Hisey for the financial results. David C. Hisey: Good morning, everyone, and thank you, Frederick. I appreciate our employees and customers for their steadfast support amid a continuing challenging residential real estate market. Yesterday, Stewart Information Services Corporation reported strong first quarter results with both revenue and profitability improvement. Total first quarter revenues were $781 million, resulting in net income of $17 million, or diluted earnings per share of $0.55. On an adjusted basis, net income was $24 million, or diluted earnings per share of $0.78, compared to $7 million and diluted earnings per share of $0.25 last year. Appendix A of our press release shows adjustments to our consolidated and segment results, primarily related to net realized and unrealized gains, acquired intangible asset amortization, acquisition-related expenses, and severance costs, which we use to evaluate operating performance. In our Title segment, operating revenues increased $104 million, or 21%, driven by strong results from our direct and agency title operations. As a result, pretax income increased $13 million, over 100%. On an adjusted basis, Title pretax income increased $14 million, also over 100%, with adjusted pretax margin of 4% compared to 2% last year. In our direct title business, direct title revenues increased $38 million, or 17%, while total open and closed orders improved from last year. Domestic commercial revenues increased $25 million, or 35%, driven by higher transaction size and volume with growth across asset classes led by energy, industrial, site development, data centers, and retail. Average domestic commercial fee per file improved 33% to $21,000 compared to $15,800 last year. Average domestic residential fee per file in the first quarter was $3,300, consistent with last year. Total international revenues increased 10%, primarily driven by higher volumes. In our agency operations, gross agency revenues increased 25% to $333 million compared to $268 million last year, driven by improved volumes across our key agency states, including New York, Florida, Ohio, and Pennsylvania, and also helped by commercial transactions. After agent retention, net agency revenues increased $11 million, or 23%. On title losses, the first quarter title loss ratio improved to 3.1%, compared to 3.5% last year, reflecting our continued favorable claims experience. We expect our title losses in 2026 to average in the 3.5% to 4% range. In our Real Estate Solutions segment, total revenues increased $64 million, or 66%, driven by growth in our credit information services operations and our MCS business, as Frederick noted. RES adjusted pretax income improved $11 million to $20 million, or over 100%, and adjusted pretax margin improved to 12.5% compared to approximately 10% last year. We continue to focus on managing our overall cost to serve and strengthening customer relationships. We expect our margins to trend higher as those relationships mature. On our consolidated operating expenses, our employee cost ratio improved to 29% compared to 31% last year, primarily due to increased revenues. Our other operating expense ratio increased slightly to 28% due to higher expenses in the RES segment. Our financial position remains solid and well positioned to support our customers, employees, and the real estate market. Total cash and investments were approximately $420 million in excess of statutory premium requirements. Total stockholders’ equity at March 31 was approximately $1.4 billion, representing a book value of $54 per share. And net cash used by operations improved to $4 million compared to $30 million in the prior-year quarter due to higher net income. Again, thank you to our customers and employees for their continued support. We remain confident in our ability to serve the real estate markets. I will now turn the call over to the operator for questions. Operator: We will now open the call for questions. Thank you. We will take our first question from Bose Thomas George with KBW. Please go ahead. Your line is open. Frederick Eppinger: Good morning, Bose. Bose Thomas George: Hey, good morning. Just wanted to start on commercial. Obviously, the fee profile was up very nicely year-over-year. When you think about the trends over the next few quarters, how do you see the cadence of that year-over-year growth? Could it persist for a little while? When do the comps get a little more challenging? Frederick Eppinger: That is a great question, Bose. What has happened is our pipeline is really quite good, and what we are seeing across the industry is the frequency of very large deals has increased. The other thing for us is we are winning more deals as we have had a good two-year run here of growing scale and capabilities. I think it is natural for our average to hover at this higher level. The other interesting thing for us, if you compared us to others, because we were small four or five years ago, our refi percentage is less. So we are a little bit bumpier on size of deal because it tends to be less refi softening of the numbers. I am pretty confident that the business will continue. The growth year-over-year will jump around a bit for us, just because, if you recall, a couple of quarters last year grew 50% plus, and we were in a market that was growing half that. So there might be some comparisons, but I am bullish on our continued success as we go through the year on commercial. I would say the commercial in our direct operation—part of that is generated by our own staffing, if you will, putting skills back into the direct offices. I believe that has momentum both continuing and could increase over time for us because of the investments we are making there. That is a little different for us because we were underpenetrated in what I call Main Street—the smaller end of commercial—compared to the big guys. Bose Thomas George: Okay, great. Thanks. And then switching over to the ancillary, can you talk about the year-over-year growth rate outlook there with MCS now? Is what we saw in the first quarter a reasonable level for the rest of the year? And I think you guided to a margin in the low teens for that segment for the rest of the year? Frederick Eppinger: Yes. On the margin first, I would say 11% to 12% was good. Now it is 12% to 13%, maybe even a little more. We have some work to do on some consolidation, but it is going to tick up to that 12.5% to 13%, maybe a little 13% plus. I feel good about the trends there, and it is a nice solid book of business. On growth, we grew most of the businesses outside of MCS. In total, I think there was 21% or something of growth, and there is good penetration expectations in that business. It could soften a little bit, but you are going to see pretty strong growth coming out of that. There is a lot of momentum. Given my view that the RES growth is going to be marginal, particularly for the next quarter or two, I feel we can sustain, with our momentum, somewhere around a 15% growth rate for the overall company. It might be a little less or more, but when I look under the hood in all of these businesses, even with a low resi market, our share growth is good—like in agency—and the trends feel pretty good. So that is how I think about it in total. I think we have established a little bit of momentum right now. David C. Hisey: And Bose, just real quick to give a little more color. We had mentioned that MCS was a little over $160 million a year, so it is roughly $40 million a quarter on revenue. When you take that effect out, you can get to that 20% that Frederick was talking about. It is slightly seasonal, so it is a little less than that in the first quarter, but the $40 million is good the rest of the quarters. Operator: Our next question comes from Geoffrey Murray Dunn with Dowling & Partners. Please go ahead. Your line is open. Frederick Eppinger: Good morning, Geoffrey. Geoffrey Murray Dunn: Good morning. First, could you share what the mix of commercial is in your agency line? David C. Hisey: In agency? Frederick Eppinger: Yes. It has to be parallel to what we have, but it will not have a lot of energy or big stuff. Agents typically do not have those mega deals. They will have some smaller in the data center space, but it is a pretty broad CRE kind of mix without the energy on top, because energy and the huge deals tend to be direct business. I feel good about it in agency. If you recall, we have always been strong as an underwriter for agents, but our commercial was very skewed to New York. Historically, the company was very good in New York, but our ability to reach our commercial capacity to other big commercial-oriented agents across the country was much weaker. We also did not have the facility when we had big multi-location deals to facilitate that. So we created something called a concierge service that facilitates that. We have also instituted what we call direct-issue capabilities, so in certain places where they do not have licenses, we can finish the account. We now have capabilities in that space as good as anybody. In my view, that has been one of those areas we have been growing now for six quarters at a very high rate, because people have started shifting parts of their book to us because we are a credible offering. Geoffrey Murray Dunn: Okay. And then I wanted to dig a little bit more into the RES margin. If I remember correctly, PropStream has a very strong margin. MCS, I think you are talking close to 20%, and then you are double digit in Informative. And the challenge, I think, has been—the rest of the businesses. So what is the margin first—is that correct? And then what is the margin opportunity on those other businesses, maybe thinking about some extra—you know, move to margin to the venture. Frederick Eppinger: Yes. The margin is a little more consistent than you think. Pricing is teeny—so yes, it has a little bit higher margins—but it is a very small business. MCS was higher, but the others hover around that 12% target that we have. Is there opportunity to improve that? Yes. For example, appraisal in my view—we have some good supply and there is work we are still doing because of the acquisition. That could be high single digits to low double digits and could go up a little bit. I am shooting for, in most of the businesses, around that 12% margin, and those are the ones where we have our volume. Our remote online notary tools are a very small business. It is really a tool for our business. We do a little bit of outside sales, but it is really for delivering for ourselves and our agent partners. It is not really a core of the growth or the margin. I feel pretty good about the breadth. Seasonality obviously in the appraisal and the notarization/signature businesses—those are cyclical; they are just like the rest of our businesses. MCS is a tad countercyclical to that because it is in the default area and it is less volatile quarter to quarter. The pattern of that is helpful to us too. As I said, I think we were at this 12% overall, moving into the 13% to 14% range. If the market comes back—if the market is at 5 million—just like our other businesses, that thing can get to [inaudible] right? They may have some cyclical nature to them because of the volume. It is a very solid portfolio now, and it is a lot stronger now that we got the scale up in appraisal and we got MCS into the mix. Geoffrey Murray Dunn: Great. Thank you. Operator: We will move next with Oscar Nieves Santana with Stephens Inc. Please go ahead. Your line is open. Oscar Nieves Santana: Good morning. You mentioned earlier the acquisition of Nationwide Appraisal Network, which was announced right after the end of the first quarter. What details can you share about that transaction in terms of the purchase price and how it was financed, and also the expected contributions to the financials, both in terms of revenue and margins? Frederick Eppinger: NAN is small—about a $40 million transaction. You will probably get about $30 million to run through the next three quarters or so. The incremental margin is what I described; we should get into the low double digits. There are going to be some integration costs and transition costs out of the gate here. As far as the proceeds, if you recall in December, when we raised $150 million, I said I saw some promising, interesting things that I wanted to pursue to complement our business. There are a half dozen or so things that were quite warm that help both in the RES area and in the direct operations area. That is what we are pursuing. We had essentially free cash on hand that we used for that, and we have other dry powder for the other transactions I am talking about. What I am trying to do is, in each of these businesses—particularly on the services side—if they are relatively fragmented businesses that are rolling up, what you are seeing is the financial buyers in a lot of those businesses—they bought in 2021, they overpaid, etc.—they are withdrawing. It has made a lot of people pause, and so what you are going to be able to do, at least I think, in some of these businesses is build a leadership position—which we have done in RES—and again, it sets up nicely for us to get the scale in these businesses. In the direct side, because the commercial market is a little bit better and there is a little bit more light at the end of the tunnel, agents are making a little bit of money, and they are much more willing. These folks that we have been talking to for months—we are getting at trading prices that make sense for both of us with an earn-out. Our target list—there are a couple in particular that I feel are higher probability in the next six months. That is why we raised the money. That is why we have it available for these transactions. We will see how it happens. We spend a lot of time reaching out, making contacts, developing a pipeline, figuring out how these things fit and how they help our talent base. My view is there is a chance things are going to start happening, and I want to make sure we are capitalized enough to take advantage of it. We do not like competing or auctions. Most of what we do is we try to make this happen on a one-on-one basis. Oscar Nieves Santana: That is very helpful. I have a couple of follow-ups related to that. Do you have an updated expectation, given what you mentioned about the pickup in the pipeline, about how much capital you could be deploying through the end of the year? And also, can you share some of your learnings so far related to the MCS integration process? Frederick Eppinger: On MCS, I am thrilled. MCS was a leader in their space, and I could not be more pleased with the leadership team and their ability to continue to grow and set us up with a high reputation in that space. It also completed a little bit of [inaudible] there are some other places I am looking to evolve capabilities, but it really rounds out our presence in the default marketplace. Because of the nature of that business, there is not a lot of integration with the rest of the company except for the normal things you think about—financial stuff. So it is a pretty standalone business model. But there will be cross-sell opportunity and relationship opportunities that come from it. It is doing everything we expected it to do, and I am thrilled by it. As far as capital, again, the things that I talked about in December are well within our excess capital availability—within the money we raised and the roughly $70 million on top of that available. So it is in that range of availability as we go forward. What is the probability of it happening? I do not know. I just want us to be prepared, to be truthful. I would also tell you that in the next two or three years—let us say two years—I think a few of the gems in our marketplace are going to become available. There are only a handful of things in the title business—[inaudible]—assets that are going to be [inaudible]. Somewhere in the next couple, three years, they could become available. I do not do capital planning for those because they are so rare. If it happens, it happens, and it will stand on its own and justify the returns. In the normal course, as you know, most of the deals we do are in that $20 million to $50 million range. We have really good line of sight to the pipeline, so in the normal course we are going to use our available capital. Oscar Nieves Santana: Super helpful. I will get back in the queue. Thank you. Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Frederick for closing remarks. Frederick Eppinger: Thank you so much for your interest in Stewart Information Services Corporation. To summarize, I feel very good about the company. I do not think we have ever been this strong as far as talent and position in the marketplace. Hopefully, even with a difficult market, we can continue our momentum. I am pleased with the progress we are making so far. Again, I just want to thank everybody for their interest in the company. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

24天前Insight Analytics约5分钟阅读

AMBP 2026 Q1 财报电话会议

Operator: Welcome to the Ardagh Metal Packaging First Quarter 2026 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stephen Lyons. Please go ahead, sir. Stephen Lyons: Thank you, operator, and welcome, everybody. Thank you for joining today for Ardagh Metal Packaging's First Quarter 2026 Earnings Call, which follows the earlier publication of AMP's earnings release for the first quarter. I'm joined today by Oliver Graham, AMP's Chief Executive Officer; and Stefan Schellinger, AMP's Chief Financial Officer. Before moving to your questions, we will first provide some introductory remarks around AMP's performance and outlook. AMP's earnings release and related materials for the first quarter can be found on AMP's website at ardaghmetalpackaging.com/investors. Remarks today will include certain forward-looking statements and include use of non-IFRS financial measures. Actual results could vary materially from such statements. Please review the details of AMP's forward-looking statements disclaimer and reconciliation of non-IFRS financial measures to IFRS financial measures in AMP's earnings release. I will now turn the call over to Oliver Graham. Oliver Graham: Thanks, Stephen. We're pleased to report strong first quarter results for AMP with adjusted EBITDA growth of 15% versus the prior year, significantly ahead of our guidance and demonstrating the resilience of our business. Beverage can sales declined by 1% versus the prior-year quarter, in line with our expectations as we cycled strong prior year growth of 6% and due to the impact of contract resets in North America. Our adjusted EBITDA outperformance in the quarter was driven by Europe, which benefited from strong input cost recovery, including a favorable timing impact from the revaluation of freight cost-related hedging as well as favorable volume mix effects. Performance in the Americas was broadly in line with expectations. Brazil delivered strong results driven by above-market volume growth, which was offset by the impact of a more challenging operating environment in North America where adverse weather conditions and aluminum supply chain disruptions drove higher operational costs. While the supply chain situation is improving, we do expect to see further impact into Q2. The conflict in the Middle East did not have any material impact on our Q1 performance. AMP has no manufacturing operations in the Middle East and no significant direct supply chain exposure. We continue to monitor the geopolitical environment and the associated volatility in input costs, in particular, energy, freight and certain direct materials. AMP's exposure to the recent increase in energy prices is small given our hedge positions for 2026 and beyond. However, we do anticipate some moderate input cost increases in the second half as a result of the impact of the Middle East conflict on certain direct materials. Now looking at AMP's quarter 1 results by segment. In Europe, first quarter revenue increased by 18% to $625 million or by 6% on a constant currency basis compared with the same period in 2025. This was due to favorable volume mix effects, including the impact of the IFRS 15 contract asset and the pass-through of higher input costs, including higher aluminum prices. Shipments declined by 1% for the quarter, which reflected the ramp-up of new contracts and the cycling of a strong prior year comparable of 5%. We experienced good growth in carbonated soft drinks and the energy category and across our diverse range of smaller growing categories. Through this strong underlying growth in nonalcoholic categories as well as our commercial actions and network enhancements, our portfolio saw a favorable mix shift in the period and good growth in specialty can volumes. First quarter adjusted EBITDA in Europe increased by 53% versus the prior year to $75 million, strongly ahead of expectations. On a constant currency basis, adjusted EBITDA increased by 36%, principally due to higher input cost recovery and favorable volume mix, including the impact of the IFRS 15 contract asset, partly offset by higher operational and overhead costs. Our input cost recovery in the quarter benefited from a favorable timing impact from the revaluation of freight cost-related hedging. Regarding our direct energy exposure, AMP is well covered for its energy needs in 2026 and beyond. For 2026, we're over 85% covered for our energy requirements; for 2027, over 75%, and we're more than 60% covered for 2028. In 2026, in terms of volume growth, we reaffirm our expectation of around 3% in Europe. Capacity remains tight in the region, and we are therefore optimizing our network to better serve higher-demand can sizes in faster-growing categories. In our last update, we highlighted our intention to add additional capacity within existing facilities in the attractive markets of Spain and the U.K. on a measured basis over the coming years. We continue to progress these plans, which are underpinned by our favorable market positions and our confidence in Europe's growth outlook. In the first 2 months of the year, beverage packaging scanner data across our markets continue to show share gains for the beverage can versus other packaging substrates. In the Americas, revenue in the first quarter increased by 19% to $879 million, principally reflecting the pass-through of higher input costs to customers, including the impact of the higher Midwest Premium and favorable volume mix effects. Americas adjusted EBITDA for the quarter was broadly in line with expectations with a 2% decrease versus the prior year to $104 million, primarily driven by higher operations and overhead costs and lower input cost recovery, partly offset by favorable volume mix effects. The strong performance in Brazil, driven by 14% shipments growth and increased fixed cost absorption was offset by a more challenging operating environment in North America. In North America, shipments decreased by 5% for the quarter. This reflected lower volumes after expected contract resets, the impact on operations from supply chain challenges and the cycling of a strong prior-year comparable of 8%. Supply chain challenges in the period included the impact of disruptions to metal supply and adverse weather at the beginning of the year. Underlying demand dynamics in the industry remain robust with strong industry scanner data year-to-date with the exception of the beer category to which AMP has only a low single-digit exposure. In particular, the energy category continues to record strong growth supported by broader distribution and further innovation. AMP continued to enjoy good growth in the energy category in the quarter, reflecting our broad positioning across the category. Looking into 2026, we continue to expect industry growth of a low single-digit percent. As previously indicated, we expect some softness for AMP following contract resets. We anticipate 2026 being a transition year with a small volume decline and with a more favorable second half volume versus the first half. We expect to return to growth in 2027, at least in line with the industry on the back of additional contracted filling locations and our attractive portfolio. Of note in North America was that on April 6, 2026, the court entered a jury verdict pending any post-trial motions in connection with the lawsuit filed against Boston Beer in 2022 for breach of contract in respect of minimum volume purchase requirements. And the jury awarded damages of approximately $175 million to AMP, plus pre-judgment interest if assessed. In Brazil, first quarter beverage shipments increased by 14%, which represented a strong improvement versus the fourth quarter and was also ahead of the industry due to our customer mix. Industry data indicates that following a strong start to the year in January and February, March activity was softer and resulted in an overall modest decline in volumes in the first quarter. Looking into the remainder of 2026, we continue to expect industry growth of a low to mid-single-digit percentage and for AMP's volumes to broadly track the market. I'll hand over now to Stefan to talk you through our financial position for the quarter before finishing with some concluding remarks. Stefan Schellinger: Thank you, Ollie, and good morning, good afternoon, everyone. We ended the quarter with a robust liquidity position of $488 million, in line with expectations. We note that in addition to our strong liquidity position, we have no near-term bond maturities and the currency mix of our debt broadly matches the currency mix of our earnings. During the quarter, AMP completed the refinancing of the asset-based lending facility, which was upsized to $450 million and with its maturity date extended to January 2031. Net leverage of 5.7x net debt over the last 12 months adjusted EBITDA compares with 5.5x in the prior year quarter, with the increase reflecting the impact of the refinancing of the preferred shares in December. Excluding this impact, the underlying net leverage metrics slightly declined year-over-year. In terms of 2026, we approximately expect the following for the various components of free cash flow, total CapEx of $200 million, including growth investments, cash interest of $220 million, lease principal repayments of approximately $115 million. Lease payments were higher in the first quarter versus the prior year, which reflected the buyout of an existing lease in North America. Cash tax of approximately $30 million and a small outflow in working capital. Finally, today, we have announced our unchanged quarterly ordinary dividend of $0.10 per share. And with that, I'll hand it back to Ollie. Oliver Graham: Thanks, Stefan. So just before questions, I'll just recap on AMP's performance and key messages. Firstly, adjusted EBITDA of $179 million in the first quarter exceeded our guidance range of $160 million to $170 million, driven by a strong performance in Europe. Global volumes declined by 1%, in line with our expectations, reflecting the impact of a strong prior year comparable of 6% and the impact of contract resets in North America. Thirdly, AMP has no manufacturing operations in the Middle East and no significant direct supply exposure. AMP's energy cost position is protected through a strongly hedged position in 2026 and beyond. For 2026, we reaffirm our adjusted EBITDA to be in the range of $750 million to $775 million. Adjusted EBITDA growth is expected to be driven by operational efficiencies and cost savings, volume growth and improved category mix. We view 2026 as a transition year in North America with volumes ahead of an expected return to growth, at least in line with the industry in 2027. In terms of guidance for the second quarter, adjusted EBITDA is expected to be in the range of between $210 million and $220 million versus the prior-year quarter of $212 million on a constant currency... [Technical Difficulty] Operator: Please stand by. Oliver Graham: We think we lost connection -- so we're just opening the call up to questions now. Operator: [Operator Instructions] And our first question comes from Matt Roberts from Raymond James. Matthew Roberts: In the prepared remarks, you noticed modest cost increases in the second half. Can you give any additional color on what specific categories those are in? Is it more pronounced in a certain region? Or what is not covered in pass-through or has a lag in recovery, whether that's freight, energy, coatings? Any additional detail there? Oliver Graham: Sure. Yes. That's mostly in our coatings area. So I think, as I said in the remarks, we're very well covered on the energy side. There are some pass-through provisions in coating contracts in year that will potentially come through in the second half if oil prices stay very elevated. But they obviously haven't changed our guidance range. So that gives you a sense of the scale. Matthew Roberts: Right. I appreciate that. And you did note that you did reaffirm the guide. 