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MBWM 2026 Q1 财报电话会议

Operator: Good morning, and welcome to the Mercantile Bank Corporation 2026 First Quarter Earnings Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Nichole Kladder, Chief Marketing Officer of Mercantile Bank. Please go ahead. Nichole Kladder: Hello, and thank you for joining us. Today, we will cover the company's financial results for the First Quarter of 2026. The team members joining me this morning include Ray Reitsma, President and Chief Executive Officer; as well as Chuck Christmas, Executive Vice President and Chief Financial Officer. Our agenda will begin with prepared remarks by both Ray and Chuck and will include references to our presentation covering this quarter's results. You can access a copy of the presentation as well as the press release sent earlier today by visiting mercbank.com. After our prepared remarks, we will then open the call to your questions. Before we begin, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to factors described in the company's latest Securities and Exchange Commission's filings. The company assumes no obligation to update any forward-looking statements made during the call. Let's begin. Ray? Raymond Reitsma: Thanks, Nichole. Our results for the first quarter of 2026 continue to build on the theme of commercial expertise generating a strong return profile. The consummation of the purchase of Eastern Michigan on December 31, 2025, represents execution of our strategic objectives around deposit growth, loan growth and margin stability paired with strong asset quality and overall financial performance. We continue to demonstrate top cortile return on asset performance relative to our peers built upon the following traits: Trait #1, a strong and durable net interest margin. Over the last 5 quarters, the SOFR 90-day average rate has dropped 67 basis points while our margin increased by 8 basis points to 3.55%. This illustrates effective execution of our strategic objective to maintain a steady margin by matched funding of our assets and liabilities and refutes the notion that we have an asset-sensitive balance sheet despite the relatively large portion of floating our proportion of floating rate assets. Trait #2, very strong asset quality. Non-performing assets to total assets remain at the low levels typical of our company at 11 basis points of total assets as of March 31, 2026. Non-performing loans to total loans over the past 6.25 years averaged 12 basis points. The allowance for credit losses stands at 1.18% of total loans as of March 31, 2026, nearly 10x NPAs providing very strong coverage relative to past due and non-performing loan levels. These numbers demonstrate our long-term commitment to excellence in underwriting and loan administration. Trade #3, improved on-balance sheet liquidity and loan-to-deposit ratio. At the end of the first quarter of 2026, our own to-deposit ratio stood at 89% compared to 91% on December 31, 2025, and and 98% in December 31, 2024, and 110% on December 31, 2023. As of March 31, 2026, our loan -- our deposit mix included 25% and non-interest-bearing deposits and 25% lower cost deposits, unchanged from year-end to 2025, but up from 20% at the end of the third quarter of 2025, which has contributed to the stability of our net interest margin. Our acquisition of Eastern Michigan contributed positively to these measures. Deposit growth for the first quarter of 2026 compared to the first quarter of 2025 was 15.8%. The growth was roughly proportional in non-interest-bearing to interest-bearing accounts. Trade #4, strong deposit and loan compounded annual growth rates. Our recent focus on deposit growth is not new to our bank. In fact, the last 5 year in periods demonstrate a deposit compounded annual growth rate of 9.2%. Over the same time period, total loans demonstrate a compounded annual growth rate of 8.6%. As foreshadowed -- in prior quarter's commentary, loan growth was impacted by an elevated level of loan payoffs compared to historical norms in the first quarter of 2026. Payoffs from borrower sales of assets were over $40 million above the elevated quarterly average experience in 2025 and planned refinancing of multifamily projects to the secondary markets, were nearly 5x the quarterly average amount in 2025 or nearly $40 million in gross dollar terms. However, March 31, 2026, commitments to make new commercial loans totaled $289 million and commitments to fund existing commercial and residential construction loans totaled $272 million with each amount representing 5 quarter highs. We expect that loan payoffs will moderate in upcoming quarters and net loan growth for 2026 will follow within the range of previously defined expectations of mid-single-digit percentages. Quarter-to-date loan growth is well aligned with our year-end expectations. Trade #5, continued strong growth in key fee income categories. Growth in commercial deposit relationships has supported growth in treasury management services resulting in a 35% increase in service charges on accounts during the first quarter of '26 compared to the first quarter of 2025. Our credit and debit card offerings report growth of 17.6% in the first 3 months of 2026 compared to the respective 2025 period. Our mortgage team continues to build market share and generate a higher proportion of salable loans contributing to 12.4% growth in mortgage banking income during the first quarter of '26 compared to the prior year first quarter. Trade #6, well-managed expenses. Net revenue, defined as net interest income plus noninterest income grew 18.1% to $67.6 million during the first quarter of 2026, from $57.3 million in the respective 2025 period. Occupancy costs and data processing costs were virtually unchanged as a percentage of net revenue. And salaries and benefits increased from 34.2% to 35% of net revenue, primarily reflecting our investment in the Southeast Michigan market. Other expenses include a $1.2 million increase in allocations to reserve for unfunded loan commitments compared to the respective 2025 period, reflecting the growth in our loan backlog and a $0.9 million increase in the core deposit intangible asset amortization account arising from the acquisition of Eastern Michigan. In sum, these trades have allowed us to report a quarter-over-quarter earnings per share growth rate of 9%, a 1.4% return on average assets and a 12.5% return on average equity for the first quarter of 2026 and an increase in tangible book value per share over the prior quarter. Additionally, our 5-year tangible value per share a growth rate of 9% and 5-year earnings per share, compounded annual growth rate of 15.1% historically placed us in the top tier of our proxy group. We remain excited about our recently completed combination with Eastern Michigan Financial Corporation. The integration of operations is well underway and the cultures have meshed very well in the early stages of the process. That concludes my remarks. I will now turn the call over to Chuck. Charles Christmas: Thanks, Ray, and good morning to everybody. This morning, we announced net income of $22.7 million or $1.32 per diluted share for the first quarter of 2026 compared with net income of $19.5 million or $1.21 per diluted share for the first quarter of 2025. Higher net interest income and non-interest income, combined with lower provision expense more than offset increased overhead costs. Excluding after-tax onetime costs associated with the year-end 2025 acquisition of Eastern Michigan and previously announced core and digital banking system conversion, net income improved to $25.2 million or $1.46 per diluted share for the first quarter of 2026. Using this non-GAAP basis, which we believe more accurately reflects our core earnings performance. Interest income on loans increased slightly by $0.2 million during the first quarter of 2026 compared to the prior year first quarter, reflecting loan growth that offset a lower yield on loans. Average loans totaled $4.83 billion during the first quarter of 2026 compared to $4.63 billion during the first quarter of 2025, an increase of $199 million that largely reflects the acquisition of Eastern Michigan at year-end 2025. Mercantile Bank's robust commercial loan fundings during most of 2025 and -- in the first quarter of 2026 were largely mitigated by significant levels of payoffs and partial paydowns of certain larger commercial loans during those periods. Our yield on loans during the first quarter of 2026 was 24 basis points lower than the first quarter of 2025, primarily reflecting the aggregate a 75 basis point decrease in the Fed funds rate during the last 4 months of 2025. Interest income on securities increased $3.9 million during the first quarter of 2026 compared to the prior year quarter. reflecting growth in the securities portfolio and a higher yield. The growth in higher yield reflect the acquisition of Eastern Michigan, along with the ongoing portfolio growth and the reinvestment of maturing lower-yielding investments at Mercantile Bank. Average balances were up $357 million, and the average yield increased 54 basis points quarter-over-quarter. Interest income on other interest earning assets, a large portion of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, increased $1 million during the first quarter of 2026 compared to the prior year first quarter. [Audio Gap] Bank, while the 80 basis point decline in yield primarily reflects the aggregate 75 basis point decrease in the federal funds rate during the last 4 months of 2025. In total, interest income was $5.1 million higher during the first quarter of 2026 compared to the prior year first quarter. Interest expense on deposits decreased $1.9 million during the first quarter of 2026 compared to the prior year first quarter, reflecting a lower cost of deposits that more than offset interest bearing deposit growth. The growth in interest-bearing deposit balances and the lower cost of these funds reflect the acquisition of Eastern Michigan, along with growth and lower deposit costs at Mercantile Bank. Cost of interest-bearing deposits at both banks were positively impacted by the aforementioned decline in the federal funds rate during the latter part of 2025. Average interest-bearing deposits totaled $4 billion during the first quarter of 2026 compared to $3.44 billion during the first quarter of 2025, an increase of $555 million. The cost of all deposits was down 46 basis points during the first quarter of 2026 compared to the first quarter of 2025. Interest expense on Federal Home Loan Bank of Indianapolis advances declined $0.3 million during the first quarter of 2026 compared to the prior year first quarter, largely reflecting a lower average balance. And interest expense on other borrowed funds increased $0.3 million during the first quarter of 2026 compared to the prior year first quarter, largely reflecting the impact of a $30 million term loan we obtained late in 2025 to assist in the cash portion of the Eastern Michigan acquisition. In total, interest expense was $2.3 million lower during the first quarter of 2026 compared to the prior year first quarter. Net interest income increased $7.4 million during the first quarter of 2026 compared to the prior year first quarter, primarily reflecting growth in earning assets and a higher net interest margin. Average earning assets totaled $6.42 billion during the first quarter of 2026 compared to $5.70 billion during the first quarter of 2025, an increase of $719 million that largely reflects the acquisition of Eastern Michigan at year-end 2025, along with securities and overnight funds growth at Mercantile Bank. The net interest margin was 3.55% during the first quarter of 2026 compared to 3.47% during the first quarter of 2025. The improvement is largely due to the Eastern Michigan acquisition. The yield on earning assets declined 31 basis points, while the cost of funds declined 39 basis points during the first quarter of 2026 compared to the prior year first quarter. Impact on our net interest margin over the past couple of years was our strategic initiative to lower the loan-to-deposit ratio, which generally entailed deposit growth exceeding loan growth and using additional monies to purchase securities. A large portion of deposit growth was in the higher costing money market and time deposit products, while the purchased securities provided a lower yield than loan products. Despite that strategic initiative and declines in the federal funds rate during the latter parts of 2025 and 2024, our quarterly net interest margin was relatively stable during that time period ranging from a high of 3.52% to a low of 3.41% and averaging 3.47%. We remain committed to managing our balance sheet in a manner that minimizes the impact of changing interest rate environment on our net interest margin. Basic funds management practices such as matched funding, combined with scheduled maturities of lower-yielding fixed-rate commercial loans and securities and a higher rate time deposits along with the scheduled rate adjustments on residential mortgage loans should provide for [indiscernible] will be stable net interest margin in future periods. We recorded a negative provision expense of $1.8 million during the first quarter of 2026, compared to a positive provision expense of $2.1 million during the prior year first quarter. The first quarter negative provision expense was primarily comprised of improved economic forecast, changes in loan mix, a reduction in the residential mortgage loan portfolio, a decline in specific allocations and limited net growth in commercial loans due to the significant volume of loan payoff and partial paydowns. The reserve balance decreased $1.5 million during the first quarter of 2026, reflecting the net impact of the negative $1.8 million provision expense and net loan recoveries of $0.3 million. The reserve balance equaled 1.18% of total loans as of March 31, 2026, and compared to 1.21% at year-end 2025. Non-interest expenses were $11 million higher during the first quarter of 2026 compared to the prior year first quarter. excluding onetime costs associated with the year-end 2025 acquisition of Eastern Michigan and previously announced core and digital banking system conversion that aggregated $3.2 million. Non-interest expenses increased $7.8 million. The increase in core operating costs largely reflects higher salary and benefit costs. In addition, we recorded a $1.2 million increase in allocations to the reserve for unfunded loan commitments primarily reflecting a significantly higher level of commercial loan commitments that have been accepted by customers. The remaining increase in non-interest expense quarter-over-quarter generally depicts the cost of inflation and the increased cost of a larger balance sheet and office network. Eastern Michigan Bank's non-interest expenses totaled $4 million during the first quarter of 2026. Despite a $3.2 million increase in pretax income during the first quarter of 2026 compared to the prior year first quarter, our federal income tax expense increased only $0.1 million. The acquisition of transferable energy credits and net benefits associated with our low income housing and historical tax credit activities equaled $0.8 million during the first quarter of 2026. The tax benefit resulting from these activities -- both Mercantile Bank and Eastern Michigan Bank have strong and well-capitalized [indiscernible] Mercantile Bank's total risk-based capital ratio was $13.8 million as of March 31, 2026, $215 million above the minimum threshold to be categorized as well capitalized. Eastern Michigan Bank's total risk-based capital ratio was 20.5% as of March 31, 2026, $30 million above the minimum threshold to be categorized as well capitalized. We did not repurchase shares during the first quarter of 2026. We have $6.8 million available in our current repurchase plan. On Slide 23 of the investor presentation, we share our latest assumptions on the interest rate environment and key performance metrics for the remainder of 2026 with the caveat that market conditions remain volatile making forecasting difficult. This forecast is predicated on no changes in the federal funds rate during the remainder of 2026, although we believe our net interest margin will remain relatively stable in a changing interest rate environment as it did during the latter part of 2024 and throughout 2025. We are projecting loan growth in a range of 5% to 7% annualized during each quarter, which encompasses a strong commercial loan pipeline as well as fewer commercial payoffs during the remainder of the year. We are forecasting our second quarter net interest margin to be similar to that of the first quarter with steady increases throughout the last half of the year as we benefit from commercial loan growth, lower levels of monies at the Federal Reserve Bank of Chicago and maturing low-yielding fixed rate commercial real estate loans and investments, along with higher costing time deposits. We are projecting a federal tax rate of 17%, which encompasses continued growth in net benefits from our low income housing and historical tax credit activities along with additional transferable energy tax investments. Expected quarterly results for non-interest income and non-interest expense are also provided for your reference. Non-interest expense projections reflect personnel investments that were made in the latter part of 2025, first quarter of 2026 and expected during the remainder of 2026 and to support expansion in Southeast Michigan as well as to support operational areas as we switch core and digital banking providers to enhance the durability, the efficiency and experience for customers and employees. One-time-type costs associated with the core and digital banking system conversion are not included. In closing, we are very pleased with our operating results during the first quarter of 2026 and continued strong financial condition and believe we remain well positioned to continue to successfully navigate through the myriad of challenges and uncertainties faced by all financial institutions. That concludes my prepared remarks. I'll now turn the call back to Ray. Raymond Reitsma: Thank you, Chuck. That concludes the prepared remarks from management. We will now move to the question-and-answer portion of the call. Operator: [Operator Instructions] Our first question comes from Brendan Nosal from Hovde Group. Brendan Nosal: Maybe just starting off here on the net interest margin. I guess this quarter came in towards the lower end of the guided range. It looks like you tempered the range for the remainder of the year by 10 basis points or so. I guess we haven't gotten any more rate cuts, and you're still not forecasting any in your outlook. So just kind of curious, what were the main drivers of that change to how you see the margin trend due to the balance of the year? Charles Christmas: Yes. And the change -- Brendan, it's a good question. I'm glad you asked it because I wanted to make sure everybody understood that is a reflection of the change in our balance sheet mix. We are expecting -- and really because of the deposit growth that we've seen, I mean, as we talked about, as you saw in our release, we had incredibly strong deposit growth. The growth numbers themselves were incredibly strong, but that comes on the top of -- we typically lose anywhere from $80 million to $100 million in deposits in the first part of the quarter, as our commercial customers pay taxes, bonuses, partnership distributions. So typically, you don't see net growth in the first quarter. I can show you that our customers still paid all those items but yet we were able to demonstrate very, very strong deposit growth. And that deposit growth was throughout the different types of products and the types of customers, business, public unit and personal. And so what we saw was that increase in deposits came at the same time, we saw the paydowns in the commercial loans that didn't allow for commercial loan growth. So really all of that deposit growth went to the Federal Reserve Bank of Chicago. Obviously, a lower yield than what we would have expected on the loan portfolio. Going forward, we do expect, as I mentioned, that the margin will continue to improve pretty much at the same pace as what the expectations were originally back in January with the guidance, but we're just kind of starting at a lower spot. And I would say that we still expect deposit growth to continue at our budgeted pace, obviously, which makes for a very strong year. We do think with our commercial loan pipeline that despite the minimal level of net growth that we had in the first quarter that we will catch back up during the last 9 months of the quarter, and get to where we expected to be. So we're kind of ending with more deposits than what we thought we were, which results in a higher balance of the Fed, which has a small compression effect on our margins. So a lot going on there with the margin, but I think it's -- at the bottom line is just more deposits same level of loans, so those more deposit balances are going into the lower-yielding accounting at the Federal Reserve. Brendan Nosal: Okay. Chuck, that's really helpful color. Perhaps 1 more for me. just kind of pivoting. Can you just update us on the Southeast Michigan initiative you have ongoing with the new team down there? And then on a related note, any updated thoughts on opportunities to capitalize on M&A dislocation across the state? Raymond Reitsma: Sure. This is Ray. We've added some commercial banking talent on the east side of the state, and they have gained some traction and are performing very well relative to our expectations, growing their book, not only on the asset side, but doing a very nice job on the liability side as well. We plan to continue to [Audio Gap] Damon Del Monte: Inside that you didn't want to keep on balance sheet. Raymond Reitsma: No, that was entirely the [Audio Gap] Damon Del Monte: And do you feel that you have room to kind of grow into a loan loss reserve and let that drift a little bit lower as you get this loan growth? Or just looking for a little guidance on the provision line basically? Charles Christmas: Yes. I think when you look at whether it's a negative, whether it's positive and over the last couple of quarters, as you mentioned, it has been negative it's been negative because of the lack of net loan growth onto our balance sheet. As you know, CECL has put banks into a corner in regards to how it calculates its loan loss reserve and how it manages it. With Mercantile having basically minimal losses since coming out of the great recession, we rely really heavily on qualitative factors. As a matter of fact, if you look at the composition of our reserve, about 60% of our reserve balance is supported by qualitative versus quantitative of course, quantitative primarily driven by lost history performance. So it's always a battle. We like to have -- we like strong capital. We also like a very strong reserve. We're very comfortable with the balance of our reserve. Ray already mentioned it relative to our NPAs, which themselves and to your point, Damon, have been pretty pristine for a very, very long time. So I think kind of back to your specific question, I think when we certainly expect to have given our guidance, some very strong loan growth, at least through the remainder of 2026, notwithstanding any other major impacts to our measurements within CECL, we certainly would expect a positive provision expense going forward. The wildcard is the economic forecast on an overall basis, the American United States economy continues to do well. And so we really don't see much. We haven't seen much change in economic conditions have an impact on our reserve for quite a while now. Just a little bit of positives and minuses as we go quarter-to-quarter. We don't really see a lot of changes in our qualitative measurements. A lot of that is levels of NPA, the way that we administer portfolios, those types of things. I don't see really any changes there. So I think the driver of our provision expense is loan growth. As long as we can keep the pristine asset quality, which we think certainly that we can. So future provision, I think, is going to be really dictated by loan growth. And for our comments this morning, we expect to have very solid loan growth for the rest of this year and certainly into the future periods as well. Operator: Our next question comes from Nathan Race with Piper Sandler. Nathan Race: Chuck, just thinking about the level of cash or excess liquidity, you're looking at run rate going forward. Can you just get some light in terms of how much export liquidity you want to keep on the balance sheet maybe versus redeploying the securities portfolio. And within that context, curious if you're pretty content with the size of this book at this point, just based on the initiatives from the last several quarters. Or is kind of thought just to run with higher excess liquidity just given the loan growth guide? Charles Christmas: Yes. I think it's a combination of both. It's a really good question. I think our securities, we're right around 16% of total assets now and the plan is to keep it there. Again, with commercial loan growth, that would drive total assets, which of case will drive the size of the securities portfolio. So we'll have to grow that in congruence with the growth and the rest of the balance sheet, primarily the commercial loan portfolio. Obviously, we love the deposit growth. We'd love to put it into the commercial loan portfolio or residential mortgage portfolio for that matter as soon as we can. But obviously, the deposit growth. We came into the year especially with Eastern joining us with a lot of excess cash sitting at the Federal Reserve, if you will. And that only grew because of the deposit growth and lack of net loan growth in the first quarter. We think that's going to turn. But I think on an overall basis, we'll keep a higher level than historical dollars at the Federal Reserve. But I think it will -- our expectation is it will be less because we do expect to fund loan growth. And with that, we'll have to increase somewhat the size of the securities portfolio. And where that ends with our reserve -- our balance at the Federal Reserve, it's hard to know with all those numbers. Certainly, we expect it to be quite a bit lower than what it has been. But I would say the balance -- my expectation of that balance is to be well much, much higher than historical norms. And I would say historical norm is probably closer to $80 million, maybe $100 million. So I would expect the balance to be well over $200 million at the end of the year. Nathan Race: Okay. Got it. That's really helpful. And Chuck, you mentioned, I think, fixed rate loan repricing is a margin tailwind as we get in the back half of this year. Can you just help us with the yield pickup that you have on that portfolio over the next few quarters? Charles Christmas: Yes. It's based on the time frame on that is the rest of this year and into next year. And going from memory, I don't have it in front of me. I think the rate is about 5% on that portfolio, what's repricing. Nathan Race: And then is it fair to assume new loans on a blended basis are coming on 6.5% these days or? Charles Christmas: Yes, upper 6% is around 7%. Nathan Race: Okay. Great. And then just lastly, do you have the spot rate cost of deposits in March and just generally how you're thinking about deposit costs trending if the Federal remains on pause this year? Charles Christmas: Can you just repeat that second 1 about the cost? I don't quite get that question. Nathan Race: Yes. I was just wondering if you had the spot cost of the deposits in the -- in March and just how you're thinking about the trajectory of deposit costs if the Fed remains on pause this year? Charles Christmas: I brought all this stuff with me, but I didn't bring it on a monthly basis. So I think, as I mentioned, we've seen the growth throughout almost all the categories, and we're down a little bit non-interest-bearing if you look at our balance sheet. But again, that's where a significant portion of those tax bonus payments and partnership distributions come out of. As Ray mentioned, the Southeast Michigan, they brought almost as much deposits as they have loans. And a lot of those deposits are coming with the loan relationships, so they tend to be operating accounts, which obviously, we love. So I would say it's a blend of all the different deposits from 0 to non-interest-bearing, 1% or 1.5% on interest checking, not much in savings. And then our money market account is in the 3s, depending on the type and the size of the balance. So I think it's pretty well a blend. We're not looking for any -- if you look at non-maturity deposits or everything but time deposits, we're not really looking for -- we're not certainly not budgeting for any change in rates on any of those things. And I think the growth will be relatively consistent within those buckets to provide for a steady cost of those types of deposits for the rest of the year. Nathan Race: Okay. That's really helpful. If I could just actually sneak one more in. Could you just update us in terms of how much of expenses do you expect to come out of the run rate in the first quarter next year following the core conversion? Charles Christmas: We're looking for some pretty sizable savings, especially in regards to the new contract on our core. It will be sizable. Maybe that's something that -- that's still something that we're calculating, trying to figure out what this new core looks like, what we need from a personnel standpoint. Maybe we can continue to work on that and give you some better guidance in July. Operator: Our next question comes from Daniel Tamayo with Raymond James. Your line is now open. Please go ahead. Daniel Tamayo: Great. Maybe just to go back to the NIM guide and the loan growth, curious if you can kind of walk us through what may be downside risk given the reduction in margin guidance we saw -- we saw it today, but you did explain it with the deposits which I get. But if the payoffs kind of remain elevated throughout the year or for the next few quarters, curious, I guess, what's driving the confidence that, that will slow. But then if they don't, what kind of impact do you think that would have on the margin and NII? Charles Christmas: Yes. Clear, Daniel, this is Chuck. And clearly, it depends on the magnitude. I think to kind of put things in perspective, we had started to talk about -- because we saw and we were starting to report on in this conference I think at least in July or probably not even April of last year that we saw some pretty big payoffs coming. Clearly, our bankers are talking to the borrowers all the time and understanding whether they were going to put a project in the secondary market, whether they were going to sell their businesses. We usually have a pretty -- some advanced notice where we become aware of the payoffs, especially the bigger ones get everybody's attention. And that has always been that way for whatever reason, the last 3 or 4 quarters, however you want to calculate it, we have seen -- we've talked about it, a pretty high level of payoffs. They're all unrelated to each other. It's just more of a timing coincidence than anything else. Now payoffs, refinancings to the secondary market are a normal part of what we see. And so, we do expect those to continue. But we do expect them to continue more at a normal or -- I would say, normal a typical level that you talked about and put in the release. When we look at our pipeline report, we're not only looking at loan fundings, but we're also looking at paydowns. We look at our pipeline on a net basis and taking the same process that we've always used, that we've always reported always taken into account and managing the balance sheet, we just don't see -- maybe that could change, but we just don't see the same level of payoffs that we've seen more recently, at least for the remainder of 2026. Again, we will see some. We know there's some out there, just not to the level that we've seen. Now having said that, as we reported, we had $180 million, and I'll call it pay downs. There's various categories there in the first quarter alone. That's just on the larger credits. Now we also have, call it, $15 million, $20 million of month just a normal amortization. You put all that together, we funded well over $200 million in commercial loans during the quarter. And that's reflective of a very strong pipeline. And our pipeline right now is even stronger than it was at the end of 2025. So we feel very confident about the level of loan fundings that we're going to have executive management team feels confident on payoffs, given the history that our commercial bankers have shown to be on top of these types of things as they work with their borrowers day in and day out. So we feel very confident sitting here that we're going to see some strong 5% to 7% annualized growth. That's a forecast. I think the surprise would be not in the funding side, but we'd be in the payoff side. If somebody suddenly find there's a rational payoffs coming up. And we see the same level of deposit growth as we're budgeting. Yes, we would end up with a higher level of money sitting at the Federal Reserve, which would put a damper some compression on our margin. Again, the size is going to drive, whether that's 2 basis points, 5 basis points or something like that. So I would kind of put it in kind of what I would see as maybe a normalization of some higher levels of payoffs, I would say, maybe 2 to 5 basis points of margin compression below what the guidance is not from where we are today. But that's kind of a guess as far as that 2 to 5 basis points. But hopefully, my explanation of what we would look at and what the -- what would drive the impact, hopefully made some sense for you. Daniel Tamayo: No, that's helpful, Chunk. And remind us, I think last -- sorry, did you have anything else? Just remind us -- Okay. On the rate sensitivity, I know you have the table in the deck, but still not much impact from a 25 basis point rate cut perspective on your guidance? Charles Christmas: Now. I think there's a -- we're pretty well matched on the balance sheet. We do have the repricing, as we mentioned, the commercial loan, fixed rates, the securities and even some time deposits that would reprice lower. We think that puts us in a pretty balanced position. Daniel Tamayo: Okay. I guess just to go back to my original question, if you were in that position where loan growth ended up being a little bit slower than expected due to payoffs remaining elevated, would that put you in a position to utilize the buyback authorization in the remainder of the year? Or is that something that you're looking at kind of separate from the loan growth conversation? Charles Christmas: Well, I think the loan growth is part of that. I think there's definitely other things to consider when we look at our capital position, where we want it to be relative to certainly the growth. We know that we're a growth company, we need growth to continue to enhance our earnings performance. And certainly, we want to make sure we got enough capital to support the level of growth opportunities that we see, which obviously from our comments this morning, we're very high on. So that's first and foremost. Clearly, we would look at our stock price. The bigger the discount to what we think is appropriate. We will get a bigger appetite. We're also looking at the proposed change in risk-based capital calculations. I'm sure everybody is going through and trying to figure out what that impact would be on the capital calculations. We're also a little bit -- kind of looking to maybe understand how the investing community and the regulators are going to look at that. Clearly, the proposed changes provide for higher capital ratios. Does that just set the new bar? Or do we really get the "spend that and use that?" Our initial calculations under a proposal put all those caveats out there. We're looking at about a -- I'm going to put a number out there, but obviously, it's going to be a ranger owned it. Our CET1 ratio would increase by about 75 basis points. in our total risk-based capital ratio by as much as 1%. So we're looking at some meaningful increases there. Clearly, that would have an impact on how we think about buying back stock. And then just all the other normal things. There's a lot going on in the world. The American United States economy has been incredibly resilient. It usually is, but there's a lot going on. The level of uncertainty is still very, very strong and evident that's out there. So this company has always been pretty cautious when it comes to managing its capital position. But we certainly do understand and appreciate the benefits that could present itself with stock buybacks. So it's always on the table. We regularly talk to our Board about that. Obviously, we haven't bought back any in quite a while now, but it's something that's toys on the stope top. Operator: [Operator Instructions] Our next question comes from Matthew Breese with Stephens Inc. Matthew Breese: I just first wanted to start with securities. Maybe help me walk through the anticipated maturities and cash flows of securities for the balance of the year. And what are some of the roll off versus roll on dynamics of securities? Charles Christmas: Yes, I'm looking at the deck trying to remember if we have that in there. I thought we do. Yes, we do have that on Slide 17, and we start talking a little bit about the portfolio there. So most of the benefit there is in our agency portfolio. And so we're looking at, I think, another $50 million this year. That's got our average rate of, I think, just under 1% that does in the dollar amounts, but also the average rate do increase over time. But if you look at where rates are today, the types of bonds that we buy today, which I would say give us a yield of, call it, around 3.5%. I'm not sure if you look at on an annual basis if we had -- maybe if we go way out. But I would say certainly within the next 5 years, if not the next 7 years, we don't have a year where the average yield is higher than 3.5%. Now that yield -- that average yield does increase over time. Like I said, it's a little under 1% for the rest of the year. I think it's like 1.5% or so next year. and then it continues to increase. The dollars, we continue to be very diligent with a laddered approach. If you look at our mature -- not this year, but if you lay out the next 5 years, we have about $100 million a year maturing and then it slides off a little bit over that over the next 4 or 5 years. But so we have lots -- I'm being somebody base because I don't have exactly the numbers in front of me, but there is some solid repricing opportunities in that portfolio, along with the commercial loans that we talked about earlier. Matthew Breese: So it's give or take $50 million for the year? Charles Christmas: There's $50 million maturing this year yet, but there's $100 million maturing every year for the next 5. Matthew Breese: Got it. Okay. And then I guess back to Nate's question on cash liquidity. The first part of my question is just around seasonality. Is there anything -- I guess, it will be determined by the deposit side of the balance sheet. But anything seasonal in the second quarter that draws down cash a little bit more than usual? And then secondly, I think you had said we should anticipate running north of $200 million in cash by the end of the year. So is it -- we're standing at like $580 million in total cash right now, that's going to come down by a few hundred million by the end of the year. Is that the right message? Charles Christmas: Yes. So I think from a seasonality standpoint, we talked about what happens in the first quarter, which we were able to overcome and then some. We do see some declines here in April as the final tax payments are being made. So April is usually a south a down month, not as dramatic as the first quarter, but there generally is some decline here in April. But there are really no other seasonality for the second quarter. We will see seasonality in the third quarter with our public units as they start collecting their summer taxes. And -- but I would say that when we think about seasonality here, it's the first part of the first quarter, first part of the second quarter and throughout the third quarter. But yes, I think where the cash ends up at the Federal Reserve is anybody's guess. Again, it's going to be driven by both sides of the balance sheet, right? What continued deposit growth we get but certainly more so on the commercial lending side, residential mortgage side, trying to grow that portfolio or at least hold it steady, I should say, going forward and the growth in the securities book, as we keep that ratio at 16%. So that's all going to work out to whatever we keep at the Fed at the end of the day. Matthew Breese: Got it. Okay. Last 1 for me. I think you had mentioned that incremental loan yields are in the high 6s, low 7s. Would love some color just on competitive conditions, both sides of balance sheet lending and deposits. And if anything is changing spread-wise? Charles Christmas: Okay. I'll take deposits and let Ray chime in on the loan side. We have -- deposit rates have been very, very quiet. I would say, all year. Obviously, we battled the credit unions, and we won't get on that setback this morning. But I think from a banking standpoint, rates have been very consistent. We don't see a lot of specials going on right now. And I would say everybody is, in my opinion, kind of everybody is behaving what they're offering out there makes sense from what they're getting on the asset side. And the stability is relatively easy to work through. Raymond Reitsma: And on the loan side, we have target spreads that we like to achieve relative to risk levels. And as we look across that continuum, there I'd say the competitive pressure there really hasn't changed for some time. It's been the normal level of competition that we've come to know and love in the banking industry. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ray Reitsma for closing remarks. Raymond Reitsma: Thank you for your participation in today's call and for your interest in Mercantile Bank Corporation. The call has now concluded. Thank you. Operator: This concludes our conference. Thank you for attending today's presentation.

27天前Insight Analytics约5分钟阅读

IDGXF 2025 Q4 财报电话会议

Ahmed Moataz: Hello, everyone. This is Ahmed Moataz from EFG Hermes, and welcome to IDH's 2025 Results Conference Call. I'm pleased to be joined with Dr. Hend El Sherbini, Chief Executive Officer; Sherif El Zeiny, VP and Group CFO; and Tarek Yehia, Director of Investor Relations. As usual, the company will start with a brief presentation, and then we'll open the floor for Q&A. IDH's management, please go ahead. Tarek Yehia: Good afternoon, ladies and gentlemen, and thank you for joining us for the full year results. My name is Tarek Yehia, I'm Head of Investor Relations. Joining me today Dr. Hend El Sherbini, our CEO; and Mr. Sherif El Zeiny, our CFO. Dr. Hend will begin the call with a summary of the main highlights from the year. After that, I will discuss in more detail the main macro and geopolitical trends seen across our markets. After my presentation, Mr. Sherif will offer a deeper analysis of our financial performance. We will then open for Q&A. With that, I will hand it over to Dr. Hend for her introduction. Please, Dr. Hend. Hend El Sherbini: Thank you, Tarek, and good afternoon, everyone. I'm Dr. Hend El Sherbini, CEO of IDH. I'm pleased to report that 2025 was another very strong year for the group with robust operational and financial performance across our core markets and continued progress on our strategic priorities. The results we are presenting today reflect not only improving market conditions in key geographies, but also the tangible impact of the strategic initiatives we have been implementing over the past 2 years, particularly around network expansion, service diversification, digitalization and operational optimization. Throughout the year, we continue to strengthen our leadership in Egypt and Jordan while making very encouraging progress in Nigeria and Saudi Arabia. We are also very pleased with the sustained improvements in profitability across the income statement, which continue to validate the scalability of our model and our ability to translate growth into stronger returns. More broadly, we are encouraged by the increased resilience of our platform, which today combines scale, a richer service mix and improving efficiency across markets. Turning to our performance in more detail. During 2025, we continue to build on the strong momentum established over the prior year, delivering 37% revenue growth year-on-year supported by growth across both volume and value metrics. Test volumes increased by 11% during the year, with all operation geographies contributing to this expansion, supported by stronger patient engagement, deeper penetration in both walk-in and corporate channels and improving refer flows. At the same time, our average revenue per test rose 24%, and reflecting a richer test mix, broader uptake of radiology and specialized diagnostics [indiscernible] of the pricing actions introduced earlier in the year. These trends also helped us further strengthen our average test per patient metric, which reached 4.6 tests per encounter, demonstrating the continued depth of patient relationship and our success in expanding cross service utilization across our platform. In Egypt, momentum remained very strong throughout the year, supported by solid growth in both volume and value alongside strong brand equity and a more supportive macroeconomic backdrop. Test volumes in Egypt continue to expand steadily, while average revenue per test saw a strong uplift driven by favorable mix dynamics, including higher value radiology, radiotherapy, specialized diagnostics and corporate channels. Egypt remained the core engine of the group performance, contributing 84.6% of total revenue in 2025 and continuing to demonstrate strong scalability, resilience and operating efficiency. The continued expansion of our physical network in Egypt remained a key growth driver during the year. Over the past 12 months, we added 137 new branches in Egypt, bringing the total to 724 locations nationally at year-end. These new sites have helped deepen our presence, not only in Greater Cairo, but also in underserved and fast-growing regional cities. Allowing us to better serve both contract and walk-in patients. Our household service remains a strategic differentiator, sustaining its strong contribution of around 20% of Egypt's revenues continues to demonstrate the effectiveness of our post-pandemic strategy and reinforces our position as an early mover in home-based diagnostics in the region. Al Borg Scan continues to demonstrate strong momentum as a key component of our long-term strategy to build a more integrated diagnostics platform. During 2025, we took an important strategic step with the acquisition and integration of Cairo Ray for Radiotherapy, which broadened our capabilities in radiotherapy and strengthened our position in oncology diagnostics. This transaction enhances our ability to participate more meaningfully in higher-value specialized diagnostics and supports our ambition to build a more comprehensive offering for patients and referring physicians. We expect radiology and radiotherapy to play an increasingly prominent role in our growth mix over the coming period, supported by expanding service capability, greater patient awareness and growing demand for specialized imaging and treatment support service. Over the past 2 years, a key strategic priority for IDH has been the successful launch and upscale of our Saudi operation. I'm pleased to share that our presence in the Kingdom continued to progress very encouragingly during 2025. With strong momentum supported by growing demand, deeper market visibility and sustained improvement in both volume and value metrics. During the year, Biolab KSA generated SAR 5 million in revenue, representing a 252% year-on-year growth as test volumes and patient throughput increased sharply, and the business benefited from the expansion of the network to 3 branches. This growth continues to highlight the effectiveness of our ramp-up strategy in the market, which is designed to accelerate revenue growth and establish Biolab KSA as a recognized provider in the large but highly fragmented [ Saudi's ] diagnostics market. At the same time, we continue to advance our growth approach, which includes targeted marketing campaigns to build brand recognition, selective promotion initiatives to drive patient acquisition and ongoing efforts to strengthen physician and patient engagement. While still in the early stages of development Biolab KSA is demonstrating strong operational traction and reaffirming our belief in the long-term potential of Saudi Arabia as a key pillar in the group's regional growth strategy. As always, profitability remains a core focus for us, and we are very pleased to see sustained improvement across all levels of the income statement. We continue to benefit from strong operating leverage, tighter cost controls and better resource allocation across our subsidiaries, including Nigeria, where Echo-Lab delivered a full year of positive EBITDA, marking a key milestone in its turnaround and confirming the potential of this high-growth market. Overall, both COGS and SG&A as a share of revenue continued to decline, supported by disciplined cost management and our growing digitalization efforts. COGS to revenue fell from -- fell to 57.3%, while SG&A declined to 15% from 16.9% last year, underscoring the success of our optimization initiatives. Consequently, our EBITDA margin expanded to 34.9% from 29.7% last year, while gross profit margin rose to 42.7% compared with 38.1% in 2024. These efforts, combined with strong top line growth and improved pricing and mix have translated into meaningful margin expansion and greater earnings quality with adjusted net profit increasing 79% year-on-year. I'm also very pleased to share that the Board of Directors has declared a dividend of USD 0.0085 per share for the year ended December 2025, presenting a total distribution of USD 4.9 million. This reflects our commitment to delivering sustainable shareholder value while preserving the flexibility to fund attractive growth opportunities. In parallel, we remain prudent in our capital allocation approach, and we'll continue to reassess distribution in line with evolving market conditions and investment needs. Before handing the call back to Tarek, I would like to briefly touch on how we view the business as we move into 2026. We entered the year with a stronger platform, broader geographic footprint and improved profitability profile, which we believe positions us well to continue expanding access to high-quality diagnostics while driving sustainable growth. Our focus remains on deepening our leadership in Egypt, accelerating the ramp-up in Saudi Arabia, building on the turnaround achieved in Nigeria and continuing to improve operating efficiency across the group. At the same time, we remain mindful of evolving regional developments including the escalation of the U.S., Israel conflict with Iran in early 2026, which may introduce heightened uncertainty across the region, particularly in markets such as Jordan and Saudi Arabia. With that, I'll hand the call back over to Tarek and Sherif, who will take you through key trends across our markets and a more detailed breakdown of our financial performance of the year. Thank you very much. Tarek Yehia: Thank you, Dr. Hend. So far this year, we have continued to operate in a relatively stable condition with supportive macro trends and constructive trajectory across all our key markets. In Egypt, we saw inflation continue to ease materially compared to prior periods, helping support a more constructive operating environment for both business and consumers, improve ForEx liquidity and a stronger investment confidence continue to a more stable backdrop for Egyptian pound during much for the year, which in turn supported planning visibility and reduce pressure on imported inputs. More recently, however, management has been closely monitoring, evolving regional developments, including escalation of U.S. conflict with Iran in early 2026. Similar to Egypt, Nigeria also saw gradual improvement during 2025 with reforms and relative currency stabilization, helping support a recovery in patient activity and more predictive operating conditions. Over in Jordan and Saudi, the health care demand backdrop remained broadly supportive through 2025. Also both markets continue to be exposed to wider regional geopolitical developments. Jordan continued to benefit from a stable health care system supporting consistent demand for diagnostics, while Saudi continued to benefit from structural reforms momentum under Vision 2030. Recent geopolitical development in the region have increased uncertainty and continue to monitor the potential implication for economic activity and patient volumes. Turning quickly to our latest full year results. Egypt continued to deliver a strong broad-based growth with revenue rising 41% year-over-year supported by both volume expansion and significant increase in average revenue per test, particularly driven by radiology, radiotherapy and higher value diagnostic. Meanwhile, Jordan continued its solid performance reporting revenue growth in both Egypt and local currency terms, test volumes increased by 21% year-on-year, supported by Biolab ongoing promotional digital outreach and loyalty initiatives. In a market where volume-led growth remains critical for long-term sustainability, we are pleased to see Biolab's strategy continue to support strong demand and patient retention. In Nigeria, Echo-Lab achieved a full year of positive EBITDA, supported by successful implementation of turnaround strategy and improving operational conditions. We are increasingly confident in the long-term potential of our Nigeria subsidiary to expand its service offering and capture significant upside offered by this growing market. In Saudi, the ramp-up continued very encouraging with revenues increasing supported by stronger brand visibility, network expansion and patient growth. With the third branch now operating and the group aiming to launch 3 additional branches over the coming months, we expect a further growth in revenue and scale in the Kingdom. Finally, in Sudan, operation remains significantly constrained by the ongoing conflict with only 1 branch partially operating and no material change to the report at this stage. I will now hand the call over to Mr. Sherif, who will provide a more detailed overview of our cost, profitability and balance sheet position for the year. Sherif Mohamed El Zeiny: Good afternoon, ladies and gentlemen, and thank you for your time today. As Tarek mentioned during my presentation, I will focus on costs, margins, profitability and our working capital and liquidity position before we open the floor to your questions. In line with the priorities we set out at the start of the year profitability for fiscal year '25 improved materially supported by our group-wide efforts to enhance operational efficiency and maintain tight control over spending. A major focus area over the past 2 years has been digitalization where we have continued integration data tools and analytics into our internal platform, procurement systems and financial planning process to improve decisions making and cost discipline. These efforts, combined with stronger operating leverage and better resource allocation helped drive meaningful improvements in efficiency with both COGS and SG&A as a share of revenue declining versus last year. More specifically, our COGS to revenue ratio improved to 57.3% in '25, down from 61.9% in '24, supported by disciplined inventory management and stronger purchasing costs. The most notable improvements came within raw materials, which decreased to 19.3% of revenue from 22% last year, reflecting our scale advantages and smarter procurement practices. At the same time, total wages and salaries as a share of revenue remained well controlled, underscoring our balance between supporting our staff with operation -- appropriate salary adjustments and continuing to optimize headcount and productivity. As you can see in bottom right chart, these efficiency gains translated directly into stronger profitability with gross profit margin expanding to 42.7% from 38.1% last year and adjusted EBITDA margin rising to 34% from 29.7% in '24. On the SG&A front, spending remained well contained. With SG&A as a share of revenue declining to 15% despite continued investment in strategic growth initiatives. The main increases within SG&A were in wages and salaries as well as advertising and marketing expenses, reflecting annual salary adjustments, selective additional -- additions to support growth and continued marketing investments in Saudi Arabia alongside targeted campaigns in Egypt and Jordan. Even with these investments, the group continued to capture operating leverage highlighting the scalability of the business and the impact of tighter cost discipline across function. Moving to our bottom line. We reported net profit of EGP 1.3 billion in '25, up 29% year-on-year. As highlighted earlier, fiscal year '24 included elevated ForEx gain, which created a high comparative base and distort direct comparisons. When controlling for ForEx expects in fiscal year '24 and nonrecurring items in fiscal year '25, adjusted net profit increased 79% year-on-year to EGP 1.26 billion with an associated margin of 16.1%. As always, we maintain a disciplined approach to working capital management while supporting growth and preserving a strong liquidity. Similarly, we saw our cash conversion cycle improved further to reach 104 days in December '25 versus 155 days at the end '24. It is also important to mention that, as expected, we saw a decline in Days Inventory Outstanding, a stronger sales momentum and more efficient inventory turnover during the second and third quarter of the year following the seasonal Ramadan slowdown in March. Finally, as 31st of December '25. Our total cash reserves stood at EGP 2.1 billion compared with EGP 1.7 billion in '24, with a net cash balance of EGP 472 million versus EGP 226 million last year. This strong liquidity position supported the Board's decision to declare dividends of USD 4.9 million while preserving flexibility to fund attractive growth opportunities. Thank you for your attention. We now welcome any questions you may have. Thank you. Ahmed Moataz: [Operator Instructions] We've actually received a couple of questions in the chat. I'll take them one by one, so that you're not confused. Within the volume growth that you've seen in Egypt, would you say that it has been driven by both existing and recently opened branches or it's entirely driven by recently opened ones and the like-for-like within the mature ones are either flat or declining? Tarek Yehia: Actually, it is both the new branches that we opened during the year and all the existing ones, both were contributing to the sales. Ahmed Moataz: Understood. The second question is on your plan for Saudi in terms of branch openings. Do you have a set in place number of branches you intend to open in '26 and beyond? That's one. And the second, would you be able also to provide us on when you expect EBITDA breakeven for the operations in Saudi and maybe also revenue contribution, not just right now, but maybe a longer-term revenue contribution? Tarek Yehia: Saudi during 2025 have existing 3 branch, and we are planning for next year is 6 branch -- in 2026, another 6 branch to reach by end of 2026, 9 branches across all Saudi as much as we can. And EBITDA is turning positive by 2028. Ahmed Moataz: All right. The following question is on Sudan update, but you've already mentioned that till now, there is no update. You only have 1 branch opened. Another question is on guidance for 2026. If you can provide on that? And also, if you can also disclose the magnitude of price increases that you've already done in January of 2026. Tarek Yehia: For 2026, we are expecting an increase of 25% on sales, a 10% increase in prices and 15% from volume. We're keeping an EBITDA of range -- same range of EBITDA of around 33% to 34%. Ahmed Moataz: Understood. The last part is with the recent weakness in the Egyptian pound and also the geopolitical issues that are somewhat reflecting in higher either freight costs or importation cost, maybe also raw material costs. How do you see this impacting the business? And also how much coverage of inventory do you already have that is secured into the business that would kind of save -- act as a safe haven before you start to see that impact on your P&L? Tarek Yehia: Business till now is not affected in Egypt, and we are securing inventory in order to keep the operation up and running, and we secured the inventory until August. Ahmed Moataz: Understood. [ Jena ] has 3 questions. You've answered -- the first one, I'll just say it out loud, so that's covered by everyone. Please provide revenue, EBITDA and net income guidance for 2026. You've already answered this, but maybe if you have guidance for net income. You've mentioned revenue and EBITDA. The second is -- you've answered most of the second question. The only thing is, that hasn't been answered, what's the percentage of total test kits that are imported? And another follow-up is how many months of test kit stocks do you have? I'm not sure if when you answered and said till August, this covers the test kits or your entire raw materials? Hend El Sherbini: So we import all our kits. So nothing is produced in Egypt, almost nothing. We -- and yes, we have a coverage till August. Ahmed Moataz: All right. And for the entire business, what is the annual target for a number of branch openings going forward? Tarek Yehia: Around 200 across Egypt, Saudi and Jordan. Ahmed Moataz: This is for 2026? Or this is an annual target in general? Hend El Sherbini: This is for 2026, but it includes clinics and hospitals. So they are not -- they're just the regular branches. Ahmed Moataz: Okay. Understood. Andrea is asking -- or actually, first, congrats on the results. Can you please provide any details and guidance on the share of radiology revenue as a percentage of total as it has stayed flat at 4.7% despite the Cairo Ray acquisition. Tarek Yehia: It's still 5% of revenue. Ahmed Moataz: You mean the target in general is 5%, right? Tarek Yehia: The actual is 5%, and it will be increased over years when the business is picking up more and more. Ahmed Moataz: Okay. [ Jena ] is asking with almost $40 million of cash on your books, are you looking to do a buyback? Hend El Sherbini: We have -- we actually have an approval for a buyback. However, we haven't decided to do that. But it is an idea that we're discussing. Ahmed Moataz: Understood. Someone is asking a follow-up on a prior question, which is do you have any revenue targets for Saudi Arabia in 2026? Tarek Yehia: Yes. The target is SAR 18 million. Ahmed Moataz: Right.[ Zoher ] is asking your branch openings target in 2026 for Saudi was 6. Why has this now been pushed out? Tarek Yehia: No, it is the same 6. We have 3 existing in 2025, and we're increasing by another 6 in 2026. Total will be by end of 2026 is 9. Ahmed Moataz: All right. Another follow-up from [ Zoher ] is why decide such a low dividend payout when the CapEx in Egypt ahead is low, given the clinic and hospital model that you have? Tarek Yehia: As we are balancing between investing and distributing dividends, we declared these dividends, and we are seeking more investments in order to grow. So we will revisit if needed, but still we keep it as it is now. Ahmed Moataz: Understood. [ Anup ] is asking household service percentage of revenue has been stable at around 20%. Is this the level of saturation for the service? Or is there further potential to increase household service contribution to total revenues? Hend El Sherbini: We're continuously expanding household service, expanding the team and the service and the value creation for our patients. Right now, it's 20% of revenue. However, the revenue itself is increasing. So the -- I mean the revenue coming from household is also increasing. But I think we still have a big room for growth in household. Ahmed Moataz: Understood. [ Zoher ] is asking if you can provide CapEx forecast or budget for 2026? And if you can break that down by geography? So Egypt, Jordan and Saudi. Tarek Yehia: CapEx is around 5.9% of total sales versus last year of 4.8%. The main CapEx will be for Egypt. Some will go for the new branches. Some goes for IT warehouse, then followed by Saudi and followed by KSA. Ahmed Moataz: [Operator Instructions] So the final question we've received for the time being is how much of your Egypt expansion do you expect will come from hospitals and clinics. Tarek Yehia: It's around 9% coming from this new business, we are going in-house and clinics -- hospitals and clinics. Ahmed Moataz: All right. We haven't received any further questions. So I'll pass it back to you in the case you have any concluding remarks. Otherwise, I can conclude the call now. Hend El Sherbini: Thank you very much, everyone. Ahmed Moataz: All right. Thank you very much to IDH's management and to everyone who participated today. Have a good rest of the day, everyone. Sherif Mohamed El Zeiny: Thank you very much. Bye-bye.