1Q came in a little bit better than you were expecting. sounds like volumes broadly are similar as well. Has anything changed on the volume outlook by region? Or based on the 1Q beat, would that imply the cost headwinds are around roughly $15 million. Could you ballpark that, if possible? Oliver Graham: No, sure, Matt. Look, I think it's -- we're just at Q1, there's plenty of the year to go. So I think that's one reason just to remain a little bit cautious given the state of the world. There's a little bit of input cost inflation we expect in the second half. I think we have to accept that the consumer is facing into a lot of inflation at the minute. So we can't be absolutely sure though. We didn't see a reason to change our volume guides because when we looked at the Q1 market data that we could see in our numbers, we saw a lot of strength in that data. And Europe, I think, particularly, we've got data in January and February in our key markets. There's some real double-digit growth rates in some of those markets in particularly soft drinks categories. Brazil obviously had a very strong January and February coming off a very strong November, December. So in other words, a very strong summer. We're going into the winter season. We do have the World Cup in the winter season, which should be favorable. And North America, again, the volume number is still extremely strong across soft drinks categories, particularly energy, especially going into the Easter period, strong promo activity. So although I think it's appropriate to be cautious at this stage of the year, we definitely saw no reason to really change the volume numbers on a concrete basis. So I think, yes, we're just being cautious around possible input cost inflation in H2 and recognizing that the consumer may be under some pressure during the year. Operator: [Operator Instructions] We'll take our next question from George Staphos with Bank of America. George Staphos: Congratulations on the progress so far this year. I'll ask three questions in sequence and return to queue just for time. First of all, can you talk about what the impact was on the timing effect on the hedge revaluation in Europe? How large of a factor was that? Is there any residual into the rest of the year? Secondly, Ollie, you talked -- touched on it a little bit. Can you talk about what World Cup and to some degree, America's 250 is meaning for volume relative to what a normal summer might look like? And then third point, Brazil, can you talk a little bit about how things softened there in the market? What's causing that? And any outlook that you can take into, obviously, now the weaker winter months and the implications for the rest of the year? Oliver Graham: Sure. Thanks, George. Yes, on the first one, I think sort of mid-single-digit millions of benefit in the quarter from the European freight hedging position coming from, obviously, we're careful around hedging some of the positions that are on us. There is some possibility of that -- some of that reversing depending on what happens to commodity costs in the year. So some of that is potentially a timing impact, which is why we're not overrating it in our forward guidance. So that's the sort of order of magnitude for that. I think the World Cup and maybe Brazil, those questions get a bit intertwined because I think where it has the potential to be probably most impactful is in Brazil, given that it's falling in the winter period, given the sponsorship of the Brazilian national team and the focus on the World Cup and assuming they go deep into the tournament. So that's why we would be hopeful that this slightly negative start to the year on the full quarter after a very good January and February would be moderated into Q2 and Q3. And we'd also be hopeful after the summer we had, that we've just come through that next summer would also be a good summer. So we think some of the macro elements are stabilizing. We've also got some elections. So -- and then we do see in the data that we continue to have the can take share from returnable, and we know that's a long-term trend that will continue. Obviously, the major brewer down there controls some of that dynamic and obviously, they have their own pressures that drive it sometimes quarter-to-quarter. But I think if you look at the long-term trend, certainly still well in place. So yes, I wouldn't overread too much probably in the Q1 numbers in Brazil. I think we're still hopeful as we said, sort of low to mid number for the year and for us to be in line with that. And then World Cup outside of Brazil, I mean, certainly, Europe, we saw a tick up in -- towards the end of the quarter in terms of label activity, graphics activity. So we're definitely seeing a lot of sort of promotional-type cans or individual-type cans coming into the mix into the inventory build, and that would suggest World Cup. And I think we're seeing elsewhere in the market some signs that there could be some positive effects. I mean I'm always cautious to call it too early. We need to see it sell-through. It's often very weather-related as well in terms of how exactly it plays through. But yes, all positive signs at the moment, I think, in both Europe and Brazil. George Staphos: Just one quick one, just a yes or no, and I'll turn it over. On aluminum, you mentioned you are seeing supply constraints in North America, at least that's what I took away. Despite the constraints, do you feel like you're positioned well enough to be able to meet your commitments over the rest of the year? And then I'll turn it over to the rest of the team -- the rest of the guys. Oliver Graham: Yes. No, good question. Look, I think it does seem like the situation is moderating quite quickly now. As we've gone into April, I think a lot of metal is coming into the market from overseas that obviously was on long supply chains. And so we do see that landing now and helping to improve the situation. We also have the first new mill ramping up now. We have the second new mill coming at the end of the year. So I think we're hopeful now that we're through the worst. I think the Middle East conflict didn't help. I mean that some supply out of the Middle East obviously got restricted in March. But as we see the trends now sitting towards the end of April and going into May, yes, we're hopeful that, that's all moderating. And we certainly don't see any need to change our guidance or change our forecast off the back of it. Operator: [Operator Instructions] And we'll take our next question from Anthony Pettinari with Citi. Anthony Pettinari: Just following up on volumes and the Middle East conflict. It sounds like you haven't seen any impact and obviously don't have any assets in the region. But I'm just wondering, you talked about strong scanner data in January, February. I think the conflict started at the very end of February. As you look at March, April, have you seen any change in order patterns in terms of people prebuying or maybe easing off? Or as you just -- as you talk to customers or channel partners, is there a sense that there could be an impact if this continues to go on or maybe it's better or worse in North America versus Europe? Or just any color you could give would be helpful. Oliver Graham: No, I guess, look, I don't want to mislead in the January, February comments. That's just where we actually have data because obviously, we're still just in April. So not all the March data and the full quarter data has come through. So our impression actually is that Europe strengthened in March after some very, very encouraging scanner data for January and February, particularly Germany, very strong again on the soft drinks side. So I think my prediction would be that March scanner data for Europe will be good. Everything we're seeing in our numbers was good in March and continues into April in a good way. So no, definitely not if I think about Europe. And then again, North America, we saw going into Easter really good volumes. We saw that in our business, particularly in certain categories. So certainly nothing to suggest that there's any change at this point. So it's just more that there clearly was something going on in Brazil in that January and February was stronger than March. But as you go into the winter season, you always -- can always be a little bit volatile depending on how people build inventory into the summer and what they were left with. And obviously, we're into the slower season. So I think one of the reasons we've held guidance, we've held our volume forecast despite the situation in the world, I think it demonstrates the resilience of the beverage can sector, of the way our customers are using beverage cans in their mix and particularly prioritizing the beverage can and then also the resilience of our own business. So clearly, a very positive outlook from our point of view to hold guidance in this current geopolitical environment. Anthony Pettinari: Great. Great. No, that's very helpful. And I guess maybe just one follow-up on Europe. I mean it seems like results really exceeded your expectations. Is the biggest surprise there from your perspective on the volume side in CSD or energy drinks? Or is it the cost recovery? Just if you think about sort of the bridge versus your initial expectations, like what was the biggest driver from your perspective of the outperformance? Oliver Graham: No. I think the biggest driver was clearly the input cost recovery. We mentioned the timing effect and the one-offs potentially around the freight. But also, we did see the mix benefit in the quarter that was strong. So we've got some good specialty can growth because of the categories we're in. And that also did play into the IFRS 15 contract asset because we had very strong production and good specialty volumes. So both of those also played into the contract asset and volume mix. So yes, just a really good performance by the region, I think, delivered against our expectations, ramped up our new specialty volumes. We did a change to one of our plants to improve our specialty footprint, and that ramped up extremely well. So production was a bit ahead. And then yes, very good delivery on all elements of cost. Operator: And our next question comes from Josh Spector with UBS. Anojja Shah: It's Anojja Shah sitting in for Josh. I just had a question on the Boston Beer verdict. What steps are left in order for you to get that $175 million? Like is it a definite? It's just a matter of time? Or what legal steps are left? And when might you actually receive this? And will it have any impact on your capital allocation priorities? Oliver Graham: Yes. No, we're not going to talk in much detail about it because it's still clearly legal proceedings. But clearly, there is a potential -- they have the option to appeal. That could mean that obviously, they could appeal it and that could delay realization. We don't see that changing our capital allocation priorities at this point. At the minute, we've laid out the next investments that we see that makes sense for the business. And obviously, we're also very conscious of making sure we stay within our leverage position. So at the minute, we don't see it changing any capital allocation policies. Anojja Shah: Okay. And on the aluminum availability issue, can you quantify what the drag was in Q1 and maybe what's in your guidance for Q2? And then do you expect it to fall away after that? Oliver Graham: So we think across the weather, I mean, we sort of forget now, but actually sort of January, Feb, there was some very cold weather in the South of the United States that led to a lot of disruption. So we had people struggling to get to our facilities, struggling to get to customer facilities and freight issues on the roads. So between that and the metal, we think we lost 1 to 2 points of growth in the quarter across both ends and cans. So that's the sort of order of magnitude we saw in the quarter. At the minute, we're not predicting anything particularly in the guidance for Q2. So we sort of held roughly to where we had planned to be because certainly in the last couple of weeks, things have improved quite significantly. So at the moment, we'd be hopeful we can come through Q2 without any significant drag. But maybe, Stefan, you can add anything to that. Stefan Schellinger: Yes. Maybe just in regards to the cost side of the impact, we had adverse impact on freight costs as well as manufacturing costs. So we had to move a little bit around sort of product in our manufacturing network and had some unfavorable freight lanes as a result. And also in terms of the operations, it was more -- a little more from hand to mouth, shorter runs, maybe not running the right spec all the time in terms of metal. So if you add that all up, it was probably a mid- to high single-digit impact in the quarter. Anojja Shah: Mid- to high single-digit millions on EBITDA, you mean? Stefan Schellinger: Yes, correct. Operator: And we'll go next to Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: Maybe I'll just get your thoughts on the potential -- the inflation and what you're seeing on the tariff side as well. So in North America, I guess, there -- how has the Midwest Premium affected demand and can pricing, if at all? And do you see that changing with 232? Oliver Graham: Yes. We keep looking for it because obviously, between the LME and the Midwest, they're pretty significant. And this has been going on for a while. So people's hedge positions may be rolling off a little bit. But we're not seeing it. We're not seeing it in the data. We're not seeing it in our customers mix and their plans, and not seeing it on the shelf. So I think the can has got a lot of resilience at the moment, the fact that it does remain a very efficient package. The fact that consumers are clearly favoring it, I think, and that obviously drives these brand companies to rightly take note of what their consumers want. And then in certain parts of the world, the sustainability credentials also play very strongly. So the tariff situation hasn't got better. If anything, the last piece made it marginally worse, but not significantly. But as I say, I mean, right now, I think all the data is really a testament to the resilience of the industry and the substrate. And what we are also seeing now, obviously, is inflationary impact into petrochemical and energy, which are obviously negative for the competing substrates. So I think net-net, although we should always be cautious and with the inflation that the consumer is facing more generally, the can seems to be continuing to win in the mix. Arun Viswanathan: Just to clarify, is it the case that the beverage companies, your customers are absorbing some of that extra cost and not necessarily passing that on in higher beverage prices. And so they're continuing to promote? Or is it that customers are paying higher prices, but they're willing to do that... Oliver Graham: Yes. There was obviously a very significant increase in pricing over the last few years post COVID and all of the inflationary effects that happened after COVID. So I think there's room for some absorption. But equally, we don't know all the ins and outs of our customers' P&L. And again, particularly, we don't know the nature of their hedge positions and other ways they might be offsetting these costs. I don't think we're seeing a huge amount of price increase at retail. If we look at the promo information, promos are still strong. And there isn't a lot of room, I think, to increase price much further given the price increase over the last few years. So our sense of it is more that our customers are managing it. Arun Viswanathan: And just on that supply-demand side. So given the strong growth, I guess, in Europe, I'm not sure if you would need to potentially add any capacity there. Similarly, in North America, strong energy growth, I guess, could continue. So maybe you can just let us know what your plans are on capacity additions in Europe, North America and Brazil, if any? Oliver Graham: Sure. Yes. So I think we said it in the prepared remarks, and we talked about it at the Q4. So we do plan to add capacity in Europe. That's where we're the most tight in terms of our network and our utilization with Spain and the U.K. being the 2 markets we'll invest in. And those projects will come in, in the next couple of years to support the growth that we have, but also it's an extremely supportive market environment, and we see our peers investing behind that environment. We see our customers really putting growth plans behind the can supported by those investments. So yes, we'll absolutely be participating through growth investments in Europe. At the moment in North America, particularly with the contract resets that took place last year, we've got space in the network. We do need to make sure we get the mix right. We've made some very good investments to increase the flexibility of the network in North America. That means we're very well positioned for different types of growth, but we may continue to do that at the margin just to make sure our network is really tuned for particularly specialty can growth. And then Brazil, yes, we have good capacity availability. We put a lot into the Northeast where we still need to grow into that. The Southeast is a bit tighter. But again, I think with the improvements we're making in the network, we've got space in Brazil. So nothing planned there in the short term. Operator: And we'll move to Gabe Hajde with Wells Fargo. Richard Carlson: This is actually Richard Carlson on for Gabe this morning. So first question I want to ask you guys about Europe. I mean you guys have mentioned that you don't have direct exposure to the conflict in the Middle East, but certainly some of your competitors do. And so are you seeing any change in the marketplace from guys who are saying they're having a hard time getting the metal supplier or getting the energy supply that they need? Oliver Graham: No, really not. And again, I think what we understand is most of the impact is occurring just in region with facilities being stopped or particularly to the east of the region. So I think markets that are supplied with energy out of the Gulf, markets like India, that's where I think the impact is landing, not in Europe where you've got much more developed supply chains and much less direct exposure to the region. So no, we're not seeing any near-term impact in Europe. Richard Carlson: Right. And your plants are all natural gas, right? Oliver Graham: I mean we operate with a mixture of gas and electricity. So yes, that's what we operate with. Richard Carlson: Got it. And then I think you were touching on this with Anojja's question. But as we think about the new cadence for the year, presumably, there's some -- you got some good momentum going into Q2. How has your Q2 outlook changed over the past couple of months? It seems like now you, of course, got a little more front-end loaded for the year. But are you seeing now -- has your guide from what you thought it would have been 2 or 3 months ago increased? Oliver Graham: No, I don't think so. I think to the extent that there are going to be different impacts from when we first issued guidance, it's mostly sitting in the second half, so either a little bit of input cost inflation. Obviously, in our guidance is some caution. We're in Q1. We've not seen how this conflict plays out. We've not seen potentially the scale of the inflationary impacts or the disruption. So we're being cautious. But I think that to the extent that we're adjusting slightly, it's more Q3, Q4 where we're just not putting through all the gains that we've made in Q1. I think Q2 is sitting pretty much where we already had it and Stefan is nodding. So it seems I got that right. Stefan Schellinger: Yes, agree. Operator: And ladies and gentlemen, that concludes our Q&A session for today. I'll turn the conference back to Oliver Graham for any additional or closing remarks. Oliver Graham: Thanks, Lisa. Thanks, everyone, on the call. So just summarizing, in the first quarter, we reported strong adjusted EBITDA growth of 15% versus the prior year, significantly ahead of guidance and particularly driven by a strong performance in Europe. And I think a testament to the resilience of the industry and of AMP. And on the back of that, even in the face of the current geopolitical environment, we reaffirm our guidance for 2026 full year adjusted EBITDA in the range of $750 million to $775 million, supported by our robust input cost pass-through mechanisms and our energy hedging arrangements. And so with that, we'll sign off and look forward to talking to you again at our Q2 results. Thank you. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

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WCN 2026 Q1 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to the Waste Connections, Inc. Q1 2026 Earnings Call. [Operator Instructions]. I will now hand the conference over to Ron Mittelstaedt, President and CEO. Please go ahead. Ronald Mittelstaedt: Thank you, operator, and good morning. I'd like to welcome everyone to this conference call to discuss our first quarter results. I'm joined this morning by Mary Anne Whitney, our CFO; as well as several other members of our senior management. As noted in our earnings release, we are well positioned for 2026 following a strong start with upside potential from recent trends. We do not -- we not only exceeded expectations for revenue and EBITDA, but delivered EBITDA margin of 32.5%, up 90 basis points year-over-year, excluding commodity impacts in spite of outsized weather impacts and in advance of recovering higher fuel costs. Against a volatile macroeconomic and geopolitical backdrop, our results reflect the durability of our model and consistency of execution, as we continue to benefit from improved operating trends along with recent increase in commodities and special waste activity. Before we get into much more detail, let me turn the call over to Mary Anne for our forward-looking disclaimer and other housekeeping items. Mary Whitney: Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed in the cautionary statement included in our April 22 earnings release and in greater detail in Waste Connections filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently. I will now turn the call back over to Ron. Ronald Mittelstaedt: Thank you, Mary Anne. On the strength of our business and consistent execution, 2026 is off to a great start with results exceeding expectations. Despite the volatility of the broader macro environment, we haven't seen anything today that doesn't support our full year outlook as provided in February. In fact, we believe we should be well positioned for incremental benefits, both from external factors driving higher fuel and other commodities and also as a result of our ongoing investments in human capital and AI, which have broad implications for our operations along with continued M&A. In Q1, we saw improving dynamics across our business, starting with better-than-expected solid waste pricing retention, resulting in core price of 6% providing visibility for the high end of our full year 2026 outlook of 5% to 5.5%. Next, our landfill tons were slightly stronger than expected offsetting the volume impacts from slowdowns and closures related to severe winter weather, which persisted in several markets, most notably in the Northeast. Landfill activity was led by higher special waste tons, up 8% year-over-year in Q1, the sixth consecutive quarter of improving special waste. Looking next at the aspects of our results related to crude oil prices and related volatility, which are twofold. First, our E&P waste business where revenues increased sequentially and were up about 4% over a year on a like-for-like basis. We saw increases both in Canada on greater production-oriented activity and higher pricing and in the U.S. on drilling-oriented activity, most notably in the Gulf. To date, we haven't seen a meaningful increase in rig count or pickup in drilling activity which may be driven by sustained higher crude prices or long-term supply disruptions and would be additive to the levels we are currently experiencing. Next, fuel and related costs. Spot diesel in the U.S. was up 12% year-over-year, including an increase of over 35% in March. That surge drove our internal fuel costs about $5 million above our expectations for Q1. Our exposure to the cost impact is limited due to the hedges we proactively put in place for over 45% of our expected diesel requirements for 2026. Additionally, in certain markets, our pricing mechanisms allow for recovery of a portion of higher fuel-related costs over time through surcharges, which will step up in Q2 as a result of the incremental costs we have already absorbed. Based on what we have seen to date, we would expect to be largely insulated on an EBITDA basis over time from most of the effects of higher fuel costs between the benefit from any pickup in E&P waste activity, the impact of hedges and the recovery of higher diesel costs through surcharges, albeit with some lag in timing. Looking next at trends for other commodities. Recycled commodity values stepped up sequentially in Q1 for the first time in 7 quarters, led by improving values for fiber during the quarter. Although nominal, the increase is a positive indicator and landfill gas sales also stepped up sequentially, in this case, due to increased volumes on stable values for renewable energy credits, or RINs. Moving next to operating trends. Q1 marked our 14th consecutive quarter of improvement in employee retention and the achievement of another milestone as voluntary turnover dropped to below 10%. We can't overstate the value of human capital as a differentiator and continue to see the benefits of lower turnover throughout our operations from our record safety levels to increased employee engagement and ultimately, customer retention. Shifting to the subject of technology. Our continued investment and focus on AI and our overall digital platform are showing promising results within pricing effectiveness, customer engagement and asset optimization. Specifically, our AI-driven pricing tool has yielded approximately 20% improvement in customer retention and pricing effectiveness, while maintaining our core pricing strength. We are encouraged by early results knowing our analytics and capabilities will only get better as our technology advances. Further, for the balance of '26 and into 2027, we are excited about our continued involvement in the field to expand our AI-powered tools, reinforcing our commitment to our decentralized-first model and value-based approach to the business. These current and future tools will continue to expand our customer engagement and routing productivity with early indications suggesting strong returns on investment. Moving next to M&A. We continue to anticipate another outsized year of activity based on a robust and building pipeline with high visibility and a handful of deals with aggregate annualized revenue of approximately $100 million expected to close by the end of Q2 or early Q3. We are on track for another above-average M&A year. Most importantly, we remain disciplined in our approach to acquisitions and well positioned for implementing our growth strategy, while also increasing return of capital to shareholders. To that end, on a year-to-date outlays of approximately $365 million, we've repurchased about 1% of shares outstanding. And finally, an update on our management of the ongoing elevated temperature landfill or ETLF event at Chiquita Canyon, our closed landfill in Southern California. We continue to make progress on mitigating the reaction, which based on objective data collected to date is stable, controlled and decelerating. As noted previously, we have sought out the increased involvement and oversight of the US EPA in an effort to streamline the process. Over the past several weeks, the EPA has expanded its involvement at the facility, which we welcome. To date, the EPA has weighed in and provided direction on 2 critical issues, and we respect their expertise and experience, which have facilitated the development of plans to resolve these matters consistent with our expectations. We continue to work with the EPA in a long-term agreement which should provide even greater clarity once consummated. There is no change in our 2026 outlook for Chiquita, which reflects free cash flow impacts of $100 million to $150 million. That said, we did adjust our accrual in Q1 to reflect the higher spending we saw in 2025, which was incorporated into our 2026 outlook. We look forward to being in a position to more formally reforecast the outlays for subsequent periods once we have a roadmap for moving forward, still anticipated this year. Additionally, we continue to expect free cash flow impacts in 2027 will decline as compared to 2026, as previously communicated and continue to step down in each year going forward. And now I'd like to pass the call to Mary Anne to review more in-depth financial highlights of the first quarter, I will then wrap up before heading into Q&A. Mary Whitney: Thank you, Ron. In the first quarter, revenue of $2.371 billion exceeded our expectations and was up $143 million or 6.4% year-over-year. Contributions from acquisitions net of divestitures totaled $55 million in the quarter. Organic growth in solid waste collection transfer and disposal of 3.1% was led by 6% core price which range from about 4% in our mostly exclusive market Western region to over 7% in our competitive markets. Total price of 5.9% included a reduction of about 10 basis points in fuel and material surcharges given the lag in recovery at higher costs. With over 75% of our price increases already in place or contractually provided for, we have high visibility for full year 2026 core pricing at the high end of the range we provided or about 5.5% and given the recent step-up in diesel costs, we would expect surcharges to increase accordingly, albeit with a lag, driven not only by the mechanics of the surcharges but also due to advanced monthly or quarterly billing for some of our customers. As Ron noted, we have hedges in place for almost half of our diesel requirements and utilize surcharges in a portion of our markets. Yield of 4.7% reflects ongoing reductions in customer churn and implies solid waste volumes down about 1.5%, including up to about 0.5 point attributable to outsized weather amounts that contributed to Q1 volume losses to varying degrees across all of our regions, except the Western region, where volumes were up about 1.5%. Looking at year-over-year results in the first quarter on a same-store basis. Roll-off pulls were down 1% on rates per pull up 3%. And with the exception of our Western region, pulls were down in all regions. That said, we are encouraged by improving roll-off trends, especially given weather impacts. As compared to Q4 year-over-year results, pulls were less negative by almost 0.5 point and year-over-year rate per pulls stepped up by 120 basis points. Landfill trends, while still mixed, are also encouraging. Total tons were up 4% on MSW up 5% and special waste up 8%, partially offset by ongoing weakness in C&D down 5%. Increases in MSW tons were spread across our Western, Canadian and Central regions while special waste activity was broad-based, driving increases in 5 of 6 of our geographic regions. Most noteworthy, though, was a 20% increase in special waste activity in our central region, where the pickup in activity we noted in recent quarters had been lagging other markets. And following up on Ron's comments about improving commodity-driven activity. Recycled commodity revenues improved during Q1 led by an increase in old corrugated cardboard or OCC, which averaged $89 per ton in Q1 and exited the quarter in line with the 2025 full year average price of $94 per ton. Additionally, our landfill gas sales increased sequentially as a result of contributions from 1 of our new RNG facilities currently in start-up and also from higher natural gas prices, which spiked in Q1, similar to last year. Values for renewable energy credits, or RINs, remained stable at about $2.40 following the EPA's updates for renewable volume obligation. Adjusted EBITDA for Q1 is reconciled in our earnings release was $769.5 million, up 8% year-over-year. At 32.5% of revenue, our adjusted EBITDA margin exceeded our expectations and was up 50 basis points year-over-year, driven by 90 basis points underlying margin expansion offset by about 40 basis point drag from commodities. Outside solid waste margin expansion reflected improvement in several cost items, reflecting favorable price cost spread dynamics led by strong pricing retention and magnified by benefits from employee retention and safety. These benefits were partially offset by higher fuel and related costs. And finally, adjusted free cash flow of $246 million was in line with our expectations and consistent with our full year outlook as provided in February of $1.4 billion to $1.45 billion. We were pleased to see Q1 CapEx outlays outpaced last year's slow start, largely as a result of more expeditious deliveries of fleet and equipment and faster progress on projects, including our R&D facilities in development. Moving next to our balance sheet. We opportunistically accessed the public debt market with a $600 million note offering in early March to further diversify funding sources. Following that highly successful offering in activities during the quarter, including share repurchases, as noted by Ron, our debt outstanding of about $9.1 billion had a tenor of over 8 years at an average interest rate of about 4% with about 80% of our debt fixed. With liquidity of approximately $1 billion and quarter end net debt-to-EBITDA leverage of about 2.75x, we retain flexibility for acquisitions as well as returning capital to shareholders through additional repurchases and dividends. And now let me turn the call back over to Ron for some final remarks before Q&A. Ronald Mittelstaedt: Okay. Thank you, Mary Anne. As we've said, 2026 is off to a great start, and there are a number of factors working in our favor for the rest of the year. The strength of our results is a reflection of the projectability and consistency that sets us apart regardless of the macroeconomic environment. Our industry-leading results are also a reminder of the importance we place on asset positioning and market selection, both of which are fundamental to our strategy and which we believe drive differentiation. Our results highlight the importance of discipline around capital allocation as well as the value of human capital and culture in driving results. These are the tenants that have guided Waste Connections approach since our founding over 28 years ago and which remain fundamental as we approach $10 billion in revenue very soon. To that end, we're most grateful for the commitment of our 25,000-plus employees who live our values every day, putting safety first and making Waste Connections such a great place to work. We appreciate your time today. I will now turn this call over to the operator to open up the lines for your questions. Operator? Operator: [Operator Instructions]. Your first question comes from the line of Tyler Brown with Raymond James. Patrick Brown: Mary Anne, so I appreciate some of the comments on fuel, but I just want to make sure that I've got it. So sorry for this, it's kind of a multipart question. But number one, I just want to make sure that it's clear that kind of over the course of the year, you would expect fuel to be effectively a push from an EBITDA dollar perspective. But then two, if we assume where fuel is and it stays where it is, we clearly need to contemplate higher surcharges, and that will be dilutive on margins. So I assume that needs to be considered. Can you maybe size some of the dilution there? And then three, for my garbage bill, I believe I paid 2 months in advance. So we also need to consider that there is a lag on fuel recovery. So can you help us think about fuel dilution, specifically in Q2? So I know there's a lot there. I'm sorry about that, but just some more color on fuel. Mary Whitney: Sure. Happy to address that, and there are a lot of moving parts. So here's how I'd approach it. First of all, you have fuel impacts that are direct and indirect. And what we know is that the direct impacts are mitigated or impacted by, first of all, the hedges we have in place. So we've got hedged almost 50% of our fuel requirements and then we get fuel surcharges in certain of our markets. And as you said and as we said in the script, largely in terms of the dollar amount of the impact from fuel, we can recover that over time through fuel surcharges. You used the term during the year. I'd just remind us since the spike started in March, it goes into next year in terms of the recovery. To your point, there is a lag, the lag is driven by twofold. One is the mechanism specified by whatever -- what limits it provides for the surcharge; and then secondly, as you also pointed out, we advance bill customers on a quarterly or monthly basis. And so you can appreciate that when fuel ran in March, customers who we had billed in January, of course, we couldn't have recovered that, we hadn't anticipated it, so it could take, by example, up until May to get that. So then that brings you to the question of how quickly we recover? And to think about it quarter-by-quarter, Q2 would be the toughest, right, because it's the slowest recovery because we're late to the game. By Q3, you're more at that 100% level, and then that continues through the year. So of course, again, as you pointed out, there's a margin impact there when you recover the dollars and so you get the revenue and EBITDA, but the margin changes and obviously, that's a function of how big the number is. Illustratively, if we've got about 50 million gallons that aren't hedged, you then rate that over the course of 3 quarters of the year, you could see how with a couple of dollars higher fuel, this could be as much as $60 million or $70 million in incremental fuel surcharges that would run through the P&L and that would create that margin differential. So then I think about the other bucket, which is indirect impact. So moving the indirect impact, it then says there's an opportunity to have incremental benefits associated with the higher fuel to the extent that there is an increase, for instance, in E&P waste activity. And that, again, we would expect to take longer. We haven't seen it yet. As strong as our E&P results were in Q1 that really didn't reflect the pickup in drilling activity. We did see an improvement in commodities. You've already seen a little bit of an offset of those margin drags. And then you would look to continue to see that as we move through the year. Patrick Brown: Okay. Perfect. And then I know I'm sometimes a bit spacey but maybe I missed it, but did you give any color specifically on Q2 around revenue or EBITDA and is that a change? Should we think about not getting that forward quarter look or how should we think about that? Mary Whitney: Well, actually, it's consistent with the way we've been doing it really since last year. And we certainly give guardrails around the movement throughout the year, and I think we did that in Q1 when people laid out their framework for the year. And so I now think about directionally to provide that what's changed since our guidance in February and of course, as I mentioned, when I look overall at the commodity impact, that's probably improved just based on where the pricing has gone to date, probably a 10 basis point benefit versus where we expected things to be in February, and you'd start seeing that in Q2 to the extent it doesn't change from here. And we just talked about the incremental margin headwinds associated with fuel, which would be most felt in Q2 versus the other quarters. Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Konark Gupta: The first one, Mary Anne, the underlying margins in Q1, if you strip out the fuel impact, I think they were up 110 basis points, commodities as well. I think in February, you guys were looking at 50 to 70 basis points for the full year. I'm just trying to understand like with the pricing moving to the high end of the range, do you think the underlying margin expansion has potential upside to the 50 to 70 bps, is that for the full year? Mary Whitney: Obviously, we're excluding fuel in this conversation. But yes, with respect to the fact that we just said we had a nice strong start to the year that could be arguably another indication maybe a nice tailwind as we move through the year. We'd always be cautious because you have to have a lot of things go right and we described all the things that went right in Q1 and acknowledging that those benefits we've seen, for instance, from the human capital-driven benefits, as we described with respect to retention and the improvement we've seen there. We've gotten most of those benefits. So I wouldn't think that they continue at the same extent as we move through the year. So you might have a little better improvement in Q1 versus the other quarters and the underlying margin expansion. Konark Gupta: Okay. That makes sense. And on the M&A side, I think, Ron, you were mentioning about the $100 million acquisition worth in the coming few months. I just wanted to understand the nature of these transactions. What kind of areas are you targeting? And what kind of assets are these mostly post collection or collection? Ronald Mittelstaedt: Yes, sure. Well, first, and that was a little -- you broke up just a little, but didn't -- we didn't mean to imply that there was a $100 million transaction. There's a series of transactions that equates to $100 million or more, just to clarify. These are all consistent with our traditional, what I'd call, singles and doubles, core solid waste transactions both franchise and competitive, both -- we have some integrated transactions in that, meaning collection through disposal and a few smaller E&P tuck-in transactions as well. So everything that's consistent with our existing platform. Operator: Your next question comes from the line of Toni Kaplan with Morgan Stanley. Toni Kaplan: I wanted to talk about volume. I think last quarter, you had talked about for the year an expectation of down 50 to flattish. This quarter, we did see some nice improvement versus last year, and it was impacted by weather, so even better than the 150. And so my question is, does anything need to happen specifically to get to -- are you still expecting a flat to down 50 for volume for the year? And does anything sort of special need to happen? Or are you running at that sort of pace to get to that level and how much visibility you have in that? Mary Whitney: Sure. So I guess a couple of observations. We did see improvement in underlying volumes, as you point out, in Q1, and we're still able to deliver the volumes in line with our expectations in spite of, call it, 25 to 50 basis points of weather impact. Some of that, we'd attribute to that improvement in special waste, which you never -- you try to hesitate to generalize from that because it can be lumpy, and we've had multiple quarters of improvement in special waste. So I'd be cautiously optimistic there. And then, Toni, the final piece of the puzzle is really that construction-driven activity, which we haven't seen accelerate yet. And so there was some improvement in the underlying dynamics factored into our expectations for the full year that got you closer to that flat or even positive as you exit the year to deliver those numbers as you described. But the good news is that we are seeing that reduction in the shedding or lost contracts and so that is directionally getting us in the right -- we're moving in the right direction. Ronald Mittelstaedt: The last thing I'd comment on, Toni, is -- I think we commented on this in our remarks -- was that we -- with our AI pricing tool, we've seen perhaps up to almost a 20% improvement in retention/churn on the same type of price, which led us to a little bit higher performance on price than our 5% to 5.5% guidance and so that has a component to volume as well. Toni Kaplan: Terrific. And then I wanted to ask about E&P strong in the quarter, I think up sort of modestly organically, but a nice quarter there. And also, you had sort of mentioned if the fuel prices continue to be high, that could be even more of a tailwind for you. Just wanted to understand, has your pipeline changed? Has it gotten better? Or is this sort of you need a little bit more time for prices to be at a higher level in order to see any sort of impact to the pipeline and future deals? Ronald Mittelstaedt: Yes. I mean, as you know, Toni, the crude ran with the Iran crisis so precipitously within a matter of days to let alone a week. We have not yet seen any increase in rig count in the U.S., which is what would be needed to drive incremental drilling activity to affect our volumes in the U.S. Now if you have a sustained higher price crude, you will absolutely see there is a mobilization period that takes place, that takes time and it takes several months. And producers aren't just going to react on a 4- to 6-week price increase in crude. But if you have a sustained increase in crude price, they will react and then you'll see a mobilization of rigs and we will see greater drilling activity and then that will have an impact. And then, of course, in our Canadian E&P business, that is 80% to 85% production linked. And we have seen some nominal increase in their production because of what's going on with the price of crude in Canada as well, as well as their ability to export or their desire to. So certainly, if this is sustained, we will see it. But I'd say it's too early to say that producers are reacting to a 4- to 6-week crisis and not knowing if that's -- how long that is going to go on. Operator: Your next question comes from the line of Faiza Alwy with Deutsche Bank. Faiza Alwy: Yes. I wanted to ask about yield. And you've been -- we've been talking about fuel surcharges, but I'm curious if there is sort of this potential for underlying benefit that we could see on yield alone, as you look at your contracts where you may not have fuel surcharges, for example. Just curious how we should think about yield going forward from here and if there's room for potential upside? Mary Whitney: Sure. So most of our price increases, as we described, are in place or known. And so when I think about the benefit in yield that could be in '27 more so than in '26. That doesn't mean that there haven't been situations in the past when there's been outsized cost pressures or inflation later in the year, and we've revisited our price increases. But at this time, we think in terms of the recovery through the fuel surcharges that we know we're entitled to and then incremental pricing benefits lagging and into next year. Faiza Alwy: Okay. Understood. And some of the benefits that you've been talking about as it relates to retention just because this is a relatively newer metric historically given us core price. Just help us think through, like, does that show up more now in volume or in yield? And sort of how should we think about that? Does yield still sort of decelerate through the course of the year mechanically or should we see, again, like a slight improvement as maybe you lean into some of your technology initiatives a little bit more? Mary Whitney: So yield, you should expect yields to follow the similar cadence to what price did because really, what we're talking about is always the dollars associated with the price increases that we've retained and the denominator gets bigger, right? So with most of the price increases are done early in the year. So that's a consistent numerator on a denominator that's getting bigger. What's changed in the way we're communicating it is that arguably before our volume was reflecting any difference in mix and the price volume trade-off the customer churn that was inherent in delivering the price increase. And so now we've just really shifted it to the yields bucket. So it's a function of those 2 pieces. So of course, as customer churn improves, the yield should reflect some of that. So you will see a little bit, but I would still expect the number, the absolute value to decrease over the course of the year. Operator: Your next question comes from the line of Adam Bubes with Goldman Sachs. Adam Bubes: I have a follow-up on E&P. I think on the last call, you talked about expectations for E&P waste revenue is flattish for the full year? In the quarter, I think it was up over 20%. It sounds like that was largely acquisition contribution, but are you seeing outperformance on the acquired revenues? And is the right way to still think about E&P revenues for the full year as flattish because the run rate looks much better right now? Mary Whitney: Sure. So I think the commentary about E&P expectations is that really not much margin contribution was expected. And on an organic growth basis, it was expected to be pretty minimal. And so this is really consistent with what we expected, given the fact that we had rollover contribution from acquisitions, but also have the benefit of projects we've done, including at bolt-on acquisitions recently, but also, for instance, reopening one of the facilities we've talked about reopening. That's why we try to communicate like-for-like basis to normalize for those benefits. So I'd say overall, I still think the margin impact, again, unless we -- or until we get that pickup that Ron was just talking about in terms of drilling activity where it could be more meaningful, I think that would be pretty limited. But yes, the dollar amount would go up because of those incremental projects on the rollover. Adam Bubes: Got it. And then I think you're targeting 7 AI initiatives through 2027. It sounds like some of those are already having a real impact. I understand you're going to lap some of the strong margin tailwinds from voluntary turnover, but between continued price cost, the AI initiatives, landfill gas ramping, just at a high level, how are you thinking about potential for continuation of outsized underlying margin expansion beyond 2026? Ronald Mittelstaedt: Yes, Adam, I mean, you're correct. We've targeted 7 initial AI initiatives between 2025 and '27. We implemented 3 of those in 2025. We're implementing 2 in '26 and 2 more in '27. We are spending roughly $25 million to $30 million a year right now in each year on those initiatives. If you put them all together, the returns have been quite staggering, to be honest. Most of them much quicker than a 1-year payback. As we roll out our routing and other broader digital tools, it really suggests that the returns will meet or exceed the pricing tool return. I know others in our space have talked about fairly significant margin contribution, and we have no reason to believe it looks any different. We haven't laid out a formal number. But look, we believe as we come out of '27 and head into '28, it is reasonable that through all of 7 of those initiatives, to expect somewhere approaching about 100 basis points of margin appreciation as we head into '28. So