27天前Insight Analytics约5分钟阅读

OFG 2026 Q1 财报电话会议

Operator: Please standby. Good morning. Thank you for joining OFG Bancorp's conference call. My name is Nikki; I will be your operator today. Our speakers are José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors; Maritza Arizmendi, Chief Financial Officer; and Cesar A. Ortiz-Marcano, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG Bancorp website under the first quarter 2026 section. This call may feature certain forward-looking statements about management's goals, plans, and expectations. These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG Bancorp's SEC filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Instructions will be given at that time. I will now turn the call over to Mr. Fernández. José Rafael Fernández: Good morning, and thank you for joining us. We are pleased to report our first quarter results. Let us go to Page 3 of our presentation. We started the year with a strong financial performance. Earnings per share diluted were up 26% year-over-year, on 4% growth in total core revenues. This was driven by ongoing loan growth, high-quality credit performance, core deposit strength, expense discipline, and proactive balance sheet management. Loans grew 5% year-over-year, and new loan production grew 9%. Reported core deposits declined 1%; excluding the previously announced $500 million government deposit transfer, core deposits grew more than 4% year-over-year. This demonstrates how our strategies and operating model continue to deliver, supported by momentum in our businesses and disciplined execution across the franchise. We furthered our commitment to capital management. We purchased $44.5 million of common shares and increased the dividend 17%. Despite growing geopolitical uncertainties and their effect on energy prices, Puerto Rico’s economy continues to grow, and businesses’ and consumers’ balance sheets are solid with high liquidity levels. Please turn to Page 4. Our core digital strategy consists of three main pillars. The first is our service offerings. We are targeting specific customer segments with accounts that meet their needs: Libre for the mass market, Elite for the mass affluent, and MyBiz for small businesses. This targeted approach is driving strong market adoption and deeper customer relationships. The second pillar is technology. Our omnichannel platform allows customers to interact with us seamlessly across all touch points. This is driving continued digital adoption, resulting in efficiency and savings that we reinvest in new ways to serve our customers. The third pillar is intelligent banking, leveraging data and real-time insights to help customers better manage their finances. We are increasingly seeing real customer connections being built through our digital channels. Please turn to Page 4. As proof of our success, we are driving innovation year-over-year. Retail digital enrollments are up 10%, digital loan payments 5%, and virtual teller usage up 7%. Net new retail and commercial customers each grew by close to 3%. The added benefit is that this enables us to free up more of our teams to provide personal, value-added services, focus on sales to expand our market share, and develop new digital products and services. Now here is Maritza to go over the financials in more detail. Maritza Arizmendi: Thank you, José. Let us turn to Page 6 to review our financial highlights. All comparisons are to the fourth quarter unless otherwise noted. Core revenues at $186 million were approximately level. Total interest income was $194 million, a decrease of $3 million. This reflected lower average balances of cash and investment securities at lower average yields. This was partially offset by higher average balances of loans at higher average yields. First quarter interest income included $3.3 million from a PCD loan paid in full. There were two fewer days in the first quarter; this negatively affected interest income by about $3.1 million. Total interest expense was $40 million, a decrease of $4 million. This reflected lower average balances of core deposits at lower average yields. This was partially offset by higher average balances of brokered CDs and borrowings at lower average yields. The two fewer days reduced interest expense by approximately $1 million. Total banking and financial service revenues were $32 million, a decrease of $600 thousand. This reflected favorable MSR valuation of about $1.3 million, while the fourth quarter included $2.3 million in annual insurance commission recognition. The other income category was $200 thousand compared to a loss of $1.1 million. The change reflected the absence of several previously reported items from the fourth quarter. Noninterest expense totaled $95 million, down $10.3 million from the fourth quarter. The first quarter included $1 million in merit raises, $700 thousand in payroll taxes, $1 million in costs related to our capital market readiness and registration process, $3.6 million in business-related volume incentives compared to $3.1 million a year ago, and $2.5 million net cost savings. The fourth quarter included net $6.8 million in previously reported expense items. Income tax was $14.9 million compared to a benefit of $8 million in the fourth quarter. The first quarter ETR was 21.6%. Looking at some other metrics, tangible book value was $30.14 per share. Efficiency ratio was 51%. Return on average assets was 1.78%, and return on common equity was 16.4%. Now let us turn to Page 7 to review our operational highlights. Average loan balances were $8.2 billion, up $1.55 billion from the fourth quarter. This reflected increases in Puerto Rico and U.S. commercial loans, partially offset by lower balances in residential mortgage, auto, and consumer. Loan yield was 7.87%, up 14 basis points. Excluding the first quarter loan recovery, loan yield was 7.71%, down 2 basis points from the fourth quarter. New loan production was $[inaudible]. This mainly reflected an increase in auto loan production. Year-over-year, new loan production increased 9%, primarily reflecting increases in new commercial loans with auto moderating as anticipated. Average core deposit balances were $9.6 billion, down 4% from the fourth quarter. This reflected the $500 million government deposit transfer to wealth management early in the first quarter. By the end of the quarter, this was partially offset by increases in retail and commercial deposits totaling more than $150 million across all categories: demand, savings and, to a lower extent, time deposits. Core deposit cost was 1.29%, down 13 basis points. This was mainly due to the previously mentioned government deposit withdrawal combined with lower average rates. Excluding public funds, cost of deposits was 1.00% compared to 1.02%. Also, reported average noninterest-bearing deposits of $7 billion in the first quarter increased 1.41% sequentially and 4.55% year-over-year. Investments totaled $2.8 billion, down $55 million. This reflected principal paydowns and maturities. This was partially offset by purchases of $49.2 million of mortgage-backed securities and residential mortgage securitization of $23.5 million. Average borrowings and brokered deposits totaled $929 million compared to $787 million in the fourth quarter. The aggregate rate paid was 3.98%, down 5 basis points. By the end of the first quarter, balances were down to $747 million due to intentional runoff compared to $897 million at prior quarter end. Period-end cash at $636 million was 39% lower due to the government deposit transfer. Net interest margin was 5.36%, reflecting the previously mentioned $3.3 million interest recovery and lower cost of deposits and borrowings. Cesar will provide more details on our credit quality in a moment. But first, let me summarize the quarter. We demonstrated year-over-year loan growth and production in line with expectations, and continue to expect low single-digit growth with our expanding presence in commercial more than offsetting a decline in auto. Our digital-first strategy is continuing to lead to more customer engagement and digital and debit card transactions. Digital-first also helped grow deposits in line with our strategies. We continue to anticipate growth this year with our Libre, Elite, and MyBiz accounts. We now expect net interest margin to range from 5.1% to 5.2%. This updated range assumes no additional rate cuts in 2026, compared to two cuts previously expected, and incorporates the exit of the large remaining government deposit later this year. Noninterest expenses were maintained within our expected run rate. We remain on track to keep expenses in a range of $380 million to $385 million this year. Based on our first quarter results, the estimated tax rate for 2026 is anticipated to be 22.3%, excluding any discrete items. We were very active returning capital to shareholders. We will continue to be selective and opportunistic, balancing shareholder returns with disciplined growth. Now, here is Cesar. Cesar A. Ortiz-Marcano: Thank you, Maritza. Please turn to Page 8. Before getting into the details, let me start with the key highlights for the quarter. Our thesis that higher customer liquidity in the first quarter drives better credit metrics was reinforced. We saw that most clearly across the retail portfolios, where early-stage and total delinquency trends improved sequentially, consistent with normal seasonality. Net charge-offs totaled $21 million, down $5.5 million, reflecting normal portfolio activity with continued improvement in retail loss trends. Net charge-offs reflected $3.9 million from our final settlement of a previously reserved U.S. loan, while the fourth quarter included $4.8 million related to a nonperforming loan sale. The net charge-off rate was 1.05%, an improvement of 27 basis points from the fourth quarter. The auto net charge-off rate declined sequentially to 1.52%, an improvement of 29 basis points. The consumer net charge-off rate also improved to 4.40%, 15 basis points better than the fourth quarter. Provision for credit losses was $22.5 million, down $9 million from the fourth quarter. This reflected $17.5 million from increased loan volume, $3.7 million in added reserves for a previously reserved commercial loan, and $1 million for newly classified small commercial loans. Allowance coverage remains strong at 2.48% of loans, and reserve levels continue to appropriately reflect the risk profile of the portfolio. Looking at other retail credit metrics, early and total delinquency rates declined meaningfully from the fourth quarter to 2.2% and 3.4%, respectively. These improvements were broad-based across the retail portfolios, with auto, consumer, and mortgage all showing better early-stage performance. The nonperforming loan rate was 1.47%, down 12 basis points. Retail nonperforming loan rates improved sequentially in auto and consumer, while remaining stable in mortgage. Overall, retail credit behavior was consistent with the seasonal improvement we typically see in the first quarter, supported by higher customer liquidity and strong employment conditions in Puerto Rico. Turning to commercial, the nonperforming loan rate declined to 2.36% from 2.5% last quarter, reflecting sequential improvement. Commercial asset quality outside of one specific trade continues to perform as expected. As we discussed last quarter, the commercial portfolio continues to include a single-name telecommunication exposure that moved to nonaccrual late last year. This exposure remains well understood and idiosyncratic, and does not represent a broader trend within the commercial portfolio. Overall, credit continues to perform well. While we remain mindful that there are various geopolitical and economic headwinds that may increase the cost of living or inflationary pressures in Puerto Rico, the first quarter performance benefited from strong employment conditions and higher seasonal customer liquidity. Credit metrics remain well controlled and within our risk appetite, and the portfolio is performing in line with our expectations and risk framework. José Rafael Fernández: Thank you, Cesar. Please turn to Page 9. The Puerto Rico economy continues to perform well. Business and consumer liquidity levels are strong, and unemployment is at historically low levels. Public reconstruction funds, private investments, and new onshoring projects continue producing economic tailwinds. And as Cesar mentioned, we are closely watching geopolitical and macroeconomic uncertainties and their impact on the island, particularly with higher energy prices and overall inflation. Against this economic backdrop, OFG Bancorp remains very well positioned. Our digital strategy is driving unique customer experiences, attracting deposits, and growing our customer base steadily. Our culture of continuous improvement and investments in people, technology, and automation are producing tangible efficiencies. We continue to have a solid commercial loan pipeline, stable credit trends, and strong risk management and discipline in liability management. All these factors, combined with Puerto Rico’s level of business activity, position us well for continued growth. Before I end my prepared remarks, I want to highlight the recognition we received in the first quarter, where we were honored with a 2026 Gallup Exceptional Workplace Award. For us, this recognition goes well beyond employee engagement scores. It reinforces a culture we have been intentionally building for many years—one that emphasizes agility, openness to challenge, and innovation. At OFG Bancorp, our teams are encouraged to question how things have always been done, to move quickly in responding to customer and market needs, and to continuously improve how we operate. That mindset enables faster decision making, more innovation across our digital and operating platforms, and better execution in a dynamic environment. This recognition highlights how our people, culture, and strategy are united by a shared sense of purpose, driving meaningful progress for all our stakeholders. It is this commitment to purpose that empowers us to consistently achieve strong, long-term results while making a positive impact across all our stakeholders. We will now open the call for questions. Operator: Thank you. Star one on your telephone keypad. If you wish to remove yourself from the queue, press star two. We will take our first question from Analyst. Please go ahead. Your line is open. Analyst: Good morning. Wanted to start just on the margin. Even excluding the $3.3 million, that would have made it about 5.24%. That was better than anticipated. When I look at the cost of deposits—if I heard correctly, 1% excluding the government deposits in the quarter—it seems like things turned out better than expected on the margin. I know the guidance is for a slightly lower level from here, but any thoughts on potential positives for the margin relative to the guidance, whether it be loan pricing or any other factors? It seems like you are probably getting close to a bottom on funding costs. José Rafael Fernández: So, Brett, before I let Maritza give you the specifics, let us be clear. For us to provide guidance on the margin is a little tricky given the uncertainty on when and how much of the large government deposit will exit and how those funds will be replaced. So when we give guidance on the NIM, we are using the most conservative guidance possible because we really do not want to promise something that we do not deliver on. Bear that in mind. We still have significant deposits from the government that have been telegraphed to us that they will depart sometime. We do not know if it is tomorrow or if it is next year. Replacing those deposits, we certainly bet that our business teams—the commercial team as well as the retail team—as they did this first quarter, will deliver and deliver substantially better than what we expected in the first quarter. It definitely has a lot to do with the economic background that we are living in Puerto Rico, and sometimes we undermine that in our own forecast, given the 22 or 23 years that we have operated on the island. Now I will pass the answer to Maritza so she can give you the specific details. Maritza Arizmendi: Thanks, José, for that. For the first quarter, deposits increased at a higher rate than expected. It was very good momentum for us. The reality is that, going forward, thinking about the rate scenario we are managing—with no cuts—we do not see much flexibility to push down more the cost of deposits. So we will continue to see deposit costs at the same level as we saw during the first quarter. The other element embedded within the range I provided is asset composition, because we will continue to see the commercial book becoming a higher proportion as auto continues to go down, as I shared in the prepared remarks. That means we also have some impact in the loan yield that during this quarter went down 2 basis points ex-recovery. We are seeing the asset sensitivity and the liability sensitivity somehow compensating between the two. Since the NIM we saw during the quarter—excluding the recovery—was 5.25%, we expect it roughly stable, maybe 5 basis points down or up. That is why we are giving the 5.1% to 5.2% range for the full year. We will also need to manage liquidity through the year, as José was mentioning. José Rafael Fernández: And you know us—we are going to be conservative in all the guidance that we provide. We have been doing that for many years. That is where we stand, Brett. Analyst: Okay. And can you remind me, José Rafael, how much of the government deposit piece is left? I know you are unsure of the timing, but any thoughts? José Rafael Fernández: Around $600 million on the one deposit. Remember, the other $500 million went to our broker-dealer, so we are getting a little bit of a fee there. That is where it stands right now. Analyst: Okay. And then on credit quality, I heard the comments and it makes sense—there is some seasonality related to early-stage delinquencies—but there was some nice improvement this quarter. Was there anything else that might have been driving the improvement other than seasonality and customers having higher liquidity during 1Q? Are you seeing any other broad-based things that were improving credit? José Rafael Fernández: Back in late 2022, we improved the underwriting standards to make sure that we booked higher quality, because that was a record-breaking period. We wanted to use that moment to improve our portfolio quality. Now we are seeing the results of those improvements in the credit metrics, where the auto portfolio is 99% prime. We are starting to see the benefits in the credit metrics of those adjustments that we did in 2022. When you think about it, the seasonality of the vintage that is coming due in 2026 is one that already has 80% plus in prime. So we expect to have lower loss content in the vintages that are becoming seasonal in the next couple of years. That is an additional element of our consumer credit portfolio. Analyst: Yep. Okay. And then just last one for me around the broad macro. I saw this morning that construction in Puerto Rico was slightly off in January, maybe February, and with higher oil prices and inflation—anything you are seeing in terms of macro in Puerto Rico and opportunities or challenges? José Rafael Fernández: You have heard me before talk about Puerto Rico’s economy, and it remains very constructive, very positive. Puerto Rico is in its best economic position in many decades. Right now, Puerto Rico has only 30% debt-to-GDP. Puerto Rico has the lowest levels of unemployment in seventy-some years. Puerto Rico receives around $4 billion to $6 billion in reconstruction funds a year and will continue to receive them for the next five to seven years. Puerto Rico is benefiting from onshoring of medical devices and pharmaceuticals, leveraging infrastructure that has been in place for many years. Manufacturing is around 45% of the island’s economy. We are also back in the limelight in terms of our geopolitical positioning; you saw when the military went into Venezuela, it all came from Puerto Rico, and they are increasing their military presence on the island. We will certainly have to face threats coming from geopolitical events and inflationary pressures, and if the United States potentially goes into a recession, we will get some of those effects. But Puerto Rico is in a much stronger position today than several decades ago to embark on those challenges. Month-to-month changes in economic data points are real, but on the ground we are seeing high levels of liquidity, strong interest in building infrastructure, strong private investments. We are meeting with commercial clients—just yesterday I had lunch with clients who are putting money to work in different industries. I think the next several years in Puerto Rico are going to continue to be steady growth. We are seeing a solid, positive economic environment that is not exempt from threats and risks, but we have been managing them for many years, and we are confident that we will continue to grow our client base, our loans, and our deposits—being very strategic and very intentional. Our team is really focused on being the challenger bank on the island and gaining market share. That is my view. Analyst: I appreciate all the color, and it has been good to see the onshoring. Thanks. José Rafael Fernández: Thank you. Operator: We will move next with Analyst. Please go ahead. Your line is open. Analyst: Thanks. Good morning. The deposit growth surprised me. Despite the government deposit you had guided as coming out, you had pretty strong growth in the quarter to cover that, where I thought it would actually come in through the borrowing side. You mentioned that Libre, Elite, and MyBiz all contributed. Are you seeing any particular growth in any one of those products, and were you doing anything special to drive that growth in the first quarter? José Rafael Fernández: The three products are the driving force for us—very targeted, very focused. We do not have 50 different deposit accounts. We have one for mass market, one for mass affluent, and one for small business. That focus helps our team members. We also have excellent benefits for each of those accounts, and that is what is driving adoption, account opening, and customer growth. It is across the board. With Libre and Elite on the retail side, we saw increasing deposits. Libre is mostly noninterest-bearing and a digital account you can open online. We continue to see great adoption there, growing client base steadily. In mass affluent, we also saw great growth in deposits and deeper relationships—more Elite customers using lending with Oriental and OFG Bancorp. On MyBiz, it is our flagship. Our team members go out there; we have a solid cash management offering, and the platform compares well to those banks in the States have. Customers are identifying those benefits, and we are seeing the results. Certainly, the economy helps with a lot of liquidity, but I do not want to underestimate the power of our strategy and execution. Analyst: Great. That is helpful. On Slide 5, you have always talked about the digital-first aspect and the statistics are impressive. Any particular new investments on the technology side to continue to improve those statistics? José Rafael Fernández: We have made investments over the last several years, and some of what you are seeing today is the benefit of those investments. We continue to invest. Right now, the biggest focus as we finalize our data management is making sure we have data readily accessible, so we can extract insights for our customers, improve their lives, and provide value-add. We are already doing that and expanding it, with a team working on it for many years. The benefits of artificial intelligence are first and foremost on efficiency. When you heard Maritza talk about expenses and our flat guidance versus last year, we continue to see good opportunities to leverage AI and bring efficiencies to the bottom line for 2027 and beyond. The other side is value-add to our customers—how do we make their lives simpler. Those are the things we are investing in right now. It is tricky—we will hit some good investments and we might miss some—but that is how we operate. We bet on innovation. Banking will require innovation going forward, and Puerto Rico is behind on that curve. OFG Bancorp is the one driving that innovation in Puerto Rico. Analyst: Thank you. Operator: Thank you. We will move next with Analyst. Please go ahead. Your line is open. Analyst: Hi. Good morning. Thanks for the question. Just a quick guidance clarification for Maritza: that 5.10% to 5.20% margin—is that for the full year or the balance of 2026 quarters? Maritza Arizmendi: It is for the full year. I already shared how we are seeing and why we are seeing that range, including the timing of the big government deposit transfer and the fact that we are not seeing rate cuts during the year. Analyst: Got it. That is helpful. Similarly, I thought a real strength of the quarter was the core deposits. I know Puerto Rico has a government tax rebate. Did you see any positive impacts from that in 1Q, or if not, can you help with the timing? José Rafael Fernández: That is usually at the end of the quarter. We saw a little bit at the end of the quarter, and it plays out throughout the first half of the year. We see the child tax credit and the tax refunds in general, and that plays out through the first half. Analyst: Great, helpful. Turning to capital, you announced a meaningful dividend raise earlier in the quarter and were more active with the buyback with the new authorization out. Capital looks very healthy. Can you remind us of any guideposts or thoughts around the capital side of things? José Rafael Fernández: Everything starts with how we deploy our capital. We want to deploy it first and foremost in our business here in Puerto Rico. If there are opportunities to deploy it in a growing balance sheet, we will do that—that is the first level of thinking. We certainly see the buyback as a way to continue to return capital to shareholders. We are methodical and opportunistic, as we showed in the first quarter, and will continue to be so during the rest of the year. For the dividend, we feel very confident about the earnings power we have. With CET1 close to 14%—around 13.75% this quarter given the buybacks—we feel that returning capital to shareholders is part of our strategy, and we will continue to do so, Kelly. Analyst: Great. Helpful. Last modeling question: I appreciate the color on margin and the interest recovery. Looking at your average balance sheet, it looks like there was a jump in PCD interest income. Just to confirm, was that where the interest recovery came in? Maritza Arizmendi: Yes. It was the pay-in-full of a loan within that book. Analyst: Great. Thank you for confirming. I will step back. Really nice quarter. José Rafael Fernández: Thank you, Kelly. Operator: Thank you. We will move next with Analyst. Please go ahead. Your line is open. Analyst: Hi. How much did taking out Fed rate cuts help that NIM guide? And if we did get one rate cut, what would you expect the impact to be? Maritza Arizmendi: Thank you, Manuel. We continue to be asset sensitive, but a 50 basis point rate cut would have a very low impact—less than 1%—to NII. We are taking that into consideration in this new guidance because we were expecting two cuts midyear and then at the end of the year. That is no longer impacting the commercial book, so it is impacting the guidance positively. We moved it about 10 basis points, not necessarily fully related to the change in rate expectations, but also due to a better funding mix from the inflows we received during the first quarter. It is encouraging us for the rest of the year. We expect core deposits to continue growing, which will help funding mix in front of the potential exit of the government deposit. That is embedded in the guidance. Analyst: I appreciate that. So the success you are having with the new account types—as long as they keep growing, they can replace borrowings and should benefit your funding. Is that what you are hoping? José Rafael Fernández: Yes. It also has another component we do not talk about often: the large commercial book and business we have. We have some good-sized commercial accounts that have been long-standing clients of ours that also are benefiting from higher liquidity levels. Analyst: On that front, I know your loan growth is commercial-led this year, a little less on the auto side. How do pipelines look? Any update to the mix of loan growth from last quarter? Is there going to be a seasonal improvement in growth? José Rafael Fernández: We have a pretty good pipeline, and we are continuing to stick with our guidance of low single digits. Not because we do not feel comfortable with the commercial pipeline, but because we are modeling a reduction in the auto loan book that is hard to predict given the landscape in Puerto Rico. We are very happy with the commercial business. We continue to grow it and have a very strong pipeline. Analyst: My last question is on credit. Is this improvement in past dues—which is somewhat seasonal—likely to drive a bit lower net charge-off levels for the year? I think we are looking at closer to 1% plus. José Rafael Fernández: We talked about the 1% last quarter too. I do not want to project this quarter’s seasonality forward. I would stick to 1% for the year, and hopefully it will be better because of the improvements in the FICO quality of the portfolio, which should translate into a better charge-off rate. But as of now, I would say 1%. Analyst: I appreciate it. Thank you. José Rafael Fernández: Thank you for your question. Operator: Thank you. Again, if you would like to ask a question, press star then the number one on your telephone keypad. One moment while we queue. At this time, there are no further questions. I will now turn the call back over to Mr. Fernández for closing remarks. José Rafael Fernández: Thank you, operator. Thanks again to all our team members, and thank you to all our shareholders who are listening. Have a great day. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

27天前Insight Analytics约5分钟阅读

UCB 2026 Q1 财报电话会议

Operator: Good morning, and welcome to United Community Bank's First Quarter 2026 Earnings Call. Hosting the call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; President and Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards. United's presentation today includes references to operating earnings; pretax, pre-credit earnings; and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the Financial Highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the first quarter's earnings release and investor presentation were filed this morning on Form 8-K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on Page 5 and 6 of the company's 2025 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I will turn the call over to Lynn Harton. Herbert Harton: Good morning, and thank you for joining our call today. We've got a lot to cover. I'm going to start with our quarterly earnings update, and then we will close with the details of our acquisition of Peach State Bank headquartered in Gainesville, Georgia. We had a great start to 2026. For the first quarter, we realized net income of a little over $84 million, translating into EPS of $0.69. On an operating basis, our EPS was $0.70, representing a 19% increase from the first quarter of 2025. Annualized loan growth of 4.5% for the quarter and an expansion of our net interest margin of 3 basis points helped to drive these results. Credit also performed very well this quarter with total charge-offs of 22 basis points, only 10 basis points, excluding Navitas. Nonperforming assets as a percentage of loans were 50 basis points, down 1 basis point from Q1 2025, and special mention in substandard loans totaled only 2.9% of total loans, down 2 basis points from Q1 of 2025. Our operating return on assets was 122 basis points, an 18 basis point improvement year-over-year, and our operating return on tangible common equity was 13.1%. Given our high capital levels, we continued to return capital to shareholders, both via a $0.25 quarterly dividend and the repurchase of $37 million of our common stock. We also announced the intention to redeem our remaining $100 million in sub debt in the second quarter, only 20% of which qualified as Tier 2 capital. Even with the dilution from our repurchase activity, tangible book value per share grew at an annualized rate of nearly 6% for the quarter and by 10% year-over-year. We were also excited to have been recognized by J.D. Power as the top-ranked bank for retail client satisfaction in the Southeast during the quarter. This is the 12th time the United team has received this recognition. I'm very proud of the dedication and genuine care that our teams across the footprint demonstrate every day. It's because of them that we are the most recognized bank for customer satisfaction in the Southeast. I'll now turn it over to Jefferson to cover our first quarter's performance in more detail. Jefferson Harralson: Thank you, Lynn, and good morning to everyone. I will start on Page 5 and talk about our deposit results. On an end-of-period basis, our customer deposits grew by $237 million or 4% annualized, mostly driven by DDA growth in the quarter. We were also very pleased that our cost of deposits moved down 9 basis points to 1.67% and that our cumulative total deposit beta stands at 39% in this down cycle, which exceeded our goal. On Page 6, we turn to the loan portfolio, where our growth continued at a 4.5% annualized pace. Our growth came primarily in the HELOC and C&I categories, which are 2 of our current areas of focus for growth. Turning to Page 7, where we highlight some of the strengths of our balance sheet. We believe that our balance sheet is in good position from a liquidity and capital standpoint to be ready for any economic volatility. We have very limited broker deposits and very limited wholesale borrowings of any kind. Our loan-to-deposit ratio remained low and was unchanged at 82% this quarter with a solid end-of-period deposit growth. Our CET1 ratio was flat at 13.4% and remains a source of strength for the bank. On Page 8, we look at capital in more detail. As I mentioned, our CET1 ratio was 13.4% and our TCE was also flat at 9.92%. We were active in our buyback again in the first quarter, buying back $37 million in shares, which equated to 1.1 million shares in the quarter or just under 1% of our shares outstanding. Moving on to spread income on Page 9. Spread income was down in Q1, mainly due to having 2 less days in the quarter. On a year-over-year basis, our spread income was up 10%. Our net interest margin increased 3 basis points in the quarter to 3.65% and up 29 basis points compared to last year, and the first quarter is the fifth quarter in a row of margin expansion. We continue to experience a margin tailwind from our back book repricing and from the mix change towards loans away from securities. In the next year, using just maturities, we have about $1.4 billion of assets, paying down in the 4.63% range. And because of this continued impact, I would expect the margin to be up between 3 and 5 basis points in the second quarter. Moving to Page 10. Noninterest income was $43.7 million in the quarter. This included a $5.2 million gain on an interest rate cap that was hedging a sub debt issuance that we intend to redeem on April 30. Excluding the cap gain, noninterest income benefited from a strong mortgage quarter and was offset by seasonally lower service charges. And we opted to sell less Navitas loans than usual. Last quarter, we sold $41.6 million in Navitas loans compared to $8.3 million this quarter. Our GAAP expenses were $157.3 million in the first quarter, and our operating expenses were $151.6 million. We had a small amount of our normal merger charges, but we had 2 more unusual and offsetting nonoperating expenses. First, we had fully accrued for the FDIC special assessment that came after the Silicon Valley failures. That said, the FDIC refilled this bond faster than expected and is not asking for the full assessment. We had taken the original assessment as a nonoperating loss, and so the release of the assessment of $1.9 million comes through nonoperating as well. We also had another nonoperating charge in the first quarter related to a change in our payroll process necessitated by changes in legislation. We had paid our employees on a current basis, and we changed this to paying our employees in arrears. As a result of the transition in payroll timing, some of our employees would have gone nearly a month without a paycheck, so we paid an additional check to bridge the gap. Aside the one-timers, expenses were $151.6 million, relatively flat compared to the fourth quarter. Moving to credit quality on Page 12. Net charge-offs were 22 basis points in the quarter, improved from last quarter and flat to last year. We also saw relatively flat NPAs and a nice improvement in past dues as credit quality remains strong. I will finish on the quarterly results on Page 13 with the allowance for credit losses. Our loan loss provision was $10.9 million in the quarter, which was in line with our net charge-offs. With the loan growth, our allowance coverage of credit losses moved down slightly to 1.15%. With that, I'll pass it back to Lynn. Herbert Harton: Thank you, Jefferson. Now let's move into a discussion of our Peach State Bank announcement, and I'll start with a bit of history. United began de novo in Gainesville, part of Hall County in 2005. Over the past 20 years, we've enjoyed strong organic growth there with now $827 million of deposits in the county. Peach State was founded that same year, 2005, and has also enjoyed strong organic growth. Total assets for the company are $788 million as of the end of the first quarter with $713 million in deposits. Hall County is a rapidly growing part of the overall Atlanta MSA. And after this transaction, the combined bank will have the #1 deposit share in the county. Culturally, we fit well together. We know each other personally. We work in the community together. We go to school together. We go to church together. Peach State shares the same passion for customer service as United. There's a tremendous amount of mutual respect between the 2 teams, and I'm very excited to see them come together and continue to win in this market. Jefferson, let me turn it back over to you now to cover the financial aspects of the transaction. Jefferson Harralson: Okay. Well, first, Peach State has approximately $800 million in assets or about 3% of our assets. The deal value is about $100 million and will be a 50-50 cash stock mix. We are paying 1.9x tangible book value and 6x cost saved earnings. Given our overlap, we are estimating 40% cost savings. While the deal is 50-50 stock and cash, we plan on repurchasing the $50 million in shares issued by year-end. As structured, we estimate the deal to be $0.09 accretive in 2027. And with the planned buybacks, we estimate the deal to be $0.12 accretive. With that, I'll pass it back to Lynn to conclude. Herbert Harton: Thank you, Jefferson. This is a great example of what we want to do in the M&A space. It is in market, manageable size, a history of strong performance, great upside potential and an attractive way to leverage capital and continue to grow our business and our brand. I'd like to now open the call to questions. Operator: [Operator Instructions] Our first question today comes from Russell Gunther from Stephens. Jake Morton: This is Jake Morton on for Russell Gunther. My first question is on deposit costs. How would you expect them to trend from here in an interest rate scenario where the Fed remains on pause on a stand-alone basis and including Peach State? Is there room for you to bring these down further? Or should we expect some pressure going forward? Jefferson Harralson: I'll take that one. Thanks for the question. I would expect our deposit cost to be relatively flat. We have some tailwind from CD maturities, but we are seeing competition out there, and we do want to grow our deposits this year. So I think if you layer in relatively flat deposit costs, that's a good place to start. And the deal being only 3% of our assets, doesn't change those numbers meaningfully. Jake Morton: Got it. I appreciate the color there. And my second question is for -- so do you have the spot cost of deposits at the end of the quarter? And also, can you talk to the competition that you were seeing in your market? And like where is it most aggressive, which specific product and also competitor-wise, if you could talk to that. Jefferson Harralson: Yes. Thanks. Great question. The spot cost is relatively close to the quarterly average, so not a major difference in spot versus quarterly average. I may pass to Rich to talk about deposit competition of what we're seeing. Richard Bradshaw: In terms of competition, in terms of past quarters, I would say, it's slowed down a little bit. We're not getting a lot of special request on pricing from the market. So I'd say it's kind of normalized. And we really don't have it. We're in 6 states. So we have a lot of different competitors, no single one. Operator: Our next question comes from Michael Rose from Raymond James. Michael Rose: Just wanted to start on loan growth. Obviously, really strong results in both C&I and commercial real estate. You did have some continued paydown on the construction side. I guess my question is, are we getting towards the end of the kind of more accelerated paydowns here? Because it seems to me, just given the growth that you've had and the momentum you've had in both C&I and CRE, that loan growth could actually accelerate from here. So I just wanted to just better understand that? And then if you can talk to some of the competition just given all the dislocation in and around your markets from the deal activity that we're seeing. Richard Bradshaw: Sure. I'm writing these down. Let's start with -- yes, so we are pleased with Q1 loan growth. It's usually a seasonally low quarter for us. So we're very pleased. And in terms of the geography, South Florida led with Matt Bruno and South Carolina and Coastal Georgia were second with North Florida in third. And in terms of the commercial lines of business that led the way, it was middle market, ABL and Navitas. And then lastly, on the retail side was HELOCs. In terms of paydowns, we actually saw the biggest amount of paydowns in hospitality, which we think is a good thing. So don't see a big pickup. Normally, we do a lot of construction CRE lending. So it's just kind of the normal flow. So I don't see a material change there. And in terms of loan growth going forward, we remain optimistic. We think it will be in the 5% to 6% range, providing nothing else goes on unusual in Iran. And then lastly, on hiring, we've talked about that because that's influencing things. In Q1, we saw a net increase of 10 revenue producers, and we're aiming for 10% annual growth on that in 2026. And we have 9 more to hit the goal, and we think we'll get there or get close by the end of Q2. Michael Rose: All right. Really, really helpful. Maybe just as a follow-up, just on expenses. If I exclude kind of all the moving parts, it looks like you guys had really good kind of expense control. Maybe you can just talk about some of the hiring efforts that you guys might have in place as we contemplate the next couple of quarters. And then if you could just touch on maybe some early investments on AI and what you guys are doing and what we could expect there from an expense build. Jefferson Harralson: All right. All right. Great. Rich just spoke about the kind of the numbers of the new hires that we're very excited about. I think if you think about our expense growth, we're targeting this 3.5% range, but now we have these hires that you might add on to that. I think the hires could add about $1 million to $1.2 million a quarter. We're not factoring in the better growth that could happen later in the year, but that should happen sometime late '26 or early '27. So we're excited about our ability to grow our producers and it could have some effect on expenses in the near term. Richard Bradshaw: Yes, I would agree with that in terms of -- you got to -- you see a little bit of a lag with the new hires. You kind of expect it to start kicking in, in 5 months to 6 months reasonably when you hire them. And so we're expecting to see late in Q2, some help from Q4, which is also a good hiring quarter. Herbert Harton: And Michael, you mentioned AI. So far, I would say our AI investments have been very good and have a strong payback. For example, most of our AI at this time is coming in through vendors. We've -- on the fraud side, all of our vendors are heavy users of AI and our fraud losses have actually dropped by 50% over the last 2 years partially because of that. And that's not even counting the benefits to our clients, which would be on top of that. Our contact center, where we have chatbots and other AI-enabled tools, we're seeing the ability to take more calls with the same number of agents. The same in our programming. We're doing more programming work today without adding programmers as they're using AI. So as we think about the next steps, an Agentic AI -- I think there are clearly possibilities for some of our kind of more mundane processes, for example, flood and other things where we could get some benefit from AI. That's at just the conversational stage now. But so far, I would say I wouldn't -- any expense build -- our history is any expense build we come out of that, we more than have realized savings on. Operator: Our next question comes from Gary Tenner from D.A. Davidson. Gary Tenner: I just wanted to touch on M&A for a second. You guys have talked about being pretty focused in-market, small banks. Obviously, Peach State fits the bill there. Given the environment we're in, do you see a pipeline of activity where you could potentially sort of announce another deal in lockstep with this one? Any reason to think that this would take you out of the market for any period of time? Herbert Harton: Great. Thank you. Great question. No, I mean, if -- we would not have any issue. I don't believe in doing another deal while Peach State is active. Certainly, given the size, given the regulatory environment, given our history, if we saw the right deal, which would have similar metrics and conditions to Peach State, I'd be more than happy to move forward with that. Gary Tenner: And then just the comment around the accretion in 2027 kind of adjusted for share repurchase. I guess it's sort of semantics, but I mean, the repurchase shares, presumably, that would be over and above what you would plan to do anyway, right? So how do you kind of balance that if that question is fine. Herbert Harton: Well, and I guess I'll start with that. And the reason we presented it that way with showing the effect of the repurchase. Our original intent was to do the entire deal all cash. In our view, and I understand it's different than a share repurchase. But at the same time, if I'm evaluating a share repurchase at 11, 12x earnings versus buying a bank at 6, hey, why not buy the bank at 6x earnings. So I guess that was in our mind, and that's kind of the way we presented it. Jefferson Harralson: I think that's well said. I don't have a lot to add to that, but I will say we have $63 million left on our authorization. We have been active in the buyback already with $67 million over the last 2 quarters. So it's a great question. But I think Lynn hit it on how we're thinking about the deal as a use of capital. Operator: And our next question comes from Catherine Mealor from KBW. Unknown Analyst: This is [indiscernible] stepping in for Catherine Mealor. And congratulations on the acquisition. So my first question is kind of a follow-up on the buyback activity. You bought back around 30 million shares in the past 2 quarters. And with the merger announcement, you mentioned that repurchasing shares could offset the dilution. I was just wondering if you could talk a little bit about the timing and the amount of buybacks we can expect moving forward from here. Jefferson Harralson: That's a great question. And I do think we will buy back the $50 million by year-end. We are somewhat price sensitive. So I cannot -- I don't want to guarantee that we're buying back shares in any given quarter. So I don't know if I would put that in the model for Q2. But I do think we are creating about $30 million of excess capital every quarter. That is the amount that we will be contemplating purchasing on a given quarter. But it depends on the price and some other things we might have going on, it might not be an every quarter thing. So I can't help you so much on the modeling there. But I think by year-end, we will get the $50 million in. Unknown Analyst: That's great. And then my other question is about your fee outlook. Your fees came in strong this quarter, and I was kind of wondering where you expect fees to go from here. Jefferson Harralson: Right. I expect a modest growth rate in our fee income. We have some nice growth businesses within here. Our treasury services has been growing well. We've made relatively significant investments in our wealth area that we're very excited about. Our mortgage business has been going really strongly. We also have seasonal strength coming in mortgage and Navitas as we go into the second quarter and SBA. So I think you will see a nice growth rate off of this seasonally low first quarter. Operator: Our next question comes from Stephen Scouten from Piper Sandler. Stephen Scouten: A couple of follow-ups maybe to some conversations that have already been covered to some degree. But Lynn, you said this was kind of like the exact type of deal you guys would look for given culture and deposits and so forth. How about like from a size perspective, I mean, would you guys lean towards these smaller types of deals moving forward still? Or would you like to do something a little more sizable if that were available? What would be your preference there? Herbert Harton: Yes. We have typically done deals 10%, probably at the most, 15% or less of our size. We just find that the institutions of that size, they tend to align with us better on employee experience, client experience, community involvement, and we can be more additive. So yes, if Peach State had been twice as large, would we be excited about it? Absolutely. There's just a limited number of those larger, call them, $2.5 billion to $3.5 billion banks. But certainly, we would be interested in those as well. This one is, I think, really unique, again, given the history of the 2 companies together, the growth in Hall County and this really rapidly growing county, #1 job-creating county, I believe, in Georgia. And so to be able to have that kind of team together and to share together made it really attractive. Stephen Scouten: Makes sense. I appreciate that. And then on the hiring target, I think if I heard Rich correctly, you guys might actually kind of hit your stated target for the year by the end of 2Q. So would you anticipate ramping up that plan further? Or would it more be, hey, let's let these people ramp up over that 5- to 6-month time line before we add incremental expenses on continual hiring? Richard Bradshaw: Steve, that's a great question. I mean, certainly, we want to hit goal, but we would be opportunistic. If we saw the right people out there with the right experience and the right sized portfolio, we would certainly look to do that. Herbert Harton: Yes. And I would just say, too, the seasonality as you get in the year, just with bonuses, those kinds of things, first quarter, second quarter are strong, starts to slow down in the third and fourth quarter, it's more difficult. So I think Rich getting out to an early start has been a great thing. Stephen Scouten: Yes. That cadence makes a lot of sense. Okay. And then maybe just last thing for me would be kind of overall NIM trajectory from here, maybe for Jefferson. I know you said spot cost deposits were kind of the same as the quarterly average and maybe expect them to stay flat from here. So would you expect a little bit of incremental upside on the loan repricing? I think you called out $1.4 billion in fixed rate assets. Jefferson Harralson: Yes, I do. I think we'll -- I had mentioned that I think we'll get 3 to 5 basis points of margin expansion in the second quarter. I think that we are slightly asset sensitive and the outlook for no rate cuts doesn't really hurt us. We're relatively flat, but slightly asset sensitive. But I think this back book repricing story continues. I think this mix change towards loans away from securities continues. So we do have a wider margin in our model throughout the year, but we do have a nice 3 to 5 expectation in the second quarter. Operator: And our next question comes from Christopher Marinac from Brean Capital. Christopher Marinac: I want to go back to Peach State Bank for a second. Would you only buy banks that have excess deposits, and that seems like an attractive feature of this transaction? And is that something that will guide your M&A interest going forward? Jefferson Harralson: I would say no to that question. We like to have a low loan-to-deposit ratio. We think we can put those deposits to work. But that's the -- one good thing of many of having an 82% loan-to-deposit ratio is that we can also buy banks, small banks that are loaned up as well and give them some more capacity for growth. So that was a nice to have in this acquisition. We also think we can help out high loan-to-deposit ratio banks as well if that type of bank came about. Christopher Marinac: Got it. And then for the new hires, is there a deposit mandate with these folks? And how will that play out as '27 comes into focus? Richard Bradshaw: Certainly, on the loan side, we are requiring a depository relationship whenever we do a loan, so we'll start there. But these people all have existing clients. And so we're hoping that the first thing they can bring over is the deposits. It's easier than the loans. So we see that pretty fast, and that's all part of the package. Operator: Our next question comes from Kyle Gierman from Hovde Group. Kyle Gierman: This is Kyle on for Dave Bishop. Just wanted to follow up back on fee income. I wanted to go into mortgage banking, saw some nice trends there. I was wondering how sustainable that might be going forward? And any initiatives in place to enhance that line item? Jefferson Harralson: So I'll start maybe and then pass it to Rich on the initiatives. We have one thing working for us and one thing working against us as we go into the second quarter for mortgage. First, rates you had rates dipped to -- mortgage rates dipped to the 6% range at the end of February, which helped promote a little mini refi boom that helped out this quarter. But also, we're going into the second and third quarters, which are the strongest seasonal quarters for mortgage. So you get a little bit of an offset as you go into Q2. I'll pass it to Rich for initiatives. Richard Bradshaw: I'd say the -- on the mortgage side, obviously, we're expecting, as Jefferson said, a stronger Q2. The challenge in mortgage is interest rates drive so much of it. And so that's a little bit -- it's a little bit hard to say. We do have a few more shorter on-balance sheet products that have driven some interest. So we'll continue looking at that. Kyle Gierman: And maybe a final question. Saw a slight uptick in NPAs this quarter. I was wondering if you could provide some color on what drove that? And then maybe just a broad view of the credit quality trends. Robert Edwards: Yes. This is Rob. Thanks, Kyle, for the question. So I sort of anticipate asset quality to be stable. And I would expect NPAs to kind of fluctuate up and down. If you look back, maybe 10 basis points up or down over time. There wasn't any one credit that moved into NPA this quarter that's a highlight or anything. It's just a standard movement in and out of nonaccrual. Operator: And ladies and gentlemen, with that, we'll be concluding our question-and-answer session. I would like to turn the floor back over to Lynn Harton for any closing remarks. Herbert Harton: Great. Thank you, and I appreciate everybody joining the call. And again, any further questions, reach out to Jefferson or myself, and we look forward to talking to you again soon. Have a great day. Operator: The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.

27天前Insight Analytics约5分钟阅读

BOKF 2026 Q1 财报电话会议

Operator: Greetings. Welcome to BOK Financial Corporation's First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Simply press star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. As a reminder, this conference call is being recorded. I would now like to turn the presentation over to Heather King, Director of Investor Relations for BOK Financial Corporation. Please proceed. Heather King: Good afternoon, and thank you for joining our discussion of BOK Financial Corporation’s first quarter 2026 financial results. Our CEO, Stacy Kymes, will provide opening comments. Scott Grauer, Executive Vice President of Wealth Management, will cover our fee-based results, and our CFO, Martin Grunst, will then discuss financial performance for the quarter as well as our forward guidance. We refer you to the disclaimers on Slide 2 regarding any forward-looking statements made during this call. The slide presentation and press release are available on our website at bokf.com. I will now turn the call over to Stacy Kymes, who will begin on Slide 4. Stacy Kymes: Thank you, Heather. We appreciate you joining the call this afternoon. We reported earnings of $155.8 million, or EPS of $2.58 per diluted share, for the first quarter. What stood out this quarter was the consistency of execution across the company and how our teams continue to build on the momentum we established in 2025. During the quarter, total loans grew $536 million, or 2.1% sequentially. That growth was well distributed across the portfolio. We saw strong momentum last year, and we are encouraged to see that continue. Pipelines remain solid, and business activity across our footprint and customer base has been constructive, even with more macroeconomic uncertainty. Growth was also well balanced geographically across our franchise, with Texas growing $[inaudible] or 8% on an annualized basis, Oklahoma posting growth of $163 million or approximately 9%, and Arizona increasing by $236 million. Our fee-based businesses also performed well, even in an environment with elevated uncertainty and a rapidly changing macroeconomic backdrop. The revenue exceeded three of the past four quarters, reflecting the diversification and underlying strength of those platforms. Expenses declined meaningfully this quarter, reflecting our continued focus on managing our core cost structure. Over the past several quarters, we have worked to better align expenses with market opportunities and customer needs. This quarter illustrates that progress. Expenses were down $6.9 million and we posted an efficiency ratio of 63.2%. Importantly, this quarter provides a clean view of a more typical expense profile, with prior actions now embedded and temporary items less meaningful. Capital levels remain very strong, with tangible common equity at 9.3% and CET1 at 12.6%. Slide 6 provides a closer look at our loan portfolio. Total outstanding loans grew 2.1% this quarter, with strong growth across our core C&I portfolio, energy, and commercial real estate. Our core C&I loan portfolio, which represents our combined services and general business portfolios, grew 2.1% sequentially. This is the fourth consecutive quarter of growth in this portfolio, reflecting long-term, sustained customer relationships. Health care loans decreased 1.3%. Loan production in this segment remains at record highs with a very strong pipeline. This business has also supported our fee income lines with strong syndication fees generated during the quarter. The reduction in loan balances this quarter is primarily related to cyclical payoff activity. We believe we are well positioned to grow this portfolio throughout the remainder of the year. Energy loans grew this quarter, increasing 4.3%. This marks another reversal of the payoff trends we discussed last year. We are not currently seeing clients seeking to add production capacity yet. Our CRE business increased 3.7% compared to the prior quarter. We remain well within our concentration limits for this segment, which allows us to be selective about opportunities and deploy capital where structure, terms, and returns make sense. Mortgage finance loans totaled $228 million, an increase of $50 million from the fourth quarter. We are happy with the progress this business is making. It is important to note that the loan growth exhibited in the first quarter was driven by our existing businesses. Moving to Slide 7, I will keep my comments short again this quarter. Credit quality remains strong. NPAs not guaranteed by the U.S. government decreased $14 million to $52 million. The resulting nonperforming assets to period-end loans and repossessed assets decreased six basis points to 20 basis points. Committed criticized assets decreased this quarter, remaining very low relative to historical standards. We had net charge-offs of just $1.9 million during the quarter, averaging three basis points over the last twelve months. I will reiterate that the limited charge-offs we have seen show no patterns or concentrations that raise concerns about specific business lines or geographies. I would also note proactively we have virtually no exposure to private credit facilities. Over the long term, we do expect credit metrics to normalize. In the near term, we continue to expect net charge-offs to remain below historical average. No provision was required this quarter. Our provision benefited from the favorable impact of higher projected oil prices in our energy portfolio, offset by loan growth, improved overall credit quality, and a modest downward revision to economic forecast assumptions. Our combined allowance for credit losses is a healthy $323 million, or 1.23% of outstanding loans. Overall credit performance this quarter was exceptionally strong. With that, I will turn the call over to Scott. Scott Grauer: Thank you, Stacy. Turning to our operating results for the quarter on Slides 9 and 10. Fee income remained solid this quarter, despite the volatile market environment and macroeconomic backdrop. Fees declined $5.1 million sequentially following a very strong fourth quarter. Fee income totaled $209.8 million, exceeding three of the past four quarters and underscoring the underlying strength of our fee-based business in any market environment. Total trading revenue, which includes trading-related net interest income, increased modestly to $34.7 million from $34.1 million in the prior quarter. Customer hedging revenue grew $1.1 million as our energy customers predictably increased their hedging activity when higher short-term crude oil prices presented themselves. Investment banking revenue, which includes investment banking and syndication fees, decreased $4.1 million after delivering two outstanding quarters. Results reflect the normal seasonality of this business, with a quieter first quarter before activity begins to build in the second quarter. I would note that 2026 is the strongest first-quarter syndication activity on record. This result represents a 40% increase from the same quarter a year ago. Mortgage banking revenue grew $2.0 million linked quarter with higher production and refinance activity. Turning to Slide 10 to discuss our asset management and transactions business. Fiduciary and asset management revenue delivered strong results, contributing $66.5 million to revenue. This was the second strongest quarter on record, only surpassed by the prior quarter. As a reminder, the prior quarter included higher-than-usual transaction-related fees. AUMA declined $3 billion to $123.6 billion, driven by lower market valuations and normal seasonality. Transaction card revenue continued its trend of record-setting results, contributing $32.0 million to revenue. These results demonstrate the strength of this franchise, which has been created through sustained momentum and reliable execution. Taken together, our fee income performance this quarter reflects disciplined execution and the strength of these businesses, even amid shifting market conditions. The overall foundation remains solid and continues to support consistent fee generation. With that, I will hand the call over to Marty to cover the financials. Martin Grunst: Thank you, Scott. Turning to Slide 12. Net interest income decreased $2.7 million and reported net interest margin declined eight basis points. Excluding trading, core net interest income decreased $4.8 million and core margin decreased seven basis points. We continue to expect margin expansion over the course of 2026. Fixed-rate asset repricing and loan growth were positive drivers for this quarter and are expected to persist. However, we saw several small negatives impacting the quarter all at the same time. Noninterest DDA declined, with Q1 being the seasonal low point. Day count, of course, played a role. Loan fees were down sequentially. SOFR spreads were abnormally wide in Q4 and we benefited from that, but spreads returned to normal in Q1 and drove some compression sequentially. Funding costs for counterparty margin posted to exchanges for energy derivatives had a small negative effect. Lastly, we saw the full-quarter impact of the sub debt issued last November. Each of those items had a one or two basis point negative effect individually, which accumulated to overcome the positives of loan growth and fixed-rate asset repricing in the first quarter. Turning to Slide 13. Total expenses decreased $6.9 million, producing an efficiency ratio of 63.2% for the quarter. Personnel expenses were down $11.6 million. Normal increases from payroll taxes and merit increases were more than offset by lower incentive compensation as well as the benefits of the realignment we took in late 2025. Nonpersonnel expense increased $4.7 million; however, during the fourth quarter, we experienced a $9.5 million benefit from the updated FDIC special assessment. Excluding that prior-quarter benefit, nonpersonnel expense decreased $4.8 million, largely related to lower professional fees. Slide 14 provides our outlook for full year 2026. On loan growth, we continue to produce strong results. We expect to see loan growth near 10% for full year 2026. Our guidance for total revenue has not changed. We expect growth to be in the mid-single-digit range. The mix of that revenue between NII and fees is somewhat rate-curve dependent, as trading income can shift between the two. Our current forecast reflects no rate cuts in 2026 versus the two cuts reflected in our prior guidance. Our NII expectations for 2026 are now slightly lower at $1.42 to $1.45 billion, and our fee income expectations are now similarly higher at $820 to $845 million. We continue to anticipate the growth rate for expenses to be in the low single digits. This should result in a 2026 full-year average efficiency ratio in the 63% area. We expect 2026 provision expense to be in the $15 to $35 million range. Portfolio credit quality continues to be exceptionally strong, and we see no tangible evidence of credit normalization. Our guide does allow for some amount of normalization later in the year. Lastly, I will note that Visa announced on April 13 that its second exchange program for Visa Class B shares has officially commenced. This allows us to monetize 50% of our remaining Visa B shares. We currently hold the equivalent of approximately 190 thousand common shares, and monetizing half that position would equate to roughly a $29 million pretax benefit based on Visa’s April 13 closing price of $309 per share. While this potential gain is not reflected in our guidance, we expect to participate in the exchange and recognize a gain based on the market value at the time of the exchange or disposition. With that, I would like to hand the call back to the operator for Q&A, which will be followed by closing remarks from Stacy. Thank you. Operator: We will now open the call for questions. If you would like to ask a question, please press star one. Your first question comes from Michael Rose with Raymond James. Please go ahead. Michael Rose: Hey, good afternoon, everyone. Thanks for taking my questions. Maybe, Marty, if we can go back to the margin. It seems like there was just a confluence of factors this quarter that drove the compression, but I think if I heard you right, you would expect margin expansion from here. Can you give us some details behind that—what you would expect in terms of deposit betas as we move forward, loan pricing, and fixed asset repricing opportunities—just the puts and takes as we contemplate no rate cuts this year? And then as a follow-up, you mentioned the Visa Class B program has commenced. I think you said about half of that position would equate to roughly a $29 million pretax benefit. Is the plan to monetize half of that, and would you look to potentially repurchase shares with the proceeds? Martin Grunst: You bet. As you think about each of those factors, the one that has been durable and will continue to be durable is the fixed-rate asset repricing. You will see both the bond portfolio and fixed-rate loan portfolio continue to pick up spread there. On deposit betas, deposit competition in the market is kind of like it has been for the last few quarters. Without rate moves, I do not think you will see a lot in the betas. To the extent that we have incremental rate moves, our cumulative down beta has been 66% in deposits, and we would continue to see that play out as it would relate to future rate moves to the extent you have them. A couple of the things that affected this quarter were loan fees and DDA. What is typical is to see growth in those two components in the back half of the year, so you will see some support there as we get into the third quarter. Loan competition is always competitive. We have seen some incrementally competitive behavior at the high end of the credit size and the very strong end of the credit quality spectrum in investment-grade territory, but not enough to really move the needle this quarter. All those components give us confidence in the trajectory of margin. One thing I might add on margin: if you think long term, you can take our 2.90% margin that we printed this quarter and rerun both the available-for-sale and held-to-maturity securities portfolios at their mature rates—where we are replacing at about 4.50%—and that would recast our margin at just a little over 3.15%. While it will take some time to get there, that gives you perspective on the big picture and what the long run looks like for our margin expansion story. On Visa, our expectation is that the program will officially start transacting shares later this quarter, and we would be able to recognize that gain in Q2. We have not yet determined exactly what we will do with the proceeds, but all those avenues are on the table for us, including potentially repurchasing shares or paying down debt. At this point, we look forward to being able to capture that gain. Stacy Kymes: Michael, this is Stacy. We will let the year play out and see what may unfold to reinvest those gains. If you recall, when we did the Visa exchange before, there were attractive opportunities in our investment portfolio to get really good IRRs by selling securities at losses and using those gains to keep our run-rate earnings relatively flat. That equation is not as compelling this time. The IRRs are not very good relative to where they were before. Obviously, the unrealized losses in the portfolio are much smaller today than they were when we had this opportunity before. We have also looked historically at contributing those to our foundation, but changes to corporate tax policy make that a little more challenging to do and get the tax benefit. For now, it is an all-of-the-above set of options, including doing nothing. We will see as the year unfolds whether we want to invest that gain or if we do not see an opportunity that merits the return profile we should consider. Michael Rose: Alright. Appreciate the color and context. I will step back. Thanks. Operator: Your next question comes from the line of Jon Arfstrom with RBC Capital Markets. Please go ahead. Jon Arfstrom: Hey, thanks. Good afternoon, everyone. Stacy, I wanted to ask you a little bit about the loan growth environment. Can you talk about the general business balance drivers? And then on energy, you used the term “not yet” in describing clients seeking to add production. What do you think needs to happen there for that to show more of a growth profile? And then for Marty, a follow-up on deposit costs—you had a nice step down in the interest-bearing deposit costs this quarter. How much more room do you think you have in an environment without any further cuts? Stacy Kymes: Sure. The loan growth was broad based by geography and by loan type. We have been exerting significant effort around core C&I and are really excited to see that expansion continue. We continue to invest there and are excited about the future. It has been nice to see a bounce back on the energy side. We troughed around this time last year and have been stable to increasing since then. For folks to continue to drill, you need to look at the strip. People often focus on the prompt month or spot price, but it is really the strip price out two to three years—really three years—that creates the incentive for people to drill for oil. If you look at three years, oil is below $70, and I think $70 is kind of a magic number. My view is you will not see folks drilling unless they can lock in a return with oil above $70 out that long. Things are volatile and the curve has moved a lot, but it is more important to look at the curve three years out than the prompt month in terms of driller behavior. The rig counts reflect that there is no impetus right now for folks to drill given the backwardation of the curve. That could change, but we are not seeing that today. Martin Grunst: On interest-bearing deposit costs, there is probably still a little bit of room, but as we have been chipping away at that over the quarters, it is a situation of declining returns. There is still a bit more there, but not as much as there was a year ago relative to where short rates are. Jon Arfstrom: Okay. Thank you very much. Operator: Your next question comes from the line of Peter Winter with D.A. Davidson. Please go ahead. Peter Winter: Thanks. Good afternoon. Stacy, there has been a lot of merger activity in your markets. Are you seeing opportunities for team lift-outs—something that you have done successfully in the past? And then, Marty, you have always maintained really strong capital levels. Could you quantify the estimated impact and benefits from the new regulatory proposals? Stacy Kymes: As you know, that is a strategy for us. Some of the periods of most rapid growth in our history have been when there has been broad dislocation created from mergers and acquisitions. You have both employees and clients of those institutions who did not choose to be a part of that institution, and they may select to go somewhere else. We see it, it is prevalent in our footprint, and you can assume that we are being very active in prospecting for both employees and customers in this environment. Nothing specific to report today. Martin Grunst: Peter, we do not have a number yet, but it is definitely going to be a benefit to us, both on the loan book—particularly in the real estate-secured loan book, given those LTV parameters—and in the trading book. You know how we underwrite. Because of where our LTVs and FICOs and so forth are, that is going to be a benefit to us on RWAs in the loan book. In the trading book, we will get a little benefit there too based on our read at this point. Operator: Your next question comes from the line of David Chiaverini with Jefferies. Please go ahead. David Chiaverini: Hi, thanks for taking my questions. Back on deposits, I think you mentioned that the noninterest-bearing DDA deposits should bottom in the first quarter. What is the driver of the rebound in the second quarter and potentially the magnitude? And should this rebound continue through the year? And then on mortgage finance, we saw balances grow nicely on a percentage basis. Previously, you mentioned getting to $1 billion in commitments by the end of this year. With a higher-for-longer environment, are you still comfortable with that commitment level? Martin Grunst: A little context on DDA. DDA was pretty steady for us last year, and that rate-seeking behavior you had seen in prior years had come to an end. We typically see a seasonal increase at the end of the fourth quarter, which we did see, and then a seasonal decrease in the first quarter, which we also saw. We also saw a little bit of our commercial middle-market customers deploy some of their cash into their businesses, which is healthy for business growth. It has been several years since you have had a nice “normal” DDA pattern to look at, but what is typical for us—and to some extent the industry—is to see DDA climb more in the back half of the year than the front half as people build cash flows. That is our expectation for the year. Stacy Kymes: On mortgage finance, I think what we talked about was being at $1 billion in commitments by the end of the year, with roughly 50% of that committed amount outstanding. Given where we are in the newness of the business for us, I still feel good about that. There will be some seasonality; the second and third quarters tend to be pretty good, and it will track the broader mortgage business. We will not be perfect on the timing, but I still feel good about the target. David Chiaverini: Very helpful. Thank you. Operator: Your next question comes from the line of Matt Olney with Stephens. Please go ahead. Matt Olney: Thanks. I want to go back to the liability side of the balance sheet. In the deck, you mentioned you moved from wholesale deposits into more wholesale borrowings this past quarter. Can you expand on that strategy? And as a follow-up, how should we think about funding the loan growth from here in terms of core funding, wholesale deposits, versus borrowings? Martin Grunst: Good question. If you go back to Q4, after a couple of rate cuts and some market dislocation, we were able to find some deposits—technically deposits, but wholesale in the way we source them—at prices that were actually better than wholesale funding, which is rare. We put on a little over $1 billion of those deposits in Q4. We mentioned on the last call that would probably run off in Q1, and it did. That run-off is the main driver of the deposit decline from Q4 to Q1; it was an opportunistic wholesale deposit trade we did in Q4 running off. Going forward, at the loan-to-deposit ratio we have, we certainly have flexibility in how we fund. Our expectation is to see loan growth consistent with our guidance and history. Deposit growth will probably be a little bit less than that, but we do expect deposit growth this year. We can end with a slightly higher loan-to-deposit ratio at year-end. Generally, loan growth and deposit growth will be somewhat aligned, while knowing we have flexibility to let that float around a bit. Matt Olney: Yep. Makes sense. Thanks, Marty. Operator: Your next question comes from the line of Jared Shaw with Barclays. Please go ahead. Jared Shaw: Hey, everybody. Thank you. Marty, can you give the dollar impact of the loan fee reduction quarter over quarter that you called out? Also, are the trends you are seeing in customer hedging activity as we go through 2Q staying pretty strong? And finally, on the provision guidance for the year, should we think about equal contribution over the next three quarters, or is it a little more back-end weighted with growth? Martin Grunst: The loan fee impact is basically two basis points quarter over quarter. There is always a bit of noise, but broadly speaking that is a good growth area for us year over year. On provision cadence, you do not want to get too cute with quarterly, but given how the portfolio looks today, it is logical to think there is a little back-end weighting. The portfolio looks very clean today. You can usually have a little visibility into the next quarter or two; after that it is harder. That is the right way to think about provision. Scott Grauer: On customer hedging activity, with the volatility in the global setting, we have seen spurts of activity on the energy side. We have seen less activity on interest-rate hedging given a relatively stable rate environment, but we continue to see good demand across hedging opportunities, with the biggest focus being on energy. Jared Shaw: Great. Thank you. Operator: Your next question comes from the line of Woody Lay with KBW. Please go ahead. Woody Lay: Hey, thanks for taking my question. On expenses, they are very well managed, and it was good to see the run rate come in following some of the actions you took in the fourth quarter. You touched on the efficiency ratio being down a little bit. Is there conviction that you could be on the lower end of the stated range, or is it too early to tell given some of the hiring question marks? And then one more for me: you mentioned oil prices factored into the ACL. Can you walk through how that is included in your CECL model, and is there any risk that if oil prices normalize lower, it could require a catch-up provision in the future? Martin Grunst: We feel really good about how Q1 turned out in terms of a clean run rate for expenses. Looking into Q2, you will have a little bit as the rest of the merit increase flows through, with an offset from how payroll taxes play out. We are always looking to hire producers, as you know, but those are the main puts and takes. We feel pretty good about the guidance of the efficiency ratio in the 63% area. On CECL and oil, higher oil prices are supportive for the energy loan book—both collateral valuation and borrower cash flows—so that is a positive. There is also the impact of higher input prices on parts of the broader C&I book, which we recognize as an offset. Those are natural offsets in how we manage CECL. There is not a lot of risk, on a net basis, of that being a driver of an adverse future outcome if oil normalizes lower. Woody Lay: Got it. Makes sense. Thanks for taking my question. Operator: Your next question comes from the line of Brett Rabatin with Stonex. Please go ahead. Brett Rabatin: Hey, good afternoon, everyone. Back to guidance on fee income. I get that the change is partly a function of interest rates and how you account for the income, but the $820 to $845 million range—given the seasonal investment banking in the first quarter—it seems like that could have been higher. Are there any other businesses you are expecting not to grow this year, or other factors in that outlook? And then, Stacy, you talked about producer adds and possibly adding people with disruption. Do you have a net producer add number for the quarter? Lastly, on the decrease in provisioning for the year despite slightly better loan growth expectations—does that reflect better visibility that 2026 will continue to be fairly benign? Martin Grunst: We feel very good about the fee businesses. The trajectory is really good, and we are confident in the history and outlook across the board. One thing to remember is that in the trading business, part of that revenue shows up in the fee line and part shows up in the NII line. You really have to combine those when you think about the strength of the fee businesses. If you are looking at multiyear trends, some of that revenue may move into the NII line; you should recombine that to evaluate the business. Stacy Kymes: On talent, that is not the way we think about it. We think about adding A-level talent. We do not have a goal around adding a set number of net new producers each quarter. We have a perpetual goal of adding the best talent in every market we are in. Those discussions have been ongoing for years in many cases. As we have an opportunity to add talent, we do it. If it is not the A talent in the market, then we do not. We do not track it that way, so I do not have anything to report. On provision guidance, the reduction is pretty small and really just a reflection that we have already got one quarter behind us now. When I was in credit, I used to say the crystal ball is pretty good for three to six months, and then it gets foggy. With one quarter in the bag, we have a little more visibility, so we brought guidance down just a bit. It is not that different, really. Brett Rabatin: Great. Appreciate the color, guys. Operator: That concludes our question and answer session. I will now turn the conference back over to Stacy for closing comments. Stacy Kymes: To wrap up, the first quarter has set the stage with solid core operating results. Diversified loan growth, resilient fee performance, excellent credit quality, and disciplined expense management have us off to a strong start in 2026, and we are well positioned for growth as the year progresses. We appreciate your interest in BOK Financial Corporation and your willingness to spend time with us this afternoon. Please reach out to Heather King if you have any further questions at h.king@bokf.com. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation, and you may now disconnect.

27天前Insight Analytics约5分钟阅读

ALK 2026 Q1 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the Alaska Air Group, Inc. 2026 First Quarter Earnings Call. At this time, all participants have been placed on mute to prevent background noise. Today's call is being recorded and will be accessible for future playback at alaskaair.com. After our speakers' remarks, we will conduct a question and answer session for analysts. I would now like to turn the call over to Alaska Air Group, Inc.'s Vice President of Finance, Planning and Investor Relations, Ryan St. John. Ryan St. John: Thank you, operator, and good morning. Thanks for joining us today to discuss our first quarter 2026 earnings results. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Benito, Andrew, and Shane. Several others of our management team are also on the line to answer your questions during the Q&A portion of the call. Alaska Air Group, Inc. reported a first quarter GAAP net loss of $193 million. Excluding special items, Alaska Air Group, Inc. reported an adjusted net loss of $192 million. As a reminder, forward-looking statements about future performance may differ materially from our actual results. Information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding fuel. As usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release. Over to you, Benito. Benito Minicucci: Thanks, Ryan, and good morning, everyone. To start, I want to thank our more than 30,000 employees across Alaska, Hawaiian, and Horizon for their continued focus, professionalism, and commitment to taking care of our guests through another unpredictable start to the year. The operating backdrop shifted rapidly this quarter. Sharply higher fuel prices driven by geopolitical events created uncertainty across global markets and meaningful pressure on the airline industry. At the same time, our network faced more disruption than normal, from once-in-a-generation rainstorms in Hawaii to civil unrest in Puerto Vallarta. Through it all, our teams have demonstrated remarkable resilience. Their response day in and day out remains the foundation of our performance and long-term success. While these events created close-in challenges, we remain convicted and excited about our strategy and the future we are building at Alaska Air Group, Inc. as we continue to unlock the initiatives we laid out under Alaska Accelerate. Throughout our history, we have leaned into periods of disruption to strengthen the company. After the 2001 downturn, we built a transcontinental network. Coming out of the 2008 financial crisis, we established our Hawaii franchise. And most recently, following the COVID pandemic, we acquired Hawaiian Airlines, secured more than 50% market share in Hawaii, and launched long-haul international travel out of Seattle. Each of these moments shaped who we are today. The near-term pressure facing the industry today is real. Fuel costs were more than $100 million higher in the first quarter, and we expect incremental fuel costs of $600 million or more in the second quarter. That represents approximately a $0.70 impact to earnings per share in Q1 and over $3 in Q2. Offsetting some of that pressure is a strong demand backdrop with fare increases holding—Andrew will share more in his comments. Importantly, our position of strength allows us to manage through environments like this while continuing to build long-term earnings power. Today's backdrop reinforces why we designed Alaska Accelerate the way we did: to create a structurally stronger, more diversified, and more resilient airline capable of delivering value across cycles for our owners, employees, and guests. Scale, relevance, and loyalty with an emphasis on premium experiences and international travel remain central to that foundation. And while fuel volatility may dominate near-term headlines, the initiatives most critical to our trajectory remain firmly within our control, and we will continue to execute on them because it is the right strategy. Now turning to the business, we continue to make meaningful progress on Alaska Accelerate, advancing our priorities and not standing still, even in a challenging environment. From an integration standpoint, we've completed preparations for our single passenger service system cutover, our final major guest-facing milestone. Beginning tomorrow, our systems will operate on a single platform, eliminating the friction of a dual environment. This is a significant moment for Alaska Air Group, Inc. We are moving forward with our combined and globally expanding network and award-winning loyalty program and premium offerings across our entire fleet. Along with the PSS cutover, Hawaiian Airlines has officially joined oneworld, expanding benefits for our loyal guests in Hawaii, attracting new oneworld guests onto the Hawaiian brand, and extending our global reach to meet the full range of business and leisure travel needs. Our network continues to grow as we connect our guests to the world. We launch Rome next week and London and Reykjavik later this spring, all tracking toward full flights. I could not be more excited to see the Alaska brand set foot in Europe for the first time in our 94-year history, marking a major milestone in becoming the fourth global carrier in the United States. At the same time, our premium and guest experience continues to improve. Premium retrofits on our 737 fleet are now more than 90% complete, increasing our share of premium seats across the network and driving higher premium revenue. Our entire regional fleet is now retrofitted with free Starlink Wi-Fi and Boeing 737 installations are underway, further enhancing our end-to-end guest experience. Guest satisfaction has already improved 15 points across all Starlink-equipped aircraft and nearly 30 points on regional jets. Another core pillar of Alaska Accelerate—our loyalty platform—continues to gain momentum. We recently agreed to a multiyear extension with enhanced economics and a deeper partnership with Bank of America, supporting continued growth in our loyalty ecosystem and reinforcing loyalty as one of the most powerful earnings drivers in our business. We're also pleased to have reached an agreement with Amazon that eliminates losses under the legacy Hawaiian terms and creates mutual value as the relationship evolves, with still more to do. And finally, despite winter weather and severe rainstorms in Hawaii, we delivered the industry's number one on-time performance in the first quarter along with very high net promoter scores—another indicator that integration friction is in the rearview mirror for Alaska Air Group, Inc. Collectively, these initiatives are reshaping the composition of our revenues and making our business more durable. Today, more than half of our revenues come from outside the main cabin, driven by premium products, loyalty, cargo, and ancillary streams, and we expect that share to keep growing. To close, Alaska Air Group, Inc. is operating from a position of strength. We have a healthy balance sheet, strong liquidity, and a fleet and network that provides flexibility as conditions evolve. I want to reiterate my confidence in our people, our strategy, and our future. We are navigating this environment with discipline, clarity, and purpose. The challenges we are navigating today do not change our longer-term trajectory, our ability to achieve a $10 EPS target, or remain a top margin-producing airline. While the path is rarely linear, the direction is clear, and our conviction in where we are headed has not wavered. Airlines with caring and committed people, strong brands, loyal guests, disciplined cost structures, and financial flexibility are best positioned to emerge stronger, and I firmly believe Alaska Air Group, Inc. fits that profile. I will now turn the call over to Andrew for the financial results. Andrew R. Harrison: Thanks, Benito, and good morning, everyone. Today, I will walk through our first quarter financial performance, our perspective on the near-term demand and revenue environment, and the significant progress we are realizing on the core initiatives that underpin Alaska Accelerate. Total Q1 revenues reached $3.3 billion, up 5% year over year on capacity growth of just 1.7%. Our unit revenues were up 3.5%, in line with our initial expectations for the quarter and building on a strong prior-year comparison. From a demand and revenue perspective, performance in the first quarter was resilient despite the volatile macro backdrop and material demand headwinds uniquely impacting our spring break revenue given our network. Specifically, we experienced significant headwinds in Hawaii and Puerto Vallarta, which together represent approximately 30% of our system capacity. In Hawaii, unprecedented storms—with rainfall reaching as much as 3 thousand percent of normal historical levels during March—disrupted travel plans and drove a spike in cancellations and near-term book-away. In Puerto Vallarta, where Alaska Air Group, Inc. is the largest U.S. carrier, civil unrest leading up to the spring break travel period had a meaningful impact on demand as well. Together, these impacts reduced first quarter unit revenues by nearly one point, with effects continuing into April and May. In response, we have reduced Puerto Vallarta flying by approximately 30% in the second quarter to better align capacity with demand. In Hawaii, we have maintained near-term capacity as the severe weather was transitory. We are busy taking great care of local travelers and welcoming visitors with the Hawaiian experience they know and love, and this past week saw bookings return to last year's level on strong fare increases. Setting aside these regions, we saw broad-based strength across our network. Premium demand continued to outperform the system and was up 8% year over year. With over 90% of our premium fleet retrofits complete, we are on track to sell all 1.3 million incremental premium seats across the network ahead of the peak summer travel season. Encouragingly, first class revenue continues to produce positive unit revenues even as capacity increases 5%. Internationally, the Reliance AI network continues to drive strong results as guests are choosing to fly with us in more ways than ever before. Seattle–Tokyo reached profitability in March, less than a year after its launch, and load factors for both Seattle–Tokyo and Seoul exceeded 90%. We are extending this momentum with the launch of Rome next week followed by London and Reykjavik next month. Early booking trends are tracking in line with expectations, with demand building nicely and premium cabins performing particularly well. Notably, more than 70% of guests booked on our new Rome service are Atmos members, materially higher than the rest of our network. Managed corporate travel was exceptionally strong, up 19% in the first quarter. Our international expansion has meaningfully increased Alaska Air Group, Inc.'s relevance with corporate customers. As a result, we are competing for and in some cases exceeding our fare market share in business travel on these long-haul routes, particularly in the U.S. point of sale. We are also seeing improved domestic corporate relevance as global connectivity strengthens our value proposition for corporate travelers. Managed corporate demand remains robust in Q2 with held revenue over the next 90 days up almost 30%. We are seeing broad-based strength across all industries, in particular manufacturing, financial services, and technology, and are beginning to see traction through greater signups for small and medium businesses in our Atmos for Business platform. Turning to loyalty, growth remains a priority for Alaska Air Group, Inc. Every major initiative we are executing on is driving relevance and growth for our members. These large-scale enablers—such as the Hawaiian acquisition and resulting domestic and international network expansion, the launch of our Atmos Rewards platform, issuance of a premium co-brand card, and free Starlink Wi-Fi onboard for Atmos members—are all designed to accelerate growth across our portfolio and deepen engagement with our most valuable guests. And it is working. In the first quarter, we generated $615 million in cash remuneration from our co-brand cards, up 12% year over year, while active membership in the Atmos program grew by 13% year over year. Importantly, we are seeing particular strength in our Hawaii loyalty metrics, with double-digit year-over-year growth across members, new cardholders, and card spend. Over 70% of the Hawaii adult population is now enrolled in Atmos Rewards, reflecting the strong value proposition of our combined network and loyalty program, with two beloved airline brands and oneworld's expansive global connectivity. Spend from our Hawaii-based cardholders increased 19% year over year and now accounts for nearly 6% of the state's GDP. Our top-rated Atmos Rewards program is clearly resonating, attracting more guests, keeping them within our ecosystem, and reinforcing the strength of our loyalty flywheel. As we look to further accelerate the growth and relevance of our Atmos Rewards program, yesterday, we announced a long-term extension of our multidecade partnership with Bank of America. This newly expanded agreement delivers improved economics, all-new capabilities, and a significant step-up in marketing investment as we move to a single issuer of Atmos-branded co-brand products. Through 2030, the agreement secures an additional $1 billion of total cash remuneration while offering what we believe will be a step change in portfolio growth. These economics are incremental to what we shared as part of the Alaska Accelerate vision and go meaningfully beyond the $150 million of loyalty profit we targeted by 2027. We are grateful to the team at Bank of America for their longstanding and continued partnership. Turning to our outlook, we ended the year with one of the most prudent growth plans in the industry. The vast majority of our 2026 growth is concentrated in long-haul flying out of Seattle as we continue to build our new global hub and generate new revenue streams. At the same time, in response to the current fuel environment, we proactively trimmed nearly a point of capacity in May and June, including reductions in Mexico and select late-night departures in high-frequency markets. We now expect second quarter capacity to be up approximately 1% year over year—again among the lowest growth rates in the industry—comprised entirely of our long-haul international service out of Seattle. While our North America capacity is down slightly year over year, the overwhelming majority of our capacity remains deployed in core hubs where we have scale, relevance, and strong loyalty. As conditions evolve, we will continue to prioritize margins, consistent with the disciplined actions we took last year, when we were the first large airline to reduce capacity in response to a challenging macro environment. Demand has shown resilience in the face of higher fares. Incoming yields for continental U.S. markets have sustained an increase of 20%+ year over year in recent weeks, pushing held unit revenues in these regions to up double digits for the back half of the quarter. Given that we still have 35% of revenue to book in the quarter, and provided this demand continues, we would expect to see the system achieve high single-digit unit revenue gains with a path to 10% in Q2, despite an overall two-point drag from Hawaii-specific impacts in the quarter. To wrap up, while the near-term environment remains volatile, we continue to make strong strides on the initiatives that matter most to the long-term value of this business. And importantly, we are not standing still, as evidenced by our new co-brand agreement with Bank of America and the transition to a single passenger service system this week, which will unlock the depth and breadth of our guest products and services seamlessly across our global network. We are executing against Alaska Accelerate, improving the durability and quality of our revenue, maintaining prudent capacity discipline, and investing in areas that strengthen our earnings power over time. I remain confident that the actions we are taking today position Alaska Air Group, Inc. to emerge stronger as conditions evolve. With that, I will pass it over to Shane. Shane R. Tackett: Thanks, Andrew, and good morning, everyone. While we entered 2026 with strong momentum, geopolitical events have quickly disrupted that trajectory, driving an acute run-up in fuel prices that has put pressure on the entire industry. In moments like this, it is important to separate what has changed from what has not. Fuel has moved sharply higher and remains volatile. Demand for air travel has remained both resilient and strong. And we have continued to execute on both our integration and the Alaska Accelerate plan, which is focused on building strength into the business for the long term. While we are once again navigating an unexpected and challenging backdrop, we know that successful airlines will be those with scale, relevance, and loyalty. The Alaska Accelerate plan delivers in each of those areas, and also broadens our commercial model as we expand internationally and in our premium offerings—two areas where demand continues to grow rapidly. As we navigate the near term, we will double down on our core business model: operational excellence, high productivity, and providing award-winning service to our guests, while also delivering on continued investment in the initiatives that will grow our earnings over time. Against that backdrop, our first quarter adjusted loss per share of $1.68 came in better than the midpoint of our revised guidance, reflecting both the resilience of demand and the discipline with which we are managing the business. Absent fuel—which alone accounted for approximately $0.70 of incremental EPS pressure versus our original plan—and the impactful, though transitory, events in Puerto Vallarta and Hawaii that Andrew mentioned, we would have been well above the midpoint of our original guide. Our financial position also remains strong. We have approximately $2.9 billion of total liquidity, including cash on hand and our undrawn line of credit, and $20 billion in unencumbered assets. Net leverage was 3.3x, and our debt-to-capital ratio finished the quarter at 61%. During the quarter, we repaid $340 million of debt and we expect to repay $65 million in the second quarter. Given the dislocation in our share price in March and April, our share repurchases accelerated, bringing our year-to-date total to $250 million, which should more than offset dilution this year. We have $180 million remaining under our $1 billion authorization, but we will pause further repurchases to evaluate the outlook for the remainder of the year. Turning to first quarter results and the second quarter outlook, first quarter unit costs were up 6.3% year over year, in line with our expectations, as we lapped the final quarter of our new flight attendant CBA and experienced some pressure from winter weather and storms in Hawaii. Unit cost for the second quarter, given a close-in reduction of one point of capacity, will be modestly higher than our first quarter result. There are three areas driving this that are transitory in nature. These include the crew training costs for ramp-in of our 787 international flying, a headwind year over year given gains on the sale of our 737-900 fleet last year, and a planned employee recognition expense tied to achieving a single PSS system—the last major customer-facing milestone of the integration. There were several positive trends in our core costs in the first quarter as well, including strong improvements in both aircraft utilization and in productivity across our operation, which were achieved while moving back into the position of the industry's best operation. We also had strong performance in our maintenance division and positive trends in selling-related expenses, where we will continue to realize incremental synergies as we drive revenue growth. Our first quarter fuel price averaged just $2.98 per gallon, reflecting the initial increase in fuel cost that began in late February. We have seen refining margins more than double, and in Singapore, refining margins spiked more than 400% during the quarter. As a result, fuel sourced from Singapore—which historically has been consistently the lowest-cost portion of our supply—became the most expensive, impacting roughly 20% of our total consumption. Given how dynamic the current fuel price and demand backdrop are, we are suspending our full-year guide until conditions stabilize and we have better line of sight to earnings beyond the current quarter. For the second quarter, the range of potential financial outcomes remains wide and difficult to predict. In just the past seven days, fuel prices have moved to as high as $5.15 per gallon and as low as $4.45. Given this, we are providing more detailed information on closed-end unit revenues and unit costs than last quarter, where we focused our guide on an EPS range and capacity only. In the future, we plan to revert to EPS-focused guides as the long-term health and earnings capability of our business remains our top financial priority. For the second quarter, we expect unit cost to be about 1.5 points above our first quarter result given we have reduced one point of capacity close in. Unit costs will inflect down in Q3 and Q4 to low single digits. Assuming continued strength in demand—where the balance of bookings that come during the quarter are at currently observed yields—we expect a path to unit revenues of 10%. And for fuel, in April, we will pay approximately $4.75 all-in, and given the current forward curve, we would put the quarter average at $4.50 per gallon. As of today, we are recovering approximately one-third of incremental fuel. We are also assuming a 32% tax rate, though this could change meaningfully depending on both in-quarter performance and also our full-year outlook as we exit the quarter. Any tax accrual changes are not expected to have cash flow impacts, as we expect to not be exposed to cash taxes in the near term. These assumptions result in an EPS estimate of a loss of approximately $1 per share. It is important to step back from the immediate challenges of fuel price, as fuel alone is driving the change in our expected immediate financial performance, and we believe that will normalize over time. Fuel price assumptions are adding $600 million of expense versus expectation for the second quarter, which is a $3.60 impact to EPS alone. The underlying business model is strong, and we see it getting stronger with all of the work we are doing on the commercial side of the business. Absent the fuel price spike, we would have expected to be guiding to a solidly profitable quarter. And absent the transitory Hawaii headwind to RASK, we believe our unit revenue trends are as strong as others who have reported. While this is not how we envisioned starting the year, the underlying demand environment gives us confidence, and the work ahead of us is clear. We are now on the eve of our single passenger service system cutover—a peak integration milestone that, once complete, puts much of the integration friction firmly in the rearview mirror. That unlocks a simpler, faster-moving airline and allows us to fully turn our energy toward the opportunities in front of us. We remain fully committed to deepening the structural advantages that drive long-term success in this industry: scale, relevance, and loyalty. Over time, we expect our revenue profile to increasingly reflect that shift, with a growing share of premium, loyalty, and ancillary streams that provide greater earnings durability across cycles. We are building the right business model, making real progress on the areas within our control, and do not anticipate slowing down in that pursuit. With that, let's go to your questions. Operator: At this time, I would like to invite analysts who would like to ask a question to please press star, then the number 1 on your telephone keypad. Our first question today will come from Jamie Nathaniel Baker with JPMorgan. Jamie Nathaniel Baker: Hey, good morning. Good morning, everybody. So when thinking about the RASM commentary that you just gave—so let's just stick with that 10% round number. Obviously, year on year, there are a lot of initiatives that are impacting that, plus some headwinds in Hawaii, which you laid out. I guess the question is, if we looked at same-store RASM in the second quarter, what do you think that number would look like relative to the 10% path that you've cited? Andrew R. Harrison: Sorry, Jamie, if I am quite understanding your question—when you say same store, is year over year, which is sort of what we gave you; capacity, I think, was marginally consistent year over year. I am just trying to understand specifically—are you asking about synergies and initiatives impact? Well— Jamie Nathaniel Baker: Yeah. So basically, it is what that 10% RASM number would look like without the synergies and the initiatives, just to get down to sort of the core. So that is the question. What would the core RASM be without the synergies and initiatives that you have cited? It is a RASM question, not capacity. Andrew R. Harrison: Sure. It is probably, you know, a couple of points. But again, some of these things like loyalty are just embedded in the core of our revenue now. But I would say a couple of points, just to give you an answer on that. Jamie Nathaniel Baker: Okay. And then second, it is a quick question. On the PSS cutover, I know you were drawing down reservations on the outgoing system. Is the number of PNRs that you have to port over, I guess by hand, consistent with what your expectations were? Andrew R. Harrison: Yeah. Actually, it was a very small number, I think 10,000—give or take on that. But essentially, we drained down the vast majority of the system. And at 6:30 a.m. Eastern Time this morning, our Incheon–Seattle, our Haneda–Honolulu, and now our JFK–Honolulu check-ins have already started, and passengers are already booking in, and things are going fantastically. Jamie Nathaniel Baker: Excellent. Thank you for the color. Appreciate it. Benito Minicucci: Thanks, Jamie. Operator: And our next question will come from Conor T. Cunningham with Melius Research. Hi, everyone. Thank you. Conor T. Cunningham: Shane, maybe I could jump to you. I was hoping you could unpack the puts and takes on the second-half cost trajectory. I realize you called out a fair bit of near-term headwinds. I am just trying to understand how those potentially roll off, and then maybe just directionally how you see each quarter. The only reason why I bring that up is that comps are all over the place. So any help there would be good. Thank you. Shane R. Tackett: Yeah, hey, Conor. Thanks, appreciate the question. Happy to unpack this a little bit. I just want to reiterate—and we said much of this in the script—but just to frame: in the second quarter, we are a bit up from the first quarter. I think there are three to four points in the second quarter that are not really structural to the business. We cut one point of capacity close in. That is always tough to remove the costs when we do that, though it was totally the right thing to do. We have got a point of buildup of crew for our 787 Seattle international flying. That is going to normalize in the business as we begin this flying in earnest out of Seattle, which starts here in a couple of weeks into Rome and then throughout the summer. We do have some planned recognition for employees, given all they have been through over the past year and a half or so with integration. And we are lapping some asset sales from last year. So structurally, the core business is not at closer to the 8%, but probably more like 4% to 5% on a really low growth rate. In the second half, what you are going to start to see—I do think a lot of this is enabled by getting through this last PSS integration milestone—we really are at peak friction over the last couple of quarters with integration, and now we can go to peak focus on optimizing the airline. Unit wages will exit the year at a rate that is equivalent to or lower than our Q4 2025 results. So we are starting to see productivity really tick up; there is more to come. We have got a lot of fleets; we have got a lot of opportunity over time to continue to right-size the network, the banking in our airports, and ultimately rationalize the fleets over the next several years and accrue some more productivity gains through those efforts. Our third-party costs for the operation—where we use partners to manage ramp and manage airports—are down on a unit basis, and will continue to reduce on a unit basis through the second half of the year. We are absorbing all of the core inflation in those contracts through just getting more productive with those partners. Aircraft maintenance per block hour—you will see continue to perform well throughout the second half. Aircraft maintenance is always a little bit spiky; it will go up and down quarter over quarter with volumes, but we expect 2026 in total to be less on a per block hour basis than it was last year. We mentioned in the script we have structurally lower cost of revenue through selling expenses and, even though selling expenses likely rise with much higher revenues and fares, on a unit basis they are lower cost than they were pre-integration. Those are a few of the areas. The places where we have challenges that are more structural, we have talked about—there is nothing new. Airport costs: we have generational investments in the West Coast, very similar to the rest of the industry. Those are still normalizing into the cost base and will be for the next couple of years. And then we have these buildup costs that are really related to transforming the airline into an international player in Seattle. Obviously, I mentioned crew, and then we have some guest-facing costs as well. The last thing that we have in front of us is joint CBAs. We need to bring the Hawaiian employees up to Alaska rates. There is no real timing on that; I think the backdrop makes some of those discussions probably spread out a little bit. But the last thing I would say—nothing that we see in the cost side of the business is a surprise to us. And we actually see most of the areas that we are really focused on performing better, and over time really starting to gain traction. I think you will see that in the third and fourth quarter of the year, and we will have a lot to say about it when we get to those earnings calls. Conor T. Cunningham: That was a very detailed answer, thanks. And then, Benito, conviction level on the $10 figure still sounds really high. It sounds more like it is floating now rather than a 2027 number, and you can correct me if I am wrong there. But in an unpredictable environment over the past 15 to 16 months, what is working that gives you so much conviction there? It seems like international is better, loyalty is a lot better, but there are obviously a lot more headwinds associated on the cost side that are out there in the world. What gives you more conviction on this $10 figure long term? Thank you. Benito Minicucci: No, Conor, it is a great question—thanks for asking it. Look, from where I sit, absent fuel, our company is firing on all cylinders. When I look at Alaska Accelerate—when I look at each and every initiative that we laid out there—this company is executing. You look at PSS; this is a major, major milestone. We are executing it. It is going to be a flawless execution, and I feel really good. One of the things—and I am surprised we have not got the question yet—even with 2027, a couple of things: one, this new Bank of America deal—again, I am not sure if you caught it in Andrew's script—it is $1 billion of incremental cash over the next five years, which in 2027 will add a point of margin. We reworked the Amazon deal from losses to not having losses, and we have a little more work to do there as well. And then overall, I think if you believe that fuel prices will moderate—I am not saying it is going to go back to what it was pre-crisis—but if they moderate and some of these fare increases are sticking, we are getting an average of, give or take, $25 on an average fare depending on the market. I believe we have a strong chance of coming out of 2027 and hitting that $10 EPS. Now I cannot tell you from where I sit today because the world is unstable. But as we get into the third and fourth quarter, we will have some pretty good line of sight to tell you where we will be. But I will tell you, if it is not 2027, it is coming. I have never been more convicted. Things are working. Our strategy is working. We are executing, and I feel really good about it. Conor T. Cunningham: Appreciate it. Thank you. Operator: We will move next to Andrew George Didora with BofA Global Research. Andrew George Didora: Hi, good morning, everyone. Maybe moving to demand a little bit. One of the bigger questions we get from investors is around demand elasticity. Based on your prepared remarks, it does not seem like there is much evidence of that at all. But first, are there any particular markets where you might be seeing some pushback on this higher price—obviously outside of, say, Hawaii or Puerto Vallarta? And second, if not, how do you generally think about demand elasticity in this environment? Are you thinking about positioning your network differently than what is planned today in order to get ready for that? Andrew R. Harrison: Hey, thanks, Andrew. I will just say on a personal note that of course there is elasticity in demand in my personal view. In fact, we have seen it here personally. We have had all these fare increases that have been great, and then our RM folks had to go in and manage some of the buckets down, and we found a really good sweet spot. So there is absolutely elasticity. But I think in the current environment it is well able to absorb the double-digit increases in the fare environment. People want to fly. The airplanes are full. So I think that is all good stuff. As it relates to the network, we are only really growing two to three areas. We are growing San Diego at around 20%. We are growing Portland in the high teens. And we are growing an international gateway. Those are all areas of opportunity and strength—loyalty, revenue, seat share—so we feel really good. And as I shared in my prepared remarks, the reality is that the only real absolute growth domestically—because the Portland and San Diego was moving seats around—is really international. We are just very excited, and we are seeing loyalty, fares, front cabin strength. We have a long way to go to get really proficient here, so it is really good. As we sit here today, as long as demand holds up, we feel really good about our network shape. And, Andrew, it is Benito—the other thing I will add to what Andrew said: we have a fantastic fleet now. What is different between before Hawaiian and post-Hawaiian is we have a much more diverse fleet that we can be more creative in exploring new markets where we see higher revenue potential. We have got 30 widebodies now, and that is a lot of dry powder for us to do some pretty novel things. There is a lot that we can and are going to do to make sure that we get the most revenue coming into this company. Andrew George Didora: Thank you for all of that. And then just my second question: obviously, industry consolidation has been in the headlines recently. You have been one of the very few acquirers over the last decade or so in the space. Do you think further consolidation is something Alaska Air Group, Inc. would want to continue? Benito Minicucci: Look, I think consolidation can only happen—having had the experience doing it—it has got a big hurdle, Andrew. It has got to be pro-consumer and pro-competitive. Those are the two hurdles that you have to get over with the DOJ, with the DOT, and a lot of other stakeholders. We know how hard it is to get past those two big hurdles. We have the experience. We know how to do it. But I am super excited about our organic growth plan. I am focused on a $10 EPS, and that is where we think a lot of value is going to come with our plan. Now look, our plan is always to look at what is good for our company and the stakeholders—the people who care about Alaska Air Group, Inc. What do our employees, customers, and our communities, as well as our shareholders, look for from Alaska Air Group, Inc.? And we will always make the right choice given that. Andrew R. Harrison: Thank you, Benito. Benito Minicucci: Thanks, Andrew. Operator: We will move next to Savanthi Syth with Raymond James. Savanthi Syth: Hey, good afternoon. Just curious—you mentioned long-haul operations and how Seattle is progressing. I was curious how the Hawaiian long-haul operation is progressing. Andrew R. Harrison: Hi, Savi. As you may recall, we made some adjustments to Hawaii. We discontinued Fukuoka. We discontinued Narita and moved that to Seattle. So on a year-over-year basis, it is improving. We are mostly left with Japan and Australia, and we continue to move unit revenue forward there. The other thing I should add is now the Hawaii long haul will welcome oneworld into the fold, which will give all these elite guests—whether it is Qantas or Japan Airlines—fantastic benefits. Savanthi Syth: Appreciate that update. And can I ask—you mentioned in the opening remarks improvements to the Amazon contract. Wondering if you could give an update on cargo in general. Benito Minicucci: Yeah, thanks, Savi. Maybe I will hit Amazon very quickly, and I do not know if Jason wants to say cargo in general, because I think it was a bright spot here for us in the first quarter. We have really enjoyed getting to work more closely with the folks at Amazon. We know them because they are neighbors of ours. We have folks who used to work at Alaska over there. So we have worked on deepening the partnership, and I think it is going well. The partnership is getting better. It is getting healthier. We are continuing to talk about how we can deepen it further in a way that is mutually beneficial. We had a nice update to the agreement that is in force today that helps us on the economic side, and we are hopeful that we can expand that through more partnership over time. Maybe just very quickly, Jason, because we are going to try to move to— Jason Matthew Berry: Hi, Savi. Just on the high level on the cargo piece, at the start of the year, we did get to our own single cargo system, which really allowed us to unlock that connectivity that we have been talking about, and we are really beginning to start to harvest from that. Savanthi Syth: Appreciate that. Thank you. Benito Minicucci: Thanks, Savi. Operator: Our next question will come from Scott H. Group with Wolfe Research. Scott H. Group: Hey, thanks. So historically, whenever we see fuel go up, RASM goes up a lot—we are seeing that right now. And then when fuel goes back down, usually RASM goes back down with it. Do you think it is different this time? Shane R. Tackett: I will take a shot at answering that, Scott. We believe there are a lot of reasons that it could be different this time. Fifteen years ago, we had different reasons—but a similar spike in fuel, a tough economy, structural changes in the industry—and then fares that were modestly higher coming out of it and actually did great from an earnings profile perspective for several years. The rapidity with which some of the fares have gone up and the stability with which bookings have held over the last several weeks suggest—like Andrew said—people really want to travel. When they have discretionary income, one of the priorities that they have, it would appear, is to go out and experience the world. Some of these fare increases—$10, $15, $20—on the total cost of a vacation is pretty modest. That is on the consumer side. It is really important that people on our airplanes feel like they have a lot of value for the fare that they are paying, and we are focused on investing in all of the experiences that we have throughout the entire aircraft, on the ground, and also digitally. We are conscientious about the incremental price being paid, and we need to deliver good value for that. On the other side, the industry structurally has to get healthier. You have got multiple airlines near failure before $4–$4.50 fuel, and that just does not work structurally long term. So I think there are a lot of factors that suggest this could be stickier, but we do not know. It is really dependent on how the economy unfolds over the next several quarters. Scott H. Group: And then just one quick follow-up. I think, Andrew, in an earlier question, you were sort of implying that of the 10 points of RASM, a couple of points is more company-specific or synergy—whatever you want to call it. Do you think that couple of points continues at that pace? Can it accelerate from here with the credit card deal? Does it naturally at some point start to slow? How do you think about that two points going forward? Andrew R. Harrison: Yeah, I think—I am just looking at my CFO and CEO here—that it is an imperative that it will continue. Jokes aside, we have dynamic pricing about to hit. We have got O&D coming. As I shared, the economics of the bank relationship—that $1 billion over the original term, which is going to happen—does not include actual incremental growth from our historic growth rates, which had started to flatten out. So overall, we absolutely still have the view that we can close the RASM gap to the industry and that we will continue our unique momentum on the revenue side. Shane R. Tackett: And, Scott, I would just remind: a lot of the initiatives’ value are to come. We are just completing the 800 remodels. We have not begun selling the full fleet of those. We have other things that we need to do in the widebodies, which are beyond 2027, but will be further initiatives that we control that are not really subject to the rest of the industry. So there are a lot of initiatives still to come for us to keep driving something like two points into the P&L for a while yet. Scott H. Group: Thank you, guys. Benito Minicucci: Thanks, Scott. Operator: Next question comes from Thomas John Fitzgerald with TD Cowen. Thomas John Fitzgerald: Hi, thanks very much for the time. Maybe just sticking with the bank deal again—you talked about it being a step change in portfolio growth. Can you elaborate on that a little more? And then put a finer point on the cadence and any benefit this year, and then in between the point of margin in 2027 and as you get to that $1 billion by 2030? Andrew R. Harrison: Yes, thanks, Tom. Maybe Shane will get the second part of that. Just to be clear, because it is a really important thing that is going on here, what is happening is that with our partner, Bank of America, this refreshed agreement—with many different elements in it that have changed—is going to help us realize the benefits of: number one, the acquisition of Hawaiian; number two, the launch of Atmos Rewards; and number three, the expansion of a long-haul network out of Seattle. We are already starting to see that, and of course the marketing investment—there is a big step change there. At the end of the day, the changes in Alaska Air Group, Inc.'s business and fundamentals, and the changes in the agreement, are going to create for us a much longer-term, wider pathway for growth in loyalty and especially in credit card, which, as you know, are very important to our economics. Shane R. Tackett: Quickly on the margin, it is roughly a half point of margin this year and a full point of margin next year. That is before what Andrew was just alluding to, which is portfolio growth that could be stronger than we are seeing today. That is our expectation, but we are not putting any of that into a forecast or guide at this point. Thomas John Fitzgerald: Okay, that is really helpful. Appreciate that, guys. And then thinking about some of the network initiatives—the growth in San Diego, the rebanking of Portland—would you mind maybe just running through your hubs, by RASM or profitability, and rank-ordering them? Where are you seeing the best performance and maybe room for improvement? Thanks again for the time. Andrew R. Harrison: Thanks, Tom. Those are questions we do not really answer, but obviously Seattle is our largest hub and Honolulu is our second largest. If you look at what we are doing, those are 40%, 50%, nearly 65%+ of our total capacity. We have got two large accelerants in both of those—Seattle with rebanking and global long haul, and in Honolulu and Hawaii in general with the integration and all the good things that come from that. We continue to feel really good about the improvement in the economics there. In places like Portland and San Diego, we believe our product, our customer service, and what we are offering will continue to be very valuable. Operator: Thanks, Tom. Our next question will come from Atul Maheswari with UBS Securities. Atul Maheswari: Good morning. Thanks a lot for taking my question. I had a question on costs. Is the back-half low single-digit CASM ex-fuel a good run rate for us to use for 2027 as well now that the PSS integration is behind us? Or are there any puts and takes specifically as it relates to 2027 on the cost side that we need to be aware of? Shane R. Tackett: Thanks, Atul. A couple of things. Our long-term view on growth is around 3% to 4%. We have not grown at those target rates for a couple of years. We think the core cost inflation in the business is 4% to 5%. So we need to ultimately get into the 3% to 4% range to have an opportunity to fully offset the core inflation. But there should be opportunities to go get at least a point of better unit cost performance through optimization of the business and through productivity. That is our thinking structurally about the business over the next year or two. We do have, as I mentioned before, joint CBA deals that are in front of us. It is hard to say if those will be in cycle or out of cycle with the rest of the industry as those other deals come up on other properties. But that would be the one outstanding area that we are going to have to ultimately get deals with our employees on and absorb those into the P&L. I do not think they are super material, but they are the one outstanding item that is nonstandard. Atul Maheswari: Got it, that is helpful. And then as my second question, I was reading some energy reports that global refining capacity is basically down 6% to 8% since the war started. How long can this disruption persist, in your view, before it causes real jet fuel availability problems in markets like Singapore where you source from? What are you seeing in that market right now, and how are you preparing the business should supply actually become an issue there? Shane R. Tackett: Thanks, Atul. I am going to answer as much as I can. We obviously are not the absolute expert on global oil supplies or refineries. We do understand our markets really well and our supply chain really well. We do not foresee any disruption anytime in the foreseeable future across our network. We are not sole-sourced out of Asia or Singapore into any of our markets, and if we need to supply Hawaii—just as an example—from the domestic market, that is totally within our ability to do so. Our hope is long term it normalizes, Singapore refineries come back on strong, and those costs return to where they were pre-conflict, as it was a really nice lower-cost source of fuel for us into the network. We would like to enjoy that structurally over time. We have also talked about this a bit—we need to work on the West Coast Jet-A supply issue long term. There is increasing desire to fly and demand for Jet-A, and we do not have the pipeline infrastructure or refinery infrastructure that the Gulf Coast or the East Coast has. That will take time, but it is something that we are focused on, and I think other airlines are starting to focus on along with us. Atul Maheswari: Thank you, and good luck with the rest of the year. Benito Minicucci: Thank you, Atul. Operator: We will move next to Catherine Maureen O'Brien with Goldman Sachs. Catherine Maureen O'Brien: Hey, good morning, everyone. Thanks for the time. Maybe just on some of the route network changes—you noted that the Seattle-to-Tokyo route has already reached profitability, and load factors are really strong. Can you speak to the profit swing from moving those aircraft from more leisure-focused Japan point-of-sale flights to more mixed travel purpose U.S. point-of-sale? How big of a bottom-line impact was that in 1Q, or any way to think about what that swing could look like, and how that is ramping versus your expectations back when you announced the transaction? Thanks. Andrew R. Harrison: Yeah, thanks, Katie. High level, what I will tell you is—and we track this as part of our synergies—the movement from Honolulu–Narita to Seattle–Narita has driven a meaningful increase in the profitability of that route. Of course, it accrues significantly to our loyalty base and corporate base. We are already seeing numbers there. It has really helped us, from a network perspective, invest and continue to grow Seattle. So I think that has been a very good move. Shane R. Tackett: Katie, I do not think we have priced the losses that were associated with the aircraft we were using for these markets, but they were in the tens of millions. So it is a meaningful change to the underlying economics of the company. Catherine Maureen O'Brien: That is great. Maybe just a follow-up on the corporate angle here. On the 19% managed corporate revenue growth, is it possible for you to break out what the domestic growth was versus the total? I am just trying to get a sense of how meaningful layering in that international connectivity is. And do you have enough international flying to maybe try to go after additional share in an extra round of corporate negotiation? Andrew R. Harrison: Yeah, thanks, Katie. To put this in perspective, the vast majority of all of our managed corporate travelers is obviously still North American domestic, and we will probably give a little bit more visibility over time. What I can tell you—obviously London is going to be huge—but we are already seeing, as a percent of our managed corporates, that it is a very low percentage, but it is already moving up and revenue is multiple points ahead of the actual passenger share as well. More to come—we are in very early innings here. As we get these all launched, and single passenger service system and loyalty and all the rest of it, we will have a lot more exciting things to share, but it is headed in the right direction. Catherine Maureen O'Brien: Great, thanks for the time. Operator: Our next question will come from Brandon Oglenski with Barclays. Brandon Oglenski: Hey, good morning, and thanks for taking my question. Benito, I appreciate the confidence in hitting $10 at some point here. But at the same time—it is different issues—but it is the second year that we are talking about fuel prices and specifically West Coast challenges. I think maybe Shane hit it there that longer term there could be an issue here. How are you positioning your business, from a commercial perspective, to potentially deal with a higher differential on the West Coast? Benito Minicucci: Brandon, it is a great question. If you would have asked me three years ago with the standalone Alaska, it would have been a lot more difficult. But now, we have flying to different geographies and we have the airplanes to access any part of the world today. What gives me confidence is: every year, there is something happening in the world where you have to pivot and move the business somewhere else, and I think we are becoming good at it. We are getting through this acquisition. This acquisition is making us a more resilient, bigger, stronger airline, and we will have—from what I believe are strong hubs that we operate from—relevance and loyalty to build on those networks. I am confident. I cannot predict the future, but I can predict the way we are executing. I know what we have: we have a phenomenal group of employees who are excited, we have great assets, we have a great balance sheet, and we have a track record of delivering and executing. That is what gives me confidence. I am not going to predict the future, but I am going to bet on Alaska Air Group, Inc. Shane R. Tackett: Brandon, just on the second part of the question on fuel structure—and I alluded to some of it—I think long term, we do think Singapore is going to be a nice, stable source of much lower-cost fuel than Gulf Coast. We were doing 20% of our fuel from there, and we like the idea of moving that up materially, maybe even to 30% or 40% over time. The other thing we are doing is, with some partners, working on building infrastructure here in Seattle to be able to take tanker fuel into Seattle, which would be a game changer for us in terms of the supply chain. I think there is a lot of interest in ultimately getting that work done. These are long-tail investments, though, so it is nice to talk about them, but it is probably a ways away before we structurally resolve this. One last reminder: we have had a $0.10 to $0.15 fuel disadvantage structurally for our entire life out here on the West Coast. This is not new for us, and even with that, we have been able to outperform most of the industry on margins over time. Brandon Oglenski: Appreciate those responses. And just maybe really quick for Andrew, is the new co-brand deal included in your RASM guide for the quarter, or should we expect those benefits to actually ramp later in the year? Thank you. Andrew R. Harrison: The agreement is reflected in the second quarter results as it ramps in and, as Shane mentioned, it is roughly a half point of margin this year ramping to a point of margin on the structural changes, and I think we can do even better than that. Brandon Oglenski: Thanks. Benito Minicucci: Thanks, Brandon. Operator: We will move next to Duane Thomas Pfennigwerth with Evercore ISI. Duane Thomas Pfennigwerth: Hey, thanks. Just on pilot training, can you speak to changes across the two segments? You said you are back to growing Alaska, but overall growth is flattish. Maybe speak to what is growing versus what is shrinking. And what are the drivers of increased pilot training costs? Is this all aircraft that are coming over from Hawaiian? Is attrition a component? And when do you expect that to normalize? Shane R. Tackett: Thanks, Duane. A few questions on pilot training. It is not attrition—attrition is effectively zero absent retirements. We have normal retirement patterns; we are not seeing our folks leave for other airlines. The majority of this in Q1 on a year-over-year basis is really building up the Seattle international flying. We have announced and have opened a pilot base here in Seattle on the 787. That flying takes more pilots per flight than Honolulu to the West Coast—even on a widebody—would have taken. So we have just got to get that ramped up into the base, get the flying started, and then it will normalize on an annualized basis as we take one or two 787s per year over the next few years. On the Alaska side, coming out of the last couple of years, we had room in our productivity within the current number of folks we had on the property for Alaska, and we are back to starting to look forward to taking incremental units throughout the back half of the year—you have got to train early to get ready for summer flying. So we have got some modest incremental costs year over year on the Alaska training side. Duane Thomas Pfennigwerth: Thanks. And then just a quick follow-up on cargo. Can you frame how big of a headwind it was to your recent results? And is the goal to get this to breakeven or something better than that? If the goal is breakeven, then why do it? Thank you. Shane R. Tackett: Thanks, Duane. I will not share the specific economics on the freighters. But no—we are not aiming for breakeven. If we are going to put time into flying aircraft around, we feel like we need to earn a reasonable margin, not a breakeven margin. That is not our philosophy in terms of investment. We will be focused on generating decent returns on this flying. Over the next year or two, we are excited—regardless of the freighter contract—about the opportunities with belly cargo on the widebodies, the opportunities to continue to grow our own freight market share up in the state of Alaska and along the West Coast, and we are anxious to talk more about that over the next year or two. Appreciate the question, Duane. Benito Minicucci: Alright, everybody. Thanks for joining us, and we will talk to you next quarter. Operator: This does conclude today's conference call. Thank you for attending. You may now disconnect. The host has ended this call.