this doesn't just come linearly. Obviously, you load the costs up initially in terms of the capital and the infrastructure we're in that phase and still delivering what we're delivering and then you see those improvements as things get fully implemented in the field and deployed, which takes time. It takes time to reroute 570 locations with 15,000 trucks. That's going to take all the way through the majority of '27, as an example. So we feel extremely confident and are very excited about what we're seeing from AI. It has outpaced our expectations in virtually every manner, but it is a complex implementation. But those 7 initiatives are all on pace. If anything, we think we're a little bit ahead. But I think that 100 basis points is a fair expectation, as we come through getting all 7 implemented. Operator: Your next question comes from the line of Bryan Burgmeier with Citi. Bryan Burgmeier: Maybe just following up on E&P. Just curious if you think the kind of 4% growth rate that you flagged in 1Q is an appropriate number for 2Q or 3Q? I'm not sure if maybe that 1% number only captured 1 month of improvement, so maybe 2Q could be even better. Also, I don't want to kind of get ahead of ourselves. So any detail on that would be great. Mary Whitney: Well, I think the key thing is that we haven't seen a pickup in the drilling activity, frankly. So really, that would be the determinant. So I would say, watch the rig count, and that will be the leading indicator that, that could improve. I wouldn't encourage you to think that there's been a recent run-up and that you should then increase that for a full quarter. As we've said, we really haven't seen it yet. Underlying activity is up nominally is the way we described it. And so I'd say it'd be a little premature to go that far. Bryan Burgmeier: Okay. That makes sense. And last question and I can turn it over. I think we're targeting like $30 million of EBITDA from natural gas this year. I guess, is that still accurate? And then beated any of that sort of come online in 1Q or do we think about that being mostly kind of back half weighted? Mary Whitney: Yes. So I think you're referring to the RNG more or landfill gas sales where nat gas is a tiny piece of it, and then we talked about that spiking in Q1 as it did last year. But -- what I'd say is it's always good news when you get a contribution from a facility in start-up. A reminder that start-up comes with a lot of expenses. So you're working through that as you start these facilities. But we look forward to having more visibility. And certainly, we'd expect in July when we revisit all of our expectations, we'll have a little better visibility on our RNG projects. But we still are on track to have those facilities come online as we have described so that our or a dozen-or-so, about half of them were still to come that we'd expect that by year-end. And so maybe some are a little early and some are a little later, but it's right in line with our expectations. Ronald Mittelstaedt: Yes, Bryan, just to reiterate on Mary Anne, we originally outlined 12 RNG projects, 5 were online by the end of '25. One came online in the first quarter -- the end of the first quarter of '26, so really no contribution or very de minimis. And we plan to bring another 6 online by year-end. Most likely most of those coming online in the fourth quarter to give us all 12 online for next year. We remain confident in that. And so the CapEx on RNG will come to effectively an end for these first 12 and then the EBITDA contribution from those will come in '27 and beyond. So you will sort of have a double impact to free cash flow starting in '27 from the RNG. Operator: Your next question comes from the line of Trevor Romeo with William Blair. Trevor Romeo: I had one more follow-up on the E&P business. I think, Mary Anne, you talked about one of the previously mothballed facilities coming back online. So can you just remind us, do you have more of those mothballed facilities kind of still off-line at this point? Or just sort of any other organic project growth opportunities or anything like that, that could still happen in the future and what the decision would look like on those? Ronald Mittelstaedt: Sure. Trevor, this is Ron. So when we acquired in February of '24, 30 facilities from Secure that were disposal, landfill and processing facilities. 25 of those were operational. There were 5 smaller facilities that were mothballed. To date, we have brought online 2 of those 5 facilities. So there's 3 that we will continue to make market dynamic decisions on whether we reopen those or not. These tend to be smaller facilities, but contributing $2 million to $5 million in EBITDA per facility sort of as we open them. So collectively, they're meaningful. And as I said, we've opened 2. We are evaluating and of course, demand will depend on whether we open 1 in the latter part of this year or not. I wouldn't expect it to be meaningfully contributive, but as I said, the aggregate and the rollover is meaningful as we go forward. Trevor Romeo: Okay. That's really helpful. And then maybe just switching over to the New York City market. I think there was some reporting recently about time lines on some of the waste zones and the rollout kind of shifting around a bit. I know you've also kind of added to your presence there with acquisitions in the market or in the region kind of the last several quarters, let's say. So all that said, could you maybe just give us an update on how the city rollout and your kind of positioning and strategy is going there? Ronald Mittelstaedt: Sure. Happy to. So the New York City market is going through the implementation of a nonexclusive franchise system from an openly competitive system where there were hundreds of smaller, in this term, called carters or haulers in the city for the commercial waste. They have divided the city into 30 commercial zones amongst the 5 boroughs. And they have awarded 3 franchise haulers per zone. No hauler is allowed to have more than 15 zones. We have the maximum at 15. We have -- most of our zones are in Manhattan and Queens and Bronx. We have a fully integrated position. We have multiple transfer stations in our zones and we also have 5 MSW and C&D landfills that we are feeding that volume to or can feed it to over the coming years. I think it's safe to say we're really the only fully integrated company in New York City in those zones. So it is an opportunity that we are very excited about. It is coming along, but the city is going through some changes, as you know, in leadership, et cetera. No impact to the franchise system other than they are slowing the implementation a bit in some of the zones just because it is such a change. And so it's pushing back between 6 and 12 months the implementation of their original zone scheduling. So it's sort of -- they hope to have everything implemented sort of by the end of '27. And now we're hearing that plan is sort of the middle of '28 to the end of '28 by the time everything is implemented. So no other change than a 6- to 12-month delay on the full implementation of the zones. Operator: Your next question comes from the line of Jerry Revich with Wells Fargo. Jerry Revich: Ron, I just wanted to circle back to the performance at Arrowhead. So you folks have ramped that operation up really nicely over the course of this year. Last quarter, we spoke about internalization rate approaching 60% for the company, that's one of the contributing factors. What can that look like on a multiyear basis? Now as you folks have delivered on the higher capacity, how much higher could you take volumes at the landfill over the next couple of years? And where could internalization rate for the company go as you continue to ramp that up? Ronald Mittelstaedt: Sure. Well, I appreciate the kind words about the achievement of that, Jerry, it's been a lot of work by our team to get there. Look, we are right now or this year running between 7,500 tons and 8,000-plus tons a day at our peak when we at Arrowhead. We have a plan to get that to 8,500 tons to 9,000 tons as we roll into 2027 for the year, then this takes a number of incremental step changes in trackage both in Arrowhead, at the landfill as well as at the intermodal facilities along the East Coast. And so that is in the process of being implemented and laid by Norfolk Southern. So we have a cap, if you want to use that word, of 15,000 tons a day is what the facility is permitted for and that's on a 7-day 365-day year 24-hour a day permit cap. So there's still obviously a lot of room. So I'm not going to tell you -- sit here and tell you that in 5 years, we're going to get to that. But I do believe that we will get north of 10,000 tons a day is somewhere in the 2- to 3-year mark from now as we sit here. As we continue to grow, that will move the internalization on that objective into the low- to mid-60% level which, as you know, and those that follow us know, it means we're really actually more than 80% internalized in our competitive market footprint, which is where it really matters. And when you compare it against competitive market models, that's very, very high. So it is something we're focused on, but it is playing out about as we had hoped. Jerry Revich: Super. And then just a shorter-term question. Impressive pricing in the quarter and so you folks were able to put up really good margins even with the diesel headwind. Can you just talk about how pricing cadence played out over the course of the quarter to what extent did that reflect you folks managing the business for these pockets of inflation or any other comps that you would make on the outperformance in the quarter? Mary Whitney: Sure. Well, what I'd say about the outperformance in the quarter is that what's really great about it is it came from so many different places. And I will say that pricing retention was a little stronger than expected, and we'd attribute some of that to the success of rolling out that AI price optimization tool that we've talked about. So we've continued to see benefits there. We'd also say that our human capital driven initiatives and being fully staffed and providing the level of service that allows us to defend those price increases has continued to be additive. And then again, as we've said, all these initiatives have driven small improvements in a number of areas. And so when I look through what drove the 110 basis points of underlying margin expansion, it's pretty much every line item with the exception of fuel and related costs, there, which was about a 20 basis point drag as we've described. So I would say, Jerry, that's how we think about the outperformance. Now that was augmented by the fact that we had strong special waste volumes. And so landfill volumes were a little better than expected, so that's a good guide. Commodities improved over the course of the quarter, so that's a little good guide. So all those pieces working together helped to drive the margin expansion. Operator: Your next question comes from the line of Seth Weber with BNP Paribas. Seth Weber: Just another margin question. Your SG&A was basically flat year-over-year with higher revenue. And just was there anything unusual in that number in either number year-over-year? Or is there any reason to think why you can't kind of continue to keep SG&A flattish year-over-year going forward with all these initiatives you're talking about? Mary Whitney: Yes. There can always be some noisy things, whether it's incentive comp or other pieces. We certainly not always in Q1. We certainly have talked about the fact that for our AI initiatives, we've hired, we've incurred some upfront costs in order to drive those benefits we're seeing. So that would be a contributor. But really nothing to call out there. Just a reminder that there's always a lot of moving pieces quarter-to-quarter. Seth Weber: Okay. And then just in your prepared remarks, you talked about strength in the volumes in the Western region. Can you just put any more color behind that? What's driving that, which areas, in particular, which markets? Ronald Mittelstaedt: Sure. Seth, this is Ron. Yes. I think one of the reasons we point this out, and again, for those that have followed us for quite some time, the West region is what we call our exclusive region in our franchise region. And the benefit of that is that we get 100% of all volumes wherever they're generated and we get them at a guaranteed price of the franchise. So I think it just shows that, that model derives very strong volume and stability benefit, which is why we like it. We had strong landfill and special waste growth in our Eastern Oregon landfills as well as in some of our Northern California landfills, as an example. So -- and we saw consistency. And as Mary Anne noted, improvement in roll-off volumes in our West, again, because we get everything, so not only was our price per pull up there, but if our pulls actually per day were up there as well. So you do not have that price/volume competitive trade-off in the West I think that was what we were trying to note more than anything. And so that probably more reflects the underlying economy at a -- maybe a 0% to 1% type real GDP going on right now. So that was really what the commentary was about. Operator: Your next question comes from the line of Shlomo Rosenbaum with Stifel. Shlomo Rosenbaum: Ron, I just wanted to ask you a little bit more about what it looks like in terms of the cyclical parts of the business? It seems like the special waste continues to be strong. C&D was down 5%. I think last quarter was down 4%. Maybe it's bouncing around a little bit. You noticed the pulls getting less negative. Are we -- are you seeing this as an improvement? Are you seeing this as kind of a flattening out? Like where do you see that we are and where do you think that we're going to end the year in terms of overall economic activity? And where do you see the trajectory of the business in that way? Ronald Mittelstaedt: Well, obviously, if I understood that, we'd be in a different business. But I'll give you what we believe, how is that? Look, special waste being up for the sixth consecutive quarter in our industry, special waste is traditionally a leading indicator. So -- and the reason is, it is predominantly speculative cleanup for development of commercial or residential real estate. That is predominantly what special waste is. So that usually precedes infrastructure and construction development on at some point. So that's a positive. Now C&D being down 4% to 5%, that's a real-time indicator of what activity is predominantly in construction, okay? Now you don't do a lot of construction in Q1 because of the winter weather. So that's a little hard to say, is that an indicator of the academy or not. I would tell you it's probably not. I think we feel like there's pent-up demand starting to come. We're not seeing any negative indicators in our business. Obviously, if the Iran situation drags on and fuel remains elevated for consumers and businesses that could be a pinch point in the economy, but assuming hopefully that this is a relatively short-lived situation and fuel will be retreated by the second half of the year, we think there's a lot of positive momentum in the underlying economy that should start to come through. So I would tell you to your comment, we would say flat to improving with how you ask the question, and that's what we would say it is. Mary Whitney: The other observation from it would be that, that was our 10th consecutive quarter of negative C&D volumes, right? So clearly, this has been around for a while, roll-off, pulls similarly. At some point, the comps get that much easier and so you should see it get better. And so that was kind of the expectation going into the year that maybe things became less negative. As Ron said, Q1 is probably not the right time to look for it, but that's how we're thinking about the business trajectory. Shlomo Rosenbaum: Okay. And then just shifting back to your question you touched on in rail and how you're continuing to internalize more over there. I just want to ask, is there -- in terms of what's going on to the rail as you're ramping up the tons, is it primarily internalization or are you seeing some also at the landfill third-party contributing to some of the growth in the tones there as well? I'm asking that both kind of strategically and then also just in terms of where the pricing is for rail versus kind of the stuff that is landfill more locally? Ronald Mittelstaedt: Sure. So at this point, Shlomo, most of what is going on the rail, our rail at least in our situation, is a greater amount of internalized tons. Now that has been very purposeful. We've taken tons over the last 1.5 years that we're going into third-party sites on the Eastern seaboard. Some of those our sites, some of those third parties, and we've internalized some of that volume. We have not yet pursued aggressively third-party volumes into our intermodal transfers on the Eastern seaboard because we have had some capacity constraints at some of our Northeastern landfills. So we have pulled down some of our volume there and internalized it on the rail so that we could take customer volumes into those landfills. And so as that alleviates itself here over the next year to 2 years at a couple of our sites, we will be able to pursue more third-party volume onto our rails, and that will be incremental to us. But we have not yet done that. So this has been mostly internalized volume at this point in time. Look, as far as the competitiveness of the rails. Look, the longer you go, the farther you go in our case now, rail is going 1,500 to 1,800 miles from the Eastern Seaborne to Alabama. So it's quite some distance you start becoming more competitive with an increasing fuel surcharge than you do on over the road. If you were going a shorter distance, trucking would be more cost effective. But when you start talking longer distances, rail is more cost-effective than trucking. Operator: Your next question comes from the line of Noah Kaye with Oppenheimer & Co. Noah Kaye: Great. The first one is on yield and price. I would just observe that this 130 bps spread between core price and yield is already quite tight in a positive way for this industry. And so I guess that spread probably tightened year-over-year given the intentional shedding moderating and some of the AI and turnover and safety initiatives. But is there any way to dimension or confirm what kind of improvement in the spread might have been year-over-year? And how should we be thinking about that sort of spread for '26 as a whole? How should we be modeling that? Mary Whitney: Sure. So when I look back and try to do apples-for-apples in prior periods, I'd say I agree with you overall that that churn was probably running more in that 150 to 200 basis points for several quarters. And so some of what we've seen is a tightening there. What gets a little trickier, as you can appreciate Noah, is that mix factors into this, and so does seasonality, therefore. And it's a reminder that when we look at, for instance, selling in the Northeast and that rates per yard can be twice as much as they are in, say, our mid-south or Southeast region, that is another factor that's influencing what that amount is, which is frankly why we thought it was good to get it out of volume because it was overstating the negative volumes in a way that felt punitive. So what we're really trying to do is achieve some parity with our peers, our comparability with our peers and we're going to acknowledge that it's still imperfect, but I think that's another consideration to have which could cause a little variability. Noah Kaye: Okay. And then related, it looks like risk management as a percentage of COGS improved 30 bps year-over-year in the quarter. You've talked in the past about risk management as a lagging benefit of improved safety rates. Was that in any way a positive surprise? And how are you thinking about in the guide risk management as a benefit to margins for '26? Mary Whitney: Yes. As you'll recall, we called it out in Q4 that, that was the first time we'd really seen it flip from being a headwind to a tailwind. And so was it a surprise? Look, it's always encouraging when you see the trends that you've expected to see in the business materialize in the numbers, you're always cautious because you can't generalize. But 2 quarters is certainly good to see. And yes, we came into the year, Noah you'll recall, we've talked about the fact those drivers for outsized margin expansion, we said this was really the final piece of those human capital-driven benefits, the lagging benefit of risk. So is it generally in line with what we were hoping for this year? Yes. It will vary quarter-to-quarter, but this is the right way to think about it. It's a good guide that was factored into our expectations. Operator: Your next question comes from the line of Kevin Chiang with CIBC. Kevin Chiang: Congrats on a strong start to the year here. Maybe just a follow-on on as a number of questions that were asked along the same vein. Just on the special waste, I appreciate a lot of the moving parts in Q1 be a little bit noisy with weather. But I guess when you look back historically, what type of lead indicator is special waste to total volumes? Like does it typically lead total volume inflection by like a year, 6 months, 18 months? Is there any like rule of thumb that we can point to when you see this type of special waste improvement over such a long period of time? Ronald Mittelstaedt: Yes. I mean I think, Kevin, it's a little anecdotal, but I would tell you that generally, it's certainly in that next 6 to 12 months. I mean, look, this is property being cleared by developers who have pulled permits to do speculative construction or development. So that's shopping centers, infrastructure, apartments, homes, et cetera. So you're probably talking that, that goes on for that and that lot clearing and cleanup goes on for 3 to 9 months and then construction begins. So we've talked about it, it's improving for 6 consecutive quarters now. So I think it's reasonable to expect that by this summer, as we go into the summer and through it, you should see some pickup in C&D and flow through into the solid waste business. I mean that would be a traditional pattern. Kevin Chiang: That's helpful. And maybe I can ask the yield and core price question over a longer period of time. You're definitely gaining traction with some of your AI revenue management strategies here. Like when you look at whether it's a ratio or a spread, does that change over time as you look at some of the benefits from this AI tool? Like do you reduce churn and so it helps the yield or maybe the rollbacks also improved, so maybe the net impact on the numerator and denominator are kind of equal? Just wondering how that ratio may or may not be impacted as you gain momentum on some of these revenue management initiatives driven by AI? Mary Whitney: Sure. So as you know, Kevin, first of all, of course, the absolute value of whatever this number is, is a function of what our costs are doing. So to the extent that we're seeing benefits in cost that say we need less price, that will factor into what you see, whether it's price or yield. Now specific to yield as compared to core price, I would expect, and we look forward to, needing to put less price on the street, but to retain more because of these tools. And as we've said, that's one of the benefits we're already seeing. And ultimately, as we've described, it's really keeping the customer longer that's the greatest benefit. And so I would expect there to be some improvement in yields, but that would be tempered by the need for less price overall. So I'm not -- we'll take both of those things into consideration in terms of expectations for what those numbers look like. Operator: Your next question comes from the line of Tobey Sommer with Truist. Tobey Sommer: If I could ask a follow-up question on the rail point. As you look at the business and the industry over a long stretch of time, how do you see the volumes shifting towards rail? And how -- what are your plans to help drive that change beyond Arrowhead? I imagine with the success of experience, you're looking at other ways to drive that change. Ronald Mittelstaedt: Yes, Tobey, I mean, obviously, look, today, rail is predominantly or almost exclusively a northeastern seaboard modality for waste because of very high tip fees in the Northeast because of landfill scarcity. You're not building new landfills in the Northeast, and it's obviously difficult to expand landfills in the upper Northeast. So the combination of all of that is ripe for rail to take waste out of the geography. As landfill aerospace scarcity gets tighter in other parts of the country, such as along the lower East Coast Seaboard, as an example, down in through Florida and the Carolinas, I think you will begin to see similar things happen at smaller levels there next. You still have a very -- a large amount of aerospace available in the Southeast and in the Midwest and in the Rocky Mountains at relatively inexpensive cost relative to the Northeast. So it's not as conducive in that geography for rail. And then on the West Coast, in the Pacific Northwest, you do have rail as a very large modality that has been in place for quite some years in Washington and Oregon. You do not have it in really in California and I would not expect it there any time soon. So look, you really need to be moving the volumes somewhere probably north of 300 to 400 miles for rail to make sense in most -- or chip the environment. So as you go forward 5, 10 years and you continue to see consolidation of landfills and increasing aerospace rates or tip fee rates, you will see more and more rail as waste moves economically farther. So look, without divulging to the last part of your question, let me just say, stay tuned. And I think with -- for us, you will see an incremental rail opportunity that will happen in 2026, and I'm quite confident in that. So it will continue to develop throughout the industry. It will be slower but follow landfill fees and the price of crude because those are the 2 things that as they move up, rail becomes more and more economical. Operator: We have reached the end of the Q&A session. I will now turn the call back to Ron Mittelstaedt for closing remarks. Ronald Mittelstaedt: If there are no further questions, on behalf of the entire management team, we appreciate your listening to and interest in the call today. Mary Anne and Joe Box are available today to answer any direct questions we did not cover that we are allowed to answer under Regulation FD, Reg G and applicable securities laws in Canada. Thank you, again.