27天前Insight Analytics约5分钟阅读

HAFC 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, welcome to Hanmi Financial Corporation's First Quarter 2026 Conference Call. As a reminder, today's call is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Ben Brodkowitz, Investor Relations for the company. Please go ahead. Ben Brodkowitz: Thank you, operator, and thank you all for joining us today to discuss Hanmi's First Quarter 2026 results. This afternoon, Hanmi issued its earnings release and quarterly supplemental slide presentation to accompany today's call. Both documents are available on the IR section of the company's website at hami.com. . I'm here today with Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation; Anthony Kim, Chief Banking Officer; and Ron Santarosa, Chief Financial Officer. Body will begin today's call with an overview Anthony will discuss loan and deposit activities. Ron will provide details on our financial performance, and then Bonnie will provide closing comments before we open the call up for your questions. Before we begin, I would like to remind you that today's comments may include forward-looking statements under the federal securities laws. Forward-looking statements are based on current plans, expectations, events and financial industry trends that may affect the company's future operating results and financial position. Our actual results may differ materially from those contemplated by our forward-looking statements, which involve risks and uncertainties. A discussion of the factors that could cause our actual results to differ materially from these forward-looking statements can be found in our SEC filings, including our reports on Forms 10-K and 10-Q. In particular, we direct you to the discussion of certain risk factors affecting our business contained in our earnings release, our investor presentation and on our Form 10-Q. With that, I would now like to turn the call over to Bonnie Lee. Bonnie? Please go ahead. . Bonita Lee: Thank you, Ben. Good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2026 results. Hanmi delivered strong financial results as key metrics in the first quarter as we consistently advanced our core initiatives and executed against our growth strategy. In the first quarter, a seasonally slower period for loan production, we delivered solid results, supported by strong C&I originations and ongoing expansion of a new full-service commercial banking relationships. At the same time, we maintained a disciplined underwriting and pricing standards. We also executed effectively on our deposit gathering initiatives, generating strong growth in total deposits while continuing to reduce our overall cost of funds. . Combined with the favorable spreads on new loan production relative to payoffs, we generated net interest margin expansion for the seventh consecutive quarter. This strong execution, combined with our disciplined expense management, led to robust growth in net income compared to the year ago period. Our performance highlights the success of our relationship-based banking model and the execution of our growth strategy. Now turning to some highlights for the first quarter. Net income for the first quarter was $22.6 million or $0.75 per diluted share, with a continued growth on both sequential and year-over-year basis. Net interest income increased from the prior quarter and net interest margin expanded by 10 basis points to 3.38% reflecting a lower cost of fund. Return on average assets and return on average equity during the quarter were 1.18% and 10.8%, respectively. Deposits grew 7% on an annualized basis and noninterest-bearing deposits remained healthy at approximately 30% of the total deposits. New loan originations were solid with the C&I loan production increasing by 64%. However, this was offset by higher-than-normal payoffs, which led to a slight decline in total loans. We continue to maintain excellent asset quality driven by focus on high-quality loans, disciplined underwriting standards and found credit administration. Nonperforming assets decreased by 38%, representing 0.6% of total assets. Our disciplined focus and risk management continues to produce positive outcomes. During the quarter, we successfully collected a sizable payment for nonaccrual loans and sold 2 OREO properties for net gain. Turning to our Corporate Korea initiative. The relationships our dedicated bankers have established have driven deposit growth from these customers, resulting in an increase of 10% this quarter. Due to ongoing uncertainty about the impact of tariffs, loan activity remained muted. Our focus on disciplined expense management continues. Noninterest expense decreased by 2% for the quarter primarily driven by the gain on the sale of real estate on lower salaries and benefits and advertising and promotion expenses. Importantly, our efficiency ratio further improved by 150 basis points to 53.5% from 55%. Our strong financial performance drove improvement in all capital ratios while we returned significant capital to shareholders in the form of dividends and share repurchases totaling $13.4 million this quarter. We remain well passioned to advance our growth strategy and deliver attractive shareholder returns. Clearly, geopolitical conflicts may have economic implications for the global economy. However, at this point, we have not seen any impact on our business nor our clients' businesses. We have had a strong start to 2026 and believe we are well positioned to build on this momentum in the months ahead. The strength and consistency of our operational performance underscores the effectiveness of our relationship-based banking model and reinforce our confidence in the strategy we are executing. I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss our first quarter loan production and deposit date. Anthony Kim: Thank you, Bonnie and thank you for joining us today. I'll begin by providing additional details on our loan production. First quarter loan production was $378 million, up $3 million or $0.08 from the prior quarter with a weighted average interest rate of 6.54% compared to 6.90% last quarter. The increase in loan production was primarily due to an increase in C&I and CRE while residential equipment finance and SBA declined from fourth quarter levels. Our disciplined underwriting approach ensures we only engage in opportunities that align with our conservative underwriting standards. C&I production was $135 million, an increase of $53 million or 64% from the prior quarter. The increase was primarily driven by the investment we made in our C&I teams and our strategic efforts to further expand the portfolio. CRE production was $131 million, an increase of $6 million or 4% CRE is now 61% of total loans, which is the lowest it has been in at least a decade. We remain pleased with the quality of our CRE portfolio. It has a weighted average loan-to-value ratio of approximately 47% and a weighted average debt service coverage ratio of 2.2x. SBA loan production declined $3 million from the prior quarter to $41 million, in line with historical ranges. The steady production reflects the strength of our key hires and the momentum we are building with the small business clients across our markets. During the quarter, we sold approximately $33 million of SBA loans. Total commitments for our commercial lines of credit were over 1.3 billion in the first quarter, up 3% or 14% on an annualized basis. Outstanding balances increased by 10% and resulting in a utilization rate of 43%, up from 40% in the prior quarter. Residential mortgage loan production was $29 million for the first quarter, down 59% or $41 million from the previous quarter. Residential mortgage loan represents approximately 15% of our total loan portfolio, down from 16% in the previous quarter. We sold 32 million residential mortgages during the first quarter, resulting in a gain on sale of $0.5 million. We'll continue to evaluate additional sales contingent on market conditions. Corporate Korea accounted for $28 million of total loan production. US KC loan balances were [ $88 million ], down $44 million or 5% from the prior quarter and represent approximately 12.5% of our total loan portfolio. Turning to deposits. In the first quarter, deposits increased 2% from the prior quarter, driven primarily by growth in interest-bearing deposits and a modest increase in noninterest-bearing demand deposits. Deposit balances for US KC customers increased by $107 million or 11%, surpassing $1.1 billion. At quarter end, Corporate Korea deposits represented 17% of our total deposits and 16% of our demand deposits. A little over a year ago, we opened a representative office in Seoul, South Korea marking a key milestone in Hanmi's USKC strategy. Through this office, we're deepening in relationships and supporting these customers as they expand into U.S. market. combined with our Korea desk across the major U.S. cities, this initiative has played an important role in growing our US KC deposits. The competition of our deposit base remained stable, reflecting the strength of our relationship banking model. At the end of first quarter, noninterest-bearing deposits remained healthy at roughly 30% of total bank deposits. Turning to asset quality, which remains strong. Delinquencies declined 25% to 0.20% of total loans from 0.27% in the prior quarter. Nonperforming loans declined 31% to 0.19% of total loans from 0.28% in the prior quarter, primarily driven by a $9.7 million payment received and $10.2 million nonaccrual loans. The performing assets declined 38% to 0.16% of total assets from 0.26% in the prior quarter reflecting the aforementioned payment and the sale of 2 properties that entered OREO status during the third quarter of 2025. These properties were sold for a net gain of $0.8 million in the first quarter. During the quarter, a $21.2 million was downgrade to special mention and a $5 million loan was downgraded to Class 5. These boundaries were borrower specific and not indicative of broader portfolio trends. Both loans remain current and are paying as agreed. Importantly, these actions reflect Hanmi's disciplined approach to early risk identification focused on achieving timely and optimal outcomes. And now I'll hand the call over to Ron Santarosa, our Chief Financial Officer, for more details on our first quarter financial results. Ron? Romolo Santarosa: Thank you, Anthony, and good afternoon. Pre-provision net revenue for the first quarter increased to $33.4 million or 4.1% from the fourth quarter, with all 3 components of PPNR contributing nicely to the growth. First, interest revenue increased 0.5% and net interest margin expanded by 10 basis points to 3.38%. Next, noninterest income was up 2.9% and noninterest expense declined by 1.9%. Looking closely at net interest revenue for the first quarter there was a $1.6 million net benefit from lower interest rates, offset by a $700,000 effect from a lower level of interest-earning assets and an $800,000 effect from 2 less days in the period. . Turning to net interest margin. It increased by 10 basis points, primarily reflecting a 16 basis point decline in the average cost of interest-bearing deposits. For the second quarter, we do not expect a similar decrease in the average cost of interest-bearing deposits. The April month-to-date average cost of money market and savings deposits is about the same as it was for the first quarter. The April month-to-date average cost of time deposits, however, is 10 basis points lower, bringing the average cost of all interest-bearing deposits to only about 5 basis points lower than that for the first quarter. Noninterest income increased 2.9% to $8.5 million, primarily from higher SBA loan sale gains with a higher volume of loans sold and higher trade premiums. Noninterest expense declined 1.9% to $38.4 million, principally due to the gain from the sales of 2 OREO properties where we had OREO expenses in the prior period. As expected, advertising and promotion expense declined from their fourth quarter seasonal high while professional fees and data processing charges increased due to higher activity in the quarter. Salaries and benefits declined as adjustments to performance and equity-based compensation plans more than offset the seasonal increase in employer taxes and benefits. The decrease in noninterest expense and the increase in revenues resulted in an efficiency ratio of 53.48% for the first quarter. Hanmi's effective tax rate for the first quarter was 26%, reflecting both the tax benefit from the first quarter's vesting of equity-based compensation and the lower California apportionment factor. We expect the effective tax rate to increase in future quarters, eventually bringing the annual effective tax rate to approximately 27% for the year. During the first quarter, Hanmi repurchased $4.8 million of common stock under the share repurchase plan, representing 185,707 shares at an average price of $25.89. At the end of the first quarter, 2.15 million shares were available under the plan. In addition, Hanmi bought $1.1 million of common stock from employees to satisfy their tax liabilities upon the vesting of their restricted stock and performance stock awards. Hanmi's tangible common equity per share increased 1.1% to $26.56 per share and the ratio of tangible common equity to tangible assets increased 12 basis points from 9.99% to 10.11%. With that, I will turn it back to Bonnie. Bonita Lee: Thank you, Ron. We believe the favorable trends that we have seen in our business positions as well to deliver strong shareholder results in 2026. Our priorities and expectations for 2026 remain unchanged from what we communicated on our last earnings call. We expect loan growth in the low to mid-single-digit range while continuing to prioritize further diversification across the portfolio. Our focus remains on growing deposits to support loan growth while preserving a stable well-balanced funding profile. Key priorities include deepening existing customer relationships, attracting new clients and further strengthening our core deposit base with a particular emphasis on growing noninterest-bearing deposits. We remain committed to disciplined expense management. While we are making selective investments in talent and technology to support our long-term growth strategy, we continue to operate efficiently emphasizing initiatives that enhance productivity and maintain cost discipline across the organization. Finally, we'll continue to take a prudent approach to credit management to preserve strong asset quality. Conservative underwriting practices, active portfolio oversight and rigorous risk analysis remains central to our operating philosophy and will guide our decision-making as economic conditions evolve. We are encouraged about the opportunities ahead and look forward to keeping you updated on our ongoing progress. Thank you. We'll now open the call to answer questions. Operator, please go ahead. Operator: [Operator Instructions] Our first question is from Matthew Clark with Piper Sandler. This is Adam Kroll on for Matthew Clark. Adam Kroll: Yes. So maybe just starting out on loan growth, had solid loan production during the quarter, and I see the breakdown in the deck that just shows the strong growth in C&I during the quarter, I guess, -- was there any specific industry or geography driving that? And then do you expect C&I to be the main driver of the low to mid-single-digit growth for the year? Bonita Lee: Yes, sure. We do expect the C&I to be the focus, continuing with our portfolio diversification. but we expect the growth to come from other portfolios as well. As far as the C&I production during the first quarter, it's pretty fairly broad-based in terms of different business types and industry. Adam Kroll: Got it. I appreciate the color there. Maybe switching to credit. I was just wondering if you could provide any additional color on the retail loan that migrated to special mention or the hospitality loan that migrated to class during the quarter and maybe how you see the situation playing out? Bonita Lee: Sure. So first of all, we did have $1.2 million loans to the initiative and downgraded to special mention. This is a retail commercial real estate loan. First of all, loan is current with past due payment history. Loan was downgraded due to the loss of 1 of their major tenants. However, despite of the vacancy of this tenant, the property continues to generate sufficient income to service the debt. And further, this credit is supported by personal guarantees with a substantial network. So accordingly, at this time, we do not expect any loss from this particular credit. The second credit, which is a $5 million substandard credit. It is a C&I loan in the hospitality industry. . The subject business was impacted by extensive renovation construction of hote where the subject business is located. As the construction is complete, we expect performance to improve to support the stability during the slow period, the modification was granted, and we downgraded the loan. The sponsor on this credit has a substantial experience and the network. So loan is paying as agreed under the modification, and we do not expect the low fund coming from this credit at this time. Adam Kroll: Got it. I really appreciate the color there. Last 1 for me is just -- do you expect to remain active on share repurchases, just given your healthy capital levels and just where the shares trade today. Romolo Santarosa: Yes, Adam. I think looking at the strength of the balance sheet, the excellent asset quality, the trends of earnings. I think it's fair to anticipate the Board will continue probably in amount not too dissimilar from what we saw in the first quarter. Operator: Our next question is from Kelly Motta with KBW. . Kelly Motta: Thanks for the question. Maybe to kick it off on expenses, these were very well controlled in what's usually a seasonally higher quarter with payroll taxes and whatnot. As you look ahead with your strategic plan, can you remind us any planned investments you have for the year? And if there's any kind of puts in case of this $38 million level that we should be considering as we think through the run rate as we go ahead. . Romolo Santarosa: Kelly, I -- we do not have any, I would consider significant notions relative to expenditures. I would characterize them as ordinary. That said, in looking at the somewhat favorable counterbalancing of seasonal effects. I have a sense that we'll probably continue at the first quarter trend with some things that I know will happen, but I couldn't tell you which direction they're going to go in. But I would think the first quarter is a fairly indicative idea of how we may play out for the rest of the year. Kelly Motta: Okay. Okay. That's helpful. And how about the pipeline for SBA? I think there's been some rule changes there. Just wondering, it looks like it was a pretty solid quarter for gain on sale, but wondering if there's any anticipated impact from changes in kind of the pipeline there. Bonita Lee: Yes. So we gave a guidance of $45 million to $50 million. In certain quarters, the seasonally high quarters we give 50 million to 55 million per quarter. Given the guideline change and the eligibility for SBA loans, we're going to continue with the $45 million to $50 million range of SBA production. Kelly Motta: Okay. Very good. Got it. maybe lastly for me. I mean, you guys have had some migration into the special mention. And I think notably, as you did note, they're paying aired highlights our proactive nature. As you survey your customer base, like how are you feeling now versus say, a year ago? And any kind of notable changes in terms of what you guys are watching more carefully? And what gives you confidence in ultimately the low level of loss content in that book? Bonita Lee: Sure. As we proactively review and communicate and our loan customers, including what's coming for the renewal trade customers, in terms of overall trend, particularly on the small businesses or consumer loans like residential mortgage loans, we don't see the negative trend compared to last year -- last quarter. The migration that I have for us, this is really due to our very we're taking the initiative and look as we communicate with each individual customers and the lows that have migrated, it's very specific to to the customer, specific to this relationship, for example. As I had mentioned, the construction from the -- where the business is located at it's very unique to customer specific, not formation any type of trend. And as we proactively work on the renewals, some of the actually payoffs, the higher payouts, they experienced in the first quarter as we look at the trends, if we are concerned of a certain trends, we communicate to the customers early on. and we ask customers to pay up the loan. So that has been done that as well. So -- and we're looking at through across our entire portfolio. So that's why in terms of just at a high level trend, we don't see the trend that's happening. So where that's where the comfort it. It's very borrower specific. And in our past, if you look at our history, some of the loans that we put on the special mention category, at 1 time, it was higher than the level that we are. We had a resolution we had to successfully resolved the most of the loans in the history for the last couple of quarters as well. So we are very optimistic for the loans that are in the downgraded category that we will aggressively work on these loans to to come to a resolution as evidenced by 1 of the nonaccrual loan, $10 million, that was a noncosts, we had a successful collection of $9.7 million. of that $10 million nonaccrual this quarter. So we'll continue with the process. Operator: [Operator Instructions] Our next question is from Ahmad Hasan with D.A. Davidson. Ahmad Hasan: On for Gary Tanner here. First question is on NIM dynamics. I appreciate the detail on Slide 10. If I see correctly here, there's about $1 billion in CDs rolling off in the next quarter. Do you think that would be the key driver and that could potentially push NIM up further from here? Or this loan yields kind of offset that in the next couple of quarters? Romolo Santarosa: Yes, Ahmad. So what we tried to point out though, with the time deposit book being the percentage that it is of the total interest-bearing deposit book, the pickup that you would envision as those CDs are repriced at current rates, while by themselves, let's say, enticing as a percentage of the book, it becomes rather small. And that's why we're just not seeing as much of a benefit to the interest-bearing deposit costs month to date. But there is something there. I think the other 2 elements that would be more potentially of a positive buying to the NIM. But again, I have a sense it's going to be in a smaller contribution than we've experienced in the previous quarters is both the securities book and the loan book. I'll first touch on the securities book, and then I'll let Anthony talk about the loan book. But on the securities book, we have substantial cash flow occurring here in 2026. That will reprice into more of a current rate idea and let's just say 3% and whatever basis points you want to assign to the right of that whole number. So there will be some lift coming from the securities book. And then I'll let Anthony talk about the loan book. Anthony Kim: Yes, sure. We have CRE maturing for the next 12 months, totaling about $1 billion. It's weighted average rate of high. So we should be able to reprice these loans and renew this loan with a much higher rate. To give you more detail on the CD maturity on about $1 billion maturing with a weighted average of in second quarter and another -- let's say, $1.16 billion maturing in the second half of the year with medium to high 3s percentage that we have opportunity to reprice for the reference point of the first quarter about 800 million retail CD was matured at low 4s. We're able to retain 77% of that with 40 basis points lower. So it's not much, but we do have an opportunity to add some benefit to net interest margin. Bonita Lee: Just to add, just on the the $1 million maturing CRE loans, as Anthony said, it's currently priced at high 4%, let's say, close to 5%. And if you look at the first quarter, the new loan yield, it's coming in at 6.5% average, right? So there will be that pick up. So that's what we are expecting that may contribute to the expansion of the net interest margin going forward. Ahmad Hasan: Great. That is really helpful. And then maybe 1 more on -- you guys seem really excited about Corporate Korea initiatives, and that seems to be going really well. Just any color on client sentiment over there given the macro recently? Anthony Kim: Yes. Based on the conversation with some of the customers, they no longer see its tariff as an obstacle. I think it's beyond them. but ongoing economic uncertainty, rising energy price inflation related to water, making companies very cautious about taking on additional lines and loans. So they're opting to use their excess cash instead. So that part of the approach is contributing to subdued loan demand. So as economic certainty improves, we're hoping to see recoveries in loan demand. And then we continue to see influence of deposit coming from Korea for them to prepare for the investment in the U.S. So that's why we had a surge of deposit increase in first quarter. and an increase in U.S. KC portfolio. Ahmad Hasan: Great. That makes sense. And maybe last 1 for me. any kind of planned new hires for this year? I know you talked a little bit about you bringing on new people this quarter. Can you talk a bit more about the planned new hires for the next couple of quarters? Bonita Lee: Yes. I mean Talent investment is 1 of our key focus. So as we see the opportunity, definitely, we will pick up the talented bankers. But we do keep in mind that what we embed in and what we get in terms of return. So -- and for the last couple of years, we have managed investment tied to the the talent investment and then the performance coming up. So the timing, we always try to balance it. So it's not impacting the bank an overarching impact on the quarter. So it's a continuation of the continuing process for us. . Operator: Thank you. We have no further questions in the queue at this time. I will now turn the call back over to Ms. Bonnie Lee for concluding remarks. Bonita Lee: Thank you for joining our call today. We appreciate your interest in Hanmi and look forward to sharing our progress with you throughout the year. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.