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LSEG.L 2026 Q1 财报电话会议

Operator: Good morning, and welcome to the LSEG First Quarter Results 2026 Investor and Analyst Call. [Operator Instructions]. I would like to remind all participants that this call is being recorded. I will now hand over to David Schwimmer, Chief Executive Officer, to open the presentation. Please go ahead. David Schwimmer: Good morning, and welcome to our first quarter results. I'm joined by our CFO, MAP; and our Head of IR, Peregrine Riviere. Q1 was a record quarter for the group and a perfect example of the value of our model. Our leading multi-asset class trading venues have been critical sources of liquidity, price discovery and risk management, while customer engagement with our trusted data to inform their decision-making has reached new highs. This is reflected in revenue growth of almost 10%, the highest since the acquisition of Refinitiv 5 years ago. This strong start puts us in an excellent position to deliver on our financial targets for the year. And as you will have seen from this morning's announcement, we expect revenue growth to be in the upper half of the 6.5% to 7.5% guidance range. We continue to take an agile approach to capital allocation. In the first quarter, we used the dislocation in our share price to buy back GBP 1.1 billion of shares. Including dividends, we expect to return more than GBP 3 billion over the next 12 months. Q1 was also a quarter of strong strategic progress. We're continuing to innovate and invest to capitalize on the opportunities that the ongoing technological change across our industry is creating. Our LSEG Everywhere strategy is embedding our AI-ready data across financial services, driving further growth in March and April in the number of customers accessing our data via MCP servers. We're also transforming our own products with very strong feedback on the Workspace AI tools we introduced in Q1 and an exciting pipeline of additional enhancements this quarter. The group's innovation goes far beyond AI. We executed the first transaction on our private securities market in Q1, expanding private market funding through our public markets infrastructure. We're making excellent progress on post-trade solutions in partnership with 11 global banks. We're building digital markets capabilities, including a Digital Settlement House and a Digital Securities Depository, and forging a new distribution channel for financial models through our Model-as-a-Service offering. I'll say more in a moment about our strong commercial and strategic progress. But first, I'll hand over to MAP to give color on the record financial performance. Michel-Alain Proch: Thanks, David. Overall, as David said, it was a very good quarter and further proof of our all-weather model. It was a strong quarter for our subscription businesses. All of them accelerated in Q1. Data & Analytics was up 5.1% as the strong growth sales at the end of last year flow through to higher revenues. We saw particular strength in Data & Feeds up 7.3%. The contribution from pricing and retention in D&A was unchanged compared to last year. FTSE Russell was up almost 9%. Subscription revenues accelerated as the rate of contract renewals normalized, as we said it would. Growth in asset-based revenue was also strong, reflecting product inflows and higher market levels. And Risk Intelligence grew double digits, 10.5%, reflecting strong demand for our business critical screening and identity verification services. Together, those businesses grew 6.3%, a strong acceleration from the 5.2% last quarter and on track for our expectation of around 6.5% growth for the full year. The quality of our market infrastructure really stands out in the kind of market environment we saw in Q1. David will give you more detail on this in just a moment, but you can see the financial impact on that on this slide. Markets revenue were up 15.5%, driven by strong performance across all the businesses. Cost of sales benefited from the action we took last year on the SwapClear revenue surplus. And as a result, gross profit was even stronger than total income, up 11.5% in Q1. Clearly, we have had a very strong start to the year. The outstanding performance from markets, combined with the great visibility we enjoy in our subscription businesses sets us up very well to deliver on all guidance for 2026. And in particular for revenue, we are confident in reaching the upper half of our guidance. In addition to our ongoing investments in the business, we are also returning surplus capital. We repurchased shares worth GBP 1.1 billion in the first quarter. Just over GBP 400 million of this was from buybacks announced last year and nearly GBP 700 million was from the latest buyback announcement in February. Combining the rest of this year's GBP 3 billion buyback and dividends, we will be returning nearly 10% of our market capitalization to shareholders over a 15-month period. As a reminder, even with our high level of investments and large shareholder distribution, we expect to end the year around the middle of our leverage range. This is all from me, and I will pass back to David. David Schwimmer: Thanks, MAP. Customers increasingly want to use our data in AI applications, opening up a new distribution channel. We are embracing that through our LSEG Everywhere strategy, delivering AI-ready data to our customers in their preferred environment, embedding our data in their AI-powered solutions and agents. We're continuing to see strong uptake on MCP distribution. In the roughly 4 months since launch, we now have 90 customers who have connected to our MCP server directly or via one of our AI partners. And we have a pipeline of over 60 more customers looking to connect. This is great progress given the onboarding process can take a few weeks. You can see from the pie charts that we are seeing a good global spread as well as broad-based interest across buy-side, sell-side and corporate customers. And we're seeing roughly half connect through Claude with the rest split between direct connections and other third parties. In terms of data sets, we are adding new ones to MCP all the time. Just this week, that included estimates, company fundamentals and corporate actions. And overall, we now have over half of our nonreal-time data available via MCP. So the platform is becoming more attractive every day. Over the coming weeks, we will add transcripts, Lipper funds, FTSE Russell indices and much more. While we are currently focused on driving adoption, we're refining our commercial policies, and we'll share the framework at our H1 results. So strong progress on our AI-ready data, and we are also making great strides embedding AI into Workspace. Our Workspace AI search product is in pilot with around 1,500 users today, and we expect to launch general availability in the next few months. Our Workspace AI deep research capability answers complex prompts with leading models from Anthropic, OpenAI and Google using our trusted data. We have around 1,600 customers in pilot and deep research is benchmarking very well against competitor products. We're adding much more data over the coming months and rolling it out more extensively throughout 2026. Today, over half of the take-up is coming from the investment management sector, where we have traditionally had lower penetration, so a positive sign. We're also seeing really deep engagement with our products. When global uncertainty and market volatility rise as they did in Q1, our customers turn to us, a testament to their trust in our solutions. We saw record use of Workspace in Q1. Our oil tools, which have long been popular with users, saw a 75% sustained uptick in usage. Our shipping data experienced a threefold increase in demand. In Data & Feeds, our real-time business data traffic grew 33% in Q1, and this has continued into Q2 with a new all-time high in early April. We're also really scaling up in some of the new channels we have added in recent years, making it easier for customers to access our data. Following the enhancements we made in 2023, we have accelerated growth in our cloud-based real-time offering, Real-Time Optimised, and use of that platform rose fourfold in Q1. I've spoken before about the power of the analytics API we built in partnership with Microsoft. In Q1, we drove 44% growth in data consumption through that channel. And making Tick History more easily available via cloud-based solutions continues to drive strong demand with 39% growth in the use of that data in Q1. Turning to our Markets businesses. As you know, we have intentionally positioned ourselves in areas of strong structural growth, driving the electronification of fixed income trading with Tradeweb, supporting cross-border flows in FX and helping customers manage risk and optimize their capital in our post-trade businesses. We achieved exceptional volumes in interest rate swaps on both our trading and clearing platforms as customers adjusted to shifting market expectations in Q1. Market conditions also drove strong volumes across the rest of the fixed income franchise as well as FX. That was on top of the strong double-digit growth we have consistently been delivering in FX clearing. In Equities, we also achieved strong trading volumes. Technology is accelerating the pace of change in our industry. We are investing and innovating to take advantage of that. Our index business, FTSE Russell, is expanding its presence in the digital asset space, attracting 8 digital asset ETFs to track its benchmarks in Q1. We're also seeing good demand for our private markets indices with StepStone. As markets digitize, we're on track to deliver 2 new digital markets capabilities, Digital Settlement House and Digital Securities Depository in Q2 and H2, respectively. I'll pick out just one more example from this slide, Model-as-a-Service. We made financial models from Societe Generale available through this channel in Q1, the first time we have expanded our analytics API to third-party models. We're adding models from our post-trade business later this quarter, taking further advantage of the powerful distribution capability of the analytics API we built with Microsoft. So to wrap up, this has been a record quarter of growth that puts us in a strong position to deliver on all our targets for the year. We're driving adoption of our AI-ready data across the industry through a range of AI partnerships. Our innovation is creating powerful new platforms for long-term growth. And we are returning significant surplus capital to shareholders, GBP 1.1 billion in Q1 and more than GBP 3 billion over the next 12 months. We're very excited about the opportunities ahead of us this year and beyond and are very well positioned for continued growth. And with that, I'll pass to Peregrine for Q&A. Peregrine Riviere: Thank you, David. [Operator Instructions]. Thanks, operator, over to you. Operator: [Operator Instructions] Your first question is from the line of Tom Mills at Jefferies. Thomas Mills: I think you've mentioned that you'll be looking to share more on the commercialization MCP as a distribution channel at 1H. I just wondered if you could give us a sense of your early conversations with larger customers, appreciating we're only about 4 months since launch. Is there a recognition on their part that this ultimately won't be included in existing agreement, will be [indiscernible] charges there? And just I noted that you said that you're seeing larger buy-side adoption in this channel versus the [indiscernible]. Why do you think that is? David Schwimmer: Tom, we are definitely seeing an understanding and recognition from our customers that this is incremental. This is a new product, a new service. So it has been specifically laid out in our -- for example, our data access agreements. A big part of those discussions, those negotiations are around the existing perimeter of what we provide. And I think it's very clear to them that MCP and the AI distribution channels are outside of that perimeter. So actually, a lot of the discussions that we are having with our customers are around their eagerness both to access the product and frankly, to understand what the commercial model will be. And so we are in early discussions with a half dozen or so about the commercial framework. And as we mentioned, we will be sharing that framework with the market in our half year results. So on the buy-side, I think it's just the utility. I think our customers are finding it very helpful, attractive product, easy to use. And so we're not particularly surprised that we're seeing that kind of traction. Operator: Your next question is from the line of Mike Werner of UBS. Michael Werner: I appreciate the presentation. A question on the MCP server. Apologies, I'm going to be focusing on this a little bit. I guess, can you give us a little bit more color as to the economics of the MCP server? If we think about you setting it up and the investment, how should we think about ultimately the variable costs? Is this something where there's a lot of operating leverage or there is a significant amount of consumption-based costs tied to the usage of the server? Michel-Alain Proch: Mike, it's MAP speaking. So in terms of economics, as far as MCP is concerned, a couple of points that I can make. As our clients are using LLM models to access MCP, so being OpenAI, Claude or Gemini. It's our clients who are paying the tokens to the LLMs. So this cost is with our clients. Then the cost we have for MCP is mostly coming from 2 things: First, the cloud cost and the cost of the data platform. Both of these costs are indeed variable. So that's something we want to take into consideration while we are establishing the commercial policy for this new product. Operator: And your next question comes from the line of Hubert Lam of Bank of America. Hubert Lam: I've got one question. On D&A growth, it was 5.1% in the quarter and only up marginally from the 4.9% in Q4. Can you talk about the different dynamics within the division where it seems like Data & Feeds had decent growth, but workflows slowed marginally? And also, I guess you touched upon it in terms of the enhancements in the Workspace, I guess would this be helpful in terms of driving up further growth within Workflows in terms of pricing or greater demand in the future? David Schwimmer: So I would not overinterpret any modest tick up or tick down in terms of workflows in particular. We continue to see really strong interest in the new functionality of Workspace and interest as well in terms of the new functionality that is Open Directory and how that will continue to be expanding over the course of this year and beyond. So we'll continue to add capabilities, add functionality, add product in there, new private markets data in there as well, which is also getting some good interest. So I wouldn't get -- as I said, I wouldn't overinterpret any kind of modest ticks up or ticks down in terms of where workflows are. And then Data & Feeds business is doing very well. We touched on this in the presentation, but very high demand for the content that we're providing in Data & Feeds as well as Workspace. And we will continue, as you know, to invest in that platform and look forward to continued growth there. Maybe just the last point -- sorry, Hubert, last point I should emphasize. I think everyone knows this, but just to be clear, no MCP revenue in here. Operator: You have a question from the line of Arnaud Giblat of BNP Paribas. Arnaud Giblat: Yes. Just continuing a bit on the MCP theme. I'm just wondering, out of the 150 clients that have signed up or signing up, how many are new clients to you? Are there any substantial new logo wins of size? Just wondering how this is driving incremental growth in the business? David Schwimmer: Arnaud, I cannot give you that answer off the top of my head. What I can tell you is that it's a broad range. We're seeing some large institutions like the big global banks. We're seeing smaller institutions like hedge funds. One dynamic that I can share with you is that the onboarding process can be much quicker with some of the smaller institutions. They're really eager just to get on. There's not a lot of focus or review on some of the compliance or regulatory aspects, whereas with the larger institutions, the onboarding process can take, I'll say, a few to several weeks. And there can be a couple of meetings where we explain the content, we explain how it works, go through a number of the security issues, then there can be some legal discussions and then there's the actual onboarding. So just in terms of timing, that's probably the area where at this point, I can give you the most insight that the bigger institutions tend to be slower than some of the smaller, more nimbler institutions. I hope that helps. Operator: And your next question is from the line of Enrico Bolzoni of JPMorgan. Enrico Bolzoni: I just wanted to follow up on your very latest comment, David, on the -- for example, on the fact that it's faster to onboard a smaller institution. So on one hand, I would think on top of my head that it would be easier to generally onboard clients via MCP relative to what has been historically. But AI is a very powerful technology, and I think that there might be some concerns and risk in terms of the perimeter of the usage of data, what AI actually might end up using. So my question is, do you expect that as this type of connectivity increases as a proportion of your, let's say, total clients and total revenues, the sales cycle will actually expand or will it actually shrink over time? David Schwimmer: I'm sorry, Enrico, when you say the same cycle, I just want to make sure sales cycle. Enrico Bolzoni: Yes. So basically, it's going to take -- you think over time, over the next, let's say, 3 years, is it going to take longer actually to onboard clients or actually it's going to be faster, so you'd be able to do it quickly. I'm just concerned about all the implication of AI for risk, for securities and making sure that the perimeter is well defined. I know there's a lot of legal implications when contracts are signed that involve AI technology. David Schwimmer: Yes, I would expect it -- well, first point I should make, it's already quicker relative to the historical onboarding in terms of what I'll call traditional or conventional products if we were setting someone up for a traditional API. So it's already quicker than that. And I would expect over time that it accelerates as our customers get more accustomed to the technology, as there is more and better understanding, particularly as we put our commercial framework out there later this year. This is all very new. Just to remind everyone, we turned this on, I think, December 23rd. And so we're just a few months into this, both in terms of having our own data sets available in this manner and in terms of our customers really figuring out how to use it. And so a number of them have been in what I'd describe as exploration mode here. But as the comfort level increases and I'm sure that on our end, we'll look to facilitate and accelerate our own processes as well, I would expect to see the sales cycle actually becoming a little bit shorter. Operator: Your next question is from the line of Julian Dobrovolschi of ABN AMRO-ODDO BHF. Julian Dobrovolschi: I have one on the subscription growth. Wondering about the sustainability of it. So you ended the quarter at 6.3%, which I think is quite healthy. But I think you also indicated that this is partly attributed to normalization in FTSE Russell mandates renewals. So I was just wondering how much is from onetime boost the performance that we have seen in Q1 versus a structural step-up in underlying run rate, please? Michel-Alain Proch: Yes. So just to reframe the conversation. So we posted indeed 6.3% for the subscription business in Q1. We reconfirm our guidance of 6.5% for the entire year, which would mean that in the next 3 quarters, we will be between 6.5% and 6.6%. In order to do so, we have a growth which is broad-based both in DNA, FTSE and Risk Intelligence. I have already indicated that we expect Risk Intelligence to carry on being double digit. As far as FTSE Russell is concerned, you're right on the fact that after 2025, which was a bit difficult, we see FTSE Russell going back on a growth trajectory to the high single digit that we used to have and an acceleration in -- progressive acceleration in D&A. So that's the 3 elements that is converging to 6.5% for the year. And as I was saying, we are very confident in it. Operator: Your next question is from the line of Ben Bathurst with RBC Capital Markets. Benjamin Bathurst: My question is also on MCP. Presumably, there are also some customers that have elected not to take it up at this stage. I just wondered what the typical pushbacks you're hearing when this is the case? Is it that customers aren't ready or that customers are using other MCP providers or any other reasons? And are there any actions you're planning to take to address any of these points to push connectivity up through the year? David Schwimmer: Thanks, Ben. So we're not seeing a lot of pushback. I think to the extent that we have had any questions, it's really been about the availability of certain data sets. So we've shared it with some customers, and they have been looking for particular specific data sets. And so sometimes if those data sets are not yet on, they're a little bit less interested. But as we mentioned this morning, we're adding more data sets all the time. We're now over 50% of all of our nonreal-time data sets available through MCP, and that continues, that just making it more and more attractive. Operator: Your next question is from the line of Oliver Carruthers of Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. I've got another MCP question, which follows on a little bit to your answer to the last one, David. But it seems like some of your data and analytics competitors are also making their data sets available via [indiscernible] clients, via MCP servers, but they're only making their data sets partially available. So can you talk a little bit about your philosophy of how you're going to set the perimeter for what data sets you make available for your clients via MCP and then particularly in the context of your LSEG Everywhere strategy, which to me feels quite differentiated in this context? David Schwimmer: As I think you all are aware, we're very comfortable making our data available through MCP. And we are adding more and more of our data sets to it. We think it is a very helpful and valuable distribution tool. We think it works very well in terms of, I'll call it, cross-selling. It's a much stronger cross-selling machine than any human could be. We have about 1,500 data sets. And so if you are submitting a query through your model that goes into our MCP server, the way that works is that it is looking across the data sets that it has access to, to respond to that query. So it is a very powerful natural cross-selling machine. It's also a great lead generation machine because to the extent that we have data available in our MCP server and a customer does not have the license to that data set, then we can structure it so that, that becomes lead generation for us. And then we can interact with that customer and let them know that there is data available that would be responsive to their queries and expand their licensing. So I understand some of our competitors have more of a closed box mentality to this kind of opportunity set. That's