27天前Insight Analytics约5分钟阅读

DGX 2026 Q1 财报电话会议

Operator: Welcome to the Quest Diagnostics First Quarter 2026 Conference Call. At the request of the company, this call is being recorded. The entire contents of this call, including the presentation and question-and-answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission or rebroadcast of this call in any form without written consent of Quest Diagnostics is strictly prohibited. Now I'd like to turn the conference over to Dan Haemmerle, Interim Vice President of Investor Relations for Quest Diagnostics. Please go ahead. Dan Haemmerle: Thank you, and good morning. I'm joined by Jim Davis, our Chairman, Chief Executive Officer and President; and Sam Samad, our Chief Financial Officer. During this call, we may make forward-looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently quarterly filed reports on Form 10-Q and current reports on Form 8-K. For this call, references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS. Growth rates associated with our long-term outlook projections, including consolidated revenue growth, revenue growth from acquisitions, organic revenue growth and adjusted earnings growth are compound annual growth rates. Now here's Jim Davis. James Davis: Thanks, Dan, and good morning, everyone. Our strong first quarter performance reflects a focused business, delivering innovative solutions that meet our customers' evolving needs for lab insights. During the first quarter, we grew revenues over 9%, almost entirely from organic revenue growth on broad-based demand for our clinical innovations, expansion into new clinical areas and collaborations with elite health care and consumer health organizations. In addition, we grew adjusted diluted earnings per share by approximately 13%, supported by productivity gains from our deployment of automation and AI across our operations both in and outside our labs. Given our strong first quarter momentum and continued strategic focus, we are raising our revenue and EPS guidance for the year. Now I'll provide more detail on how we executed our strategy across key customer channels and operations during the quarter. Quest operates at the center of health care, delivering solutions that make testing simpler and smarter for our core clinical customers, physicians and hospitals as well as customers in higher-growth areas of consumer health, life sciences and data analytics. In the physician channel, we delivered high single-digit revenue growth in the first quarter on strong demand for our clinical innovations, geographic expansion from greater health plan access and increased volume from our growing business in enterprise accounts. We are also pleased with our growth during the quarter in end-stage renal disease, a new clinical area for us, focused on lab testing for dialysis patients. In addition to volume from serving thousands of dialysis clinics operated by Fresenius Medical Care nationwide, we also added independent dialysis clinics and other providers as clients of our lab and water purity testing. In the hospital channel, we grew revenues at a double-digit rate with the majority of this growth coming from our collaborative lab solutions for Corewell Health, a leading health system in Michigan. Our Co-Lab solutions combine our scale, clinical depth and operational excellence to improve quality and cost efficiencies. Our implementation with Corewell Health is proceeding smoothly. We are also advancing our joint venture with Corewell Health with plans to open a state-of-the-art lab in Southeast Michigan next year. Hospitals value our flexible solutions that enable them to free up capital while benefiting from our expertise and innovation. Our pipeline of potential Co-Lab collaborations as well as potential outreach and independent acquisitions remain strong. In the consumer channel, we deliver solutions that empower people to own their health. Similar to recent quarters, we generated significant revenue growth during the quarter, both from questhealth.com and from our portfolio of top consumer health collaborations. Growth from questhealth.com featured robust double-digit customer repeat rates and notable demand for new solutions such as our Elite health profile and autoimmune and hormone tests. Quest is a trusted health care brand with broad reach, which enables us to drive efficient customer acquisition for questhealth.com. In addition, we are the preferred lab engine for top consumer health brands and a key part of our growth this quarter was due to consumers accessing our lab insights within the apps and wearables of our collaborators. Our customer channels are also growing as we continue to deliver advanced diagnostics in 5 key clinical areas: advanced cardiometabolic and endocrine, autoimmune, brain health, oncology and women's and reproductive health. We delivered double-digit revenue growth across several of these areas in the first quarter. I'll comment briefly on a couple of examples. In the areas of brain health, Alzheimer's disease is a progressive dementia that affects over 7 million people in the U.S. and is expected to affect nearly 13 million Americans by 2050. For several quarters, we've spoken about delivering double-digit revenue growth from our AD-Detect blood test for Alzheimer's disease, a trend that continued in the first quarter. To understand this growth, consider that until recently, clinicians typically diagnosed Alzheimer's using PET/CT scans, which are costly and inaccessible for many. While these scans are highly accurate at identifying mid- and late-stage disease, they are less sensitive at detecting Alzheimer's in early stages before major impairment has occurred. Years ago, we recognized the power of blood testing to reveal disease earlier and more affordably so more patients could benefit from the emerging therapies with potential to slow progression sooner. Today, Quest provides a range of tests under the AD-Detect brand, featuring sensitive mass spec tests for amyloid beta and ApoE, a genetic risk marker to complement p-tau217 and p-tau181. We also developed a proprietary algorithm that combines multiple biomarker results to establish Alzheimer's pathology with sensitivity and specificity of 90% or greater. At the same time, we are seeing that physicians are becoming more confident using blood test to aid diagnosis and guide pharmaceutical treatment decisions often in lieu of imaging. As blood tests are increasingly used both in primary and specialty care, we expect to remain a leading source of diagnostic innovation and insights for managing this disease. In other areas, we drove double-digit revenue growth across much of our cardiometabolic and endocrine portfolio, including for tests for Lp(a) and ApoB as well as for kidney, liver and reproductive hormones. New guidelines from the American Heart Association recommend Lp(a) and ApoB testing for the first time, underscoring the clinical value of these important biomarkers. We are also encouraged that the guidelines now recommend screening for high cholesterol at young ages as new research has found dangerous cardiovascular events are increasingly occurring in young adults. In oncology, we recently announced a research collaboration with City of Hope, a cancer and research treatment organization to study the use of our Haystack MRD test to aid recurrence monitoring and treatment decisions in clinical trial participants with solid tumor cancers across 14 U.S. sites. In addition to driving top line growth through innovation and collaborations, our focus on operational excellence aims to improve productivity as well as quality and the patient experiences. Through our Invigorate program, we expect to continue to deliver 3% in annual cost savings and productivity improvements. We have spoken in the past about our growing use of AI and automation in our labs. And while that continues to be a major focus in the first quarter, we stepped up our deployment of these technologies in several other areas. As one example, we boosted productivity by 40% in the first quarter among customer service agents that used AI to triage and route customer emails to speed responses. We are also deploying AI to make testing simpler and smarter for everyone, including our patients. Our new Quest AI Companion transforms complex biomarker data and reference ranges on test reports into clear plain language. By empowering patients with lab insights, our AI tool, which is powered by Google Gemini, can help shift the doctor-patient relationship to be focused on shared decision-making instead of data gathering, potentially improving care outcomes. Patients have engaged Quest AI Companion approximately 350,000 times since we rolled it out to users of our MyQuest app in the first quarter. Lastly, we are scaling the planning and design work for Project Nova, our multiyear initiative to transform our order-to-cash processes and systems and are on track to implement our first wave of solutions in the fall of 2027. And now Sam will provide more details on our performance and 2026 guidance. Sam? Sam Samad: Thanks, Jim. As Jim mentioned, our solid first quarter results reflect the disciplined execution of our strategy. Consolidated revenues were $2.9 billion, up 9.2% versus the prior year, and consolidated organic revenues grew by 9% in the quarter. Revenues for Diagnostic Information Services were up 9.4% compared to the prior year, reflecting strong organic growth in our physician, hospital and consumer channels. Our total volume measured by the number of requisitions increased 10.9% versus the first quarter of 2025, with organic volume up by 10.8%. Fresenius Medical Care and Corewell Health contributed approximately 7% to organic volume growth in the quarter. Our organic volume growth in the quarter was 3.8%, excluding the favorable impact from these 2 relationships. As expected, Fresenius Medical Care and Corewell Health's business mix impacted total revenue per requisition, which was down 1.3% compared to the prior year. As a reminder, the business mix from these 2 collaborations includes a greater proportion of routine tests than most of our clinical testing. Excluding this business mix impact, total revenue per requisition increased by approximately 2.5%. Unit price reimbursement was relatively flat, consistent with our expectations. Reported operating income in the first quarter was $399 million or 13.8% of revenues compared to $346 million or 13% of revenues last year. On an adjusted basis, operating income was $447 million or 15.4% of revenues compared to $406 million or 15.3% of revenues last year. This increase in operating income was primarily due to organic revenue growth and increased productivity, partially offset by the impact of wage increases and to a lesser extent, weather. Reported EPS was $2.24 in the quarter compared to $1.94 a year ago. Adjusted EPS was $2.50 versus $2.21 a year ago. Adjusted EPS grew in the first quarter versus the prior year, largely due to organic revenue growth, increased productivity and lower interest expense, partially offset by the impact of wage increases and weather. Cash from operations was $278 million in the first quarter versus $314 million in the prior year. Cash from operations was lower than a year ago due to the timing of operating receipts and disbursements and higher bonus payments in the current period versus a year ago, partially offset by an increase in operating income. Turning now to our updated full year 2026 guidance. Given the solid performance in the first quarter, we are raising our full year revenue and EPS estimates. We now expect revenues to be between $11.78 billion and $11.9 billion, a growth rate of 6.8% to 7.8%. Reported EPS to be in a range of $9.58 to $9.78 and adjusted EPS in a range of $10.63 to $10.83. Cash from operations to be approximately $1.75 billion, capital expenditures to be approximately $550 million, share count and interest expense to be consistent with 2025, and our 2026 guidance reflects the following considerations. Our revenue guide does not include any contribution from prospective M&A. Operating margin is expected to expand versus the prior year. With that, I will now turn it back to Jim. James Davis: Thanks, Sam. We are very pleased with our start to the year. More than ever, people are turning to our lab insights to illuminate their path to better health. In summary, our first quarter results reflect a strong focused business delivering innovative diagnostic solutions to meet our customers' evolving needs for lab insights. We grew the top line on broad-based demand for our clinical innovations, expansion into new clinical areas and collaborations with elite health care and consumer health organizations. We also grew the bottom line with productivity benefits from automation and AI. Given our first quarter momentum, we are raising our guidance for the full year. I'd like to thank each of my nearly 57,000 Quest colleagues for living our purpose every day, working together to create a healthier world, one life at a time. Your passion and commitment are the engine that empowers Quest to deliver diagnostic insights that improve health and transform lives. Now we'd be happy to take your questions. Operator? Operator: [Operator Instructions] our first question comes from Michael Cherny with Leerink Partners. Michael Cherny: Congrats on a nice quarter. If it's possible to unpack the organic volume dynamics a bit, clearly, that was a standout, especially against a broader macro backdrop. How should we think about the impact of mix, the impact of commercial activities on your part? And if you can, can you just reaffirm the same expected contribution from Corewell and Fresenius relative to what was embedded in your guidance to start the year? Sam Samad: Yes. Sure, Michael. This is Sam. So let me just start with some of the facts about Q1 that we talked about in the prepared remarks. Organic volume growth was 10.8% in the quarter. Total volume growth was 10.9%. So the contribution to volume from Fresenius and Corewell was about 7%. And so if you exclude those from organic volume growth, the organic volume growth, excluding those 2, was 3.8%. The revenue per requisition in total was down 1.3%. If you exclude the impact of Corewell and Fresenius, it was actually up 2.5%. So a solid revenue per requisition. If you look at the impacts within that revenue per requisition, excluding Corewell and Fresenius impact, if you look at what's driving that 2.5%, which is a really strong revenue per req, I would say test per requisition was really the key driver. We continue to see a step-up in terms of the number of tests per requisition. This is being driven by a lot of the things that we have shared over the course of last year and this year, more advanced diagnostics testing, more early detection options and screening options, our consumer business contributing to it as well. So we continue to expect that, that test per req continues to be solid and has benefited Q1 rev per req significantly. Now I think your other question was how should we think about the balance of the year. As we think about Q2 to Q4, we're looking at continued growth in terms of organic utilization. A continued impact, I would say, on revenues from Fresenius, we said it was about a $250 million impact for the year in terms of revenue growth impact from Corewell. So that's, I think, what you should be thinking about in terms of the impact of Corewell. And Fresenius would be an additional roughly, let's call it, between $80 million and $100 million on top of that. So between those 2, it's about a 3.3% increase to our revenue that's embedded in the guide. And we expect an impact on volume, I would say, somewhat consistent with what you saw in Q1, but still expect very strong utilization as we go forward and expect strong revenue per requisition, excluding the impact of those 2 businesses. And Jim had a couple of comments there. James Davis: Yes, Mike, the mix impact has really benefited our business from an organic revenue standpoint. And specifically, our commitment to consumer health and wellness and these partnerships in the wellness industry have really helped us nicely. There's really 2 things there. It's both the absolute test per req, which has a big impact, mixes us up from a test per req standpoint. And then the advanced types of tests that are being ordered on these panels from advanced cardiovascular test to autoimmune testing to hormone testing. And then the last thing, and this comes mostly from our physician channel, both neurologists and primary care physicians. As I mentioned in the script, our Alzheimer's book of testing more than doubled year-over-year. So we're really, really seeing nice lift from our Alzheimer's set of tests. All of those things together, Mike, is what's really driving this nice organic test mix. Operator: Our next question comes from Elizabeth Anderson with Evercore ISI. Elizabeth Anderson: I guess on just a couple of things on a short-term basis. Can you talk about sort of any embedded like weather and sort of flu expectations for the short term in the quarter? And then if we think about going forward for the rest of the year, can you talk about sort of any other expectations in terms of puts or takes on timing for the quarter, particularly in regards to margins on that second part of the question. James Davis: Yes. Liz, on the weather, I'll take that first, and Sam can comment on the second part. If we look at it on a year-over-year basis, it was like a $9 million revenue impact, $7 million operating income. So -- but that's on a year-over-year basis. So now we know in January, it was a rough month. We had some weather in February. But honestly, what we did see in March is that the people who canceled appointments during those bad weather events, about 70% of them made appointments and came back to Quest. So the follow-on from canceled appointments was really good. And that only comes from us e-mailing out to patients, texting patients and really trying to encourage patients to come back from missed visits. Sam Samad: Yes, and with regards to the weather, as Jim said, so we had some impact in the quarter, some negative impact year-over-year, but a good recovery in the last month of the quarter. Now I think the second part of your question, Elizabeth, was on the go forward, what should we expect? If you think about at least from a year-over-year compare, we are expecting in the second half of the year this year that we're going to have some negative weather, which we usually have. Usually in the summer, we'll have the hurricane season and some negative weather. So that's embedded in our guide expectation. And if you compare it to last year, last year was actually a very mild weather season in the summer from -- I think we virtually had no to -- very little to no hurricanes in the summer of last year. So there is some embedded expectation of some more negative weather in the next, let's call it, in the summer versus what we saw. And in terms of the cadence over the next 3 quarters, I think you should expect that similar cadence to last year to some extent with maybe more of a contribution in the first half than what you saw last year than in the second half. So I would call it just over 49% of our revenue and EPS in the first half, just over 50% in the second half. So that's kind of a cadence to think about also to give you more precision on how to think about revenue and EPS. Operator: Our next question comes from Patrick Donnelly with Citi. Patrick Donnelly: Maybe similar, Sam, on some of the moving pieces on the cost. Can you just talk about the Project Nova piece, how the investments are progressing there? Wondering if potentially higher expenses tied to some of the macro conflicts caused you to move those investments around at all. I think it was $0.25 dilution. Is that still the right way to think about it? And again, where those investments are kind of heading and when we see the fruit of those would be helpful. Sam Samad: Yes. Thanks, Patrick. So let me break down some of the impacts that you mentioned. Yes, Nova expectations are still $0.25 for the year, as we shared last quarter. In terms of the cadence of those expenses, slightly changed from my comments on the Q4 call. I think we're expecting now more of those expenses to happen in the second half of the year than in the first half of the year. We had some expenses in Q1. That's going to ramp in Q2. And I'd say we're going to see probably more than 60% of those expenses be in the second half of the year. So that's one portion in terms of just thinking about the cadence of the year. I think it goes back to also the question that Elizabeth asked. And then if you think about the macro, I mean, listen, we're impacted by, obviously, fuel costs. We have a fleet of transportation vehicles. We have a fleet of planes. We have some fuel expenses that were going to be impacted by the higher fuel costs. That, I will size it for you as somewhere in the $7 million to $10 million range, and it's embedded in our guidance. Our expectation is that fuel costs will continue to be elevated somewhere at the $4 per gallon and above. And that embedded in guidance is somewhere in the $7 million to $10 million of fuel cost that, again, will impact the next 3 quarters. So we've sized it. We've included it. It's not that significant, but it's still somewhere between $0.05 to $0.07 of EPS. Operator: Our next question comes from Ann Hynes with Mizuho Securities. Ann Hynes: Just on the organic volume front, was there anything that came in better or worse than your expectations? And maybe just on the ACA, I know the subsidies ran out in December. Did you see any meaningful impact versus what's embedded in your guidance in Q1? James Davis: We didn't, Ann, on the ACA subsidies. I think it's too early to tell. As we've said in the past as well, we can't tell 100% with every requisition, is it an ACA req or not. Not all the commercial plans code the reqs that way. But we think about 60% of our reqs, we know discrete are ACA. And so based on that, we're not seeing any impact to date. On the organic growth, it was strong across the board. I mean our hospital reference business had up 3%. It was very strong. Our Co-Lab business, obviously, with Corewell was up significantly double-digit growth. Our physician business organically was high single digits as we indicated on the call. So it's broad-based. And then obviously, the contribution from all the consumer health in both our direct channel plus our partnerships were strong, strong double-digit growth in that area. So it was pretty broad-based and across all segments that we serve. Sam Samad: And just one clarification, Ann, on the ACA to add to Jim's comments, we have built in, in our guide still the expectation that we do see a 30 basis point impact to revenues as a result of ACA disenrollments or higher subsidies. The enrollments have been good in Q1. We just need to validate that actually the enrollments lead to utilization and some people don't drop off. So we kept the assumption in our guide of 30 basis point impact. But to Jim's comment, we haven't seen really that negative impact in Q1. Operator: Our next question comes from Jack Meehan with Nephron. Jack Meehan: I wanted to ask you about PAMA. So the survey kicks off in 10 days or so. How is your prep work in terms of participating in that? And then just your latest thoughts on how you think the Medicare rates for 2027 will shake out that whole process? James Davis: Yes. Jack, so we're ready. Obviously, we submitted last time. We're going to submit this time. That's the law. And we're going to abide by the law and submit the data after May 1 of this year. I think the period is open until -- basically until the end of July. As you know, Medicare actually this year provided some guidance as to what labs need to submit. So anybody that makes more than $25,000 a year from a revenue standpoint from Medicare requisitions is supposed to submit -- that would really say there's over 2,600 hospital labs that are going to need to submit. Now whether that happens or not, we can't tell. We'll have to wait and see. CMS also came out again and said, if you don't submit, there's potential fines of upwards of $10,000 per day to those that don't submit data. Now they didn't collect those fines last time. So again, it remains to be seen. At the same time, we're going to drive the RESULTS Act as fast and furious as we can. There's a few things that still have to be completed in order for the bill to get through this year. Number one, there has to be a tech assessment done. CMS does that. That is underway. And then second is the CBO scoring. We think that process is underway as well. There's over 80 cosponsors for the bill. There was a hearing already this year in the health subcommittee of Energy and Commerce. It was a good hearing, very positive. So we're hopeful. But we're also mindful of the fact that there's summer vacations coming up and then obviously, elections. And so there's a lot to get done before the end of this year, especially with those 2 things coming up. Now in terms of rates for 2027, I think it's too early to speculate. If RESULTS Act gets done, it would keep rates as is for 2027. If the RESULTS Act does not get done, and we rely on this data collection process. If everybody submits, Jack, we're hopeful that the data will come out and show that our rates should actually go up. If you think about it this way, the last time there was a data submission, there were probably 2 companies that submitted over 80% of the data. And so the 2 companies probably -- and we're one of them and our nearest competitor is the second one, we probably have at best 17% to 20% share of the Medicare market, right? We were disproportionately lower in that portion of our business than in other segments because it's any willing provider. So when only 2 providers submit -- basically 2 providers submit 80% of the data and you have less than 20% of the market, it's obviously going to lead to a very skewed data set. So we're hopeful that the other 80% submit. We know that, that other 80% is paid 2 to 3x Medicare rates by most health plans. And you put all that together, Jack, and it should indicate a price increase. Operator: Our next question comes from Luke Sergott with Barclays. Anna Kruszenski: This is Anna Kruszenski on for Luke. We were hoping to hear more about the consumer business and how that momentum has been building with your recent partnerships. And we saw that Function Health acquired a mobile lab testing company during the quarter. So just any color on how you're thinking about that potentially impacting volumes to Quest? James Davis: Yes. So our consumer business, again, we think of it in 2 segments: our own questhealth.com, our direct-to-consumer business, that grew very nicely in the quarter, somewhere -- let's just call it somewhere between -- in the high 20s. And then all of our partnerships. We have value-added resellers that we provide lab testing to. These include 2 of the wearable companies that we've talked about in the past. And I would just say that the growth in that combined non-Quest Direct is even stronger than our own direct channel in the quarter. Yes, Function Health did acquire Getlabs. We think that's a real positive for Function Health. There's many parts of the country where even though we have 2,000 patient service centers to conduct blood draws and urine collections, there's parts of the country where we simply don't have some of the coverage, and that includes areas in the upper Midwest, the Great Plains. We also know that there's a segment of customers that would prefer a home draw. And so Function having this capability now, Getlabs will acquire the specimens, bring them to our Quest PSC or have them transported to directly and we'll continue to do that lab testing. So we think it's a positive. Sam Samad: And the one addition I'd make to Jim's comments is the growth that we're seeing from some of the collaborations that we have, the wellness companies that we're partnering with is broad-based. We're seeing a lot of growth from different players and a broad ecosystem that we're very encouraged about. Operator: Our next question comes from Eric Coldwell with Baird. Eric Coldwell: A couple of weeks ago, we had this odd day in the market where labs were getting hidden on a Friday afternoon, I think it was. And apparently, there were rumblings or rumors going around about some impact from the CMS' CRUSH RFI. I don't think that's a big deal, but I'd love you to put that in perspective and maybe talk through what you see happening in the government in terms of various fraud, waste and abuse initiatives and then your exposure to any tests that are in question and what potential impacts, positive or negative may come out of this in the future? James Davis: Yes. Thanks, Eric. And we're glad you don't think it has an impact because we don't think it does either. But just for those who may not have heard of CRUSH, it stands for Comprehensive Regulations to Uncover Suspicious Health Care. And first of all, I want to say we applaud the government's efforts to crack down on any fraud waste or abuse. So certainly applaud those efforts. The second thing I'd say is if you look at the test, first of all, it came out of an OIG report, right? There was an OIG report that looked at 2024 Medicare lab spending, and the report noted that lab spending was up 5%. And as you know, Medicare enrollees are probably flat to down. So why would it be going up 5% if pricing stayed flat across the industry. And what the report noted is that there were 10 tests that drove the majority of the increase, okay? Now 7 of those 10 tests were PLA codes, meaning they're very proprietary tests to individual laboratories, okay? We had nothing in those categories, okay? The other 3 categories were genetic or molecular-based tests. And when we look at our billing or our revenue from those tests, it was de minimis, okay? So it really, really wasn't a factor at all. So we don't put Quest in the bucket of driving that 5% increase in Medicare spend. Now the last thing I'd say about the report, and we all ought to be concerned about this. If you looked at that report, it did show that routine and wellness tests that are critical to preventative health and wellness, critical to making the country healthy again, those test categories were actually down. And what I'm talking about is basic CBC panels, CMP panels, those panels and information that really illuminate chronic care conditions, progress towards those conditions or people that aren't making progress. And those are absolutely the kinds of tests that we want to see growing across the Medicare population in order to make sure that people's chronic conditions aren't worsening and become a bigger cost and health burden to the country. So in summary, Eric, we don't think it's an issue, and thank you for asking the question. Operator: Our next question comes from Erin Wright with Morgan Stanley. Erin Wilson Wright: On consumer, I have a follow-up. I understand there's a broad range of types of partnerships that you're engaged in and the economics may vary. But can you speak to the overall margin profile outside of the Quest Direct business? And how should we think about the pipeline of future partnerships. Do you have -- are you talking with several different types of platforms from a wellness or wearable standpoint. And then a follow-up, just a broader question. You gave some interesting stats on AI and automation. And just how do we think about your targets or your goals on that front from an efficiency gain standpoint and what you can leverage from an AI use case? Sam Samad: So this is Sam. I'll take the first question around the margin profile, and then I'll hand it over to Jim, who'll talk about the pipeline and AI. I'll keep it simple. I mean the margin on these deals, both in terms of the deals and collaborations that we have, whether they're wearables collaborations, whether they're wellness companies, but also the margin profile on the questhealth.com business is on par, if not slightly better than our overall enterprise average. These are tests that are out of pocket at least on questhealth.com. And then it's a client bill business with the wellness companies that we engage with. It's all cash pay. So there's no denials. There's no patient concessions. So it's clean business in terms of just at least the complexity or the lack thereof. And it provides a really good margin profile for us. James Davis: Yes. So Erin, yes, we continue to pursue other partnerships. It's part of our goal. As we've said before, we're trying to empower people to own their own health. We want people to be the CEO of their own health care. And there's -- if we find other partnerships out there that meet our brand criteria that are in line with the mission of our company, then we'll certainly support it. And there's others out there that we continue to talk to. So we're encouraged by the growth in both our direct channel as well as the growth that we're getting through these partnerships. In terms of AI and automation, certainly, we continue, I would say, 60%, 70% of our efforts are in the 4 walls of our laboratory because that's where still opportunity exists. Anytime we see somebody looking through a microscope, we ask the question, is what you're looking at? Can we digitize that image? If you can digitize an image, you can apply algorithms to that image. And if you can apply algorithms to that image, it can assist whoever is reading that image and make a higher quality diagnosis as well as improve the productivity. So there are still plenty of areas in our laboratory where we have laboratory technicians or MDs looking at data or looking at slides or looking at pathology, and we know there's ways to automate that. We've made tremendous progress in cytology. We've made great progress in microbiology, hematology, and there's still other areas for us to go. Outside of the laboratory, as I mentioned in the script, we've deployed some tools in our call centers. Our call centers are a big part of our operations. So anything we can do to improve the productivity of the call centers as well as e-mails and text messages that come into the company, we're certainly going to drive that. The last thing I mentioned is we did put that Quest AI assistant out on our MyQuest application. This empowers people to now ask questions about the lab results that we've just provided to you. And we were pleasantly surprised by the use of that AI tool for people trying to decipher what all of these 40, 50, 60 analytes could possibly mean. We think it's a great way to educate patients so that patients can have more proactive discussions with their clinicians, and we think it's a win-win for the industry. Operator: Our next question comes from Kevin Caliendo with UBS. Kevin Caliendo: Sam, if I'm taking your comments correctly, it sounds like the north of 49% comment for one -- for the first half of the year is pretty consistent with what you said before. But then you also commented that you're pushing maybe more of the Project Nova expenses to the second half. There's some higher fuel costs that are going to be impacting the second half of the year. So within your guidance, what's the offset that makes the second half a little bit better? And then just one quick follow-up to Eric's question on CRUSH. Part of the proposal talked about prior authorizations and looking at that. And can you discuss that aspect of it, which isn't necessarily just on the molecular test, but I don't know if they're talking more broadly about how prior authorizations might be handled and if there's anything we should think about with regards to that part of the proposal? Sam Samad: Yes. Thanks, Kevin. So let me start with the second half, first half comment. I would say some of the fuel costs that I mentioned, I mean they basically start now, right? So it's not like just the second half that you have to phase those across. And again, I don't want to make too much of them because it's $7 million to $10 million of additional fuel costs. It's not that significant, but I was just giving it for completeness and to give a full view as to EPS. But they do start now, and they impact Q2 and they impact the second half. Nova steps up in the second quarter. But obviously, the first half, because it's -- because Q1 was lower in terms of Nova spend, the second half is going to be over 60% of the Nova expenses, but it does step up in the second quarter. In terms of why we see the contribution being over 50% in the second half, I mean, I think it's really primarily the margin profile across, again, those 2 partnerships, those 2 important partnerships that we have, Corewell and Fresenius, that margin profile improves in the second half, notably for Fresenius as that business ramps. I've said before that, that business a year in starts to approach the average enterprise margin. It's just the ramp up. There's some ramp-up costs that initially impact us. So I think you start to see some improvement in the margin profile of those businesses and then just the normal seasonality of the business with the strength of utilization. So that's really what I'd point to. James Davis: Yes. And then, Kevin, in terms of your questions on CRUSH, again, I'll remind you that there were 10 tests that contributed to the vast majority of the growth in the spend. 7 of those 10 tests, we have no participation in and 3 of those 10 tests, it's de minimis. So it really Quest was not a driver of those increased costs. In terms of pre-authorization, CMS did put out a request for information, a response. They asked people to comment on the CRUSH initiative. Our trade association did that. I can tell you that pre-authorization is not something we would ask for. But rather, I think what's appropriate is CMS ought to require some type of certificate of accreditation for the labs that are performing these higher complexity tests. That's a way to ensure that those labs that are producing these tests and some of these tests are absolutely necessary in health care today that you know they're being done by certified labs with good quality and a commitment to science, technology and excellence. Operator: Our next question comes from Andrew Brackmann with William Blair. Andrew Brackmann: Jim, I want to ask on the advanced diagnostics strength and all the color that you gave on that business. Can you maybe just sort of talk about any specific investments that are going to those areas in 2026 or in 2027? Just sort of anything to call out with respect to maybe specific clinical trials in some of those areas or sales team increases. I really just sort of want to get a sense of the opportunities that might exist there to maybe further accelerate that growth. James Davis: Yes. Thanks, Andrew. Yes, again, some of these advanced diagnostics tests were certainly a strong contributor to the mix that we saw in the quarter in the organic rev per req increase of 2.5% that Sam cited. But the biggest area again is brain health. As I indicated, the business more than doubled from Q1 of last year to Q1 of this year. We are committed to the space. There are other biomarkers that we are investing in and doing research on in addition to the AB 42/40, in addition to the ApoE, NFL. And then commercially, we procure the p-tau181 and 217 assays. But there's other biomarkers we're working on. We're in constant discussions with the therapy makers who are collaborating with us on looking at different biomarkers that help identify the disease at the earliest possible point. We continue to invest in advanced cardiometabolic testing in various biomarkers, one specifically in the HDL arena that goes beyond just the basic HDL test. And then obviously, I'd be remiss if I didn't talk about Haystack, we continue to invest in the space. We've made progress quarter-over-quarter. As we discussed in the script, we have a great partnership now with City of Hope, which is a leading cancer treatment detection and treatment center on the West Coast. And there's all types of clinical partnerships that we have there. We've discussed a few in the past, Rutgers and MGH. So we continue to invest in that area and continue to make progress. Sam Samad: Yes. And Andrew, maybe to add to Jim's comments, a healthy portion of our $550 million capital investment goes towards our esoteric labs to drive capacity upgrades given the growth that we're seeing in that business, in that advanced diagnostics business. So I don't want to -- I'd be remiss if I didn't mention that as well because in addition to the investments that Jim talked about, which are more on the business side that we do have a significant portion of capital investments going towards those tests as well. Operator: Our next question comes from Tycho Peterson with Jefferies. Noah Kava: This is Noah on for Tycho. I wanted to ask a few on oncology. I believe the partnership with Guardant for Shield went live 1 month ago. If you could speak to early adoption there. And then just on Haystack, what should we be expecting in terms of the phasing of EPS contribution throughout the year and kind of getting to breakeven? James Davis: Yes. Thanks, Noah. Yes, we announced a partnership to distribute -- do blood collections for the Guardant colon cancer CRC test. And so it started in the quarter. We are listing the test on our test menu so that Quest physicians can order that test and patients, regardless if it came from a Quest physician or another physician, patients can bring that requisition to a Quest PSC and we'll draw the blood and send this specimen on to Guardant's lab. I would say it's early. We just got going in the middle part of the quarter. So I can't make a comment yet on the volumes, but it's certainly starting to take hold. On the Haystack margin profile, Sam, I'll ask you to comment on that. Sam Samad: Yes. Thanks, Noah. So Haystack, listen, we're making some really good progress on the test with regards to the order experience, the commercial, both ramp in terms of resources and the uptake in terms of tests ordered. I think oncologists are starting to recognize just the impressive profile of the test with its low limits of detection. Making good progress on the reimbursement front. We have submitted to MolDX, the technical assessment to get Medicare Advantage reimbursement. We have PLA codes now that are basically priced a $3,900 baseline and an $800 monitoring reimbursed price. So we're making really good progress. It's early days to talk about EPS ramp in terms of the dilution or the improvement over the course of the year. We'll provide updates as we go. Again, it's a test, and we have many tests in our portfolio, both in terms of AD, advanced diagnostics and routine tests. So I don't want to be overly focused on just one test. But we -- obviously, it's an important business for us, and we're making good progress on it. Operator: Our next question comes from Lisa Gill with JPMorgan. Lisa Gill: I just was wondering the current M&A environment. I appreciate that there's nothing in your guidance for '26. But are you seeing anything different? Are you seeing any incremental opportunities in the market? I heard your comments earlier around hospitals and their need to submit their rates. Is that changing any of their views around the potential for reimbursement cuts for Medicare going forward? So just anything on an update on the M&A side would be helpful. James Davis: Yes. Thanks, Lisa. The M&A funnel is good. We have a mix of various health system outreach types of deals that are there. And there's not a ton, as you know, of remaining independent labs across the country, but there's still some out there, and we still take a look and sometimes they proactively come to us. I don't think that the Medicare reimbursement changes are affecting a hospital's view of their outreach business. You got to remember, in general, Medicare is our best payer here at Quest Diagnostics. And in general, it's the worst payer for a health system. So if the worst payer goes down a little bit in pricing, I don't think that affects your viewpoint on outreach. What I do think affects their viewpoint on outreach is the commercial view of the lab market in the lab industry. And I think you got a lot of really smart health plans that are starting to wake up and say, "Hey, why am I paying these health system labs 200% to 300% of what we pay 2 of the leading independents across the country." And furthermore, that 200% to 300% price premium that they get, it affects patients. It affects co-pays. It affects co-deductibles. It affects employers who are paying for this health care. And so there's nothing easier to get a quick hit, a quick win from an employer standpoint, from a patient standpoint is to normalize these rates. And we strongly advocate that health plans ought to pay all labs the same amount of money for outreach work. It doesn't do anyone any good to penalize patients and penalize employers who are paying for the majority of the health care cost in this country to reimburse some labs 200% to 300% of what the 2 leading independents are getting paid. Operator: And our last question comes from David Westenberg with Piper Sandler. David Westenberg: So I wanted to talk about the convergence of multiple factors, AI, wearables, consumer-initiated testing. Just given the fact that these AI wearables, et cetera, and consummation tested gamify longitudinal testing, it seems like there would be an increase in longitudinal testing. So am I thinking about this the right way? And how should we think about test per patient right now and where it could go in the next 5 to 10 years? Are you monitoring test per patient right now? And is it trending indeed the right way? And maybe one of the things that I might want to look at is something like are the Function Health people, for example, also doing their annual labs? And is that increasing? I mean where is the momentum going with this? James Davis: Yes. So that's a great question, David. Look, we continue to think that this convergence of consumer health, wellness, wearables and AI are going to have a profound impact on how people think about their health care going forward. I don't think the physical of today where you go see a doctor, they do a physical in the office, they order labs generally after they've done the physical and then the information flows back to the physician, back to the patient and maybe somebody calls the patient and says, here's a few things that are out of range and here's what you should do about it. I honestly think that the future, the physical of the future is going to be really before you ever see the doctor, you're going to download your wearable information. You're going to get your lab work done ahead of time. And all that information is going to be fed into an AI engine and it's going to provide you the patient with a report. It's going to provide the physician with a report. And then when you actually go and see the physician, the physical exam itself is informed by all of that information. And then it becomes more of a discussion between you and the physician on the things that you really need to work on from a biometric standpoint, sleep, diet, heart rate variability, blood pressure, stress, the things that you really need to work on to improve your biomarkers. This linkage between biomarkers and biometrics is so incredibly important. Just this past March, I believe it was March 13, there was a really interesting article written in Nature, some work that Google Health did. It was a study between us, Google Health and Fitbit that really highlighted the linkage between biometrics and biomarkers and the use of artificial intelligence to actually calculate some of these biomarkers in between lab tests. So what we're actually seeing is, I think, this trend that you check your biomarkers, combine it with your wearable data, combine it with artificial intelligence, it's just making people more and more conscious of their -- of what's going on inside their body. And then I think as you indicated, we're likely to see an increased trend of consumers continuing to test certain biomarkers to check to make sure that the things that they're working on, the things they're trying to optimize are actually improving. Okay. Operator, I think that wraps up today's call. I want to thank everyone for joining our call today. We certainly appreciate your continued support. Have a great day, everyone, and good health to all of you. Operator: Thank you for participating in the Quest Diagnostics First Quarter 2026 Conference Call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics website at www.questdiagnostics.com. A replay of the call may be accessed online at www.questdiagnostics.com/investor or by phone at (866) 388-5361 for domestic callers or (203) 369-0416 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern Time on April 21, 2026, until midnight Eastern Time, May 5, 2026. Goodbye.

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FOOD.TO 2026 Q2 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to the Goodfood Q2 2026 Earnings Conference Call and Webcast. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, April 21, at 8:00 a.m. Eastern Time. Furthermore, I would like to remind you that today's presentation may contain forward-looking statements about Goodfood's current and future plans, expectations and intentions, results, level of activity, performance, goals or achievements or other future events or developments. As such, please take a moment to read the disclaimer on forward-looking statements on Slide 2 of the presentation. I would like to turn the meeting over to your host for today's call, Selim Bassoul, Goodfood Chief Executive Officer. Mr. Bassoul, you may proceed. Selim Bassoul: S [Foreign Language] Good morning, everyone. Welcome to our Goodfood earnings call in which we will present our results for the second quarter of fiscal 2026. You can find our press release and other filings on our website and SEDAR+ and all figures on this call are in Canadian unless otherwise noted. With me today are Najib Maalouf, our newly appointed President and Chief Operating Officer; Vanessa Hadida, our Vice President of Finance; and Ross Aouameur, our outgoing Chief Financial Officer. Before we begin, I wanted to highlight two things. First, Najib and I joined Goodfood with a clear mandate: stabilize the business, protect cash and rebuild discipline. That work is underway, and albeit today's results will show the impact of a license suspension, we have made significant strides in advancing our mandate. Also, for fiscal 2026, both Najib and I have made the deliberate decision to forgo our base salaries. This is a voluntary choice. Our employment agreements remain unchanged, but we believe that in this phase of the company's transformation, accountability needs to start at the top. This is not a signal that we expect others to do the same. Our priority is to build a stronger, more resilient company, one that creates long-term opportunities for our teams, delivers for our customers and earn the trust of our shareholders. The second thing I wanted to highlight is that today is the last earnings call our Chief Financial Officer. I want to recognize Ross for his strong leadership and disciplined financial stewardship over the years. He has been instrumental in the transition, and we wish him continued success in his upcoming next chapter. I will now turn it over to Najib to begin our review of the quarter with Slide 3. Najib Maalouf: Thank you, Selim. First, I wish to say that it is a privilege to be serving alongside you one more time. Slide #3 captures the reality of the quarter. We are executing a necessary reset while absorbing short-term disruption. During Q2, operational factors, including a temporary regulatory-related disruption impacted order volumes and created cost inefficiencies, particularly in logistics. These pressures were real that they were also temporary. More importantly, they accelerated our execution. We responded quickly with disciplined cost actions, namely reducing marketing intensity, optimizing head count and tightening our focus on profitable demand. As a result, we continue to see strength in average order value and customer quality. At the same time, the reset is well underway. We are simplifying the operating model, removing complexity, aligning the cost structure to current volumes and focusing the business on core profitability. In parallel, we are sharpening the product offering, improvements in ingredient quality, meaningful increase in portion sizes and faster recipe cook time to 20 minutes or less are designed to delight customers and in turn, better retention and increase wallet share from our most engaged customers. So while Q2 reflects pressure, it also reflects progress. The actions we're taking are deliberate, structural and focus on improving the earnings profile of the business. I'll now turn it to Vanessa to walk through the financials. Vanessa Hadida: Thank you, Najib. As shown on Slide 4, net sales and active customers declined year-over-year reaching $22.5 million and $59,000, respectively. These figures reflect three primary factors: the temporary license disruption during the quarter, lower order frequency, and our intentional pullback in marketing and incentives. The reduction in marketing and coupon intensity is a conscious trade-off. We are prioritizing revenue quality over volume and that is reflected in the continued increase in net sales per active customers year-over-year, reaching $382 higher basket sizes and lower discounting are driving the improved unit economics. This is an important point. While the top line is lower, the underlying revenue base is becoming more efficient and more profitable on a per customer basis. I will now turn to Slide 5 to discuss margins and profitability. Profitability in the quarter was impacted by a combination of higher shipping and labor costs and lower fixed cost absorption due to the reduced volume as a result of a temporary license suspension. As such, gross profit was $7 million for a gross margin of 30.6%. These pressures resulted in margin compression and negative adjusted EBITDA for the quarter to the tune of negative $1 million. That said, we view a significant portion of these results as transitional in nature rather than a structural change. Indeed, when the license suspension occurred, we shipped Ontario orders from our Calgary facility, which is significantly more costly than shipping from our Montreal facility, which we have now resumed. Of course, the current operating environment with heightened fuel cost and food inflation remains a meaningful headwind. We also have already taken action to address these cost drivers, both through operational simplification, tighter cost control and pricing, which we expect to support margin stabilization going forward. Moving now to Slide 6. Cash flow in the quarter reflects the impact of profitability as well as working capital timing with certain payments shifting into Q2. Importantly, capital expenditures remain tightly controlled, and we continue to operate with a disciplined approach to cash management. Our focus is clear: improving cash generation through better margins controlled investments and continued working capital discipline. I will now turn to Slide 7. The key takeaway from this slide is that Q2 reflects a combination of lower scale and temporary cost pressures. At the same time, the results reinforce why our current priorities, cost discipline, margin protection and cash generation are the right ones. We are actively addressing the drivers of performance and the actions underway are designed to improve both profitability and liquidity over time. With that, I will now pass it back to Najib to walk through our outlook. Najib Maalouf: Thank you, Vanessa. Let's now turn to Slide 8. Our path forward is focused and disciplined. First, on the operating model. We're simplifying the business and aligning the cost structure to current demand levels. We're not relying on a market recovery to improve performance. We are designing the model to perform under today's conditions. Second, on the product. We are repositioning the offering around value, quality and convenience. We have introduced a simpler menu that is designed to fit our customers' busy lives. We also increased portion sizes and have sourced better ingredients to ensure the consistent quality of our subscribers' experience. This is already contributing to a stronger basket size and is expected to support retention and lifetime value. Third, on capital and the balance sheet, our priority is consistent cash generation and liquidity preservation. Every dollar of capital is being allocated with discipline with a clear objective of maintaining flexibility. And fourth, on growth, we will remain selective. We see opportunities in adjacent categories such as heat and eat, but we will pursue them in a measured way with a strict focus on returns and cash flow. The common thread across all of these priorities is discipline. We're simplifying the business, improving execution and positioning Goodfood to generate more consistent and sustainable financial performance. I will now turn it back to Selim for closing remarks. Selim Bassoul: Thanks, Najib. This quarter was not about optics. It was about action. We addressed operational issues, reduced complexity and reinforce discipline across the organization. We are running the business with a clear set of priorities: protect margins generate cash and maintain balance sheet flexibility. We have $44 million of convertible debt on the balance sheet with large interest payments that is hindering our transformation and ability to invest in the business. We are focused on strengthening the business while evaluating a range of financial alternatives to address our debt situation and enhance long-term value. We are not depending on external improvements to deliver results. We are focused on what we control, which are execution cost structure and product relevance. This is how we will rebuild performance and create long-term shareholder value. With that, I will now turn it over to the operator for Q&A. Operator: [Operator Instructions] There are no questions at this time. I will now turn the call over to management for closing remarks. Selim Bassoul: Thank you for joining us on this call. We look forward to speaking with you again at our next call. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

27天前Insight Analytics约5分钟阅读

GETI-B.ST 2026 Q1 财报电话会议

Operator: Welcome to Getinge Q1 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Mattias Perjos; and CFO, Agneta Palmer. Please go ahead. Mattias Perjos: Thanks, and welcome, everyone. Thanks for joining the call today. As mentioned in the intro here, it's me and our CFO, Agneta Palmer, with you today. And in today's conference, we'll go through performance and some of the highlights in the first quarter of 2026 before opening up for a Q&A. So let's move directly to Page #2, please. And I'd like to start by looking at the development of some of our strategic KPIs. And as you can see here, it's evident that we continue to clearly track in line with plan to increase the share of sales from recurring revenue and also accelerating the share of sales from higher-margin products like, for example, our ECLS offering, our consumables in Infection Control and our BetaBags within the Sterile Transfer product category. This is all supported, of course, by solid and effective quality processes. And if we look at the specifics here, you can see that sales from recurring revenue continue to make up 2/3 and high-margin products closing in on about 70% right now. When it comes to quality, the number of field actions in relation to sales has decreased significantly, and we see this positive trend sequentially continue also into the beginning of 2026. And these improvements, we always act with -- in line with thinking of responsible leverage and an attractive long-term return on invested capital. We can move to Page #3, please. So if we then look at some of the key takeaways from the first quarter, we managed to beat last year's record quarter and grow top line organically. Net sales grew by 0.8% organically with positive development specifically in Life Science and in Surgical Workflows. And on the order intake front, we saw an organic increase of 3.9%. When it comes to our adjusted gross and EBITA margins, they were down in the quarter, mainly due to the strong headwind from currency and from tariffs. And adjusting for the SEK 226 million in currency and tariff headwinds in the quarter, the EBITA margin was about 50 basis points higher than last year's Q1. So the conclusion from that is that the underlying performance in business -- in our business continues to be strong, and it's developing according to the plans, the long-term plans that we have laid out. We also have a strong cash flow and continue to have a solid financial position. So our financial leverage is at 1.5x and well below the 2.5x EBITDA that we have kind of as an internal threshold. We can then move over to Page #4 and some of the key events during the quarter. And if we start with our product offering and our customers, I think one situation that is, of course, evolving on a daily basis is the situation in Middle East, and we continue to monitor this closely. Our first priority is, of course, to tend to our employees in the region and continue to support our customers. And if you look at the region as such, it makes up about 2% of our sales and where Saudi Arabia is half. And so far, the impact on top line and on cost has been very limited for us. To our Life Science customers, we launched a new steam sterilizer dedicated to larger items for use for labs and for research applications. And when it comes to the sustainability and quality perspective, I'm very happy to see that we got the CE approval for Cardiohelp II in the quarter, and I'll talk more about that on the coming slide here. In addition to this, we have in our implants business received EU MDR certificate for the Intergard Synergy, which is a vascular graft with an antimicrobial coating, to minimize the risk of infections. Furthermore, in the quarter, we released our annual report for 2025, including our sustainability statement and the annual report provides a lot of good information on Getinge. So I encourage you to have a look at this if you haven't done so already. We can then move to Page #5, please. So just wanted to elaborate a moment on the positive news about the CE approval for Cardiohelp II. And just to remind everybody, this is a market segment where we are already the global market leader within ECLS therapy, thanks to our strong existing portfolio. With the launch of Cardiohelp II now, we become even more relevant for our customers. And some of the systems' key features are that it's even more lightweight and transportable, meaning that it can be used for both in-hospital and intra-hospital use. It also has an attachable gas blender as an option, which is something that is highly appreciated by our customers. And from an interface standpoint, we have an interface now that is even easier for users to operate, and it includes also several smart monitoring functionalities for better decision support for our customers. We have initiated a limited market release now in the beginning of the second quarter to a handful of customers and very happy to see how positive the reception from our customers have been for this important product. The plan now is to do a full CE market release at the beginning of the third quarter. And when it comes to the important U.S. market, the plan is still to make the submission of the Cardiohelp II system, including our HLS Advanced consumables in the second half of this year. We can then move to Page #6 and talk about the top line for a moment. So overall, we had a solid top line performance in Life Science and in Surgical Workflows. And when it comes to order intake for the group, we grew 3.9% organically. The order intake for Acute Care Therapies decreased mainly due to the temporarily high comparative figures in ventilation, where one competitor last year drastically exited the market. So we're very successful in capturing some of that market share. At the same time, we saw really good growth when it comes to ECLS consumables across the board. And this is, as you know, one of our key categories. In Life Science, the organic order intake increased in the quarter, for example, because of an anticipated improvement from low levels that we've seen in bioprocessing for quite some time. And this is something that [indiscernible] and it's good to see some of the momentum here. [ Surgical Workflows ] grew double digit in the quarter, mainly on the back of the strong development across all our product areas, which is also encouraging to see. Net sales there, we had growth of 0.8% organically for Acute Care Therapies. Organic net sales decreased mainly on the back of last year's consolidation in the ventilation market, that I just mentioned. In Life Science, they had a really strong quarter in terms of deliveries, and they grew organic net sales in all product areas. BetaBags and Sterile Transfer continues to show significant traction and momentum. In Surgical Workflows, the organic net sales increased primarily thanks to growth in Infection Control consumables within service and within our operating table category. With that, we can move over to Page #7, and I hand over to you, Agneta for a moment. Agneta Palmer: Okay. Thank you, Mattias. So overall, the headwind from tariffs and currency continued in the first quarter. Even so, we managed to hold up margins, thanks to continued pricing and productivity. Starting with adjusted gross profit for the group, adjusted gross profit amounted to SEK 3.828 billion in the quarter, heavily impacted by currency and tariffs. Adjusted gross margin was down by 0.7 percentage points in total in spite of healthy contribution from price and mix. If we then look at adjusted EBITA, cleared for currency, adjusted gross profit effect on the EBITA margin was plus 0.3 percentage points, while OpEx adjusted for currency had a negative impact on the margin by about minus 1 percentage points in the quarter. And FX impacted by minus 0.3 percentage points. So all in all, this resulted in an adjusted EBITA of SEK 824 million and a margin of 11.1%. Let's then move to Page 8, please. And here, we can clearly state that we remain in a solid financial position. Free cash flow amounted to SEK 842 million in the quarter. Compared with last year, free cash flow was impacted by improved operating profit and changes in capital. Working capital days continued to be well below 100. We are now at roughly 90 days. On operating return on invested capital, we are at 11.4% on a rolling 12-month basis, which is well above the cost of capital. At the end of Q1, net debt decreased to SEK 9.3 billion. If we adjust for pension liabilities, we are now at SEK 7 billion. This brings us to a leverage of 1.5x adjusted EBITDA, which is well below the 2.5x that we have set as an internal threshold. If we adjust for pension liabilities, leverage is at 1.1x adjusted EBITDA. Cash amounted to approximately SEK 4 billion at the end of the quarter. So all in all, we can conclude that the financial position continues to be strong. Let's now move to Page 9, please, and back to you, Mattias. Mattias Perjos: Okay. Great. Thank you, Agneta. Just a moment then to focus on the impact from tariffs and FX in the quarter. So this was, in total, a drag on adjusted EBITA in Q1 of more than SEK 200 million, so SEK 226 million altogether. Tariffs made up just over SEK 100 million of that. And if we exclude the impact of tariffs and currency, our adjusted EBITA margin in Q1 would have been 12.6%. And there, as you can see, showing then an underlying improvement. As tariffs were first implemented in Q2 of 2025, then we expect the year-on-year comparison to be a little bit cleaner from Q2 and onwards if tariff levels remain. And that's, of course, something we'll continue to update you on. We can then move over to Page #10, please. So I want to talk a little bit more about the long term as well. So zooming out and returning to what we said at the Capital Market update that we had in May of 2024. There, we talked about an adjusted EBITA margin of 16% to 19% by the end of 2028. And I think we're on a steady path of reaching that despite the headwind factors that we have seen, that we were not aware of when we announced this target. The main drivers which will enable this are growth, mix and productivity. From a growth perspective, from regulatory approvals and key strategic product launches such as Cardiohelp II in ECMO that we've talked about here and also launching our low-temp sterilization in the U.S., having the sales restrictions removed for Cardiosave in our Intra-Aortic Balloon Pump business. It's just to mention a few factors here. Specifically, when it comes to Cardiosave, I'm happy to say that we, at the end of last week, got the release for sales in CEE countries in line with the plan for Q2. We also expect that the investment fatigue that we've seen in the pharma industry will improve and some of the decision anxiety that we've seen in the last year will go away here as well. We will also, in addition to this, get our share of the announced U.S. investments and benefit from the recovery in bioprocessing. And of course, we will also continue our diligent and successful work with realizing price increases annually. When it comes to mix, we have been successful in our strategic intent to steer our business towards a continued rotation to high-margin products and consumables. And if possible, we prefer to have products made up of a competent hardware with captive consumables attached to it, similar to what we have in our ECLS offering with Cardiohelp and HLS and in the Sterile Transfer offering with Alpha Ports driving the consumption of BetaBag. Our strong R&D and innovation pipeline is, of course, set to support this. When it comes to productivity, here, we've already done a lot in different parts of the business, and we are still excited that there remain quite a few opportunities across the business as well. One thing to mention, I think, is the heightened extraordinary quality costs connected to the product uplift of Cardiosave and Cardiohelp that is expected now to go down in the second half of 2026 and that we will be on a lower level in 2027 and '28. Furthermore, we will, of course, continue with our production excellence effort, where we also have some very tangible measurable benefits and helping us further optimize our supply chain and remain with an overall tight cost control across the company. So this all supports our assessment that our target for 2028 is still within good reach. Then we can move over to Page 11, please. So for the remainder of 2026, we confirm the financial outlook for 2026. As we all know, there are some geopolitical uncertainties that we need to navigate. But based on the underlying demand and the dialogue that we have with our customers on a daily basis, our expectation remains for an organic net sales growth in the range of 3% to 5%, adjusted for the phaseout of the surgical perfusion product category. Surgical Perfusion is still expected to have some net sales in 2026, but declining from about SEK 250 million last year to SEK 50 million this year. We can then move to Page 13, please. So in terms of summarizing here, the key takeaways from the first quarter. We did achieve organic growth in our top line despite the record quarter last year. Tariffs and FX continue to be a significant headwind, but our underlying performance is improving. Cash flow in the quarter was really strong in the quarter, and our financial position remains solid as well. For 2026, we reiterate our guidance for organic net sales growth of 3% to 5% adjusted for the phaseout of the Surgical Perfusion. And when it comes to our priorities for 2026, you've heard them before, we are focused on addressing the remaining challenges when it comes to quality remediation in Acute Care Therapies. We focus on sustainable productivity improvements and cost consciousness when it comes to navigating the geopolitical uncertainty and also addressing the impact from tariffs. And most importantly, we continue to focus on the work hand-in-hand with our customers, adding value for them and the patients that they serve. With that said, I open up for questions. Operator: [Operator Instructions] The next question comes from Sten Gustafsson from ABG Sundal Collier. Sten Gustafsson: A couple of questions. First of all, with regards to the ventilator headwinds you had here in Q1, if I remember correctly, you had pretty good sales development for ventilators also in Q2 last year. So is it fair to assume that the headwind will continue into Q2? That would be my first question. Mattias Perjos: Maybe to some extent, it's not something -- it's not going to be a significant factor, I think, for Q2, but it certainly won't be a big help either. Sten Gustafsson: Okay. Excellent. My second question is regarding Cardiohelp II. And what kind of gross margin should we assume for that product compared to the existing Cardiohelp product? Is it going to be accretive? Or is it fairly similar gross margins on those 2 products? Mattias Perjos: Yes. We don't guide on and disclose gross margin levels on any of our products and Cardiohelp II is no exception. Generally, though, when we work with product development and new launches, we make sure that the products that form the next generation of any therapy or product category have a better gross margin than the generation that they replace, and Cardiohelp II should be no exception to this. Sten Gustafsson: Okay. And one final, if I may. You talk about these lower extraordinary quality costs going forward. Could you please sort of quantify those? I mean we've heard SEK 800 million in the past. And where we are today? How low those will be going forward? Mattias Perjos: Yes. Yes, I think you're right. We said that they peaked at about SEK 800 million in 2024. We saw a small decrease in 2025. We expect another small decrease this year and then a slightly bigger decrease from 2027 onwards. And the end game here is to at least halve those costs. Operator: The next question comes from Erik Cassel from Danske Bank. Erik Cassel: First, I want to get some more color on the composition of the ACT decline. I mean, obviously, you talked about ventilators, but you're also talking about Cardiac Assist, et cetera. And I think last quarter, you said that the demand for Cardiac Assist was quite positive on the hardware side. So I wanted to ask if something has changed on that side. And if you could, if possible, give some more color on how much the ACT Americas part declined by the different parts? Mattias Perjos: Yes. No, thanks for the question. We don't dissect the business that much. What I can say on Cardiac Assist is that we had hoped to be able to resume deliveries in Q1 already of balloon pumps in CEE markets. And that was not the case. We only got the final approval to start this last Friday. So it will be a Q2 event. So that's been a little bit of a drag on sales. And also, it has a direct impact on order intake as well because customers don't order new pumps unless they have received what they're expecting to be delivered. Erik Cassel: Can you say anything on how much the ventilator decline did on that 8.5%? Mattias Perjos: No, we don't disclose subcategory financial parameters, unfortunately. Erik Cassel: But can you say anything if it would have been, say, positive organic growth if it wasn't for ventilators? Mattias Perjos: No, I can't answer that either, unfortunately. Erik Cassel: All right. Fair enough. I got to try. Then on the guidance side, I view it as the wording is a bit softer, perhaps the visibility is worse now and maybe you're even seeing a bit more, say, negative outlook. Can you just talk a bit about what you're seeing for the rest of '26 in terms of the, say, customer behavior and dialogues that you're referring to? Has it become slightly more negative? Or is this just a wording change that I'm dwelling too much on? Mattias Perjos: Yes. No, that was not the intent of the wording change at all. It was really just a way of recognizing that we do operate in a rather volatile environment, and we're mindful of that, but we feel confident reconfirming our guidance here even if the word, semantics, had changed a little bit. Erik Cassel: Okay. Just a last question then. Surgical Workflows, obviously quite strong in terms of order intake, especially for Americas and Digital Health. Is there some specific projects that this relates to that sort of makes it nonrecurring? Or are you seeing a more upbeat environment in the U.S. specifically for Surgical Workflows? Mattias Perjos: It's a bit of both. If you look at DHS, it's always lumpy. I mean they tend to be rather large projects, and we do have that, but there's also a little bit of an underlying better confidence, I think, generally in the market and also, I think in the way we operate in this business as well. We made some tweaks to how we organize ourselves, which hopefully also for the long term has a better, more positive impact. But there's absolutely a bit of -- you cannot call them one-offs because they're not. It's just project business that is a little bit fluctuating by nature. Erik Cassel: Okay. Can I ask one short one? Will you tell us anything on the potential impact of the change in steel content tariffs? Or is that something you're going to not disclose? Agneta Palmer: What we can say there is that it's still under analysis, how it impacts us. It's fairly recent. But the preliminary evaluation is that it's mainly if it hits us. It's components and spare parts, not complete products. And the absolute majority of our exposure is on the complete products. Erik Cassel: So the SEK 500 million for full year still holds, you think? Agneta Palmer: I don't think that we have guided on this, but that sounds like a fair assumption given the current levels, yes. Operator: The next question comes from Filip Wetterqvist from SB1 Markets. Filip Wetterqvist: I have a couple. First one, given recent pricing hikes that we have seen on raw materials such as plastic, steel, aluminum, it seems like you do not see any material effect of this in Q1, and I assume contracts are negotiated a few quarters in advance. But do you anticipate any higher input costs in the coming quarters? Or do you not expect any effect at all from this? Agneta Palmer: Yes. Thank you for that question. If we dissect it a bit into parts. When it comes to freight, which is the more direct near-term impact, we have very limited impact in Q1. But if it's prolonged, yes, there will be some impact in Q2 onwards. When it comes to plastics, et cetera, it's too early to say that we have any effects there. Filip Wetterqvist: Okay. And at the Q4 call, you indicated price increases of around 2% for 2026. Did that materialize here in Q1, meaning the 0.8% organic growth was hampered by lower volumes? Or -- and do you -- are you able to accelerate price increases further there if you see increasing costs here in the coming quarters? Agneta Palmer: Yes. We still stand by that, roughly 2%. It is a gradual rolling during the year. So it's slightly less than that in Q1, but we are progressing well towards that level. Filip Wetterqvist: Okay. But let's say, we see -- so if costs are increasing, you won't be able to translate that onwards to your customers, you still anticipate only a 2% price increase then? Agneta Palmer: This is always an ongoing discussion that we have with the -- all the commercial dynamics and the cost levels that we have. So of course, we will adapt our ways of working if we see that we get higher inflation, but it's not an automatic or sort of something that we can directly pass on. Mattias mentioned it for tariffs and it's similar then for raw material. But we do have very active pricing. Operator: The next question comes from Kristofer Liljeberg from DNB Carnegie. Kristofer Liljeberg-Svensson: I have a few short ones. I hope that's okay. First of all, is it possible to quantify at all the positive effect you expect here from the new ECMO approval in Europe or whether that potential positive effect is more a factor of when and -- yes, when you get the U.S. approval, again? And then could you just clarify a little bit about the Cardiosave status here in Europe and the U.S. filing? And then finally, on tariffs, if it's fair to assume really neutral effect here year-over-year from the second quarter? Mattias Perjos: Yes. I think we can't quantify. But of course, there is a positive effect from the launch of Cardiohelp. I mean this is an important part of our product range. So definitely a net positive, but I can't give you a magnitude of that. When it comes to the Cardiosave status, we got approval to start shipping last Friday. So the first pumps are being delivered in CEE markets this week. And the U.S. filing, there is no change here. We still expect to do that before the half year mark. Agneta Palmer: And then when it comes to tariffs, it's dependent, obviously, on the tariff level, but also on the product mix of imports. But generally speaking, yes, it sounds like a fair assumption to assume that. Operator: [Operator Instructions] The next question comes from David Adlington from JPMorgan. David Adlington: Maybe could you quantify the impact of foreign exchange hedges in Q1, how they roll off through the next 12 months or so? And then secondly, obviously, we're a quarter in now, still no margin guidance. Just wondering if you're willing to give us an idea around how you're seeing margins for the year, whether up, down or sideways? Agneta Palmer: Yes. If we start with FX, we have not changed anything specifically regarding our hedging strategy, and we will not disclose that. But just a reminder, I think we have talked about it on this call before, looking at the natural hedge, around 60% of what we sell in the U.S., we also produce in the U.S. And then the second thing maybe to mention regarding natural hedging and FX exposure is that we work very actively with our payment flows to compensate or offset as much as possible. So those are the 2 things to highlight there, but no quantification of the hedging effects as such. Mattias Perjos: And on the margin guidance, I mean, there's still [Technical Difficulty] said in the presentation, we are confident about the long-term margin guidance of 16% to 19%. David Adlington: Sorry, Mattias, you broke up again. I might have missed the first part of that. Would you mind just repeating the margins for this year? Mattias Perjos: Yes. I just said that we -- there's a lot of uncertainty in the world, as you know. So we are not going to do any margin guidance for 2026. We remain with the top line guidance only, and we remain with the long-term margin guidance of 16% to 19%. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. I just have a follow-up on ACT. So on ECLS consumables continued to grow despite being up against a rather tough comparison numbers. And I assume there was some flu-related headwinds here given the lower hospitalizations Q1 '26. So I just wonder if there were any one-offs or stocking of consumables that you saw here in the quarter or if it's rather the underlying run rate? Mattias Perjos: You broke up for a second. Can you repeat the question on the ECLS consumables, please? Ludvig Lundgren: Yes. So it seems pretty strong considering the quite tough comparison. So I just wonder if you saw any stocking or one-offs here in the quarter or if it rather reflects the underlying run rate? Mattias Perjos: Yes. No, there were no abnormal events in Q1. I think your analysis of this seems correct. It's a good underlying demand. Ludvig Lundgren: Yes. Okay. And can you just confirm that like the flu-related sales was lower this quarter versus Q1 '25? Mattias Perjos: [indiscernible] confirm that we see the same flu data as you when it comes to hospitalizations. How our customers use the product they buy, whether it's for treating flu or something else, we don't have perfect insight into it. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Mattias Perjos: Okay. Thank you very much. I think I already made the summary before the Q&A. So I just wanted to say thanks, everyone, for joining, and I wish you a good rest of the day. Thank you very much.

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MMM 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the 3M First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded, Tuesday, April 21, 2026. I would now like to turn the call over to Chinmay Trivedi, Senior Vice President of Investor Relations and Financial Planning and Analysis at 3M. Chinmay Trivedi: Thank you. Good morning, everyone, and welcome to our first quarter earnings conference call. With me today are Bill Brown, 3M's Chairman and Chief Executive Officer; and Anurag Maheshwari, our Chief Financial Officer. Bill and Anurag will make some formal comments, then we will take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website at 3m.com. Please turn to Slide 2 and take a moment to read the forward-looking statements. During today's conference call, we will be making certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K lists some of these most important risk factors that could cause actual results to differ from our predictions. Please note, throughout today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. With that, please turn to Slide 3, and I will hand the call off to Bill. Bill? William Brown: Thank you, Chinmay, and good morning, everyone. We delivered solid operating performance in Q1 with earnings per share of $2.14, up mid-teens versus last year. Operating margin increased 30 basis points to 23.8%, and free cash flow was over $500 million, up double digits. During the quarter, we returned $2.4 billion to shareholders, including $400 million in dividends and $2 billion of share repurchases. We had a light start to the year on the top line with organic growth of 1.2%, driven by pockets of macro pressure. But we saw encouraging order trends that support our outlook for acceleration in the balance of the year. Looking forward, we remain confident in achieving our full year 2026 guidance despite the volatile environment. Our performance reflects strong execution on productivity, cost discipline and commercial rigor. We're building a stronger foundation based on commercial, innovation and operational excellence, underpinned by a relentless focus on strengthening our performance culture. In commercial excellence, we're seeing benefits from improved sales effectiveness and lower customer attrition, and we continue to make progress on cross-selling opportunities. To date, we've closed on approximately $80 million of new business against the 3-year, $100 million target we laid out at Investor Day with a pipeline of $85 million of additional cross-sell opportunities. We've introduced AI tools to drive growth, reduce churn and automate manual work, including an agent that analyzes our sales and opportunity pipeline data to develop customized coaching plans for sales managers to help reps meet their targets. And we believe digital tools like Ask 3M, a new AI-powered digital assistant that helps customers find solutions to design challenges using 3M products, will allow us to reach a broader population of customers. Our pace of new product introductions is accelerating with better on-time performance, reduce cycle times and clear governance and accountability across R&D. We launched 84 new products in Q1, up 35% versus last year, and we're on pace to launch 350 in 2026. This will put us ahead of our Investor Day target to launch 1,000 new products through 2027. We've maintained OTIF service levels above 90%, while at the same time, reduced inventory by 3 days and delivery lead time by 25%, improving our competitiveness with customers. OEE improved over 100 basis points year-on-year as we optimize asset run length, run time and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage. And cost of poor quality decreased by approximately 100 basis points versus Q1 last year, driven by more structured root cause analysis, significantly increased Kaizen activity and tighter process controls. What matters is that these are not isolated wins. They collectively reflect greater execution discipline and constancy of purpose. And that consistency and momentum gives us confidence that we can meet or exceed the medium-term goals we outlined at our Investor Day last year, even in an uncertain macro environment. While we continue to strengthen our foundation and shift from a holding company to an operating company model, we're beginning a broad-based transformation of the company, simplifying and standardizing processes, reducing complexity, reshaping our portfolio and improving resilience and predictability. We see substantial opportunities to streamline operations and consolidate facilities. The transformation includes both deliberate footprint actions as well as targeted investments in manufacturing and process technology. For example, transitioning from solvent to solvent-free coating, which brings cost capital and environmental benefits. Earlier this month, we closed on the previously announced sale of our precision grinding and finishing business within SIBG, which reduced our footprint by 7 factories. And we closed 1 factory and announced 3 other full or partial closures, bringing our total projected manufacturing site count to below 100. At the same time, we're investing more than $250 million over the next 3 years in standard, easy-to-replicate automation across our plants and distribution centers. By automating material handling in our warehouses, replacing manual slitters with automated systems and automating our current manual visual inspection processes, we are improving safety, reducing labor costs, increasing yield and putting ourselves in a better position to support demand as volumes recover. To illustrate the opportunity, we have 7,000 material handlers and over 600 operators performing manual visual inspections across our network and about 500 manual slitters. When we automated the slitting operation at our [ Novato ] facility late last year, we achieved a 30% increase in square yards per hour productivity. Over time, this transformation will allow us to accelerate towards a structurally higher growth, higher margin potential portfolio of priority verticals. Slide 4 provides a more detailed view of growth and orders by end market. When you look across our portfolio, roughly 60% of our businesses showed relative strength in Q1, including general industrial and safety. Importantly, we also saw strong orders in these markets, which gives us visibility and reinforces that the demand environment in these verticals remains healthy. At the same time, we experienced macro and industry-driven softness in about 40% of the portfolio that we've been highlighting as watch areas. In electronics, we delivered flat year-over-year growth in Q1 versus mid-single digits last year. Our performance in semiconductor and data centers was very strong, while consumer electronics was soft due to industry-wide memory chip issues, which is impacting demand. Electronics orders were up double digits due to significant activity in semis and data centers, which will convert to revenue in Q2 and the second half. In automotive, the market was soft as expected in the first quarter. Global IHS build rates were down about 3% overall and 10% in China, which pressured volumes. And in Consumer, we continue to see soft U.S. consumer discretionary spending with a few pockets of strength in categories with recent new product introductions. POS trends in the U.S. improved over the course of the quarter and were positive in 7 of the last 8 weeks, providing some encouragement heading into Q2. Overall, orders were up slightly over 10% in Q1 and backlog grew double digits, both sequentially and year-over-year, giving us momentum into Q2. This strength reflects the combined impact of our new product introductions, continued progress in commercial excellence and orders for longer lead time products, with some additional benefit from pre-buying ahead of recent price actions. It's encouraging to see order strength continue into the first few weeks of April. Turning to Slide 5. As part of our ongoing focus on portfolio shaping, last month, we announced the acquisition of Madison Fire & Rescue, which will be combined with our Scott Safety business to create a leading global fire and safety business. The combination of Scott Safety's premium self-contained breathing apparatus with Madison Fire & Rescue's premier portfolio in rescue technology and fire suppression creates an $800 million revenue business, growing at a high single-digit growth rate. This strategic transaction broadens our safety portfolio, one of our priority verticals by expanding our market reach and building scale for future growth. It positions us to maintain above-market growth, enhance margins and drive strong free cash flow generation. I also want to highlight our growing data center and associated power utility business with current revenue of approximately $600 million, $100 million inside the data center and about $500 million bringing power to the facility. This is a priority vertical space, where we are introducing new products like EBO or Expanded Beam Optics, a high-performance optical connector engineered to improve installation speed, reliability and operational efficiency within data centers. EBO builds on our existing TwinAx copper connector for high-speed data transmission and positions us well for the copper to fiber transition underway. With hyperscaler validation, a significant order in hand and $1 billion-plus addressable market, we're investing to more than double our capacity to support growing AI demand. We see additional opportunities here as demand expands to ceramics, silicon photonics and on-chip optical connectors. We have strong IP to support this evolving market and a clear road map to develop new products that further drive growth. Overall, I'm pleased with our progress this quarter, encouraged by the pace, op tempo and executional rigor of the 3M team. We're on a multiyear journey and progress won't be linear, but we're building the capability to execute consistently, to innovate with purpose and to allocate resources toward the parts of the portfolio that deliver the most value. I'm grateful to the 3M team for their commitment, hard work and focus as we deliver progress every day. With that, I'll turn it over to Anurag to share the details of the quarter. Anurag? Anurag Maheshwari: Thank you, Bill. Turning to Slide 6, we had a good start to the year, performing ahead of expectations on orders, margins, earnings and cash. Starting with top line, we delivered organic sales growth of 1.2%. SIBG showed continued momentum and grew over 3%, slightly better than expectations. TEBG was flat, lighter than expectations due to ongoing weakness in certain end markets like consumer electronics and auto as well as late timing of order intake within the quarter. In CBG, we did not see the expected recovery in the U.S. consumer market, resulting in organic sales down 1%. Notably, we saw significant strength in orders this quarter driven by progress on commercial excellence and NPI. Overall, orders grew slightly more than 10%, with SIBG and TEBG growing mid-teens, driven by industrial, safety, data center, semiconductor and aerospace. The auto momentum accelerated through the quarter, resulting in backlog growth of 20% over last year and 35% sequentially, positioning us well for the second quarter. First quarter adjusted operating margins were 23.8%, up 30 basis points year-on-year, driven by strong volume and broad-based productivity, which more than offset approximately $145 million of tariff impact, stranded costs and investments. Operating income from the 3 business groups was up $85 million with 60 basis points of margin expansion driven by supply chain productivity, including improvements in cost of quality and procurement and logistics and continued focus on structural G&A reduction. Corporate was a 30 basis point headwind from planned wind down of Solventum transition services agreements. Our sustained operational performance of driving growth and productivity led to EPS improvement of $0.26 or 14% to $2.14. In addition, we benefited from lower share count, timing of tax benefit and FX of selling tariffs, stranded costs and investments. Adjusted free cash flow was $540 million in the quarter or up 10% from strong earnings growth and improvement in inventory, a decrease of 3 days while maintaining service levels of greater than [ 90% ]. In addition, we returned $2.4 billion to shareholders in the first quarter, including approximately $400 million in dividends, reflecting a 7% increase per share and $2 billion through opportunistic share repurchases. Turning to Slide 7, I will provide an overview of our business group performance for the first quarter. First, Safety and Industrial had another quarter of 3%-plus growth as we continue to gain traction on commercial excellence initiatives and realized benefits from new product launches. We delivered mid-single-digit growth across industrial adhesives and tapes, safety, electrical markets and abrasive systems, driven by continued share gains from new product introductions and targeted commercial initiatives to reduce customer churn, strengthen sales coverage and increase cross-selling. Collectively, this growth more than offset continued weakness in roofing granules as the housing market and consumer sentiment remains soft. Even though auto repair claims were down mid-single digits, it was encouraging to see our auto aftermarket business be flat to slightly up after a couple of years of decline from good execution of the key account strategy. Turning to Transportation and Electronics. While growth was flat, orders were up low teens, accelerating through the quarter, resulting in backlog up about 30%. Approximately half of the business delivered mid-single digits growth, including double-digit growth in semiconductor and data center, driven by continued market demand and ramp-up of EBO that Bill referenced earlier. In addition, we saw growth in aerospace and commercial branding from better sales effectiveness. This was offset by the other half of the business, which is exposed to consumer electronics and auto where the market was down. Finally, Consumer first quarter organic sales were down 1%, driven by weakness in USAC as we did not see the expected pickup in retail traffic in the early part of the quarter. We did see pockets of strength. Scotch-Brite grew approximately 10% on the back of new product launches. We also saw good traction in international markets, especially in China and Asia, but it was not enough to offset the impact of USAC, which makes up a majority of the CBG revenue. By geography, in China, we again grew mid-single digits despite soft auto and consumer electronics end market as we executed on our key account strategy and launched local NPIs in a relatively strong industrial market. USAC was up slightly with mid-single-digit growth in industrials being offset by softness in Electronics and Consumer. Asia had another quarter of good growth, with India in the high teens as we drove higher sales coverage across the country. EMEA was down about 1% due to market weakness in auto. Moving to Slide 8. Though the macro remains uncertain, given our good performance in the first quarter, we are reiterating our guidance for the year. Organic sales growth of approximately 3%, earnings per share ranging from $8.50 to $8.70 and free cash flow conversion of greater than 100%. For sales, the strong backlog combined with continued strength in orders in the first 3 weeks of April gives us confidence that all 3 business groups will accelerate growth in the second quarter and through the balance of the year. On margins, we had a solid start with the 3 business groups growing 60 basis points despite 100 basis points year-on-year tariff impact. As we lap tariff pressure in the second half, the continued momentum on productivity and volume acceleration gives us confidence in our expectation of approximately 100 basis points margin expansion for business groups this year. On nonoperational, we expect positive trends driven by a $2 billion share repurchase in the first quarter and lower net interest expense. Overall, we are maintaining our EPS guidance, which includes a contingency, and we will go through the components of the earnings bridge on the next slide. Given the strong earnings growth and good progress on working capital, particularly inventory and continued CapEx efficiency, we believe our free cash flow will be more than $4.5 billion for the year and greater than 100% conversion. Slide 9 shows the trend of key earning elements and the current guidance. We are trending $0.05 to $0.15 higher on earnings from momentum on productivity and lower share count and interest expense. We are facing higher input costs due to the recent increase in oil price, but have implemented targeted price increases to mitigate the impact at the current levels. Given that we are early in the year and we are operating in a volatile macro environment, we think it is prudent to keep a contingency until we have more clarity about the rest of the year. Overall, we are moving with determined pace, and we'll continue to calibrate as the year progresses. Regarding cadence, we expect sales growth to accelerate in Q2 and the back half of the year. Backlog conversion and continued order strength is expected to support growth momentum in both SIBG and TEBG in the second quarter. We anticipate consumer to improve as point of sale is on an upward trend, resulting in normalized inventory levels. On EPS, given the contingencies for the second half, we expect the first-half EPS to be higher than the second half. Our 2026 financial outlook puts us on pace to exceed our medium-term financial commitments that we laid out during Investor Day around growth, margin and cash. And on capital allocation, we have already returned over $7 billion of the $10 billion shareholder returns that we had committed to. Before we open the call for questions, I want to take a minute to thank the team for a strong start to the year and being proactive in this environment to mitigate risk and control the controllable and for their commitment to strengthen the foundation and drive profitable growth. With that, let's open the call for questions. Operator: [Operator Instructions] And our first question comes from the line of Jeff Sprague with Vertical Research. Jeffrey Sprague: Bill or Anurag, just trying to dig into the order commentary a little bit more, maybe you could give us a little more perspective on the pre-buy, the size of it, if you could. And I guess the prebuy would imply getting ahead of price increases and the like. So maybe a little bit of color on how much additional price is now embedded in your organic growth forecast. And just also on these backlog numbers, obviously, the delta sound great, but it's not really a backlog business. So kind of the question, is it law of small numbers on those deltas? Or is there actually significant visibility that you can anchor to as you look into Q2? William Brown: Jeff, thank you for the question. I'll start, and maybe I'll pass on to Anurag on the backlog point. As we said, we had very good orders in the first quarter, up double digits, which was very good. And you're right, we're not really a backlog-driven business, but backlog was very strong coming out of Q1 and continues to build into Q2. Over the course of the quarter, we saw good order growth in January and February, kind of up mid-single digits. But it accelerated quite a bit in the month of March. So it would be well over the double-digit number that we ascribed for the whole quarter. And it continues into April, which I think is very encouraging. Now how much is price? I mean the reality is we do a price increase every year on April 1. So it's hard to discern how much was a prebuy. We think there's some of it. We've signaled to investors -- to customers rather that we're going ahead with a price increase on top of what we went out with April 1, associated with the price of oil coming up. So that could cause a little bit of pre-buy, if you will. But again, it's hard to discern exactly how much would that be. You asked about price for the year. For the year, we had guided before at about 80 basis points. We came in a little bit below that in Q1. We still see -- outside of oil-based increases around 80 basis points. But when you add in oil and the expected price increase from oil, it could be around an extra 50 basis points is what we're thinking at the moment. So price for the year around 1.3 points. I don't know, Anurag, maybe share a little bit about the backlog. Anurag Maheshwari: Yes. Thanks there, Bill. You are right that we are largely a book-and-ship business. We have about 75% of our revenue in a quarter comes from book and ship, but we do get backlog coverage as we enter the quarter. With the numbers that we mentioned, which was about 35% up sequentially to 20% year-over-year, provides us about 400, 500 basis points of additional coverage as we enter into the quarter, which is not insignificant given the growth acceleration that we expect from Q1 and Q2. So I think it's really good to kind of see that we are starting with a very good backlog coverage for the quarter. Combined with the order momentum that Bill spoke about in the first 3 weeks of April, it gives us really confidence for acceleration of growth through the -- through second quarter. And typically, we do not talk about orders and sales because of the book and ship because they converge together. But this time, you could see the big spike. And as Bill mentioned, part of it could be the pre-buy, but a lot of it is commercial excellence, NPI and other initiatives that we are driving, which resulted in order acceleration. Jeffrey Sprague: Great. And then maybe just a quick follow-up then. Just a comment about then accelerating into the remainder of the year. By that, do you mean each quarter will be a faster growth quarter than the one that preceded it, even though the comps are getting tougher in the back half of the year? William Brown: Yes, we see Q2 being better than Q1. And we see the second half being better than the first half, is the way we're currently looking at it, Jeff. Operator: Our next question comes from the line of Scott Davis with Melius Research. Scott Davis: Just to follow up on Jeff's question. Are customer inventories low and there's a little bit of a restock occurring? Or are they balanced? How do you guys kind of see that element right now? William Brown: So we track it pretty carefully on the Safety and Industrial business group, the distribution inventory is relatively normal, I'd say maybe a tick below what we typically would see. We would typically see 65, 70 days, and it's a bit below that. On the Consumer side, it's about normalized from where we were last year, around 13 weeks of supply coming into the year was a bit higher, maybe 13.5. But right now, we're around 13. So on the Consumer side, fairly normal. On the Safety and Industrial side, I'd say normal to maybe a bit light in the channel. Scott Davis: Okay. Helpful. I think you mentioned your factory footprint is down like 10%. Is there another 10%? I mean how do you guys kind of think of where the endpoint on that journey is? William Brown: So it's -- we're going to keep talking about this with investors as we go forward. I mean, at the end of last year, with 108, we sold and closed on PG&F, the precision grinding business, which was 7 factories scattered across Europe, one in Asia, a couple in the U.S. So it was not a large business, but a big factory footprint. So that brought down by 7. We closed 1 in the first quarter. We announced a couple of others. So that will close over the course of this year into next year. So that puts us below 100. The number will be below where we happen to be today. We'll continue to look at that and size it for investors as we go. But clearly, the footprint just under 100 is bigger than we really need today. Operator: Our next question comes from the line of Julian Mitchell with Barclays. Julian Mitchell: Just wanted to start maybe if you could give any color around the second quarter dynamics in a bit more detail, understand the organic sales growth accelerates year-on-year from the 1% in Q1. Also, I think Anurag, you said first half EPS more than second half because of the contingency. So I just want to gauge sort of how much sequentially or year-on-year EPS should grow in Q2? And what's the sort of margin embedded in that guide would be? Anurag Maheshwari: Sure. Sure, Julian. Let me answer those questions. So first, just on the revenue growth. As we mentioned because of the good backlog and the auto momentum, we expect organic growth in the second quarter to be higher than 3%, with all the 3 BGs accelerating. SIBG, which was at 3.2%, obviously going higher than that. TEBG, low single digit. And CBG flat to positive. So that's the expectation of the revenue growth acceleration. Obviously, that's going to come with high flow-throughs. We're going to continue with the productivity that we did in the first quarter will continue to the second quarter. And between volume and productivity, we'll offset all the last quarter of the tariff year-over-year impact for us, a pickup in stranded costs and investments. So you will see operationally for us, it's going to be a solid margin, about 24.5%, and good EPS flow-through coming from that. On below the line, we will see a couple of pennies of headwinds relative to last year. Last year, in the second quarter, we had a divestment of an investment that we had in India, which was about $0.08 to $0.10. Then you see a little bit of tax, which was favorable in Q1 coming back in Q2. So those are two headwinds. Of course, they will be offset by the share buyback, which we did in the first quarter, which is going to help us in the second quarter, plus a little bit on the non-op pension side. So you put all of that together, we should grow more than $0.05 in the second quarter, which for the first half would put us at about $0.30-plus of EPS growth, which is more than half if you include the contingency for the full year. Now the contingency, as I mentioned, we kept it for the second half of the year, depending on how things evolve. If we continue performing the way we do, revenue grows over 3% in the second quarter, which is a good exit rate as we enter into the second half. And if it continues at that a little bit better with good volume flow-through, no tariff headwind, the margins in the second half could be much higher than the first half. Yes. Julian Mitchell: I appreciate all the color. Just one very quick follow-up. That was very thorough. Maybe on the pre-buy dynamics, credit for calling that out, but trying to understand what you're assuming for how much that sort of reverses because you've got organic sales growth accelerating in Q2. We have maybe some sort of -- I don't know if a prebuy is helping that or the unwind hurts that. Maybe flesh out that prebuy sort of dynamic over the balance of the year. William Brown: So Julian, I mean we -- it's hard to discern exactly how much is pre-buy. I mean we get orders coming in, it's quite strong. But we are seeing much better traction on new product introductions, a lot of momentum building on commercial excellence. And keep in mind, part of what was driving Q1 growth, including into early April, are some longer-lead products that will go into semis, more importantly, in data centers, delivering in Q2 in the back end of the year. So you have all these factors in there. I think when I step back and look at the full year, as we said, we'll see acceleration into Q2 and then in the back half. And all these pieces come together. And any pre-buy that's happened will wash out in Q2, but we do see acceleration in the back half on the back of really core operating fundamentals around NPI and commercial excellence. Operator: Our next question comes from the line of Joe O'Dea with Wells Fargo. Joseph O'Dea: On the $0.05 to $0.15 of contingency tied to oil macro uncertainty, can you just outline kind of roughly how you think about the split on the demand side versus the cost side of that and your planning assumptions? And then really looking for any color on the oil exposure sort of across the business, and what you're thinking about that contingency could flow through if you need to use it? Anurag Maheshwari: Okay. Let me start with the contingency, and then I'll -- and then Bill, you can add from there on. On the $0.05 to $0.15 of contingency that we kept, it's actually across the 2 buckets that you mentioned around here. As I mentioned, in the second quarter, we'll be above 3%, we expect -- which is a good exit rate as we go into the second half. So if there is a little bit of an impact on the volume piece because of macro, which we are not currently seeing right now or a little bit of the input cost that goes up, so I guess it gets spread between the two, Joe, to be honest. Our objective right now is to continue driving what we control on the NPI commercial excellence continue to outperform the macro and drive more productivity so that we don't have to use the contingency in the second half. William Brown: And Joe, on the oil price, the way we look at it is really two pieces. One is on the supply side. The other is demand. And on the supply side, we have about 45% of our cost of goods is raw materials and about 1/3 of that -- so it's about $6 billion of raw material spend. And about 1/3 of that is its basis in polychem. So it's ethylene, it's propylene, esters, acrylates, all those various things. And we are seeing some upward cost pressure on that. What we've seen so far and expect is about $125 million of cost increase there, which are offsetting into pricing. As I mentioned earlier on that we expect about a 50 basis point uplift on price coming from that oil-based exposure. How that affects the overall macro economy? What's going to happen with consumer spending, auto? I mean that's still all unfolding as we speak and depending upon what happens in the Middle East, but that's our current assumption as we speak today. Joseph O'Dea: Got it. And then just on the transportation, electronics commercial excellence program, can you talk about where you are on that trajectory? I think you started to see traction in SIBG last year, and that continues, but just the efforts that are underway. And as we think about the growth acceleration, just any quantification of how you're thinking about commercial excellence contributing to better T&E growth as you move through the year? William Brown: Yes. So it's a good question. I mean, they're doing a great job on this. They're falling right behind what we've done in SIBG, which has been very, very successful. I'm very pleased with the traction on the sales force, on pricing discipline, on cross-selling, on churn reduction and looking very hard at attrition with the predictive AI models that we have in place. And the team at TEBG is doing the same sorts of things. I think the cross-sell opportunity is not going to be as robust, but they move very aggressively on improving on the sales force and better incentives, better targeting. We're close, we're on targets. They're tracking attrition rates, which I think is very good. They have the same predictive models tailored for TEBG into that business. So they're making good progress. It's going to roll out over the balance of the year. One of the key things we're focused on is making sure we have the right mix and focus of our sales reps versus application engineers. Are they -- do we have the right mix between the two? And are they calling at the right level in the customer, for example, in automotive at the OEE versus the tiers? So it's a little bit different than what we see in SIBG, but they're working it pretty hard. And I think you're going to see in the back end of the year certainly improvements in TEBG coming from a lot of that commercial excellence work. Operator: Our next question comes from the line of Andrew Obin with Bank of America. Andrew Obin: So on the Transportation and Electronics, to just to dig in a little bit further, also double-digit orders. So it seems like we -- a lot of questions into the quarter about weakness in consumer electronics. So does that mean that we are offsetting consumer electronics into the second half? William Brown: Yes, Andrew, it's exactly what's happened and will happen. In fact, when you -- again, when you discern with TEBG, just in Q1, I mean they were flattish, but half of the business was up mid-single digits and half the business was down mid-single digits. And you can really isolate that in the 2 areas, which is auto, auto OEE and commercial vehicles, and consumer electronics. So we show in our slides that electronics as a whole is flattish. What you see there is you see very strong semiconductor, data center business offsetting a weaker consumer electronics business. As we look at the balance of the year, we see electronics start to get modestly positive. Again, I think CE, or consumer electronics, may soften a little bit. But we are seeing better trajectory and growth in the data center and the semiconductor business. Andrew Obin: And Bill, just to follow up on that. At CES, you showcased some pivot in strategy on consumer electronics. You've also talked to your analyst -- your first Analyst Day about the need to rebuild the R&D pipeline, particularly on the electronics side. Can you just talk about how these two internal initiatives impacting your growth and the growth trajectory over the next 12 months, let's say? William Brown: Yes, that's a great question. I mean, we're putting a lot of time and effort into making sure we have good new product introductions in consumer electronics, both for the premium segment as well as for the mainstream segment. Wendy has been talking about this quite a bit. We are seeing good traction here. Unfortunately, the market isn't cooperating with us. We do see a greater downturn in LCD, which is where our strength happens to be. But we do see a lot of innovation in this space. We are gaining some share modestly in the mainstream side. When you look at content per device, 3 or 4 China OEMs have increased their content per device in the first quarter and the fourth one, we saw a pretty good order for us. So I think we're making some progress here. And this comes on the back of a lot of the NPI work that's happened in TEBG, and there's more to come. Operator: Our next question comes from Andy Kaplowitz with Citi Group. Andrew Kaplowitz: So can you give us some more color into what you're seeing in Consumer? I know you talked about share gain actions in Consumer. So maybe you can elaborate on what you're doing there? And how much discounting do you have to do to get there? And should Consumer contribute to your margin performance this year? Or could Consumer margin continue to be pressured a bit over the year? William Brown: So look, I'm pleased with what's happening in Consumer. The market for us, we're 70% U.S. So it's really focused on the U.S. consumer. We sell a discretionary product. As Anurag mentioned, we had a couple of pockets of strength in the year from new product introductions. I think the team has really gotten back to basics, focusing on priority brands and started to innovate again. The reality is we went for a lot of years without a lot of new product introductions, a lot of Class 3, so they're incremental, some are Class 4, but really starting to kind of be more aggressive on new product introductions. And I think we're holding our own and in fact, starting to gain back shelf space because we have new product coming into the marketplace. Yes, it's not a segment that we see upward movement on pricing, we're trying to contain the discounting that happens half the year. Again, the market is a little bit soft. For the year, we expect to see some growth. It will be positive. It won't be a meaningful driver of the overall 3M growth in the year. But again, we're down 1.3 in Q1, down a little bit more than that in Q4. We were up sort of modestly for the first 9 months of last year at 0.3 points. So I mean, they're hanging right around flat to up a little bit. And when the consumer starts to spend more, we'll have the right products with good innovation, great commercial excellence efforts there, and we'll see that business to return to growth. Andrew Kaplowitz: Helpful. Then Bill, maybe just a little more thoughts about portfolio management. You obviously opted for a JV structure with the purchase of Madison, despite seemingly leaning into safety as one of your priorities. So maybe a little more color on why you chose the JV structure there. And then stepping back, can you give us an update on how you're thinking about overall 3M portfolio? I think you've said in the past 2% or 3% of your portfolio is actionable in terms of divestitures, 10% is commodity. Like is that still the right numbers of the company? William Brown: Yes. So look, I'm really pleased with the structure and the conclusion of this Madison, Scott and [ SCBA ] joint venture, where we're a 51% owner, it's going to be consolidated. It's a strategic bolt-on acquisition. And what you just referred to as a priority vertical, it is. It does strengthen our SCBA business. It's a great brand. We have been innovating in this space. We talked last year about some new innovations coming on to the marketplace. This also creates some scale by putting this business together for future organic and inorganic opportunities. Madison and all of its fire and rescue products, have been performing very well. They bring a terrific management team. They're growing double digits. The margins are coming up. So it's -- I think it's a great combination in a space that we like quite a bit. Bain Capital is our partner on this. They're 49%. We know them well. They are very good at post-merger integration, they bring a lot of operating rigor and good expertise on driving incremental M&A while we focus on other areas around the company. So when you put all that together, I think it's a strategic opportunity for us. It gives some optionality for do we pull it back or do we suit something else over time. But the reality is it's a terrific deal. It is going to be accretive to our growth, margins, earnings over time. So I feel pretty good about that particular deal. We closed on PG&F, the Precision Grinding business on April 1. It wasn't very big, but businesses that don't perform sometimes can be difficult to transact on. But I'm very, very pleased that, that one got over the line. We continue to look at the rest of the portfolio. Yes, we're around 10% of our business is more commodity like. We don't have a clear right to win, not a lot of technology differentiation. We said 2% to 3% was in flight, PG&F was part of that. We continue to evaluate this, and we'll talk to investors as we go on what that shaping happens to be. But the reality, the investors should see the transaction on Madison with Scott as an important strategic signal for investors around the things that we want to do to reshape our portfolio to be higher -- structurally higher growth and higher margin potential. Operator: Our next question comes from the line of Chigusa Katoku with JPMorgan. Chigusa Katoku: First, can you maybe recalibrate us on the outlook for U.S. IP and electronics you're embedding and your assumptions for the full year? I think it was U.S. IP flat and electronics up mid-single digit last quarter. William Brown: Sorry, Chigusa. You're talking about IPI, the macro? Chigusa Katoku: Yes, the U.S. IPI. William Brown: Okay. So well, thanks for the question. And I guess, congratulations on the role. Welcome to the call. So just in terms of the macro, as we came into Q1, we saw some of the similar trends we saw in '25 continue. So maybe a couple of comments relative to where we were in January. Global IPI is still around 2%. It's not moved around very much. USAC or U.S. is up a little bit better. EMEA is down a little bit. China is still mid-single digits. And interestingly, those trends are exactly what we saw in our business through Q1. So U.S. up a little bit, Europe down a little bit, China mid-single digits. So it's pretty much aligned with that. GDP is still sort of in that same 2.5% range. Auto builds are still floating around between flat to down 1. It's really early in the year. I think that tends to be more of a backward-looking indicator. But right now, it's sort of flat to down a little bit. U.S. retail is flattish. The place that we're watching a little bit is consumer electronics where the outlook is for a little bit more softness as we get into the back end of the year. But overall, the macro is trending about where we saw it in January and through last year. Chigusa Katoku: Okay. Great. And then on this contingency, I was just wondering what it would take for you to remove this. I think it's prudent that you're including in guidance, but you've been seeing good order trends, you're operationally raising guidance by about [ $0.025 ]. And without this contingency, it would have been a $0.10 raise. So kind of what would it take for this to be removed? Anurag Maheshwari: Yes. Thank you for the question, Chigusa. Listen, we'll probably give you an update in our next earnings call on that. As we go through the next couple of months, we're pretty confident with the backlog and auto momentum on the Q2 revenue. We'll see how that plays out as well as we have executed. We have a very good playbook on -- which we adopted from the tariffs last year in terms of working with the customers and pushing out the price increases over there. So that's an area we will kind of monitor on the yield over there over the next couple of months plus and see where oils are at which levels they are after a few months. And if we continue performing the way we did in Q1, both on the productivity as well as in operational excellence, and come July, we will give you an update on where we stand for the full year. Operator: Our next question comes from the line of Nigel Coe with Wolfe Research. Nigel Coe: We covered most of the topics. So I just wanted to -- a couple of quick follow-ons. Just going back to the pre-buy comments, just trying to understand, why you think there may have been a pre-buy? Is it because you're trying to rationalize the strong orders? Or is there something else that you're hearing from customers? So just maybe cover that. And then on the 50 basis points of additional price, is that in the form of a surcharge? It certainly seems like it's in the surcharge, so that rolls back if oil comes down. And would that hit in 2Q? Or is that more in the back half of the year? William Brown: So really, Nigel, thanks for the questions. Look, it's hard to avoid the fact that we're pushing pricing a little bit more aggressively. We know there's an inflationary environment. We know price oil is going to go up. We know the impact on our company. We know perhaps what we did 4, 5 years ago, maybe not moved as quickly on pricing when oil came up, which we're correcting for that. I think we're being a lot more attuned to what's going on in the macro. And we're enforcing it better. If a shipment goes out beyond a date, that shipment will have a price increase associated with it. I think the customers have seen that and heard that. And then when you put all that together, it gives us a sense that perhaps there's some advanced buying from these price increases that are going out. So again, we'll know more in the next month, 6 weeks, how much of that might be prebuy, simply because we'll watch the orders through the balance of the year into the balance of the quarter and into May. So that's kind of basically how we're thinking about the prebuy here at the moment. On pricing, we do see right now about $125 million worth of cost impact, which we've been relating to pricing, and that would translate to about 50 basis points. So that's factored into the guidance of about 3% organic for the year, but that's kind of what we're thinking at the moment on pricing. Operator: Our next question comes from the line of Chris Snyder with Morgan Stanley. Christopher Snyder: I wanted to also follow up on pricing and I guess a little bit on price cost. When do these surcharges take effect? I would imagine some point in Q2, but any color on when they take effect would be helpful. And it just seems like with the $120 million of cost inflation that you referenced, Bill, on the 50 bps of price, the plan here is to be, I guess, be neutral on price cost. And I asked because if I remember a year ago, you guys were actually EPS negative on the tariff inflation. Just want to make sure I have that neutral view right. William Brown: So Chris, I think we've learned a little bit. Yes, we're moving a lot faster than we did last year on tariffs, tariffs came on. And I think maybe we're a little tentative at front, but I think we ended up offsetting a good part of the tariffs on cost and price. We're trying to be careful on that. So yes, exactly, we will offset cost increases associated with oil through price increases, and that's the assumption that we're making here. I mean you're right. Historically, we have covered material cost inflation with pricing. So historically, with a 2% material inflation, that would translate into roughly 50 basis points of price. For the year, we are guiding to about 80 basis points, again, a little bit lighter in Q1, but inflation in Q1 came in a little bit lighter as well. So for the year, 80 basis points. With oil coming in, that's driving an incremental 50 basis points of price, so a total of about 1.3 points roughly for the year on pricing. And that's our current expectation. It's not a surcharge. The price is going out embedded into the pricing of our products. And that's kind of -- and it's depending on the product and the geography, but generally speaking, it was less of a surcharge, more being built into the underlying price. Anurag Maheshwari: Yes. And in terms of the rollout in the timeline, we've already started in April in a couple of countries in Asia. And then in the United States, it starts in May 1 and Europe as well. So it is imminent right now with all the letters going out to the customers, knowing when the surcharge is going to impact them, oil price increase is going to impact them. Yes. Christopher Snyder: Appreciate that. And then maybe if I could follow up, just any color you could provide on how firm or how much flexibility is there on these delivery dates for these orders or what's in the backlog? And then I guess asked because I remember a year ago, there was elongation on those orders, I think, tied to some of the preordering ahead of tariffs. And it seems like there could be some of that again now. So just kind of wondering, trying to gauge that as a potential risk into Q2. Anurag Maheshwari: Chris, the delivery is limited to the lead times that we have. So it's not like an order can be placed for 6 or 12 months of delivery. So it's definitely within the time frame that is we always describe. Yes. Operator: Our next question comes from the line of Amit Mehrotra with UBS. Unknown Analyst: This is [ Neil ] on for Amit. So I know we just got first quarter results, but if I could ask about the growth algorithm into 2027 because the outlook suggests some meaningful improvement in trends exiting this year. If I just look at new product introductions, for example, I mean, these are accelerating. And if we add maybe 2 points of macro growth to new product introduction, would that math imply that 3M is growing around 4.5% organically next year? Anurag Maheshwari: Yes. Thanks for the question, Amit. I'll start and Bill can add from there. William Brown: [ Neil ]. [ Neil ] on for Amit. Anurag Maheshwari: Yes, I'm sorry. [ Neil ] for Amit. Yes. So I -- we said this year that we will grow about $330 million, $300 million above macro. And as we get into the second half of the year, from the exit rates, you are right, we will be north of 3.5%, which would imply that we would be above where we are in the first half and above where the full year would be. So we do feel very good as we enter into next year with what we are doing on the NPI as well as what we are doing on commercial excellence and how that is translating. So first is, obviously, we've got to grow in the second quarter about 3%. And if we do grow above the 3.5% in the second half of the year, I think it will give us good momentum to kind of accelerate the growth into 2027. But it's a little bit too early to kind of talk about that, and we'll provide more color as we go through the course of the year. Operator: Our next question comes from the line of Deane Dray with RBC Capital Markets. Deane Dray: I was hoping we can address the point-of-sale momentum. I mean that's a surprising number, up 7 on the last 8 weeks, given the pockets of macro pressure. So just your impression here, is this consumer driven? Is it more on the commercial side at all? Just some context and the momentum into April? William Brown: Deane, so it is consumer driven because it's in the consumer business group. I think it's very encouraging for us to see POS up. That's a sell-out 7 of 8 weeks, which I think is really good. It does kind of make us feel a little bit better going into Q2. And that business, Consumer business stabilizing, perhaps growing a little bit in Q2 and the balance of the year, so those are good trends. I think it reflects the team's very aggressive efforts on driving promotions, getting shelf space, driving NPI, being really aggressive at hustling at the customer interface, good on-time performance still in at 95%, 94.5% range. So just really good work. Anurag talked a little bit about a couple of pockets that are growing a bit better, but it's pretty broad-based. We see really good trajectory here through the first quarter now going into Q2 on the clubs, which is not surprising, given where consumers happen to be today. But we feel good about the trends and good about the outlook for Q2 so far. Deane Dray: Good to hear. And I'd love to hear a bit more about the Expanded Beam Optics opportunity. There's a lot of focus on this. It's addressing the data transfer bottlenecks in AI processing. So just where do you stand competitively? How quickly can you ramp on this? Is there any question of manufacturing capacity? Because the take rate on this is one of the fastest growing right now in data centers. William Brown: Well, Deane, exactly. That's why we're so optimistic about it and why we're talking more about it. And the fact that we've had some really good robust IP protection around the technology. It is expanded beams. So it's not a point-to-point fiber connection to the data center. It's sort of like an easy click between two pieces of multi-fiber device referrals that come together. And we can put that together at 80% less time with a less strain technician; better reliability, can operate in a dusty environment, which is why it's gotten some good take rate. We've had at least a validation by at least one hyperscaler, a second one is in testing. I expect that will be positive as well. We had a fairly large order coming in, in Q1 relating to the hyperscaler that has certified it. We are in a ramp-up mode. We will double capacity towards the back end of the year. We're investing quite significantly to expand capacity, relying on other partners in the space. Hyperscalers won't go with a single source of supply. So we've got to make sure we have some dual source, either a couple of factories or us with a contract manufacturer. So all of this is working. We're working the ecosystem. The pace at which this has happened is very encouraging, and the team is pushing hard. I'm really optimistic about where it's going to go from here. This is a polymer EPO as it moves to ceramics, which is more EBO or fiber to the chip. I think it opens up a lot more opportunities with a lot of other players in the space. So look, it's encouraging, which is why we want to share today with investors. Operator: Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Nicole DeBlase: I'm just going to ask one since we're near the top of the hour, and we've gotten through a lot of the questions on my list. Just on some of the margin puts and takes, so have you guys seen any changes to your full year productivity assumption or stranded costs or growth investments? And I guess was any of that kind of front-loaded into the first quarter? How are we thinking about phasing throughout the year of those 3 items? Anurag Maheshwari: Right. Thanks for the question, Nicole. So we said that we have a contingency of $0.05 to $0.15. So let's say, at the midpoint, it's $0.10. About half of that is because of productivity, and most of that was in the first quarter. So the -- I would say the only two changes that we made from our previous guidance, about $0.05 of that was very good productivity both on the supply chain side as well as the G&A. And a lot of it we saw in the first quarter. And obviously, we try to continue with the momentum that we have. The second $0.05 at the midpoint, I would say, is because of our active capital deployment where we bought back $2 billion of shares in the first quarter of 2.5 billion, which obviously gives us accretion through the course of the year and active cash management with the cash balance that we have. Those are the big changes. William Brown: But we're not changing our productivity guidance, stranded cost guidance at [ $150 million ] tariffs. I mean that all stays the same as it was back in January. Operator: Our final question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: Just very quickly, can you just address what your customers are saying about potential supply chain bottlenecks, I guess, particularly in the kind of sulfur, helium, methanol derivative chains? And does that -- are those factored into your contingency that you kind of see ways to work around those shortages if they develop in the back half of the year? William Brown: So Laurence, it's a good question. I mean that's probably affecting some of the pre-buy activity perhaps. Look, I think we're all working through this. We're in direct contact with all of our suppliers trying to manage all of our sources of supply, making sure we've got a variety of players that we can go to. So it's on our minds. So I know it's on theirs, and it's going to affect behavior as we go through the next several months, and we watch what's happening in the Middle East and through the Strait of Hormuz. So we'll keep you updated on that, but it's certainly a factor that's on everyone's mind today for sure. So thank you. Operator: This concludes the question-and-answer portion of our conference call. I will now turn the call back over to Bill Brown for some closing comments. William Brown: So I know we're a couple of minutes late, but thank you all for joining today. And I want to thank again all of the 3Mers for their efforts, for their dedication and executing against our priorities, strengthening the foundation, as Anurag say, controlling the controllables, delivering value to our customers and shareholders. So thank you. Thank you all for joining today. Have a good day. Operator: Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your lines.