not our approach. And from what we hear from a lot of our users and customers, they prefer our open model in this new era of very powerful AI distribution channels. Michel-Alain Proch: And if I may just add, David, we are adding data sets on a fortnight basis. Actually, we added yesterday, Reuters News and macroeconomic. So now we have Reuters News, we have fundamentals, estimate peers, and of the pricing corporate action, ESG ownership, company officers and directors, macroeconomics that we just put yesterday night. And in front of us in 2026, as mentioned in the slide, the major one that are awaited by our clients is deal and ownership data and transcript and filing. And then we will add commodities and Lipper fund data and finally, FTSE Russell. So you see it's a very busy pipeline of data set onboarding that we have in front of us. Operator: Your next question is from the line of Ian White of Autonomous Research. Ian White: I'm also on MCP, if that's okay. Maybe can you just elaborate a little bit more around the strategy with respect to MCP. I see that you kind of led with sort of real-time pricing data Tick History, while others have led with maybe more sort of company fundamentals, transcripts, kind of research content. Is there any strategic reason that you sort of see it differently to peers in terms of prioritization? Or is it a case of adding what is readily available more or less as quickly as possible? And can you just elaborate for us what's the end state here? And when will we reach that? Do you anticipate having more or less everything available via MCP in the medium term? And when is the medium term effectively? David Schwimmer: Thanks, Ian. So just, I guess, I'd say a slight correction. We do not make our real-time data available through MCP because of the latency requirements of real time, that is -- could you do it technically? Yes, you could do it. It's just given the current construct and the customer demand, that's not practical. So it's really just a function of making the data sets available in part relative to what we see in terms of customer demand and in part, making sure that the data sets are structured in a way so that they can be interoperable. And this is actually an important point that people often don't get. If you put a bunch of different data sets in an MCP server sort of willy-nilly, and they're not structured in a way to be interoperable, that can confuse the model in the same way that if you have a model accessing different data sets from different MCP servers that are not designed to be interoperable, that can confuse the model. So we are making sure that we're providing our data sets into our MCP server in a manner such that they are all designed, architected to be interoperable so that a model that is accessing data or content through our MCP server is going to get a very consistent experience with the interoperability amongst the different data sets, which just leads to better performance, higher accuracy in the model. So that's an important point that sometimes gets lost in terms of understanding how this works. In terms of end state, I expect that we'll have the vast majority of our DNA data available this half. And then as MAP mentioned, there's more coming in terms of FTSE Russell and other data from broader parts of LSEG over the second half. So we see really significant opportunity there in terms of creating an MCP channel to access the vast amount of data that we have across LSEG. Michel-Alain Proch: No, I would just add, it's really about what David said, it's -- the reason why we are able to put new data sets on the fortnight on MCP is because these data sets have been rearchitected by our team through our partnership with Microsoft. So it's all the work that we have been doing at rearchitecting the data with Microsoft, which is now coming to fruition and which is allowing us to be so fast at getting the data set ready for MCP. So as David said, by summer, we will be done for all nonreal-time data sets. Operator: [Operator Instructions] And your next question is from the line of Andrew Lowe of Citi. Andrew Lowe: I'll take one outside of MCP, if that's all right. There's been growing debate about your FXall business. So could you just talk us through the sort of planned investment within that business, where do you think you need to step up functionality? What's going to change over the next year or 2, and what the synergies are with the rest of your business? David Schwimmer: So FXall has had a very strong performance, as you would have seen in Q1. We have been continuing to invest in the capabilities in FXall really over the past couple of years and continuing to improve in its functionality, in its speed, in the interface. And I would say probably the area to touch on for this year is the fuller integration from FXall into Workspace and the opportunities that, that brings with this integrated front-end system. We've got FXall also plugged in as of a year or 2 ago into Tradeweb. We have straight-through FXall execution capabilities into ForexClear, so the kind of end-to-end processing. So again, strong performance this year, continued investment and continued improvement in its functionality, and we think it's a great business. Operator: You have a follow-up question from Arnaud Giblat of BNP Paribas. Arnaud Giblat: Yes. Just in your prepared remarks, you talked a bit broadly about the momentum you're having in post-trade services. I'm just wondering if there are any specific milestones you want to flag here in terms of activity pipeline? David Schwimmer: Arnaud, I just want to make sure I heard you right. The momentum in post-trade services, is that what you were asking about? Arnaud Giblat: Yes, yes. And specifically the partnership with the banks. David Schwimmer: Yes. Got it. Yes. It's going well. We're seeing -- we -- in Q1, we put trade agent out there, which is a very efficient, helpful platform in terms of OTC processing. We are seeing significant onboarding of new customers. And the real area of focus, now that we have the banks fully involved as of the announcement in Q3 of their investment, there's now active ongoing discussion across the business of really creating more integrated functionality. So when we talked about this business last year, you would have heard us talking about Quantile and Acadia and the different -- SwapAgent and different parts of it coming together. Now it's becoming much more of an integrated offering, and there's good engagement and dialogue with the banks as partners in terms of where we're taking this business. So good progress and good onboarding. It, at this point, has good growth. It's not a huge contributor to the business yet, but we expect -- as you have seen us deliver on in other parts of our business, we expect a nice long runway of growth. Operator: You have a follow-up question from Enrico Bolzoni from JPMorgan. Enrico Bolzoni: Sorry, just one follow-up to clarify as I think there's been a bit of confusion around it. Can you just please, to clarity, confirm that the derivative hedgings or the FX impact that you experienced in this quarter, that was about, I think, GBP 5 million positive, is not included in the reported constant currency growth rate, just for the detail to be clear? Michel-Alain Proch: Yes. Sure. No, I confirm that the embedded derivative impact of GBP 5 million is not recorded in the organic growth. Operator: And this concludes our questions via the conference line. I will now hand the presentation back to David Schwimmer, Chief Executive Officer, for closing remarks. David Schwimmer: Great. Well, thank you all. Thanks for your questions. To the extent you have any further questions, you certainly know where to find us. Peregrine and the team would be happy to hear from you and wish you all the best. Thanks a lot.

24天前Insight Analytics约5分钟阅读

LPL 2026 Q1 财报电话会议

Operator: [Interpreted] Good morning and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's First Quarter of Fiscal Year 2026 earnings results. Dong Joo Kim: [Interpreted] Good afternoon. This is Kim Joo Dong, Vice President, in charge of Finance and Risk Management Division at LG Display. Thank you for joining our first quarter 2026 earnings conference call. Joining us today are CFO, Kim Sung-Hyun; Vice President, [ Cho Seung Hyun ] in charge of Business Control and Management; Vice President, [ Kyong Jeong Deuk ], in charge of Large Display Planning and Management; [ Hong-jae Shin ] and Ahn Yu-Shin, in charge of Medium Display Planning and Management; Vice President, [ Paek Seung-yong ], in charge of Small Display Planning and Management, Vice President, [ Sang Keuk Kwon ] in charge of Auto Marketing and [ Kim Kyu-dong ], Leader of the Business Intelligence team. Today's conference call will be conducted in both Korean and English. For detailed performance-related materials, please refer to our disclosure or the Investor Relations section in the company website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with International Financial Reporting Standards. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q1 2026. Revenue in Q1 was KRW 5.534 trillion, down 9% year-over-year and 23% quarter-on-quarter on the back of stable OLED product shipment and favorable exchange rate and despite such external factors as the seasonality and the base effect coming from the discontinuation of the LCD TV business in Q1 last year. Operating profit was KRW 146.7 billion, rising Y-o-Y, driven by strengthened business structure and sustained OLED performance. Operating profit margin was 3%, and EBITDA margin was 21%. Net income recorded a loss of KRW 575.7 billion due to the impact of FX translation loss on foreign currency debt as the high exchange rate persisted. Next is area shipment and ASP trends. Area shipment in Q1 was 3.2 million square meters, down 21% Q-o-Q. On top of the seasonality, there was continued push by the company to streamline low-margin models, primarily in the midsized product line. As for ASP per square meter, it fell 4% Q-o-Q due to the seasonal decline in small panel products with relatively high price per square meter. But at $1,244 it was up 55% Y-o-Y, thanks to the rising share of OLED as a result from the company's business structure upgrade efforts. Next, I will discuss the revenue breakdown by product category. TV was 16% and IT 37%. Mobile and Others segment accounted for 37%, down 3 percentage points Q-o-Q as the market entered into seasonality. Auto, which is relatively less season sensitive, took up 10%, up 3 percentage points Q-o-Q. The OLED product group accounted for 60% of total revenue, up 5 percentage points Y-o-Y. We believe that through our persistent internal push to enhance our business structure and shift to an OLED-centric company, we have established a structure that can generate meaningful performance despite unfavorable externality. Next is financial position and key metrics. Cash and cash equivalents in Q1 was KRW 1.525 trillion, largely unchanged Q-o-Q. Of the main financial ratios, current ratio was 74%, almost flat Q-o-Q with debt-to-equity ratio at 251% and the net debt-to-equity ratio at 157%. While there have been temporary fluctuations quarter-on-quarter due to adjustment in our borrowing portfolio and the impact of exchange rates, we plan to further strengthen our financial soundness in the long term. Next is guidance for Q2. Total area is expected to grow by low 10% level Q-o-Q, driven by shipment increase, mainly in large-sized panels. As for the price per square meter, it is expected to fall by low to mid-10% due to lower shipments resulting from mobile products seasonality, which typically command higher price per square meter. I will now turn the call over to our CFO, Senior Vice President, Kim Sung-Hyun. Sung-Hyun Kim: [Interpreted] Good morning and afternoon. This is the CFO, Kim Sung-Hyun. Thank you for joining us at this conference call. Despite the seasonality in Q1, we were able to remain profitable for 3 months in a row, thanks to our years-long internal efforts such as initiatives to transition to a business structure based on OLED and high-end strategic customers as well as the innovation of cost and improvement of operational efficiency. Furthermore, we have significantly enhanced business stability and competitiveness by increasing the share of OLED out of total revenue to 60%, a 5 percentage point increase Y-o-Y. The clearly improved business fundamentals will serve as the solid foothold for a sustainable profit-generating structure that the company aspires for and will be the driving force behind our continued improvement in business performance. We will keep working to ensure stable OLED-centered product shipments and the expansion of business performance. But looking at the external environment, uncertainties today are higher than ever before. The scope and scale of these uncertainties continue to grow, including not only rising semiconductor prices, but also declining global demand, rising energy costs and supply chain disruptions, making it difficult to estimate their full impact at this point. Accordingly, we believe that close monitoring of the external volatility and uncertainties, along with the ability to respond swiftly are essential capabilities that the company must possess and that the situation requires more cautious approach. Meanwhile, even as external uncertainties persist, it is highly positive that our competitiveness in high-spec products, which is our strength, is increasing and that technological barriers are rising along with it. Even as we seek optimal response to external uncertainties, we will strive to secure financial soundness and achieve sustainable results that meet the expectations of the market and our customers based on a company-wide effort to strengthen our technological differentiation. Next, allow me to briefly outline our plans and strategies by business segment. In the small-sized mobile business, we will flexibly respond to our customers' diverse technical needs based on our technological leadership and reliable supply capabilities. We will also efficiently utilize our existing production infrastructure to ensure seamless preparation for the future. In the midsized business, we plan to continue improving profitability by focusing on high value-added products, actively responding to customer demand with our differentiated competitiveness in tandem OLED and high-end LCD technology. We also intend to keep improving our product portfolio with a focus on profitability to further enhance production efficiency. In large panel business, we plan to strengthen our premium product lineup based on our white OLED technology while also expanding our range of price competitive products. And in monitor business, where the shift to OLED is accelerating rapidly, we intend to grow our OLED business and focus on acquiring customers by expanding our gaming product lineup, which incorporates our proprietary technology. And in auto, where competition is increasingly fierce, we will keep solidifying our market position based on our differentiated product and technology portfolio. Finally, a few words on our investment. We maintain the principle of allocating CapEx primarily towards essential current investment and future-proof technology investment. The investment disclosed last afternoon in new OLED technology infrastructure was also decided in this context. We plan to strengthen our technological competitiveness and growth foundation by continuing to upgrade our OLED technology as a way to respond to future market trends and customers' demand. At the same time, our work to optimize investment efficiency will continue unchanged. CapEx in 2026 is expected at around KRW 2 trillion. We will continue to build up a decision-making framework that enables a prudent yet flexible response by finding the right balance between preparing for future growth and ensuring financial soundness. This concludes our presentation of business highlights for Q1 2026. We will now take your questions. Operator, please commence the Q&A session. Operator: [Operator Instructions] [Interpreted] The first question will be provided by Gang Ho Park from Daishin Securities. Gang Ho Park: [Interpreted] Thank you for taking my question, which is on the disclosure of new investment that was made yesterday. So the disclosure was for about KRW 1.1 trillion in OLED. And so my question is, can the company provide more details about this disclosure? And recent media reports have mentioned that another company is exclusively supplying into foldable products. Is the disclosed investment for new -- is it for new form factors to counter this? And if that is the case, then what is LGD's business strategy regarding foldable smartphones and its market entry? Sung-Hyun Kim: [Interpreted] This is the CFO. Allow me to respond to your first question. Now as everyone would know, in the industry, we see that the technological development is really accelerating at a remarkable pace. And the importance of technology is also translating into the competitiveness of companies. So all the companies are now struggling and really competing against each other to secure the competitiveness. Now as has been reiterated several times, the company is focused on the OLED business. Accordingly, the more ready we are with new OLED technologies and the more technologically competitive we are, then there will be more business opportunities coming our way, and we will be able to maintain our competitiveness across the industry. And yes, the company has disclosed -- made disclosure about new facility investment within this context. And as for the specifics, I would love to share more of them, but then given the fact that our new technology directly translates into new technologies for our customers, please understand that I am not in the position to discuss them further. Unknown Executive: [Interpreted] This is [ Paek Seung-yong ] in charge of Small Display Planning and Management and allow me to respond to the question about the foldables. Our position and perspective on foldable devices remain unchanged. Foldables offer consumers differentiated value through a new form factor, and there are growing market expectations that they will be the new growth driver. But until we gain visibility into market size, pace of growth and our own opportunities, our strategy will be to grow performance by maximizing production and sales of existing products. If clear opportunities are identified in the smartphone sector, we will prepare a supply system after carefully reviewing such factors as market acceptance of differentiated products and growth rate, and we will then try to build on our mass production experience in midsized foldable devices to expand new business opportunities in the smartphone sector. Operator: [Interpreted] The following question will be presented by Jimmy Yoon from UBS Securities. Jimmy Yoon: [Interpreted] My question is regarding the overall panel business. Today, we see that the memory shortage is driving up memory prices and oil price is also surging following the Middle East conflict. Such mounting uncertainties may trigger more concerns regarding potential production disruptions in the tech value chain, shifts in demand, rising cost and price pressure from customers. What is the expected impact on demand? And what will be the company's response? Unknown Executive: [Interpreted] This is [ Cho Seung Hyun ] in charge of business control and management. Now it is true that the market today is facing growing uncertainties stemming from the memory shortage and the impact of the geopolitical conflict. But I believe that we have to look at the first half and the second half of the year separately. Now in the first half, we are seeing some pull in demand due to concerns over memory supply. And with the scheduled major sporting events coming around, there is expected to be some positive impact. Now going into the second half of the year, considering factors such as component price hikes, set price changes and macro uncertainties coming from the Middle Eastern situation, we will have to be more cautious in our approach to market changes. While external uncertainties are increasing across the market, the impact varies slightly by company depending on their customer and product structure. The impact of rising chip prices is more pronounced in the mid- to low-end product segments, meaning that the impact on global customers with relatively strong SCM competitiveness is likely to be quite limited. It might even be an opportunity for them. So against the risk of growing volatility, we will closely monitor changes in demand and trends in component supply and demand. We will collaborate with customers and focus more on cost innovation drawing from our global customer portfolio and established high-end product lineup and successfully navigate these challenging market conditions. Operator: [Interpreted] The following question will be presented by Jung Hoon Chang from Samsung Securities. Jung Hoon Chang: [Interpreted] My question is similar with some of the previous questions. There has been some uncertainties in the business, as the CFO has mentioned, with the pronounced effect of the U.S. and Iran conflict, especially on the rise on the commodity prices. So, so far, there was some discussion about the midsized and small-sized businesses. But then for the large panel business as well, then what will be the company's operational strategy as well as the growth strategy for the future? If you could provide us with an update, what's helpful. Unknown Executive: [Interpreted] This is [ Kyong Jeong Deuk ] in charge of large display planning and management. For our large panel business, amid industry volatility this year such as rising prices of commodity as well as the components like semiconductors, we plan to establish a stable revenue structure and strengthen our fundamentals by enhancing our high-end OLED TV lineup with leading global set makers and also by expanding our mid- to low-end OLED TV lineup. And for the OLED monitor segment, the high-end gaming monitor market is very rapidly shifting from LCD to OLED. And we -- and the share out of our total shipment is likely to grow very significantly from low teen percent last year to around 20% this year. So our product and customer strategy will be about maximizing our business performance and opportunities through an optimized production share between TVs and monitors and to keep solidifying our market leadership. Operator: [Interpreted] The following question will be presented by Won Suk Chung from iM Securities. Won Suk Chung: [Interpreted] Now I also have 2 brief questions. Now we have been discussing uncertainties a number of times so far. But now yes, as the uncertainties continue, I believe that perhaps cutting losses from the IT business has made a significant contribution to the company improving profitability Y-o-Y and also for the year. Then as the uncertainties continue, then when does the company believe that you will be able to turn around to profitability? And also looking at the OLED new investment disclosure yesterday, it seems as if the company is also increasing OLED investment into new technologies. Now given the fact that the other companies are also looking into the investment for the 8-gen IT OLED and so forth. So what is the company's plan for investment down the road? Yu-Shin Ahn: [Interpreted] This is Ahn Yu-Shin, in charge of Medium Display Planning and Management. Now the ongoing uncertainties in the external environment, including the U.S.