27天前Insight Analytics约5分钟阅读

ELMUY 2026 Q1 财报电话会议

Vesa Sahivirta: Good morning, everyone, and welcome to Elisa's First Quarter 2026 Conference Call. We start with a presentation given by CEO, Topi Manner; and CFO, Kristian Pullola. And after that, we move on to Q&A. And I think we are ready to start, and I give word to Topi. Please go ahead. Topi Manner: Thank you, Vesa, and good day, everybody. Welcome to this Elisa Q1 earnings call. And let's get right down to business and briefly go through the Q1 highlights. During the quarter, our revenue decreased by 1.3%, and this was to a large extent driven by lower equipment sales impacted especially by higher device prices due to the shortages of memory chips worldwide. Telecom service revenue increased by 0.5%, driven by fixed service revenue. The mobile service revenue declined by 0.1% as the full impact of intense campaigning in Q4 was visible in the MSR. International software services revenue increased by 6.9%. During the quarter, however, we sold a small software business in Brazil. Adjusting for this, the comparable organic revenue growth was 7.7% in Elisa Industriq. Comparable EBITDA on group level increased by 2.2%, especially driven by our cost efficiency measures. Cash flow continued to develop strongly during the quarter and increased by 15.7%. What was notable during the quarter was that the churn decreased to 17.2% from 23% level of Q4. So this 6% decrease -- 6% unit decrease in churn is a bigger decrease than the typical seasonality would be. Post-paid voice subscriptions decreased by 2,700. And in the fixed broadband subscription base, we experienced strong growth, 14,000 on the back of the strong customer demand that we are seeing on the market. The transformation program, where we are targeting EUR 40 million of cost savings during the calendar year of '26 is progressing well according to the plan, and we will deliver the communicated savings during this year. So it was indeed a quarter of slower growth, as stated, driven by equipment sales. What impacted the revenue was a small divestment that we made, EpicTV that impacted the revenue with EUR 3 million. However, it did not have any EBITDA impact as such. The biggest increases in revenue came from the international software services and from digital services. EBITDA during the quarter landed at EUR 203 million in accordance with our own expectations. EBITDA margin increased to 37%, partially reflecting the little bit different mix of revenue resulting from the decrease in equipment sales. In telecom service revenue, as stated, we grew with 0.5%. And there, we did see the full impact of the lower price levels in Q4. The upsells from 4G to 5G, however, continues intact. I will come back to this a little later. And then certainly, in the fiber broadband, we saw growth as described a moment ago. The churn during the quarter was 17.2%, and this is broadly in line with the long-term average churn on the Finnish market. And what is notable is that the churn also decreased to a lower level than it was in Q1 2025. So then looking into the mobile KPIs in a little bit deeper fashion. It is good to note that our new sales prices in mobile subscriptions on the consumer side of the business returned to Q1 '25 levels in March. So in the upper right-hand corner in the graph, you are seeing the prices of new consumer mobile subscriptions. And what you also see there is that during the year '25, we saw gradual pressure to new sales margins culminating in the campaigning of Q4. And now we have been seeing the mentioned return to Q1 '25 levels. What is also noteworthy that going forward, there will be a bit of time lag in how the new sales prices turn into mobile service revenue as there are fixed term contracts in the customer base of our competitors. And when we acquire those customers to us, there typically is a time lag of some months before the new prices actually come into effect. The churn we already discussed in terms of sales and marketing costs. During the Q4 last year, we had EUR 5 million of more sales and marketing costs. And then those campaigning-related costs were decreased during Q1 in line with the churn development. However, the sales and marketing costs are still a tad higher than they were during Q1 '25. But all in all, these metrics are pointing to the right direction. Then briefly going through the business segment by segment. In consumer customers, the revenue continued to be weighed by the competitive situation and the mentioned equipment sales. However, the cost savings measures were effective and EBITDA improved with 1.4%. Broadly, the same story in corporate customers business. The equipment sales impacted the revenue negatively. So very much the same phenomenon related to equipment sales was seen also on the corporate side of the business. Our traditional fixed network, PSTN will be ramped down at the end of June altogether. And there we are seeing a decreasing number of customers, and that is weighing on revenue a bit. But as stated, the cost savings measures also on the corporate side of the business were successful and the EBITDA grew with 2.1%, in line with the total Elisa number. International software services, the comparable organic revenue growth was the mentioned 8%. And we took a step forward in terms of profitability during the quarter. The EBITDA grew to EUR 3 million in this business from the EUR 2 million on the same period last year. So we are seeing gradual improvement in the Elisa Industriq profitability, and we expect to continue to see that when we go forward. However, in software business, you will need to remember that there is a little bit different type of seasonality in Elisa Industriq. Q1 and Q4 are typically the strongest, whereas Q2 and Q3 are seasonally softer. In Estonia, our revenue increased by 3.4% and EBITDA increased by 2%, in line with the rest of Elisa. The churn number remained on the level of previous quarters in Estonia and is 11.7%. We are very focused on implementing our strategy. In the mobile part of the business, you saw the key metrics and the development during the Q1 as stated, there's a bit of time lag in the new sales prices turning into mobile service revenue. But during the latter half of this year, we expect to see improved momentum in mobile in line with the guidance that we have been giving. In the fiber business, we see strong customer demand, and we are investing in FTTH as well as FTTB. And also the data center connectivity, fiber connectivity for data centers is a tangible business opportunity. And during the course of this year, we would expect to see some deals coming through in this customer category. In international software services, we are continuously improving the profitability, and we do see further potential in that one by accelerating the growth, but also by integrating the multinational business and various business units better together and realizing synergies in the process. In terms of productivity, we are progressing with our transformation program. And as stated, we will be delivering the targeted cost savings during the course of this year. At the same time, we have taken note of the development of LLMs recently, and that's a clear indication that there is further productivity potential in AI, meaning that we will also continue the AI-driven transformation going forward during the coming years. So these 3 areas, 5G and fiber, international software services and productivity will be the main levers to take us toward the strategy targets that we have communicated. 5G penetration at the end of the year passed 15% -- 50% milestone. And that upsales trend continues to be intact. During the quarter, we reached 53% penetration. And we are especially seeing now big corporates on the corporate side of the business increasing their 5G subscription take-up rate. The average billing increase when we upgrade customers from 4G to 5G continues to be intact. That monthly billing increase is EUR 3. And also in terms of value-added services, we have continued to increase the penetration of security features in our mobile subs -- customer base, by means of new sales. And now the hard bundled security features have been taken up by 700,000 of our consumer customers. During the quarter, we also launched a new value-added service called Who's Calling service, which enables customers to see the caller ID even if they don't have that recorded in their phone previously. And this has been very well received by our customers. We already by now have 130,000 paying customers for this service. What is also notable related to the Estonian market is that in Ookla Speedtest Awards, we got the award for the best 5G network in Estonia, giving us competitive advantage. In the fiber business, in the mentioned way, the momentum is strong, and we continue to invest in fiber. In new -- in digital services related to home services, during the quarter, we published a fifth season of Ivalo, which is the most popular of our Elisa Entertainment original series, getting good reviews from customers. On the corporate side of the business, we continue to win new customers. Earlier this week, we announced that we have been winning the cyber and network business of Valmet, a global large Finnish company, also clearly outlining that we have the capability to serve our large corporate clients globally in these areas. In International Software Services, we continue to have a record high backlog. And the order intake, the bookings during the quarter were strong. We won a number of new customers, big, large global customers in these areas. Some of these are not public references. Some of them are. Boygues Telecom in France is one. And then also for Gridle for our energy optimization business, we won Vantage Towers as a customer in Spain, Vantage Towers being the tower company of Vodafone, the biggest tower company in Europe. What is also worthwhile to mention that in Elisa Industriq business, we saw some revenue delays from customers in Middle East due to the war in Iran. And that brings me to the outlook and guidance for this year. So the guidance remains unchanged with the range of EBITDA that we have been communicated previously, the CapEx guidance and then the guidance-related assumptions, especially related to the telecom service revenue, where we are indicating a range of 1% to 3% growth during the course of the year. So with that, I will hand over to Kristian. Thank you. Kristian Pullola: Good. Thank you, Topi, and also welcome on my behalf. In Q1, we saw solid EBITDA performance despite lower revenues. This was helped by our transformation efforts coming through as well as good cost discipline in general. As Topi said, the temporary sales costs were lower on a sequential basis, however, still slightly up year-on-year. Some of the revenue decline that we saw in Q1 related to divestments and ramp-downs of older technologies. The EBITDA impact of these was limited. The same is true for the decline in the equipment sales, which was driven by increased uncertainty as well as higher device prices on the back of especially memory component shortages. One note here, Elisa has somewhat seasonal business when it comes to Q1 versus Q2. Both are positive -- both of these 2 drivers are positive for Q1 and negative for Q2. As Topi said, in Industriq, we typically see strong licensing revenue in Q1 as a result of annual renewals. And in that sense, there's a negative seasonality going into Q2. Also in TechOps, we do see higher network-related costs in the second quarter when the overall construction activity starts in spring. And for this year, spring has arrived early in Finland, so we will see somewhat more of this impact. Also then maybe a second reminder, just on the yearly dynamics. Last year was solid when it comes to the first half and weaker when it comes to the second half, especially Q4 was weak on the back of the competitive intensity. Thus, we will have a tougher compare in Q1 and Q2 and then kind of easier compares as we work into the second half and especially for Q4. Then when it comes to CapEx, our strict disciplined continued. Our investments are focused on the areas of improving our technology leadership and which will enable us to continue to upsell both 5G and work on the -- work with the fiber momentum. In addition to this, our investment is going into us renewing our IT infrastructure so that we will be able to drive both simplification as well as productivity longer term. On the cash flow side, the first quarter was a continuation of our strong cash performance. We have now seen 5 consecutive positive quarters of positive development for net working capital. We will continue to drive improvements in cash flow as we move on. But of course, improvements in net working capital is going to be tougher and tougher to achieve when we have optimized the different items. Inventories are already at good levels. As I said last quarter, there's more work to be done on both receivables as well as on the payable side. But overall, a solid quarter from a cash flow development point of view. As a result of that, our capital structure continues to be solid. Our maturity profile is good. We did not have any material -- we did not have any material transactions during the quarter. And during the remainder of the year, we will start to focus on proactively refinancing the '27 maturities that we have. Then on capital returns, Elisa continues to have industry-leading capital returns. We saw a slight uptick as a result of having somewhat lower cash balances at the end of Q1 compared to the slightly elevated levels that we saw at the end of the year. And we do believe that with cash flow focus and continued strict discipline on CapEx, we will continue to produce industry-leading returns also going forward. With that, Vesa, back to you, and let's start Q&A. Vesa Sahivirta: Thank you, Kristian. And now we move on to Q&A part. And we have many questions on the line, so we appreciate that we'll keep them short. Thank you. Operator: [Operator Instructions] The next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: I had 2 questions. Firstly, on your cost or sales and marketing costs. And then secondly, on your visibility on the mobile service revenue trends through the year. On the sales and marketing costs, you mentioned -- you highlighted they're still above where they were a year ago. Can you explain why that is, given churn is back to average levels and the pricing environment recovered? What's driving that heightened sales and marketing cost competition? And then secondly, just on the mobile service revenue trends, it sounds like the first quarter is the trough for mobile service revenue growth. But could you just help us understand how we should see that improvement come through in the second quarter and then into the second half? It sounds like it will be a more meaningful improvement into Q3 than into Q2. How that's going to be balanced between volume and ARPU? And how much visibility you have on that given the lags that you mentioned? Kristian Pullola: So maybe if I start on the sales and marketing costs. You're right, the costs were still somewhat elevated compared to a year ago, but down sequentially. And I think the logic here is that you don't pull back your sales and marketing efforts before you see evidence of the market environment being such that it justifies lower spend. And we started to see the evidence during the quarter. And because of that, we took down the temporary costs during the quarter, and thus, they were still a bit up on a year-on-year basis. Topi Manner: And then, Andrew, related to your question about MSR. So, starting with the metrics that we just went through. So the new sales prices during the quarter returned to Q1 levels in March. And the churn was notably lower than it was in Q4. And now the churn is in line with our long-term average. When you consider the mechanics of how the new sales prices turn into mobile service revenue, you will need to factor in a time delay of some months, approximately a quarter. This is because mobile operators in this market have fixed-term contracts in their portfolio. And when we win customers from our competitors, we do the deal now, but the mobile's subs actually transforms into our customer base with the agreed pricing a little bit later when the fixed-term contract with the competitor actually ends. So this is a mechanic that will need to be factored in. And then related to Q2, what is perhaps a useful reminder is that last year, in Q2, we started the rollout of the security features, the hard bundled security features to our mobile subs, supporting the MSR for that particular quarter. There is no similar initiative in the plans for this year. And thus, when you consider mobile service momentum, that momentum should be visible on the latter half of this year, increasing towards the end of the year. And all this boils down to our telecom service revenue guidance where we are guiding a range of 1% to 3% during the course of the year where mobile service revenue is the main contributor. Andrew Lee: Can I just follow up, so just on the sales and marketing costs. So it sounds like you're reducing those through Q1. As things stand today, late April, sales and marketing costs now today where they were a year ago? Or are they still not back to normalized levels? Kristian Pullola: So I think we are here to discuss the first quarter. But as I said, we are responding to the market situation with our costs. And because of that, the costs started higher during Q1 and ended up lower during Q1. Operator: The next question comes from Ajay Soni from JPMorgan. Ajay Soni: My first is on the cost savings. You mentioned EUR 40 million. Just wondering what's been delivered in Q1 and how you expect that phasing to look for the remainder of the year? And then my next question was just around the MSR into Q2. You mentioned that you're not going to have the support of security features, which got launched this time last -- well, Q2 last year. But surely, you will still have a better improving effect because you're going to have more people moving on to security versus Q2 last year because you would assume you'd have ramped up that business. So isn't that still going to be a tailwind in Q2? Kristian Pullola: So maybe if I start with the cost savings. So as Topi mentioned, we are on plan on delivering the full EUR 40 million. And as we have said earlier, the majority of the cost savings kicked in during the first quarter. Some of it is visible in our lower operating expenses and impacting positively the personnel costs because a large chunk of the savings that were implemented came from there. But of course, we also have driven activities outside of headcount reductions, which is visible. Some of it is also coming through the CapEx line item and thus coming through as depreciation -- lower depreciation at a later point. And so in that sense, there will not be much more acceleration of the impact as we move through the quarter because of the fact that the majority is already up and running as we speak. Topi Manner: And then related to your question about MSR and the security features, so if we look at MSR development in Q1 and we decompose that a bit, then clearly, the impact of intense campaigning and the lower prices in Q4 introduced a drag to mobile service revenue during Q1. And that drag was offsetted by the continued upsales from 4G to 5G and the value-added services where the security features are the most important element. And actually, when you look at the upsales isolated. And when you look at the value-added services isolated, they continue to provide the consistent growth that we have been seeing in the past. Then in terms of security features and the mechanics of security features supporting the MSR during the course of this year. What you need to remember is that when we started the rollout of security features last year, we rolled that out to that part of our customer base, roughly 600,000 customers where the customer contracts were of ongoing nature in force until further notice and the terms and conditions allowed us to change the offering and with that, change the pricing of those customers. Now that back book rollout has largely been completed. And what we are now doing is that we are offering the security features to customers in new sales. And the 100,000 pickup that you saw during the quarter is a result of new sales. Operator: The next question comes from Andreas Joelsson from DNB Carnegie. Andreas Joelsson: I was just a little bit curious and I hope you can help us understand a little bit the experience that you have from the higher churn environment that you had in Q3 and Q4. If something similar would happen again, would you react the same way as you did last year? Or have you -- some new experiences that will make you change that action that you took at the end of last year? Topi Manner: No, I think that -- I mean, our market is competitive and every situation in the market is unique. And we continue to monitor the market, and we continue -- and we focus on developing our own competitiveness, our own services in the market. And when you look at the things that we have been doing recently, as an example, we have been increasing the penetration of fixed-term contracts in our customer base as a churn prevention measure. And that measure has been bearing fruit in Q1, as you see in the churn number. Andreas Joelsson: Perfect. Maybe a follow-up on the mobile post-paid subscriber base. It is continuing to decline. Can you explain or tell us a little bit more where that decline is? And then I talk about excluding machine-to-machine, of course. Topi Manner: Yes. I mean if you look at that number, what is important to remember is the market trend in mobile broadband. So mobile broadband subscriptions are declining for us, and they seem to be declining on the whole market when customers are transitioning partially to fiber connections. And we do see a pickup in fiber connections as witnessed by our numbers. So this is something that you will need to factor in. And then when we look at the post-paid voice subscriptions and the development of net adds in that number, then as stated, the churn decreased notably during the quarter. Also, our intake of new customers decreased during the quarter. And this was because we did not respond to all of promotions that we saw on the market. Operator: The next question comes from Fredrik Lithell from Handelsbanken. Fredrik Lithell: Just a follow-up on your last comment that you described in Q1 that you did not respond to all of the promotions you saw in the market. Is that the same to say that you have seen sort of more activity in terms of campaigning in Q1 compared to earlier -- not compared to Q4, but maybe compared to Q1 '25, i.e., they don't need to be more aggressive, but more of them in the market. Is that a fair point? Topi Manner: The market continues to be competitive in Finland. But I think that here, I come back to the slide that we presented. So during the quarter, we saw the new prices -- new sales prices return to Q1 levels in March, and we saw the sales and marketing cost decrease. We saw a significant drop in churn that is clearly more than the typical seasonal drop in Q1 would be. Fredrik Lithell: Okay. That's perfect. My original question was really about the ISS, if I may. I mean you had 7% growth in the quarter, and you depicted a few details around your situation there with the pipeline that seems to be growing and some delays in Middle East. How are these sort of contracts structured? They are not perpetual licenses. Are they SaaS type of contracts with some variable components in them for revenue to grow with volume? Or how does it work in these contracts? Topi Manner: Yes. Absolutely. So as stated in Elisa Industriq business, the organic growth during the quarter was 8%, and we saw a step forward in terms of profitability the way we would like to see in this business. And if we decompose the contract structure a bit, then part of the revenue is driven by licenses. Part of the revenue is driven by recurring revenue, SaaS model and maintenance. At the end of last year, the share of recurring revenue was 50%, and there's some quarterly fluctuation in that share based on how many licenses we have been selling on a given quarter. And then part of the revenue is also driven by implementation projects with customers. And here, in that category of revenue, the revenue recognition is dependent on how the implementation projects move forward with customers. Operator: The next question comes from Derek Laliberte from ABG Sundal Collier. Derek Laliberte: So I wanted to come back on pricing. You mentioned this selective price increases in early Q1. Can you elaborate a bit on the scope and customer response of this? And during Q1 and into early Q2 now, are you still seeing improved rationality amongst the competitors? Or are there still pockets of sort of aggressive or increased aggressiveness on pricing? Topi Manner: Yes. I think that we will need to come back to the Q2 developments when we report the Q2 during the summer. In terms of the market development in Q1, what I would just like to come back to is the slide that we presented that our new sales prices returned to Q1 '25 levels in March and then the decrease in sales and marketing cost and the notably significantly lower churn. So looking at those numbers, I think that you get a good picture of the market development during Q1. Derek Laliberte: Okay. Great. And then strategically for you, I mean, has there been any change here given the current environment in terms of how you're prioritizing ARPU versus subscriber growth? Topi Manner: Yes. I mean our long-standing target on the market has been that we maintain our market share, and we will continue to do so going forward. That is part of our strategy. And what we have also communicated already in our Capital Markets Day a bit more than a year ago is that we focus on providing customer value. Upsales from 4G to 5G in mobile services is a big growth driver for us and so is value-added services, namely security features. So we continue to focus on that strategy, and we bring new value elements, new offerings to customers and to the market all the time. And then during this quarter, a good example is the Who's Calling service that already has 130,000 paying customers. Derek Laliberte: Okay. And finally, on the B2B trends, apologies if you mentioned this, but you have flagged some pressure there. So what did you see in Q1 in terms of, say, demand pricing and the contract renewals? Topi Manner: Could you please repeat the question? So was it about broadband or what... Derek Laliberte: About B2B -- no B2B corporate trends. Topi Manner: Yes. In B2B corporate, if we talk about mobile services, it continues to be a competitive marketplace. Our offering in B2B mobile services is strong with the value-added services and for example, with AI tools, where we clearly differentiate from competition. And then if you look at the other product categories of B2B business, IT services, cybersecurity and these kinds of things, we continue to enjoy some momentum in that one. We are clearly competitive on a market that is tough. The market is characterized by sluggish macroeconomic situation in the Finnish market, impacting corporate customers' willingness to invest. And that, of course, impacts the competitive landscape on B2B business. But at the same time, we are clearly competitive, and we are winning customers, both in IT and especially in cybersecurity, where our capabilities are really strong today. Operator: The next question comes from Abhilash Mohapatra from BNP Paribas. Abhilash Mohapatra: I just want to come back to the topic of cost cutting, please. Obviously, this year, you've got a big benefit from the EUR 40 million of savings. And you referred to earlier in the call, the idea of sort of using AI to drive further savings. As we look into next year, do you anticipate a sort of similar sized benefit from your cost measures? Or in other words, do you think you can continue to do a similarly sized sort of big headcount reduction? Or should we expect the cost-cutting benefits to normalize as we head into next year? Kristian Pullola: So again, we have nothing new to tell here in addition to the EUR 40 million transformation program that we announced last year. And as I said earlier, which is now kind of up and running in our P&L as savings. In the prepared remarks and in our report today, we do acknowledge that we live in a world where transformation will need to be on the agenda for now, and that's what we're going to do. Transformation related to AI means both improving your competitiveness and driving revenues through that as well as then driving productivity improvements on a structural as well as on a continuing basis. There is no new program or no new amounts to be announced here. We feel that we need to do this to be able to achieve our strategic targets that we have set for ourselves. Topi Manner: And generally speaking, related to the AI, we clearly see that our industry and Elisa in specific, will be benefiting from AI. AI will be increasing our bread and butter business, namely mobile and fixed connectivity. And we have an opportunity to use AI for digital services growth and for software growth. And then in the areas of productivity or in the productivity-related areas, we are working continuously in improving the automization of our customer service. And where we do see possibilities is in the area of AI-assisted coding -- prompting to be exact, improving the productivity of our software development. Operator: The next question comes from Siyi He from Citi. Siyi He: I have 2, please. The first one is really on your comments earlier about the interest in the market of taking on fiber products. I'm just wondering if you can share with us about your fiber investments, whether you think it could be a good opportunity to organically expand your fiber footprint or you could be looking at some infrastructure opportunities if some of the network is up for sale? And the second question I have is really on your comments earlier about the -- pushing the upgraded security features into your base. I think last year, when you talk about the rollout I had an impression that you would -- it's possible to roll out throughout the base within 18 to 24 months of the launch. But now I think you're commenting on you are actually adding on new sales. Just wondering whether that could create a particular delay of this 18 to 24 months time frame? And if so, any reason behind that? Kristian Pullola: So maybe I'll take the fiber-related question first. So as I said in the prepared remarks, we do see momentum in fiber. Customers want reliable and fast connections for their homes, for their base and fiber is now from an affordability point of view at the price point where consumers are responding well to it. We will -- on the back of this, we are investing in fiber, building additional fiber. As I said a quarter ago, we are leveraging a joint venture structure that we announced last year for the majority of that build. And at the same time, we will be pragmatic and look at, are there more cost-efficient ways of doing that by also looking at the existing assets. And if they are at sale at reasonable cost, then we'll evaluate that against building new fiber ourselves. Topi Manner: And related to your question about the rollout of the security features, yes, the rollout schedule of security features has been prolonged. And the driver of this is that during the -- due to the competitive situation last fall, as a churn prevention measure, we increased the share of our fixed-term contracts notably. And now we have a larger share of those fixed-term contracts in our customer base. And for those contracts, we cannot do the back book changes in similar fashion than we can do for those contracts that are in force until further notice. However, all of this is something that we have already factored in into our guidance. And the guidance assumptions where we are stating that the telecom service revenue is increasing during this year within the range of 1% to 3%. And that mobile service revenue is the main contributor. Operator: The next question comes from Felix Henriksson from Nordea. Felix Henriksson: I have 2. One is very simple, just to double check on MSR. Do you think that growth will further decelerate in Q2 versus Q1 before turning better in H2 given the time delay that you discussed as well as the tough comps? And then the second question is relating to the data center connectivity, which you have started to talk about. Could you expand a bit on the opportunity? What could the potential contract structures in this domain look like? And how large deals are we talking about? Topi Manner: Yes. So coming back to the mobile momentum and mobile service revenue. As mentioned earlier in this call, when we look at the new sales prices and how they translate into mobile service revenue, it's good to understand the mechanic and the time delay, when we win customers from our competitors, a meaningful portion of those customers are having fixed-term contracts with their old providers. And that means that even though we do the deal today, those customers might be moving to our customer base 2 months from now, 3 months from now. And that delay needs to be understood. And then as stated in Q2 last year, we started the rollout of the security features, which provided support for MSR for Q2 last year. Putting all of this together, we should be seeing improved mobile momentum during the latter half of this year, in line with the guidance that we have been giving on telecom service revenue. And then to your question related to data centers, I mean, this market is about to take off in Finland, and we have been seeing data center operators reserving land and quite a bit of that has taken place. We have been also seeing announcements for new data centers starting to come in during the course of this spring. So this leads us to expect that during the course of this year, we will be seeing sizable data center announcements on the market. And we do have a business opportunity in that. We are naturally advantaged in a sense that we have the most extensive backbone network, fiber network in the country, and it's shorter distance to connect to that backbone. And then therefore, we feel that it's realistic for us to get a sizable chunk of that data center connectivity market going forward. It is an emerging market. During the course of this year, we will be seeing most likely deal announcements and then the revenue starts to come in, in '27 and onwards. Operator: The next question comes from Paul Sidney from Berenberg. Paul Sidney: Just 2 questions. Just coming back to Finnish mobile, price rises on new offers in Q1. I was just wondering, was this a deliberate action from Elisa to raise prices? Or did pricing just follow the market? Just wondering your previous comments that you did not respond to some promotions over the past few months. I'm just wondering, are you trying to lead the market as a rational incumbent? Or was it the MNO's pulling back in the quarter? And then just secondly, on cash flow, comparable cash flow is a clear focus for you, but we don't have cash flow guidance. So just 2 parts to this question. Can you clarify if free cash flow is expected to grow over the next couple of years? And secondly, how important is cash flow in assessing the success of the business? Is it as important to you as revenue growth, EBITDA, ROCE, all these other sort of financial KPIs? Topi Manner: Well, to your first question, we are the market leader in this market. And we certainly would like to think that we are rational in managing our business. So then looking at Q1, what you see in the mobile metrics is that we come back to Q1 levels in terms of new sales prices in March. And you see the churn decreasing significantly more than the seasonal drop typically would be and also the sales and marketing cost decreasing. So coming back to my earlier point, I think that, that gives quite a good picture of what happened on the market and for our business during Q1. Kristian Pullola: And again, on the cash question, cash is a critical KPI for us that we both drive as well as assess our success based on. You're correct that we haven't guided specifically on cash flow as of now, something for us to consider for the future. But clearly, it is a measure that we judge our performance based on. And if anything, we'll be doing more of going forward rather than less. Operator: The next question comes from Ulrich Rathe from Bernstein. Ulrich Rathe: I have one clarification and a question. The clarification is you pointed out the mechanics of the customer sale versus the contribution. Can I just confirm that you're not including these customers that you have signed up in your customer base that you report before they actually start to contribute revenues? The second question or the real question is, if we look back at what happened there in autumn, how confident are you, if you look at the market overall, about the sustainability of the current recovery away from this slump? In other words, how stable do you think the market environment is vis-a-vis the causes of what happened last autumn? Topi Manner: Yes. On the first question, so -- no, we count customers into our net adds once they move into our customer base and the revenue recognition starts. So that's it. And then in terms of the market dynamics, I think that, first of all, we just need to come back to this in the coming quarters when we report our Q2 and when we report our Q3. If you look at the long history of the market, you have been seeing previously also these kinds of periods of intense competition like we saw during the latter half of last year. Similar phase was gone through during the years of '17 and '18. Operator: The next question comes from Ondrej Cabejšek from UBS. Ondrej Cabejšek: Two questions from me as well, please. The first one, apologies, I may have misheard on your back book, but I wanted to -- on the back book comments that you made, but I wanted to basically understand if now that the market seems to be stabilizing and the macro situation in Finland seems to be also improving. Are you again planning to kind of put in effect some kind of back book price rises the same way and the same kind of quantum on the -- that you did in 2Q '25, I believe it was around 400,000 customers that you raised prices for. Is there something similar plan for 2Q '26 because I believe that was the kind of assumption going forward? That's the first question. And second question, if I may, on the promotions that have been kind of dragging effective pricing down, are we correct to assume that most of these people or subscribers are locked in for 12 months. And so as they come out of the heavily kind of promoted pricing, I guess, around 2H '25, the assumption would be that they get back to some kind of normal pricing levels? Or what do you expect there as they come out of contract? Topi Manner: Starting from your latter question. So yes, you would be correct to assume that those customers that we took in during Q4, to a large extent, were with fixed-term contracts for 12 months. And then that will be a factor that will be impacting the market, the mobile market at the latter end of this year. And then related to your first question about back book price increases and offering changes, the like of offering changes that we did in the spring of last year with the security features, as stated -- we are introducing new individual services to the market all the time like we, during Q1 did with the Who's Calling service that now has 130,000 paying customers. But we do not have bigger offering changes like the security features in the plans for Q2. On corporate side of the business, B2B side of the business, there might be some sort of inflationary price changes that will be conducted, which is part of the sort of normal cycle in the B2B business. Ondrej Cabejšek: And apologies if I may follow up because the line was a bit choppy. So last year, you mentioned there were -- part of the 2Q price rises were the hard bundled security features, and you do not plan to do something similar this year, but straight price rises is something that is kind of in the plan? And also, yes, if you could please answer that, this is the straight price rises, I guess, is that something that the market is now allowing you to do you think? Topi Manner: No such plans. Operator: The next question comes from Sami Sarkamies from Danske Bank Markets. Sami Sarkamies: I have also 2 questions. Still wanted to get a bit more color on the situation at ISS. I think you mentioned some delivery headwinds from the geopolitical turmoil in Q1. Are you anticipating more headwinds going into Q2? And any comments from sort of order intake during the recent months? And then secondly, you booked EUR 4 million of one-off costs in Q1, where this related to the EUR 40 million savings program? And do you still see more coming during later of this year? Topi Manner: Yes. Related to Industriq, we did see strong bookings in Q1 and then quite happy with that. And then related to the war in Iran and the Middle East situation, we saw some revenue delays in Q1, partially because for customers in the Middle East, some projects were delayed. And with that, the revenue recognition was delayed and then partially because the anticipated sales just was prolonged given the outburst of the war in Iran and the impact to places like Dubai. So those were the short-term impacts that we have seen. And then generally, the impact of war in Iran, as a business, I think that we are in a fortunate position that the direct impacts of war in Iran to our business are very, very limited. To Industriq, we will need to see what those impacts are. As stated so far, we have been only seeing limited impact to a handful of existing clients and prospective clients in the Middle East. Kristian Pullola: And I think on the transformation costs, yes, we did book some in the quarter. And yes, they relate to the measures that we have taken. And yes, based on our prepared remarks, we do see that in the current environment, there is an opportunity to do transformation on an ongoing basis. So I would expect that there would also be some such costs also in future quarters as we take the appropriate measures. However, not to the same extent as we had kind of higher costs in Q4. Operator: The next question comes from Max Findlay from R & Company Redburn. Max Findlay: Apologies if the first question has already been answered while I was struggling with the line. So last year in ISS, there were some delivery delays in Q1, which saw revenue deferred into Q2. And in your preprepared comments, you mentioned that there was some revenue delay in this year's Q1. So I guess I'm trying to triangulate these comments with other comments you've made about 2Q and 3Q being weaker quarters generally. Should we expect these quarters to be lower than the 8% achieved this quarter? And then there's been a change in ISS' leadership. Can we expect any changes to strategy to accelerate growth to achieve your 10% organic growth target? And any comments on further acquisitions and disposals? Topi Manner: Yes. So indeed, Mikko Soirola has been appointed as the CEO of Elisa Industriq business. He is a very experienced software leader, having worked in international software space for 20 years. And the better part of last decade, he has been a CEO of successful software businesses. So the job to be done for Mikko is to accelerate growth, to improve the profitability of Elisa Industriq, carry out bolt-on M&A and integrate the M&A and integrate the portfolio of businesses that we have today better to achieve synergies. So it is a new strategic phase that we are entering into in Elisa Industriq. And then related to the first part of your question, what I was referring to is that the typical seasonality in Elisa Industriq business and in many of the other software businesses for that matter, is that Q2 and then Q3 are sort of seasonally softer than the start of the year and especially Q4. So that is something that is good to keep in mind when understanding the sort of dynamics of the Elisa Industriq business on a stand-alone basis and the impact to Elisa numbers. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Vesa Sahivirta: Thank you, and thank you for participating in this conference call. Thank you, Topi. Thank you, Kristian, and we wish you a very great reporting seasons. Topi Manner: Thank you very much. Kristian Pullola: Thank you. Bye-bye.