-Iran conflict makes it difficult to expect a recovery in the IT sector this year. To prepare for increased demand volatility in the second half due to rising commodity prices and prices of components like semiconductors, we are securing supply flexibility and closely monitoring the situation. Although sales and shipment volumes decreased Y-o-Y in the first quarter, profitability improved thanks to internal initiatives like strengthening our product mix. For the year, we will focus on high-end differentiated products based on long-established customer trust, technological competency and responsiveness and further upgrade our high-end focused customer structure and maximize opportunities with a select and focused approach tailored to customer demand, which will keep up our trend of improving profitability. And regarding IT OLED, as the transition from LCD to OLED accelerates, starting with tablets and extending to monitors, we are aware of the growing interest in the market as well. IT products have a diverse customer base and product specifications and having sufficient demand to keep the fab running is crucial. To do that, we need to meet consumer needs for technological capabilities and price competitiveness as well. As the period of uncertainty and high volatility in demand continues, we intend to proceed cautiously until there is clearer demand visibility for OLED in the downstream. Until we have enough visibility to make investment decisions, we plan to utilize our existing infrastructure as efficiently as possible. We are actively exploring various strategies to prepare for future opportunities, and we will be ready to respond in a timely manner when the market begins to fully take off. We will take one last question. Operator: [Interpreted] The last question will be presented by HyeonWoo Park from Shinhan Investment & Securities. HyeonWoo Park: [Interpreted] The company is reportedly implementing voluntary retirement this year again following last year. So what is the expected scale of this adjustment? And when will this be reflected? Will there be more of this type of workforce adjustment and onetime cost in the future? Unknown Executive: [Interpreted] Yes. So as have been reported in the media, there is going to be another round of workforce adjustment this year. And this is part of the company's effort and transition to an OLED-centric company. So along with this, we have been upgrading our business structure and improving our product portfolio and strengthening our cost structure and also undertaking cost innovation. Now we are aware of the sense of fatigue that the shareholders might be feeling as the similar event continues to repeat itself. And for the short term, yes, this will be something that will incur cost to the company, and this is the kind of decision that requires very cautious approach as well. But we also see this as a necessary process for the company to remain sustainable, and we have made this decision from a long-term perspective. And as this is an internal company process, the specific terms cannot be disclosed for which I ask for understanding. But then there have been some fairly detailed reporting by the media as well. But again, the program is still ongoing. It's not been concluded yet. So as for the specific overall cost or the scale, it is too early to tell. Now yes, it is true that having the repeated implementation of the voluntary retirement by no means is desirable for the company either. But if it does have to happen, then it better happen within a short period of time so that the sense of stability will be restored among our members. And that is why we have -- we are offering a much strengthened package this time around. And this is part of the company's plan to make sure that this does not have to happen again in the near future. Now the second quarter for the company historically has been a period of poor financial performance. Now of course, we have undertaken some business restructuring, business realignment and also cost innovation efforts. And as a result of the series of efforts, we were planning and expecting profitability in the second quarter of this year. And that is how the business was managed as well for at least 1 month. So we were expecting to see profit in the second quarter. And despite that, of course, we continue to try to become a better company, a more sustainable company for the longer term. So on that note, I would also like to ask for a more positive view from the shareholders and investors as well. Operator: [Interpreted] This concludes LG Display's Q1 2026 Earnings Conference Call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

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HEXA-B.ST 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Hexagon Q1 Report 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Anders Svensson, President and CEO of Hexagon. Please go ahead, sir. Anders Svensson: Thank you, operator. Good morning, everyone, and welcome to Hexagon's First Quarter 2026 Conference Call. First, I will direct you to the standout cautionary statement, and then we turn into the next slide. Before I begin, a reminder that the upcoming potential spin-off of Octave, we are now presenting Octave as discontinued operations. We have provided this first bridge here for you to understand the performance of continuing Hexagon, Octave and taking them both together, meaning the former Hexagon Group. Looking at the headline numbers for the first quarter. Hexagon continuing operations delivered a revenue of EUR 964 million, with an organic growth of 8%. EBIT was EUR 251 million, giving us an operating margin of 26%. Octave generated EUR 327 million in revenues, organic growth was 1% and EBIT1 of EUR 83 million, delivering an operating margin of 25%. At the former group level, including Octave, revenues were EUR 1.29 billion, with organic growth of 6% and an operating margin of 26%. During the quarter, we also completed the sale of our Design & Engineering business on the 23rd of February, and the business was deconsolidated as of that date. Today, unless I mention otherwise, I will discuss Hexagon, the continuing operations, excluding Octave and with D&E deconsolidated as of the 23rd of February. Mattias will cover the Octave business separately after Norbert. So turning to the agenda for today on the next slide. So I will start with taking you through Hexagon's performance in the first quarter, and then dive into our business area performance. Norbert Hanke, our interim CFO, will then take you through the Hexagon financial performance. He will then hand over to Mattias Stenberg, CEO of Octave, who will then cover the Octave performance in the quarter. We will then, of course, have time for your questions at the end of the presentation. So next slide. Starting with the first quarter performance then for Hexagon on the highlights of the quarter slide. The first quarter of '26 was a strong start of the year and also a busy one for us at Hexagon. We delivered 8% organic growth with a gross margin of 63% and operating margin of 26% and cash conversion at 77%. Alongside this strong financial performance, we continue to take decisive portfolio actions to sharpen Hexagon's focus on the core precision measurement and positioning opportunities. We completed the Design & Engineering business sale to Cadence for approximately EUR 2.7 billion in cash and stock. And here in April in the second quarter, we announced the agreement to acquire Waygate Technologies from Baker Hughes for approximately $1.45 billion. And this is then expanding Manufacturing Intelligence into the very attractive area of nondestructive testing. And I will cover this more in detail on the next slide. Mattias and Octave team held Investor Day in New York on March 26 with the spin-off expected to become effective on May 22. We also continue to build the new Hexagon executive team. Renée Rädler has been announced as the Chief People Officer on the 1st of April, and Enrique Patrickson, who will join us as Chief Financial Officer on the 24th of April, meaning tomorrow. And I wish Enrique welcome to Hexagon, and both of them welcome to the executive team. And I'm happy to have you on board. Finally, a humanoid robot, AEON, is making excellent progress in the past quarter. AEON successfully completed a pilot at BMW and will be deployed in production at the Leipzig facility. It is a significant milestone in demonstrating the real-world industrial capabilities of AEON. In parallel to this, our pilot at Schaeffler has resulted in an agreement to deploy up to 1,000 AEONs in the next 7 years. This is a big step that we communicated here in April as well. Then we expect commercialization of AEON by the end of 2026. So a very active quarter of delivery. Let me now give you the overview of the Waygate acquisition. So next slide. Acquiring Waygate is a natural next step for us at Hexagon as a market leader in the nondestructive testing, they fit very well into our portfolio focus on precision measurement and positioning technologies. They're completing the measurement chain from surface to the interior of components. The computed tomography hardware combined with our volume graphic software creates a unique value position for customers. And the business also brings exposure to maintenance, repair and operation markets with recurring utilization-driven demand, which boosts our exposure to the growing aerospace markets. Waygate has a portfolio of assets with different growth and margin profiles. This brings a meaningful opportunity for us to create value. RBI is already growing very well at good and healthy margins of about 30% EBIT. Radiography is a strong business where we can leverage our manufacturing and sales footprint to really drive synergies across the business and leverage shareholder value. The ultrasonic testing and imaging solutions are also very good assets. But here, we will assess the position of those assets. They are either challenged by not being market leaders or they have a -- not a perfect strategic fit for us. So we will look at these assets from different perspectives, and we will try to then either through acquisitions make them into market leaders or we will have also the possibility to go through strategic reviews or do turnarounds of these assets. Now turning to our organic growth performance in more detail for the quarter on the next slide. So we delivered a strong organic growth of 8% in the first quarter and that's a significant acceleration from the prior year. This was primarily driven by Autonomous Solutions, which grew 13%; Manufacturing Intelligence, which grew 9%. Both businesses benefited from growth in aerospace and defense. Geosystems grew 2%, while completing the channel destocking program that I talked to you about in the fourth quarter report. Excluding this impact, the underlying growth would have been 4% for Geosystems, which gives us the confidence in that the momentum is again building within Geosystems. Recurring revenues grew 6% driven by continued momentum in construction software subscriptions and also GNSS correction services. You can see the rolling 12-month figures in the chart on the right. For the full transparency, excluding the impact of our Design & Engineering business, software & services account for 44% of sales for the remaining Hexagon corresponding to recurring revenues of around 28%. The new product adoption is also progressing very well, especially if you look at our laser tracker, ATS800, and also our new robotics total station, TS20, and this is, of course, supporting the growth trajectory across our businesses. Turning now to the development by region and industry in the quarter. So on the next slide. Here, you have a snapshot of the development, and I'll start with the geography. The Americas was the strongest region delivering a 15% organic growth with a positive performance across all of our business areas. North America was especially strong, while South America was weaker. EMEA recorded 4% organic growth with broad-based contributions across the portfolio. China reported a decline of 4%. Performance in Manufacturing Intelligence was very solid, but the wider China business was impacted by the weaker Geosystems business and also by the completion of the destocking actions taken within Geosystems in China. Without the destocking initiative of roughly EUR 8 million in the quarter, there was actually also single-digit growth in China as a whole. The rest of Asia delivered 7% organic growth, a solid performance, reflected the good momentum in several of our key markets in this region, and especially a strong India. By industry, if we look at it like that, construction remains our largest vertical, and we recorded a strong growth in Americas with also good growth in Western Europe. General manufacturing, the second largest vertical showed broad-based strength across all the regions. Aerospace and defense continued to perform strongly, while Mining was more mixed with uncertainty impacting the demand in South America. We also had some pull-in of deliveries from the first quarter into the fourth quarter last year, and that had some negative impact for the first quarter. Automotive remained under pressure, particularly in the EMEA, but we also saw signs of weakness in China. Electronics was very strong in the quarter, and this is primarily then in China and rest of Asia. That's where a strong majority of our exposure is, and it was very strong growth. Agriculture, while only being 2% of our sales, still remains weak globally. I now turn into profitability on the next slide, and I'll start with the gross margin. And I want to say first that the Design & Engineering that normally operates with strong margins had a challenged start to the year. So while it was very strong in the first quarter of 2025, which is the reference period, it performed quite badly during the 6, 7 weeks that it was within our business before it was sold on the 23rd of February. There's a lot of reasons for that. But if we exclude the impact of Design & Engineering in both periods, both in the first quarter of '26 and the first quarter of '25, the gross margin was 62%, and in the comparison period, 62.6%. So it's 60 bps down year-on-year. Gross margin was, however, stronger in this quarter than in the last 2 quarters, quarter 4 and quarter 3 of 2025. And you will also be able to see this in the appendix slide attached to this presentation. The ramp-up of new product sales continue to support cost volumes, but this was offset by a full quarter of tariff impact. And in the comparison period, there was very little tariff impact. And we also had input cost inflation and also on freight, and this is driven then by the Middle East conflict primarily. If you look at the currency for the quarter, that also created a significant headwind. Going forward, we will mitigate these pressures through pricing and also freight surcharges, et cetera, and actions are already taken at the end of the quarter. But the full impact of this given our delivery times should be seen in the third quarter. Turning now to operating earnings. During the first quarter, we delivered an operating margin of 26.1% versus 25.9% in 2025. Importantly, excluding also here the full impact of Design & Engineering business in both periods, the operating margin grew 80 basis points versus the previous year. And this, I would say, is a meaningful improvement, driven by the organic growth performance and benefiting from our restructuring program that we communicated in the second quarter report. With some of the contributions also a gain from a sale of a building within the quarter of about EUR 8 million. Offsetting our good performance was, like as mentioned, a weak Design & Engineering performance and tariffs and cost inflation. We also saw the strong currency headwind on EBIT, and that corresponded to a negative 60 basis point performance. Year-on-year reduction in capitalization to amortization gap, which we have talked about before, had an impact of 70 basis points negative. A key driver for the margin improvement was the cost reduction program. We benefited here about EUR 10 million during the quarter, and the program remains on track for a total savings within Hexagon at EUR 74 million at the end of the year. We also had generally good cost control despite the growth, and that also, of course, supported the performance. Now turning to the business area performance. I'll start with Manufacturing Intelligence. MI delivered a revenue of EUR 433 million and an organic growth of 9%. We also had a very strong order intake in the quarter, which is positive for the coming 2 or 3 quarters. If I start with the geography, the Americas was the strongest region, but we also saw growth in EMEA and Asia. By industry, Aerospace & defense continue to perform very strong and the automotive business remained under pressure, particularly in the European markets, but as I mentioned, also in China. Operating margins came in at 23.7%, down from 24.6% in the first quarter of last year. And this reflects the impact of currency headwinds and tariffs and the weak D&E performance in this year, which more than offset the positive operating leverage from higher volumes. Again, if we eliminate D&E as we have divested these parts from both periods, the operating margin improved from 23.1% to 23.6%, so 50 bps up. Looking ahead, we had an agreement to acquire Waygate Technologies, and this is a transformative step for Manufacturing Intelligence, and it expands, as I mentioned, into the adjacent nondestructive testing market and positions us to offer customers a truly end-to-end precision measurement solution from the surface to the interior and through the life cycle of products. And as I mentioned earlier, we did divest D&E on the 23rd of February. If I move then into Geosystems slide. Revenue was EUR 349 million with an organic growth of 2%. And even if -- great to see a return to growth here, I should note again that if we disregard the China destocking program, which now has ended, the actual underlying growth of Geosystems was around 4%, which is a more accurate read of the demand environment within the business. By geography, America was the strongest. EMEA was broadly flat. And we saw solid performance in the Western Europe, offsetting the weakness we saw in Middle East. In Asia, China reflected a destocking that I mentioned, but India performed very well. By end markets, construction software & services delivered double-digit growth, very good to see, and we are seeing also the contribution of the TS20 total station. Operating margins were 26.9% compared to 27.4% in the prior year. The decline primarily reflects currency headwinds, which were partially offset by strong cost discipline and favorable product mix. Turning now to our superstar of the quarter, Autonomous Solutions on the next slide. Revenue was EUR 176 million and organic growth of 13%. By industry, aerospace and defense continues to be a major growth driver with very strong demand. Mining was more mixed in the quarter. Customers remain cautious with capital expenditure, which also softened the demand for equipment investment, but our mining and safety business remained resilient during the quarter. Agriculture, as I mentioned, is subdued globally. We are not worried about the mining business in the midterm. There is a lot of activity. But as I said, a bit of hesitation with high oil prices for capital investments. By geography, both America and EMEA delivered strong double-digit growth, and APAC declined. Within the product portfolio, demand for anti-jamming solutions and GNSS correction services was particularly strong in the quarter, benefiting from the growing need for a secure and reliable positioning in defense, but also in critical infrastructure applications like aerospace. Operating margins expanded to 34.1%, up from 31.6% in the prior year, 250 basis points improvement is strong, and that's driven primarily by the strong operating leverage on the higher volumes and also a favorable product mix. Of course, also here, partially offset by currency headwinds and tariffs. That concludes my overview of the business area performance, and I will now hand over to Norbert, who will take you through the Hexagon continuing operations financials. Go ahead, Norbert. Norbert Hanke: Thanks, Anders. I will take you now through the Q1 performance. Unless stated otherwise, the slides and my comments will relate to continuing operations, so it will exclude Octave. Turning to the next slide, please. Let us begin with the Q1 2026 income statement, taking the sales bridge first. Revenues were EUR 964 million with a reported growth essentially flat year-over-year. Currency had a negative impact of 6%, and there was a 1% negative structural effect from the sale of D&E, resulting in organic growth of 8%. Gross earnings were EUR 606 million with a gross margin of 62.9% compared with 64.4% in Q1 last year. The 150 basis point decline reflects currency headwinds, tariff impacts and cost inflation that Anders discussed earlier. As he also mentioned, excluding the full impact of D&E, the decline would reduce to 60 basis points. EBIT1 was EUR 251 million with an operating margin of 26.1%, up 20 basis points year-on-year or up 80 basis points, excluding D&E. This improvement was supported by the cost restructuring program and organic growth in the quarter, partially offset by a reduction in the R&D gap of 70 basis points and currency. Earnings before taxes grew 4% to EUR 224 million supported by the operating improvements. Earnings per share were at EUR 0.067, up 3%. Next slide, please. Now moving to the bridge. As discussed, net sales were essentially flat on a reported basis with organic growth of 8%, offset by currency headwinds and the structural impact from D&E. On operating earnings, EBIT1 increased to EUR 251 million from EUR 249 million last year. The improvement was driven by the cost restructuring program and the net gain of the sale of the facility, supporting organic performance in the quarter. Currency represented a meaningful headwind with a 35% drop through, primarily reflecting the weaker dollar. On the margin bridge, we expanded 20 basis points to 26.1%, both organic and structural effects were accretive, while currency diluted margins by around 60 basis points. Next slide, please. Turning now to the restructuring program. We are targeting EUR 74 million of annualized savings with the full run rate expected by the end of 2026. In Q1, we delivered EUR 10 million of incremental savings, bringing the annualized run rate to EUR 51 million. We are therefore well on track and progressing towards our targets. As shown on the chart, we expect continued ramp-up through 2026, reaching the full EUR 74 million run rate by year-end. This program continues to be a meaningful contributor, and we remain confident in the delivery. Next slide, please. Turning to cash flow, where we continue to demonstrate strong operational discipline. Adjusted EBITDA was EUR 351 million, up 3% year-on-year, reflecting organic growth and benefits from the restructuring program, partly offset by currency headwinds. Capital expenditure amounted to EUR 76 million, down 38% versus the prior year, partly driven by proceeds from the sale of a building following our footprint rationalization. This resulted in cash flow post investment of EUR 250 million, up 16% year-on-year. Working capital was an outflow of EUR 56 million, reflecting the normal seasonal pattern in Q1 as we see activity ramping up through the quarters. As a result, operating cash flow before tax and interest was EUR 194 million. This translate into a cash conversion of 77%, a significant improvement from 60% in Q1 last year. After taxes of EUR 46 million and net interest of EUR 24 million, cash flow before nonrecurring items was EUR 124 million, up 84% year-on-year. Next slide, please. This slide shows working capital to sales on the new Hexagon base, providing a view of the underlying trend. On this base, Q1 performance is in line with normal seasonal patterns. Net working capital was an outflow of EUR 56 million compared to EUR 68 million in the prior year. The rolling 12 months working capital to sales ratio improved to 11.9%, trending down versus last year. So to conclude, we delivered organic growth of 8% with stable margin despite significant currency headwinds and gross margin pressure on tariffs and input cost inflation. Cash conversion improved to 77% and the restructuring program continues to deliver with EUR 10 million of savings in the quarter and an annualized run rate of EUR 51 million. Looking ahead, currency is expected to remain a headwind, and we remain focused on execution. I will now hand over to Mattias. Next slide, please. Mattias Stenberg: Thank you very much, Norbert. Let's take a look at the first quarter results for Octave. What you're seeing in the numbers this quarter, it's not just a transition to recurring revenue. It truly reflects the early impact of connecting workflows across the asset life cycle, which is where the real value in this business sits. Recurring revenue grew 6% organically compared to the prior year, with SaaS revenue continuing to grow at strong double-digit rates. Reported organic total revenue grew 2%, whereas reported revenue is down year-over-year, driven by currency impact and the disposal of the federal services business that we did last year. If you look at monthly project-driven subscription license revenue, that was roughly flat with the prior year period, while perpetual licenses and professional services revenue declined, reflecting the deliberate shift we are doing towards subscription-based models. The EBIT for the first quarter reflects the lower perpetual license contribution together with lower levels of R&D capitalization and higher related amortization. Excluding these factors, underlying profitability was in line with the prior year period as disciplined cost savings offset incremental public company costs. Cash conversion was a healthy 118% in the quarter. Next slide, please. If we look at our workflow environment in Q1, the trends were consistent with our expectations. In Design, perpetual license sales declined, while monthly subscription licenses continued their sequential improvement. Build delivered strong double-digit growth driven by SaaS adoption in construction and project controls. Operate also saw strong revenue growth across quality management, APM and EAM. And in the Protect area, recurring revenue continued to grow offset by lower perpetual licenses and services revenue. Our advantage, however, is not in a single product. It is in how these workflows connect. Intelligence created in design, build, operate and protect becomes more valuable when it is shared across the life cycle. Next slide, please. To the left here, you can see the monthly subscription licenses. We saw a step down as earlier discussed in the activity level in early 2025. However, since then, we've seen sequential improvement, and that positive trend continued in Q1, and we do expect year-over-year comparisons to get easier as we move through 2026. In the middle chart, you can see that excluding this short-term volatility from project-driven licenses, the underlying trend is, in fact, strong. Recurring revenue continues to grow at a high single-digit rate, reflecting healthy underlying momentum across the portfolio. And on the right, you can see that our quarterly perpetual licenses continue to decline in line with expectations as we shift towards recurring revenue models. We do expect this shift from perpetual to continue to pressure total revenue growth for the remainder of this year. Next slide. If we turn towards some of the information we shared at Octave's first Investor Day in March, and if you haven't watched it yet, you can access the videos and presentations at the Investors page at octave.com. One of the key takeaways that we discussed there was that we expect to accelerate organic recurring revenue growth to 10-plus percent over the medium term. Approximately 2/3 of that ARR growth is expected to come from our existing customer base. What underpins this is that expansion within our installed base is driven by the multi-workflow adoption where we see a clear step-up in ARR as customers move beyond a single workflow. We expect the remaining 1/3 of growth to come from new customers as we invest in growth areas and expand the partner channel to broaden our coverage across geographies as well as customer segments. Next slide, please. Turning to customer highlights in the quarter. We had a number of important wins, both for new logos as well as expansion. And I think these wins really reinforce several of the strategic themes we outlined at our Investor Day in March. If we start with new logos, we added Visa CashApp Racing Bulls for enterprise asset management to handle their logistics and operations in their F1 business through a multiyear SaaS contract. We signed both BNSF Railroad and Spokane 911 on multiyear SaaS deals for our OnCall Dispatch platform. We also landed a leading U.S.-based LLM developer on a design subscription for their facilities infrastructure. And these wins demonstrate 2 things that we emphasized at our Investor Day: the diversity of our addressable market across mission-critical industries and our ability to land new customers on recurring SaaS-based contracts as we accelerate the shift towards recurring revenue. On the expansion side, I want to highlight 2 deals that could not have happened a year ago, frankly, from an organizational perspective as these businesses then sat in separate Hexagon divisions. The first, a global motion and control leader and existing design customer expanded into operate through a 4-year strategic agreement, adding both our EAM and ETQ solutions across their global manufacturing operations. The other one was Kimberly-Clark, who signed a deal that consolidates over 700 of their systems onto our platform in a 5-year SaaS conversion spanning design and operate. And I think this is a great illustration of our -- how our opportunity for ARR per customer expansion where customers adopting 3 or more workflows consistently reach 7-figure ARR levels. And while the 86% of our customer base is still on a single workflow, and that is the expansion runway embedded in this business. We also expanded with a leading European chemical producer displacing a competitor for critical communications across their production plants. This customer now runs on Octave across all 4 workflow environments, design, build, operate and protect, validating both our platform strategy as well as the value customers see in consolidating onto our solutions. And lastly, we cross-sold our build solutions into a long-standing design customer with a major copper mine operator, extending our relationship to include project controls. So to me, what these examples really show is that once we land in one workflow, expansion into adjacent workflows is not theoretical. It is happening, and it materially increases our ARR. So in summary, the Q1 customer activity validates our strategy. We're winning new logos on SaaS, expanding within our base across the workflows and displacing competitors where our integrated life cycle approach gives us a clear right to win. And this is what differentiates us. We are not competing as a point solution. We are competing as a life cycle partner for mission-critical assets where failure is not an option. Next slide, please. So if we turn to our Investor Day outlook, in the nearer term, 2026 is a transition year as we become an independent public company. We're targeting 3% to 4% total revenue growth on the back of 6% to 8% ARR growth with adjusted operating margins stepping down modestly as we absorbed roughly 100 basis points of public company costs and up to 100 basis points from revenue model shift, net of savings. We do expect revenue growth to be second half weighted, reflecting both the recovery in monthly subscriptions and the typical back half seasonality of enterprise software bookings. For the second quarter on a U.S. GAAP basis, we expect organic recurring revenue growth of 6%, so similar to Q1. And we expect organic total revenue growth to be flattish year-over-year due to the declines in perpetual licenses that we have discussed. On a reported basis, which will reflect, again, then the disposal of the federal services business, we expect second quarter total reported revenue to be down approximately 4% over the prior year. Next slide, please. Our medium-term ambitions remain as we laid out in March. ARR growth of 10-plus percent and total organic revenue growth of 6% to 8%. Over time, of course, these growth rates will converge as recurring revenue becomes a larger and larger part of total revenue. We also expect free cash flow margins to expand from today's level of roughly 20% to 23% to 24% of the medium term. Next slide. So I'd like to close by reiterating why we believe Octave is a compelling investment. We operate in a large and growing market. It's $28 billion today, reaching $40 billion by 2029. We have a deeply embedded sticky installed customer base with 97% gross retention and significant room to expand. Our recurring revenue base of $1.1 billion continues to grow as a share of the mix. AI amplifies the value of 3 decades of domain data and context that is very hard for anyone to replicate. We are leaders in our product categories as recognized by basically all the major industry analyst firms. We operate in mission-critical environments where failure is not an option. And as customers connect workflows across the life cycle, value compounds and expansion becomes more predictable. That is the foundation for sustainable growth and profitability as we scale as an independent company. So final slide, please. So as a reminder, on the key dates for the separation. The Hexagon AGM vote is tomorrow, April 24. And assuming approval, the record date and effective date for the distribution is May 22, with Octave SDRs expected to begin trading on Nasdaq Stockholm on May 26, and the Class B shares on Nasdaq New York on May 28. So with that, thank you very much. And I'll hand back to you, Anders. Anders Svensson: Thank you, Mattias. Let me jump forward directly into the Q1 summary slide. So Hexagon delivered a strong financial performance. Our cost restructuring program is clearly on track and delivering. On the portfolio side, we completed the sale of our Design & Engineering business to Cadence, and we also announced here in April an acquisition of Waygate Technologies. As we have heard, the Octave spin is remaining on track. And all these actions are then sharpening Hexagon's future focus on the core positioning measurement technologies, positioning technology and autonomy opportunities. Our full executive team is now in place, as I mentioned, with Enrique and Renée. And looking ahead, we have a solid foundation entering into the second quarter. We had a strong order intake within Manufacturing Intelligence. And with the closure of the Geosystems destocking program, we provided a clean base for growth of Geosystems going forward. We remain, of course, attentive to the macroeconomic situation, particular to the tariffs, currency dynamics and also what's happening in the Middle East situation. We are, however, very confident on the momentum of our different businesses going forward. And as we have just heard from Mattias, Octave generated another very strong quarter of SaaS growth, contributing to recurring revenue growth in the mid-single digits. Before I move forward, I want to take this opportunity to thank you, Norbert Hanke, who has been an excellent interim CFO, covering from the gap in August 2025 when David Mills was stepping down. And now handing over to Enrique Patrickson. Norbert will remain as an Executive Vice President at Hexagon, leading our ventures operations and also strategic projects. And I'm very much looking forward to continue working with you, Norbert, in that capacity. Before we move to the Q&A, I would like to draw your attention to an upcoming event on the next slide. We will be hosting our Capital Markets Day in April, at April 30. That's next week, Thursday, in London. And this will include strategy updates from each of our business areas. And also importantly, we will present the new updated financial targets for Hexagon, reflecting the new portfolio composition that I have spoken about today. So of course, I encourage all of you to join us in London or follow the event via the webcast. And details and registration are available on our Investor Relations website. So with that, we are now happy to open up for questions. And in the room, we have Mattias Stenberg, Norbert Hanke, Ben Maslen, and myself. So please go ahead, operator. Operator: [Operator Instructions] We will now go to your first question, and your first question today comes from the line of Alice Jennings from Barclays. Alice Jennings: I've got a couple. So the first one is just on, I guess, the outlook for Q2. So you've expressed some confidence, but then also recognized a bit of uncertainty. So could you perhaps outline where in the business, like which divisions you have the most visibility or also the most uncertainty? So thinking about divisions, but then also the industries. And then I just have a question on the Waygate acquisition. So I understand that we're expecting to see some revenue synergies from cross-selling. But how long after the deal is closed? Can we expect to start seeing some of these synergies? And how meaningful could these be? Anders Svensson: All right. Thanks, Alice. So I can start a bit and Norbert, you can maybe contribute as well. So if we look at the different businesses and the outlook for Q2, of course, we don't give forecasts on the future. But we have a very strong order intake in our Manufacturing Intelligence business, and that will, of course, benefit us in the coming quarters. And as I mentioned within the Geosystems area, we have completed the destocking initiative. So we don't have -- we don't start every quarter with a negative sort of EUR 8 million to EUR 10 million that is already sort of cleaned, and we have now a clear base to move forward from. And as I said, the underlying growth has now turned positive within Geosystems, and we expect that to continue also going forward. In the Autonomous Solutions, we have a very strong demand in different sectors like aerospace and defense, et cetera. And we don't see any signs of that changing. And we don't see any signs of the weak business of agriculture improving dramatically either. So many of the businesses are expected to remain in a similar level. Mining, perhaps not growing very much in the second quarter because that's related to what I said in the presentation. But more in the midterm, we don't see any risk for our mining business as the activities is still very strong. If you look at electronics, for example, we expect that to continue to be a strong business for us also going forward. Automotive will be challenged in Europe. I think also we have seen now some negative growth for us in automotive in China, and that might remain. But given also the high oil prices, you might come back to more electric cars and that will also benefit our automotive sales in China. So we have to wait and see what happens within that business. General manufacturing is a strong business across all the different businesses, basically, and we expect that to continue on similar levels. So I think that's a summary of what we can say about the outlook. If I then should comment on the Waygate acquisition. So of course, there is a process here that we need to go through until we have actually closed this acquisition. And then there is an integration of the acquisition. And we will start seeing benefits, I think, quite quickly of the synergies because we have similar exposure to customers. We will also complement our offering, and we will go to market with the same people across the different geographies. So I think you will see synergies coming quite quickly after the integration of the business into Manufacturing Intelligence. Operator: Your next question comes from the line of Daniel Djurberg from Handelsbanken. Daniel Djurberg: Congrats to a nice growth profile here. I was wondering, Anders, if you could -- you mentioned some pulls from Q1 into Q4, still strong organic growth, 8%. And my question is, did you experience any prebuys for some reason? And how much of the organic growth was a result of this, if so? And also, if so, would it impact you negatively later on? Anders Svensson: Thanks, Daniel. The pull-in from Q1 to Q4, which I referenced was primarily within deliveries in mining. And I wouldn't say that, that has a significant impact for -- with the performance in the first half year here in 2026. Of course, the first part of the quarter was a bit weaker within mining, of course, due to that. But not any permanent effects in any way. Pre-buys, we actually don't see across the different businesses to any extent that we can recognize that this is a typical prebuys. So we don't see that as a future negative impact for us either. Daniel Djurberg: Super. May I ask you another question on Waygate, obviously, early days, but you mentioned that you will do a strategic review of imaging solution and ultrasonic testing. So my question is, can you already start to plan for this right now? Or do you need to await the full consolidation and then see and plan later on? Or more or less, can you do theoretically a divestment or something at the same time as you do the transaction later in 2026? A little bit hypothetical question, perhaps. Anders Svensson: Yes, I would agree with you, Daniel. I think we are here, first, making sure that we do the acquisition before we do anything else and close the acquisition. Then I didn't say that we will divest these businesses. I will say that we will evaluate them to see if we can make them into a market-leading position, #1 or #2 within those businesses as well. That could be with complementary acquisitions. We will also evaluate if we can do a turnaround of the business to improve the performance and create shareholder value. And then we don't exclude to do strategic reviews of businesses, which we don't exclude for any of our businesses, actually. We are always evaluating our portfolio. Operator: Your next question for today comes from the line of Johan Eliason from SB1 Markets. Johan Eliason: Just two questions from my side, just starting on the cash conversion, obviously, a good improvement, 77% in this quarter and then 60%, I guess, on some sort of comparable basis a year ago. But is -- I think your target has historically been 80% to 90% cash conversion. But considering Octave bringing all the SaaS and subscription prepayments with it. I guess, one should assume that this 80%, 90% target will be more difficult to achieve going forward? Or how do you see it? Norbert Hanke: Yes, Johan, I will take it here. For the time being, yes. I would agree, 77% was a good performance, as we said as well from our point of view. But say, we will have the CMD next Thursday, and I think you will hear quite a bit from Enrique as well going forward, what will be the target and how to achieve this. And I think I would then say, wait until Thursday. Hopefully, you are there. Johan Eliason: Yes, I am. Okay. Just trying. Then another question. On the robotics, you mentioned the Schaeffler, 1,000 robots coming 7 years or so. Are those on commercial terms? So can you sort of indicate what sort of price tags you are targeting for your type of robotics? I remember when you showed us them in September, I think it was -- there was a wide range of assumptions on what price tags robots could fetch from the consumer side to the professional industrial use? So do you have any indications here? And are you sort of satisfied with the returns for your clients, obviously, but with the returns for you as well in the deals you seem to have struck right now? Anders Svensson: Yes. Johan, I think we are not going out with any numbers, as you can see from the release. So we are very happy with this deal. I think the key thing for us here, it proves that this solution with AEON is commercially viable and implementable in an industrial application. And we could also see that with the BMW announcements. We are happy with the outcome for our customer here, and we are also happy with the situation for ourselves in the deal. But we don't comment on anything else regarding the deal. Operator: We will now take our final question for today, and the final question comes from the line of Mikael Laséen from DNB Carnegie. Mikael Laséen: I have a question for Mattias about Octave, and specifically, how we should think about the capitalized software development costs going from 8% to 4% over the medium term? And my question is about the total R&D expenditures. How should you think about stats in '26 and going forward? Mattias Stenberg: Yes. No, thanks, Mikael. I think I'll pass to you, Ben, for the detail. But I mean it is correct that we are stepping down capitalization. But I'll let you take it, Ben. Benjamin Maslen: Yes. Mikael, so as we said at the Analyst Day, there's no plans at the moment to change the gross level of R&D expenditure, which has been about 18% to 19% of revenues the last few years. I think there are areas where as we implement AI, we could get savings, but the priority at the moment is to reinvest in the product and drive growth. That was the message from a few weeks ago. Obviously, we're moving the product development more and more towards SaaS, where you have continuous development cycles, and it doesn't really make sense under the accounting standards to capitalize. So this will be gradual at first, and we'll go from 8% of capitalized software development costs in 2025. It will come down this year. And then we think by in the medium term, it will come down to about 4%, as we said a few weeks ago. Mikael Laséen: Okay. So the cash effect from the R&D activities will essentially then develop in line with sales? Benjamin Maslen: Yes. I think that's probably the best guide at this point, yes. Mikael Laséen: Okay. Can I also follow up with a quick question on the stock-based compensation. That probably is expected to go from 1% to 4%. Will you have a step up now when you have been separated and listed? Or will that be a gradual process? How does it work? Benjamin Maslen: Yes. It will be a gradual process as the new program gets approved and kicks in, and it layers and stacks up kind of year-over-year. So I would say it's fairly linear between the 1% and the 4%. Operator: There are no further questions. I will now hand the call back to Anders for closing remarks. Anders Svensson: Thank you very much, and thank you, everyone, for participating and engaging with questions. Looking forward to seeing you all then on next Thursday in London. And we wish you all a great day from here. Bye. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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