27天前Insight Analytics约5分钟阅读

DHR 2026 Q1 财报电话会议

Operator: My name is Chelsea, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation's First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] I will now turn the call over to Ms. Rachel Vatnsdal, Vice President of Investor Relations. Ms. Vatnsdal, you may begin your conference. Rachel Vatnsdal: Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt Gugino, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, quarterly report on Form 10-Q, the slide presentation supplementing today's call, the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A replay of this call will be available until May 5, 2026. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials I referenced describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the first quarter of 2026, and all references to period-to-period increases or decreases in the financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. With that, I'd like to turn the call over to Rainer. Rainer Blair: Thank you, Rachel, and good morning, everyone. We appreciate you joining us on the call today. We're off to a solid start to the year. Our team executed well in a dynamic environment, leveraging the Danaher Business System to accelerate innovation, drive productivity gains and deliver better-than-expected adjusted EPS growth. On the top line, continued strength in bioprocessing and better-than-expected performance in Life Sciences largely offset the impact of a lighter-than-normal Q1 respiratory season at Cepheid. Now looking across the portfolio, trends in many of our end markets were modestly better than our expectations entering the year. In large pharma and biopharma, commercial monoclonal antibody production remained robust, and we continue to see gradual improvement in R&D spending. Trends at smaller biotech and academic and government customers were stable sequentially with some pockets of improved order and funnel activity. Meanwhile, clinical and applied end markets performed well, consistent with recent quarters. Geographically, we saw an acceleration in our Life Sciences and Biotechnology businesses in China. Now the global environment has become more dynamic since the start of the year, including the ongoing conflict in the Middle East. And while we have limited direct revenue or supply chain exposure to the region, we're mindful of potential pressures from a sustained conflict. That said, we remain focused on controlling what we can control, including leveraging the Danaher Business System to proactively manage our supply chain and mitigate inflationary pressures while continuing to invest for the long term. At the same time, we're enhancing our portfolio through strategic M&A, including the pending acquisition of Masimo, where we believe there are significant opportunities to improve performance over time through DBS and our global scale. With the strength of our balance sheet and robust free cash flow generation, we're well positioned for further capital deployment going forward. So with that, let's take a closer look at our first quarter 2026 results. Sales were $6 billion in the first quarter, and core revenue was up 0.5% year-over-year with a 2.5% headwind from respiratory revenue, partially offsetting 3% core revenue growth in the rest of the business. Despite a lighter-than-typical Q1 respiratory season, underlying momentum across the portfolio improved as many end market headwinds began to moderate. Geographically, core revenue in developed markets were down slightly with a mid-single-digit decline in North America and a mid-single-digit increase in Western Europe. High-growth markets were up low single digits with solid performance across most regions, including mid-single-digit growth in China. In China, better-than-expected growth in Biotechnology and Life Sciences more than offset the expected high single-digit decline in Diagnostics, which continued to be impacted by volume-based procurement and reimbursement policy changes. Our gross profit margin for the first quarter was 60.3%, and our adjusted operating profit margin of 30.2% was up 60 basis points, reflecting the benefit of year-over-year cost savings, more than offsetting the negative impact from lower respiratory revenue year-over-year. Adjusted diluted net earnings per common share of $2.06 were up 9.5% year-over-year. We generated $1.1 billion of free cash flow in the quarter, resulting in a free cash flow to net income conversion ratio of 105%. Turning to capital deployment. In February, we announced our intention to acquire Masimo, a leading provider of mission-critical pulse oximetry and patient monitoring solutions in acute care settings. We followed Masimo for over a decade and believe the company is well positioned with its trusted brand, differentiated technology and attractive financial profile. Looking ahead, we believe there are clear opportunities to run the same playbook that has driven value creation across our portfolio for many years, leveraging DBS to drive growth and expand margins while further strengthening our value proposition with customers. We expect Masimo to be accretive to adjusted diluted net earnings per common share in the first full year post acquisition and to deliver high single-digit return on invested capital by the fifth full year of our ownership. The transaction remains subject to customary closing conditions, including regulatory approvals, and we look forward to welcoming the talented Masimo team to Danaher later this year. Now alongside M&A, we made significant progress on organic growth initiatives across Danaher, including new product introductions and strategic partnerships. These efforts are strengthening our competitive positioning while helping customers improve quality and yield, reduce costs and accelerate the delivery of life-changing therapies and diagnostics. So let me highlight a few examples. In Biotechnology, Cytiva launched Fibro dT, a next-generation mRNA purification platform that improves manufacturing speed and efficiency. By eliminating diffusion limitations associated with traditional purification methods, Fibro dT reduces processing time, increases yield and lowers material usage, enabling more cost-effective higher throughput production of mRNA-based therapies. Additionally, Cytiva will showcase its next-generation automated perfusion system, or APS, at the INTERPHEX trade show this week. APS is a cutting-edge tangential flow filtration platform designed to address key challenges of currently available process intensification systems, including product loss, filter clogging and scalability. In Life Sciences, Beckman Coulter Life Sciences announced a strategic partnership with Automata, combining its liquid handling genomic and cell analysis technologies with Automata's AI-ready automation platform. This partnership is positioned to empower scientists with AI-driven tools in an automated workflows to improve throughput, workflow reliability and data integrity and increasingly autonomous research environment. Lastly, Beckman Coulter Diagnostics continued to make progress on menu expansion for the High Resolution DxI 9000 Immunoassay Analyzer with FDA clearance of the HBc IgM assay for acute hepatitis B. With this clearance, nearly all core blood virus assays for the DxI 9000 are now cleared in both the U.S. and the European Union. This closes a historical gap in Beckman's immunoassay test menu and positions Beckman to accelerate new placements, customer wins and growth as the DxI 9000 rollout continues. So now let's take a closer look at our results across the portfolio and give you some color on what we saw in our end markets. Core revenue in our Biotechnology segment increased 7%. Core revenue in Discovery and Medical declined low single digits. Growth in medical filtration and research consumables was more than offset by declines in protein research instrumentation as academic customers continue to face funding constraints. Core revenue in bioprocessing grew high single digits in the first quarter. High single-digit growth in consumables was driven by robust demand for commercialized therapies globally with notable strength in China. Equipment declined modestly in Q1, but we were encouraged to see orders growth of more than 30%, marking the first quarter of year-over-year equipment order growth in nearly 2 years. Stepping back on bioprocessing, monoclonal antibody production remains robust and is expected to continue growing at historical or better rates, driven by new molecules, biosimilars and increased utilization of existing therapies. In fact, we saw a sustained pace of new biologic drug approvals in the first quarter of 2026, building on a robust level of approvals in 2025. At the same time, equipment investment has been relatively muted, which we believe creates a growing need for incremental capacity in the coming years. We're encouraged by improved trends in bioprocessing equipment and believe we're in the early stages of a multiyear investment cycle. We see activity in brownfield projects today with larger greenfield investments expected to follow. Given Cytiva's expansive global footprint, broad portfolio and depth of technical expertise, we're well positioned to benefit from this capacity expansion across biologic drug production. Turning to our Life Sciences segment. Core revenue increased by 0.5%. Core revenue in our Life Sciences Instruments businesses declined low single digits, primarily driven by weakness in North America academic research customers as we expected. While demand at academic research customers remain muted in the quarter, we saw early signs of momentum building in our order book. We continue to see a gradual improvement in large pharma and biopharma investment. Instrumentation demand at biotech customers remain muted but stable, but we were encouraged to see recovery in the funding environment drive improved funnel activity. Core revenue in our Life Sciences consumables businesses collectively grew low single digits. Aldevron grew in the quarter, driven by solid commercial execution and an improved biotech funding environment. And we also saw early pockets of improvement in academic customers and research consumables, contributing to growth at Abcam. We're particularly pleased by Abcam's recent performance as DBS-driven commercial execution has gained traction and cost structure initiatives have driven meaningful margin expansion since acquisition. As end markets improve, we expect continued progress on both growth and margins at Abcam. Moving to our Diagnostics segment. Core revenue declined 4%. Core revenue in our clinical diagnostics businesses grew low single digits, with mid-single-digit growth outside of China. In China, pricing headwinds in the quarter from volume-based procurement and reimbursement policies were consistent with our expectations and the anticipated impact from remaining policy changes remains consistent with our expectations from the start of the year. At the same time, volume growth in China was slightly better than our expectations, an encouraging indicator for future demand and growth as we move past the most significant year-over-year impacts from current policy headwinds. Beckman Coulter Diagnostics delivered another strong quarter with mid-single-digit growth outside of China, led by immunoassay reagents and instrumentation. In Molecular Diagnostics, Cepheid's revenue declined in the quarter as respiratory revenue was down approximately 25% year-over-year, given lower than typical seasonal respiratory infection rates. Cepheid's core nonrespiratory test menu was up mid-teens, led by our 20% growth in sexual health and hospital-acquired infection assays. Now we've seen strong early demand and several notable customer wins for Cepheid's recently cleared Xpert GI panel, a multiplex PCR test that quickly detects 11 common gastrointestinal pathogens from a single patient sample. This strong momentum supports Cepheid's broader multiplexing strategy, and we believe it provides a long runway for continued installed base growth and increased utilization. Now let's briefly frame how we're thinking about the second quarter and the full year 2026. For the full year 2026, there is no change to our expectation of core revenue growth in the 3% to 6% range. This includes an assumption that a slightly lower respiratory revenue outlook of approximately $1.6 billion to $1.7 billion will be offset by modestly better core growth in the rest of the business. Additionally, given our strong Q1 performance, we're raising our full year adjusted diluted net EPS guidance to a range of $8.35 to $8.55 versus our previous range of $8.35 to $8.50. In the second quarter, we expect core revenue to be up low single digits. Additionally, we expect the second quarter adjusted operating profit margin of approximately 26.5%. So to wrap up, we're encouraged by the first quarter momentum across our portfolio and expect growth to accelerate throughout the year as we continue on the path towards consistent, higher core revenue growth. Cost and productivity execution translated into strong Q1 earnings growth, enabling us to raise our 2026 adjusted EPS expectations. During the quarter, we also announced the pending acquisition of Masimo. And with the strength of our balance sheet and more than $5 billion of expected 2026 free cash flow, we're well positioned for further capital deployment going forward. Now we see a bright future ahead for Danaher. Across the portfolio, we're helping customers solve some of the world's most important health care challenges from enabling faster, more accurate diagnoses to accelerating the discovery, development and manufacture of therapies. Over time, we also believe the emerging opportunity in AI will further accelerate the pharma development and commercialization flywheel, improving success rates, lowering development costs and driving increased demand. This in turn is expected to drive incremental demand for our Life Science solutions as well as in bioprocessing as commercial drug production expands. So with the combination of our differentiated portfolio, our talented team and balance sheet optionality all powered by DBS, we're positioned to drive long-term shareholder value while making significant strides in applying science and technology to advance human health. So with that, I'll turn the call back over to Rachel. Rachel Vatnsdal: Thanks, Rainer. That concludes our formal comments. We're now ready for questions. Operator: [Operator Instructions] And our first question will come from Michael Ryskin with Bank of America. Michael Ryskin: Great. Congrats on the results. Rainer, I want to ask a little bit on that progression through the year. As we look at 1Q, you guys did 0.5%. I'm backing into something like 2% core growth in the second quarter, given the various segments. I think that's what the low single-digit implies. So you've got a little bit of an acceleration in the second half of the year. Can you just talk to what's driving that across the segments? I think you're lapping, obviously, some of the respiratory headwinds in some of the Aldevron and VBP, but just confidence in the rest of the business to get that second half ramp and sort of the progression that's implied in the guide through the year? Rainer Blair: Mike, good morning. Well, there's certainly a lot going on in the world today. But as we've said, we're focusing on controlling what we can control, and there's really no change to how we view the progression throughout the year that we laid out in January. In January, we said there are 3 things really needed to happen to support the ramp throughout the year. And all 3 of those things played out as we expected or actually even a touch better in Q1, and we feel good about the balance of the year and here's why. In Diagnostics, the China diagnostic policy headwinds are playing out as we expected and actually patient volumes are higher. We also saw good momentum across the rest of Diagnostics, which showed another quarter of mid-single-digit growth without China and respiratory. And while respiratory was a touch softer, we continue to take share and our core molecular business grew mid-teens. So we expect our broader Danaher portfolio compensates for the touch of softness that we saw there in respiratory. But the quarter also demonstrated strong high single-digit EPS growth even if respiratory was a little bit softer. So those are some important proof points here around the resilience of our portfolio and the work that we're doing. Now as you think about bioprocessing, here, we see strong underlying commercial biologic drug production continue and it drives strength in consumables, and notably, we are really encouraged to see improvement in our equipment order book with over 30% year-over-year growth. Now turning to Life Sciences and the progression there, both China and Life Science consumables globally performed better than we expected. And that includes growth at Abcam and Aldevron, which is really encouraging. And we saw a broad stabilization in our life science end markets with pockets of improvement. So we're also seeing better funnel activity there as a result. So all in, look, we feel really good about how we started the year, and we believe this momentum continues. Matthew Gugino: And Mike, maybe just to give some details around the numbers and the specifics here on the progression. So the way we're thinking about it is core growth, low single digits in the first half of the year, sequential improvement from Q1 to Q2, you see this reflected in the Q2 guide. Together, the headwinds that we've talked about, China diagnostics, respiratory, some of the comps in Life Sciences, they're collectively about a 300 basis point, maybe a little bit higher impact in the first half of the year. These essentially go away by the end of the year and why we believe we'll exit Q4 in that mid-single-digit range. So for the purpose of the guide, the way we've laid it out is we're not really assuming any improvement in our end markets to exit the year at that mid-single digits, and that's why we feel comfortable about that progression through the year. Michael Ryskin: Okay. That's both those super helpful answers. And let me squeeze a follow-up on the bioprocess specifically. Like you talked about, Rainer, strength in consumables, the 30% or greater than 30% equipment order book. It doesn't sound like you're assuming any of that will come through later this year? Or could you see some benefit in the fourth quarter? Should that inform how we think about equipment growth next year? I mean just sort of how do we take those end points -- those data points of consistent high single-digit consumables and order book turning to think about [ BT ] later this year and into 2027? Rainer Blair: Well, we continue to see that strength in consumables. And so we see that progressing through the year consistently. Equipment, what we're seeing there in the order book certainly underwrites and reaffirms the year-over-year improvement that we expected. Recall last year, we were down double digits. This year, the guide assumes that we're flat on equipment. But we do like the activity levels here in equipment, and that marker of 30% year-over-year growth is an important one that is certainly supportive of the out years, and we'll have to continue to see how customer readiness plays in here. Sometimes these equipment orders come and it gets to be a little bit lumpy as customer readiness is a real important factor here as to when you actually end up recognizing the revenue. So we certainly see the guide underwritten here going forward, and we think positively about what this means certainly for the out years. Operator: Our next question will come from Vijay Kumar with Evercore ISI. Vijay Kumar: And want to pass along my congratulations to Matt Gugino and Rachel. Good to have you both on the call. Rainer, maybe my first one for you on your comment around Masi acquisition. I think initially, when people saw the deal, it was a little confusing. People thought this was a MedTech deal. But maybe just walk us through on this strategic rationale. I think you guys mentioned call point synergies between Radiometer and Masimo. My understanding is Masi, some of their tech board sales are perhaps tied to players like Philips, GE HealthCare. So how do you see the call point synergies and potential for DBS driving high single-digit ROI for the business? Rainer Blair: Thanks, Vijay. Look, we see the Masimo transaction as a very typical Danaher deal. And by way of update, the process continues to progress well there, and we're excited to get the Masimo team on board. So all things are positive in that regard. And look, we've been following Masimo for over a decade based on the learnings that we had with Radiometer, which is really our Diagnostics acute care strategy, where we believe that Masimo is a mission-critical player, differentiated technology, all the things that we like to see when we talk about our 3 dimensional acquisition framework. This is a great end market with long-term secular growth drivers. Two, this is the premier asset in pulse oximetry and other applications in acute care diagnostics. It's supportive of what we're doing at Radiometer. In fact, there's geographic synergies as well as Masimo is a little stronger than Radiometer in the U.S., and that reverses as you think about Europe. So those are all very positive. And really, these solutions sit next to each other here in these acute care settings. So to your call point synergies, they are significant, and they are direct synergies as well. And then I'll also add, from a financial profile, this is a transaction that's accretive at all levels, whether it's growth, whether it's gross margins or operating margins. And at the same time, we've been able to identify some pretty significant value reserves here to help us drive that return on invested capital to that high single-digit ROIC in year 5. Matthew Gugino: And Vijay, just to follow up, I mean Rainer talked about some of the synergies here, but what we outlined here a couple of months ago when we announced the deal was, we expect both cost and revenue synergies, $125 million of cost synergies realized by year 5, call it, $50 million of that is on the gross margin side, $50 million on the OpEx side and about $25 million of public company costs and then about $50 million of revenue synergies. Rainer outlined some of the opportunities there where we can probably help Masimo through our Danaher Diagnostics platform, get stronger in positioning around the IDNs or integrated delivery networks. And then there's probably some opportunity for Masimo to help us, including Radiometer, in the U.S. So really excited as Rainer said, to get the team on board here later this year. Vijay Kumar: That's fantastic. Matt, maybe my second one was on margins. I think typically, you guys have some seasonality Q1 to Q2 on respiratory, but I just feel like second quarter, maybe margins, the step down. It's a little bit more than what we saw in the last 2 years. Maybe just talk about sequential margins just given Q1 was such a good execution from a margin standpoint? Matthew Gugino: Yes. Sure, Vijay. I mean like you mentioned, I mean, we typically see a several hundred basis point step down in operating margins Q1 to Q2, that's driven by that typical step down -- seasonal step-down in respiratory. There's probably a little bit more FX impact here Q2 versus Q1, just given where the dollar has moved over the last couple of months. And then also, I think given the Q1 beat here, we wanted to take some of that beat, accelerate some growth investments from the second half of the year into Q2. So the way we're thinking about it is we just did -- we're expecting mid- to high single-digit earnings growth in the first half of the year, all in, and that puts us on the right path here for the rest of the year as we go forward. Operator: Our next question will come from Scott Davis with Melius Research. Scott Davis: Congrats. Can you talk about raw materials, just resins, cost? Rainer Blair: Sure. So with the spike in oil prices and the associated increases in petrochemical derivatives, we have our eyes firmly focused on what's going on there. And while we see some of that pressure out there, it hasn't been really meaningful yet as it relates to our own cost position. That said, we're incredibly vigilant there and leveraging the Danaher Business System as well as our contract positions to mitigate any pressures that are there. And I'll just say, as you would expect of us, Scott, here with the Danaher rigor, we -- every month, with every business, every operating company work through the entire P&L to understand what measures we're taking and how raw material volatility might affect the business. So we are all over that proactively, and to date, we haven't seen any meaningful pressure there. Scott Davis: And same with Middle East, Rainer? Rainer Blair: Well, the Middle East is really driving a good part of that pressure, Scott, in the sense that the volatility in oil prices are driving that. In terms of supply from the Middle East, that really doesn't affect us. So our supply chain is not directly affected by the Middle East, but of course, the indirect effects that you're alluding to here are something that we have to address head on. Operator: Our next question will come from Jack Meehan with Nephron Research. Jack Meehan: One of the big topics in the market at the moment is AI, wanted to get your thoughts on that. The first question is, as you look across the business segments, how do you think AI is influencing customer spending behavior? Your referenced bioprocessing could be a beneficiary. I was curious what you also thought about Life Sciences and Diagnostics, any signs of increased or reduced spending in the business? Rainer Blair: Sure. So let me get started here. You were a little bit in and out in terms of the volume on the question, but I think I've got it. Let me start with the conclusion here, which is we think AI is going to be a growth accelerator for the pharma and biotech industry, both in the near and in the long term. And the reason for that is we think that AI will accelerate the drug development and commercialization flywheel and result in better development pipeline yields. So as you know, the average yield in the drug development pipeline today is just above 10%. There's an enormous opportunity here to improve the yield of the pipeline and to accelerate the biopharma flywheel along with the flywheels of life science tool providers like ourselves. And so this improved yield drives both growth and profitability and reinvestment in the pharma industry. And that, of course, in turn, drives more investment into discovery, including wet lab validation, development in the clinic as well as commercial drug manufacturing. So in the short term, what we're seeing actually is incremental more demand, which we expect to accelerate in the building of biologic models. Autonomous science is the current buzzword that refers to the building of biologic models, and of course, that requires automation, which we're very well represented in. It requires more analytical instruments and it requires more reagents as well. So that's the short-term impact as this practically new market segment of autonomous science starts to play out here, and that plays out first in discovery and then continues to accelerate through the development pipeline. And of course, we're very well positioned here with our life science tools. I mentioned automation, analytical instruments that, of course, increasingly are AI-enabled reagents that support all of those models going forward. And that's a several year driver. These biologic models are in the single-digit percentage of information coverage required, very different than large language models. These biologic models require significantly more information in order to become general use type of model. So that's the short term. And as I indicated then in the long term, what we're going to see is the cycle time of pharma development being compressed and the hit rate, i.e., the yield to be increased. And that flywheel is going to be very good for patients. It's going to be very good for the pharma industry and those partners like ourselves that support that industry. Now as you think about that going through development, Jack, sorry, just to finish up, of course, these more commercialized drugs means more business for our bioprocessing business. We're the best positioned there with the broadest and deepest portfolio. I talked about the innovations that we're launching there. And then lastly, a lot of these drugs are going to be more sophisticated. They are going to require more sophisticated, more accurate diagnostics. If they're not personalized diagnostics, they will require near personalized diagnostics to come online. So again, I start with the conclusion, which is AI is a tailwind in the short and in the long term and is healthy for all market participants, and of course, we're very well positioned there. Jack Meehan: Excellent. Yes, it's clear. There's a lot of exciting things across the business. Maybe for you, Rainer, or for Matt, just extending that from a DBS perspective, are you seeing any tangible signs of productivity benefits from AI in the business? Any cost savings or revenue targets that you'd be comfortable sharing at this point? Rainer Blair: We are getting to the point, Jack, where DBS and AI are synonymous to us in terms of accelerating cycle times and driving efficiencies, and we bring those together. So we talk about AI-enabled DBS and DBS-enabled AI in one sentence, and that will continue to drive efficiencies. Let's just tee it up this way. As you think about the conversation I just had as it relates to the pharma development pipeline, think about Danaher's flywheel also being accelerated by AI-enabled DBS. That will result in more and better products that are AI-enabled, it's going to result in lower costs that we gained through efficiencies, and together, that's going to drive growth and earnings expansion going forward. Operator: Our next question will come from Tycho Peterson with Jefferies. Tycho Peterson: Rainer, I want to go back to bioprocessing. I appreciate you touched on order trends and how that may translate to revenues. But wondering if you can unpack a little bit more what you're seeing pharma versus biotech versus CDMOs? Secondly, are you seeing any replacement cycle demand? We've heard about replacement cycle heating up a little bit as we've done some checks. And then how are you sizing the China opportunity in biotech? I think it was around $1 billion, $1.3 billion if you go back a couple of years, but how are you sizing that opportunity today? Rainer Blair: Thanks, Tycho. Well, starting with China here where you ended up, China continues to be in recovery mode. We're very encouraged with what we saw in China here in the first quarter with double-digit growth in the bioprocessing business. The China biologics and -- driven by the biotech market that you referred to is accelerating. The monetization of the therapies being developed there has been resolved with both the license deals that you see with multinationals, but also the stock exchange and IPOs, once again, functioning properly. And so we expect that to continue to be a growth driver here as we get back to normality. So is the original $1.3 billion that we saw there at the peak in the cards? Well look, we're on the way to improved markets. We're happy to see that. We want to get through 2026 here to see that continued positive progression on China. As it relates to the equipment orders that we saw there, we think that continues to be very constructive to our hypothesis around 2026 and beyond. Both the funnel activity is encouraging as well as you saw that year-over-year orders growth. As I said, that underwrites how we're thinking about the year here. And let's see how the next quarters progress to see whether that has any impact here in 2026, but certainly, it will as we go beyond 2026. Tycho Peterson: Okay. And then maybe just shifting over to Life Science. Encouraging to see the turn there. I think you talked about improved funnel activity, obviously, Aldevron. I think coming out of 4Q, you hadn't assumed Aldevron will grow in the first half of the year. So that's encouraging to see. And then A&G consumables a bit better for Abcam. I guess maybe just talk a little bit about where you're feeling better as we think about the remainder of the year for the Life Science business? Rainer Blair: So in Life Sciences, and you just touched upon it in the consumables area, we expect it to be slightly down here in the year, albeit off of an improved second half of the year. I think as we go forward, we see positive growth for our Life Science consumables business here. For the full year, while that might be a little bit lumpy as we go through the next quarter or 2, we do expect that to go from slightly negative to slightly positive, and that's quite encouraging. And then we also saw China. China is continuing or, let's say, starting up and investing again also in Life Science instruments that was nice to see here in the quarter and the funnels there continue to be quite constructive. So all in all, we see some nice pockets of improvement there. Pharma was strong, continued to improve here quarter-over-quarter. Clinical was robust. The applied markets are playing out as we thought. Only academic remains a bit muted, albeit stable. So we're encouraged here by what we saw in Life Sciences in the first quarter and expect that to play out positively for the rest of the year. Operator: Our next question will come from Casey Woodring with JPMorgan. Casey Woodring: So nice to see the greater than 30% bioprocessing equipment order growth in the quarter, but I assume that number is probably coming off of a lower base year-on-year. So can you just give us any sense of what orders grew sequentially in 4Q or what book-to-bill was in the quarter? Any sense of how those came in relative to your expectations? And then, I'd also be curious to hear more about the brownfield versus greenfield investment dynamic that you talked a little bit about? You highlighted brownfield investments are flowing through and said greenfield would be expected to follow. Just curious on your expectations of when we could potentially see those greenfield orders start to flow through? Is that something you wouldn't be surprised to see in the second half? Rainer Blair: Yes. So Casey, the first quarter orders growth was the first positive year-over-year orders growth that we have seen in nearly 2 years. So by definition, then the comp is a little bit lighter. But if we look at the activity level here quarter-over-quarter, while the first quarter orders were actually down a little bit sequentially, that's absolutely expected as a result of the first quarter activity seasonality step down. So we always see that, and that's why that year-over-year comparator is so important. But at the same time, we see our funnel activity continue to be robust on the equipment side. So I wouldn't focus as much on that as a data point that we're seeing year-over-year growth now, whereas previously, it was sequential growth. So very encouraged, as I mentioned earlier about what we're seeing in the equipment orders. Some of those orders are starting to get a little bit larger. And that dovetails into the second part of your question. So we see equipment orders growth and the funnel activity driven by 2 different dimensions. The first one is that we have seen underinvestment in the industry for the last 2 years as it relates to capacity. Despite the fact that we've seen very robust growth, our consumables business demonstrates that the activity level has been robust and strong here for the last couple of years now. And that means that capacities require expansion. We have biosimilars coming on the market. We have new compounds coming on to the market and, of course, a little bit of underinvestment. So that really explains what we're seeing there, both in terms of brownfield investments as well as the one or the other additional line or even greenfield investment. The second vector is this reshoring dynamic. And here we see, again, increased dialogue, already some funnel activity, even the one or the other order here for brownfield expansions as it relates to reshoring. So we're really encouraged by what we're seeing here. On the equipment side, as I say, it underwrites our hypothesis for the year, and it further supports how we think about the equipment progression and the bioprocessing strength beyond '26. Casey Woodring: Great. That's helpful. If I can just squeeze one more in quickly. Rainer, you talked about solid growth across nonrespiratory within Diagnostics, and you held the guide for the year in Diagnostics, even with the lower respiratory number. So maybe can you just walk through what exactly is offsetting that lower respiratory number for the year? And what's getting better in that nonrespiratory piece that's enabling you to hold the guide? Rainer Blair: Well, there's a couple of things going on there, Casey. The first one being that we continue to take share at Cepheid in the core business, which is very important, and our hypothesis around Cepheid continues to play out. We're launching new assays there. The gastrointestinal -- GI panel is doing very well. Our MVP panel is doing very well. So even within Cepheid, you see strength here that is playing out. And then in our nonrespiratory business and you take out China, we continue to see mid-single-digit growth there with our innovation strategy playing out. We've launched at Beckman Coulter an entire series of new instruments and equipment there, none more important than the high resolution DxI 9000, which opens up entirely new pieces of menu to us. We've closed that blood virus menu gap. And of course, we have that fast track device certification for Alzheimer's disease testing. So we continue to see positive momentum there. And then we haven't even talked yet about the implications of Masimo joining the portfolio. So then the last point I would make, as it relates to China, VBP and the guideline discussions that we have, we're in a very strong dialogue with the China government here. And we've had visibility of what has been going on there for some time. So we feel good about our assumptions around the $75 million to $100 million headwind there in China, and that's only been validated by what we've seen in China here in the first quarter, even if the patient volumes were actually a little higher. Operator: Our next question will come from Dan Brennan with TD Cowen. Daniel Brennan: Maybe just on M&A, the balance sheet is in good shape post Masi. Just wondering how you're prioritizing M&A today if you look at your 3 business segments? Where do you see the biggest opportunities? It's a question we get a lot from investors. And kind of what does the funnel look like? Do you think you could see another sizable deal this year? Rainer Blair: We're very encouraged by what we're seeing in the funnel. As you know, multiples have come in and our 3 -- vector filter on M&A is becoming more and more relevant here. As we've talked about so often, one, our bias to capital deployment is M&A; two, we will not compromise on our discipline as it relates to being in the right end market with the secular growth drivers that we like to see, two, having a premier asset that has defensible positions or the opportunity with real value reserves. And then lastly, of course, the financial model has to work. And what we've been seeing in the current context is that the financial models are becoming more viable. So just to reiterate, one, the Masi deal for us was one that we have envisaged for a long time and the timing of that deal is defined ultimately by the processes that are run and we were ready with the balance sheet and the point of view to execute on that deal, and we're really excited about that. And that fits right into our acute care strategy. Now what is not is a broader investment thesis around the broader MedTech market on the one hand. But on the other hand, it is also not indicative of our point of view as it relates to Life Sciences, Diagnostics and Bioprocessing. We see here plenty of opportunity to deploy capital and are fully prepared to do that as the opportunities arise. Matthew Gugino: And Dan, I mean, from a balance sheet perspective, post close of Masimo, we'll go to about 2.5x net debt EBITDA. Given our strong free cash flow of $5 billion plus per year as well as EBITDA generation, I mean, this leverage will come down fairly quickly. So it gives us the ability to remain active on the M&A front even in the near term. So feel good about how we're positioned from a balance sheet side of things. Daniel Brennan: Yes, that sounds great. And maybe back to a question, I think Mike started off the call with. Your core growth is anchored at 3% this year. I think consensus is around 5% next year. So assuming the consensus is in the right ZIP code, can you just walk through the key levers to generate 5% growth next year, including what could push down or higher up in your LRP towards the high single-digit level? Matthew Gugino: Yes, Dan, I mean it's April of 2026, I think we're a little bit too early to talk about '27, but I'll just kind of go back to what we talked about with Mike here at the beginning of the call, where we're talking about low single-digit core growth in the first half of this year. There's about 300 basis points or a little bit more of impact from the headwinds that we talked about. China Diagnostics, respiratory, the comps in Life Sciences, that's why we feel comfortable about exiting Q4 in that mid-single-digit range. And really getting through those headwinds enable us without really any improvement on the end market side to get comfortable into that mid-single-digit range. Operator: And our last question will come from Doug Schenkel with Wolfe Research. Douglas Schenkel: Matt, maybe a follow-up on your comments there at the end in response to Dan's question. What gets you to the high end of guidance for the year? Is it really just what you described there moving past the headwinds and maybe those actually reversing in a more robust way than we're seeing right now? And maybe related to that, as we sit here today, should -- would you recommend that we essentially stay at the lower end of the guidance range for the year until we see some improvement, both in terms of those headwinds abating and maybe some improvement in end markets. So that's the first topic. And then another follow-up on M&A. Just to be clear there, from a readiness standpoint, could you do something in any segment as we sit here today, or given the pending Masimo deal, would it be less likely that you would do something in Diagnostics as you're in the process of integrating that business or getting ready to integrate that business? Matthew Gugino: Thanks, Doug. So look, we talked about in January, continue to anchor to that -- the low end of the 2026 core growth guide for planning purposes. In terms of what gets us to the higher end of the guide, I think you need to see a couple of things, Doug. First, you need to see some further improvement across the Life Sciences end markets. I think we're encouraged by what we saw here in Q1, but we need to see some of those policy headwinds further abate, especially in the U.S. and what we've seen there. I think China, good start to the year, but we need to see further growth acceleration as well. And then on the biotech funding side, again, starting to see some improvement, but we want to see that funding turn more quickly into orders. I think the second thing, bioprocessing, we probably need to see it a little bit better than the high single-digit growth. We need to accelerate on the consumable side as well as get that equipment growth going here, again, encouraged by the order patterns, but probably need to see it move a little bit quicker. And then the other thing here that we talked about on the respiratory side, we probably need to see a little bit above normal respiratory season to finish the year here in Q4 back to that kind of endemic $1.8 billion rate that we see going forward. So I think all in all, we're encouraged by the start to the year. We're already at 3% ex respiratory today and encouraged to see some of the underlying trends improve as we talked about. Rainer Blair: And Doug, as it relates to M&A, we have both the balance sheet capacity as well as the leadership bandwidth here to execute additional acquisitions in any of the 3 segments and feel very good about how we've positioned our talent and develop that talent in order to be able to do that. Operator: We've now reached our allotted time for questions. So I'll turn the call back over to management for any additional or closing remarks. Rachel Vatnsdal: No, perfect. That is all we have. You can reach us with questions today. Thank you so much for joining. Rainer Blair: Thanks, everyone. Operator: Thank you, ladies and gentlemen. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

27天前Insight Analytics约5分钟阅读

ATO.PA 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to Atos Group Q1 2026 Performance Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Philippe Salle, Group Chairman and CEO. Thank you. Please go ahead, sir. Philippe Salle: Thank you very much. Good morning, everybody. I am today with Jacques-Francois, and we're going to talk about Q1. So let's go directly on Page 6, on the business highlights. So first point is solid financial performance. I think we are quite happy, let's say, with the start of the year. We have always said that's the lowest point of the year. And then we gradually, I would say, improve the growth. Further progress in the execution of the Genesis plan. So the Genesis is doing also very well. We will finish the first Genesis plan probably by mid of this year. And we have extended the plan, I would say, with another savings to be finished probably by the end of 2026. The idea, of course, is to have the full savings of the new, I would say, the extended plan in the course for the year 2027. We have a positive business momentum, and I will come back to this. With, I would say, book-to-bill that is the highest for the last 5 years. And so now, we have a clear focus on our strategic pillars. Agentic AI, we have launched a manifesto. Sovereign, we have launched also a manifesto internally, and it's going to be externally in the coming weeks. And, of course, Cyber, where we are #1 in Europe. So if we go on the key numbers on Page 7, order entry is EUR 1.5 billion. It's 89% for Atos. It's 87% with Eviden. And of course, as you can imagine, with Eviden, the order entry was a little bit low in Q1 with the war. We definitely think that it's going to be much better after, let's say, the war, but we don't know, unfortunately, when it's going to be finished. Revenue is EUR 1.7 billion plus. It's roughly EUR 1,640 million what we call with the go-forward perimeter, the go forward, it's without Build that we have sold on the 31st of March and Latin America, and we expect to close Latin America next week. If it's not next week, beginning of May, but we will try, I would say, to finish this transaction, let's say, next week, which means that the perimeter is roughly the perimeter going forward. There are still some countries we want to close, but are very small. But in terms, let's say, of sale, I think it's finished. Net change of cash, I think very good news. It's minus EUR 47 million. So you have to understand that we have EUR 71 million of restructuring. So it means that we have produced roughly EUR 24 million of cash. And also, we have the Build cash consumption. Unfortunately, we are not able to estimate that cash consumption for now. We will do this, in fact, when we're going to close H1 -- just for information, build EBITDA was around minus EUR 25 million; CapEx, minus EUR 30 million. So EBITDA minus CapEx is minus EUR 55 million. We estimate that probably there is a positive working cap, but it's possible, of course, that Build has an impact of, let's say, around EUR 10 million, EUR 20 million, EUR 30 million, we'll see. So it means, in fact, that the production of cash is much higher than, in fact, EUR 24 million. And then the liquidity EUR 1.7 billion, it's a little bit above last year, December 2025. And remember also that we have bought already EUR 62 million of the EUR 1.5 [indiscernible]. So of course, there is less cash, but we have also less debt. So let's go on the 3-year for the Genesis. So I'm not going to highlight -- remember that there were 7 pillars in Genesis. There are a lot of things that we are doing. So the first one, is the growth. So as I say, we have redesigned completely for me the engine of growth. And it's going to, I would say, produce a lot of, I would say, of course, results in the coming months now and years. So I would say the teams are in place, most of them. We have, I would say, also put a focus with Florin, the CTO on our 3 strategic pillars, so Agentic, Sovereign and Cyber. We have now launched this morning for 2 or 3 months campaign also in France, I would say, to, let's say, push the image of Atos. And I would say the main, I would say, message is that Atos is back. And as I say on the term, the target operating model, in fact, in sales is completely in place. You will see also, for example, that the pipeline has increased almost by EUR 1 billion in 1 quarter. And that's -- I would say that gives, of course, a very good signs for the rebound that we estimate that will happen, in fact, in Q3. In terms of country review, so we sold iDEAL, it's a company that was in Nordics. It's mainly, in fact, Norway and Finland. So we closed the deal on end of Jan. South America, as I say, next week, and Build was done also end of March. In terms of operational costs, I think we are continuing, I would say, the progress. The billability rate now is above 80%, and it's, in fact, close to 85%, the target that we have. We are now, let's say, recalculating a little bit differently this billability rate because we take into account the average salary of the people that are not billed versus, I would say, the salary of people that are billed. And then there is -- and we see that there is, of course, a discrepancy and there is no, I would say, magic, but usually the people that are more costly, unfortunately, are more on the bench than the people that are billed. So I would say we will not recalculate, I would say, this rate, but we will adjust it, I would say, to the salaries. Legal entities, we continue to simplify the number of entities. We want to shave, I would say, the number of entities by hundreds still. And then we are also putting some AI internally. And right now, for example, we are testing AI on the revenues. So in fact, we are looking at all the contracts that we have, it's several thousands, and we look also at the options I would say, the paragraph in the different contracts that we have signed where we can extend the pricing or bill a little bit differently. So it can give, I would say, some rooms of improvement in terms of margin and revenues for the teams. But Genesis is going very well. The Genesis, the initial plan will be finished mid-'26. So we estimate that the EUR 650 million saving plan is almost complete. And that's why we have extended now the plan to have, I would say, a plan that will finish end of '26. So it means it's a target above EUR 700 million. In terms of workforce on Page 9, as you can see, so we started the year at 63,000. We continue, I would say, the restructuring, and we also managed the levers versus hirings to be negative. So we finished at 61,000. You take out Build to 2,500. So we are now at a little bit below 59,000. If you take South America, we are probably close to 56,000. So that's probably where we will be probably at the end of next week. And I would say we will -- I definitely think that we can -- we will land around 55,000 when Genesis will be complete. So we are almost there. We go on Page 10 on the order book. So first, the book-to-bill is very strong, 89 for -- and in North America, it's above 100. Just for the analysts, that's the -- I always say that the book-to-bill is a proxy, unfortunately, of growth. And I think we have a very good example. The book-to-bill of North America is above 100. They continue to decrease, unfortunately, in terms of top line in Q1. The book-to-bill of U.K. is below 100 and now they are growing. So as I say, unfortunately, it's not an immediate, I would say, readings when you have a book-to-bill at below 100 that it means that we're not going to grow. I don't think that it's the case. We are still looking to find a better measure. It's not an easy one, but we are working on it. I hope that we can probably share some, let's say, results in H1 or at the end of the year. The qualified pipeline, as I say, is up roughly close to EUR 1 billion. We are now at EUR 13 billion roughly of qualified pipeline, so almost 2 years of revenues, a little bit less than 2 years, of course. The renewal rate also is 94%. The good news is that we don't have big renewals now going forward. So in fact, for this year, I think we are not going to lose any other contracts. It has been done, of course, in the course of '25. The 2 big contracts in the U.S. have been renewed. One has been signed, in fact, in end of March with CNA. It's a very big contract, $480 million. And we're also discussing probably to extend the contract to more than this $500 million. We will have probably -- we're still in negotiation in the course of Q2. And the second one also is in California. We have won the contract. It will be signed in the course of April or May. It's done. We are just waiting, I would say, the signature of the client. And then for the U.S., it's done. We don't have big renewals, in fact, in other parts of the world. There is a medium-sized contract, in fact, in BN right now. We are waiting the answer probably next week. And that's all, which I think is very good news. And that's why we are very confident on the rebound of the top line in Q3. And then as you can imagine, we have a good traction in cloud, in cyber and in data AI because we are growing, in fact, in these 3 service line, let's say. You can see below some contracts that we have renewed. So for example, CNA in the U.S., it's a very big contract. There is some CM&I, there is a digital workplace and cyber, and we are also now looking for digital applications and the data AI, in fact, for the client, and it's an insurance company. So I definitely think that Agentic has a big impact in fact, in this company. We have, for example, with Gigalis in France, renewed a 4-year plan with cyber. It's what we call framework agreement. So it means that we have after that the possibility, I would say, to tender, put people or put, I would say, new projects in place. Most of the work, in fact, are not in the book-to-bill. So we are very cautious on this. And that's why it doesn't -- I think probably the book-to-bill is a minor, I would say, minor of probably what is going to happen on the revenues going forward. In the U.K., we have won a very good contract with the Ministry of Housing at GBP 63 million 7 years for digital applications. And for example, in the Germany, Austria, in Austria, we have won also a very big contract with OBB, EUR 48 million for 9 years. But I think that there is good traction. I see that there is more and more, I would say, appetite. Doors are open from the clients. I think it's much better than last year. And definitely, I think now we need to win, I would say, the contract. So I would say we are back to a normal business. If we go on Page 11, this is the 3 pillars in terms of technology. This is where we're going to invest most of our R&D and push, I would say, very hard. So Agentic, sovereign, and cybersecurity. So Agentic, as I say, we launched already the manifesto. We have already studios in place in the 4 big countries, and we have now signed different clients. And there is an ecosystem around us of start-ups that will help us, I would say, deliver the Agentic and the agents in the different scenarios of our clients. Then with the sovereignty, so there is a manifesto also that we're going to produce. It has been already shared with the top 200 within Atos in fact, last week, and we're going to share it externally in the course of next week or probably beginning of May. There is a lot of appetite, as you can imagine, right now, especially in Europe. And then cyber, of course, there are a lot of things going with this. We see also some developments with Agentic there. And of course, we have a very strong position, as you can imagine, in Europe, and we are pushing now also cyber in North America. Now if I go to the next page. So the next section is the Q1 revenue performance. So I can go through, I would say, the main numbers. So first, as you can see, when we looked at the Q1 restated, it's roughly EUR 2 billion. We take out the scope and the foreign exchange, the divestitures. So in fact, the perimeter going forward, which is without Build and without IDL and of course, without Latin America was roughly EUR 1.8 billion. We finished at EUR 1,640 million, which is roughly minus 11%. And as I say, we were, in fact, anticipating, let's say, a weak Q1. It will be much better, in fact, in Q2, and we are still looking to make the rebound in Q3. If you look, in fact, on Page 14 by region, we were probably a little bit, let's say, not surprised, but North America probably is too weak, the sentiment, in fact, the economic sentiment is a little bit, let's say, challenging in this area. The rest is okay. As you can see, U.K. now is growing at plus 5%. We estimate also that Germany will be on positive growth in Q2. So we see, I would say, region by region that I would say we are coming back to a positive territory in the coming quarters. If I go, let's say, region by region, so I start with Germany on Page 15. I think Germany is doing quite well. As you can imagine, also the EBIT now is positive in Q1. It was negative last year. And by the way, just for information, the EBIT of the group has more than tripled with our bill in Q1 versus last year. We don't publish, of course, the EBIT -- we will do this, in fact, in H1. But I would say we see the benefits of Genesis now going -- falling through, I would say, the P&L already, of course, in the beginning of '26. Then you have, I would say, some contract wins. I'm not going to go over, but I would say we are stabilizing, I would say, Germany. And as I say, we estimate that the rebound will happen in the course of this year. Now North America is probably the most difficult, let's say, region. In fact, the start of the year was probably lower than anticipated, but we are signing, in fact, a lot of new contracts and the book-to-bill is 10 -- so it's big. And definitely, now we estimate that we're going to ease, let's say, this contraction of revenues in coming quarters. You can see some below some big wins. The biggest one, of course, is CNA. And also, we have another one on CM&I at $30 million, as you can see below on the bottom, I would say, of the page. 17% is France. So France is still also challenging. Remember also that we did not have a budget in January and February. So it freezes a lot of our public and defense customer and public and defense in France is 40% of the revenues. So we know that the start of the year is probably, of course, lower than anticipated in the budget for us. But we have some very good signs for example, with SNCF, SNCF when I arrived last year, they said that they want to stop to work with Atos. And finally, we work -- we won a very big contract with them. So it means that the doors are open, as I say, in many customers. Gigalis also, it's a big contract we have won also for cyber. And you can see also other, I would say, wins and qualifications. U.K. on Page 18. So that's the rebound of the U.K. and also the profitability also is skyrocketing, as you can imagine. So we are very happy. And there is more to come. I think we have win also a big contract in Q2 that will be probably public. So I would say we are quite confident right now in the U.K. And as I said, that's the first region to come back to growth, and there will be more, of course, in the coming quarters. Last, international markets on Page 19. So we have taken out the 28, 30 that's Latin America. So in fact, without Latin America, it's around EUR 220 million, so minus EUR 12 million. It's mainly, in fact, impacted by one client in Asia, in fact, that is stopping the CM&I contract because they want to manage internally, I would say, their data. The good news is that we suffered, in fact, in '25, and we continue to suffer in '26. But at the end of the year, this ramp down is completely finished. So it means that we are quite confident that we will restart growing, in fact, in the course of '27. You can see also some wins that we have in Singapore, Spain and Slovak governments. Last, in fact, and it's not -- it was not international, sorry, is, of course, at Benelux, so Benelux or BN, what we call with Atos. This is also a slow, let's say, start of the year, but we are, I would say, quite confident also that this region is doing very well. We have win also different with Eurocontrol with -- in the automotive sector with DAF and also in the financial services, as you can see. Now Eviden as you can see on Page 21. So without Build, in fact, the revenues were EUR 71 million, and we are roughly at EUR 69 million. It's roughly flattish. In fact, we have been impacted by the war because part, for example, for Vision AI, a big chunk of our business is in Middle East. So we definitely think that it will be much better after the war concludes, but when nobody knows. But I would say we have a good traction in terms of also contracts, and we are very confident that we will accelerate both in the book-to-bill going forward and also, I would say, in the top line. So that's it for me. I give the floor now to Jacques-Francois for the liquidity position. Jacques-François de Prest: Thank you, Philippe, and hi, everyone. So on Page 23, as a reminder, the publication of the quarterly liquidity position is part of our regular reporting requirements, which have been defined and agreed with the group's financial creditors. So the certificates are available on our website. Our liquidity position remains strong at the end of March, thanks to the limited estimated cash consumption over the last quarter. In Q1, the net change in cash is estimated to be approximately minus EUR 47 million, which includes EUR 71 million spent related to the restructuring. This figure is reported without any use of the account receivable factoring or without any specific optimization on trade payables. This number is also reflecting the results before the estimated impacts. So you can -- we take them from the left to the right on the slide. So a, the change in the unsolicited payments received in advance of the invoice payment due date during the year. So that's the minus EUR 115 million. Then you have the exchange rate fluctuation, which amounts to approximately minus EUR 2 million. You have the M&A impact, which is plus EUR 257 million, and you have the debt repayment of minus EUR 62 million. So these amounts are excluded from the net change in cash, which I announced is minus EUR 47 million. And that brings us as a result, as of the end of March '26 to have the Atos Group's liquidity at EUR 1.736 billion, which is to be compared with EUR 1.705 billion at the end of December '25. And this is more than EUR 1 billion above the minimum requirement of EUR 650 million set by the credit documentation. So with that, I'll now hand over to Philippe. Philippe Salle: Okay. So just for the outlook, just I give you the numbers now with the FX at the end of March. So it's a little change just because, of course, as you can imagine, the dollar is weaker. So it gives in euro, let's say, a smaller revenues at the end of '25 with the FX of March. So we are still at EUR 7.1 billion. So compared to EUR 7.1 billion, of course, at the end of '25, EUR 312 million as the EBIT. We are now close, as I said, to 56,000 people without. And we are now in 54, sorry, countries of operation. So as I say, we continue also to close some countries will below 50 by the end of the year. Now if I go on Page 26 for the guidance of this year. So remember that at the beginning of this year, we say we will try to touch a positive, let's say, organic growth with, let's say, the start of this year and, let's say, the economic sentiment, we estimate that it's not going to be possible. So we have narrowed, I would say, the range. It's between minus 1% and minus 5%. So we still keep, I would say, the worst case at minus 5%. We think we will do probably better than that. And the best case, let's say, to minus 1%, so roughly a flattish revenue. Operating margin confirmed at 7%. As I say, we have tripled -- more than tripled the EBIT, in fact, in Q1. So we are very confident on the profitability of this group for '26, of course, and a positive net change in cash. So in fact, you've seen that we have already spent EUR 70 million with Genesis in Q1. Genesis this year is probably between EUR 150 million and EUR 200 million. So we have, in fact, spent more than, I would say, the average that we should have by quarter, and it's normal because we are accelerating the plan. And of course, the EBIT of the Q1 is always the lowest. So it means that it's a good sign, I would say, for the cash going forward. And then I would say for 2028, next year and 2028, we are still looking for an acceleration of the top line, still targeting around 10% of profitability. And of course, the deleveraging will continue. In fact, I would say with this year, the deleveraging, in fact, will be seen already in fact, in '26. And in fact, with hundreds of millions of cash next year because, in fact, the Genesis in terms of cash outs next year will be very small. We will produce a lot of cash to either do M&A or deleverage, I would say, the balance sheet. With that, I can now, with Jacques-Francois, take any questions that you have on the Q1 results. Our Q1 performance, it's not really results because we don't produce the P&L. Operator: [Operator Instructions] Our first question comes from the line of Frederic Boulan from Bank of America. Frederic Boulan: If I can ask 2. Firstly, on demand. So you flagged a strong order book momentum, a number of big contract wins. Can you discuss a little bit the nature of discussions with clients, any impact on demand from the current macro? I mean you flagged that for Eviden, but would be keen to hear any broader impact on the overall demand environment? And then specifically around pricing, it would be good to understand where you see price points in the deals you've been signing recently, how it's comparing versus, let's say, a year ago? And is this pricing driven by any kind of competitive or AI factors? Philippe Salle: Yes. So on the second point, Frederic, for example, CNA, the margin is 25%, which is roughly in line with the former margin that we have with CNA. Remember that the goal we have is to be around 25%, 26%. It's very important. And I'm very adamant on this. So I think probably, and that's why also the book-to-bill also last year and this year is probably lower than what we can achieve because we are still watching very closely the margin that we want to produce. Profitable growth, remember, is the goal for us. It's not very difficult to buy some contracts, but I would say it's far-ridden, of course, as you can imagine, since now beginning of '25. In fact, in some contracts, for example, like CNA, and it probably goes with the sentiment of the clients. Everybody, of course, is talking about AI. Nobody probably understands the impact of AI because it's very difficult right now to see what is going to happen. There are a lot, of course, disappointments, in fact, with some clients trying to put some agents because it's not that easy. And my view is that Agentic is the new revolution. It's coming, but it will take probably 2 to 5 years to be really in force, probably more in the U.S. at the beginning and after in Europe. So we see that in these contracts, for example, for its 8-year contracts, we're going to give, for example, some savings after year 3 and 4 in terms of -- let's say, in terms of Agentic. But in fact, we -- as I probably said already, since we don't know exactly the number of savings, in fact, we're going to share part of the savings that we're going to produce. But it's difficult, in fact, for clients and even for us to see the impact -- the real impact, I would say, of the savings we're going to have. So there are a lot of studies, and I'm sure that you've read some of them saying that we can divide by 2 by 3 by whatever. Unfortunately, there is one cost that nobody knows, it's the price per token. And we definitely think that this will probably say out in the future. And so it means that, in fact, there is a price for agents. There is probably, of course, less people cost in the contracts going forward. But the sum of the 2 right now is still, I would say, unknown. So I would say everybody is talking about AI. Everybody wants to us, let's say, to give some rebates or not rebates, but I would say, to apply, let's say, Agentic in our delivery and then give, of course. But I would say it's too soon even with the big contracts we are signing right now. They understand that there will be an impact, but it's too soon to say that there is a big impact. And as I say, for us, we're going to protect the margin. So we estimate that the margin of '25 probably will be more after that. And then we can probably produce more output on a given framework. Now the sentiment, I would say, of clients, it depends on the sectors. I think there are some sectors that are probably more difficult than the rest. Automotive is one, transportation, luxury goods. And other sectors, we don't see, in fact, a big impact on right now, let's say, the economy, the banking sector, insurance sector, defense, of course, and public, where we are very strong health care. So I would say it's a mix of sentiment, but you know that in economy, unfortunately, the fact that we -- there is a lot of uncertainty, it doesn't give, I would say, the sentiment to clients that they can spend more, specifically with AI. So I would say that for the moment, probably there is a postponement of some contracts or projects. They are looking exactly probably waiting, let's say, to see how the economy is going to rebound after the war. So there is more wait and see in some clients, let's say, for some projects. And that's why -- that's what we see for the moment. My view is that the projects will happen. But in fact, if you, of course, extend or postpone, let's say, by 3 to 6 months, it has an impact, in fact, in the -- for the '26 year. And then, of course, it will be good news for, let's say, end of this year and of course, in 2027. Operator: [Operator Instructions] Our next question comes from Sam Morton from Invesco. Sam Morton: Two questions, please. The first is on the bond buyback. So I think you bought back EUR 62 million of the 1.5 lien. Certainly the last time we spoke, I think you've been buying back the second lien. So I'm trying to understand what's the change in strategy there? And then secondly, any update you can provide on the refinancing, that would be really helpful. Philippe Salle: Yes. I think Jacques-Francois is going to answer your 2 questions. Jacques-François de Prest: Sam. So yes, the change of strategy is more or less in line, I think, with what we announced in the Q4 publication call, where we said that at the end of fiscal year '25, we thought the second lien was really very low actually and bought opportunistically a little bit of that. So last year, this was EUR 2.5 million of second lien. Now when we look at the NPV, the second lien has gone up. And it's true that the EUR 62 million amount we have bought back on the market, on the open market was only 1.5 lien bonds. Again, we noticed that -- how can I say, this bond was momentarily trading below due to geopolitical situation, nothing to do with the performance of the company. So since we had a little bit excess of cash, we decided to take advantage of that. We signaled that, and we implemented this program, which is not finished, by the way. It might be pursued in the coming weeks or months. That's the first question. On the second question, the refi, well, we are monitoring the market. The company is ready. So we have nothing to announce today other than we are checking how the market is evolving. We have some banks advising us. And when we think there is a good window allowing for a good operation and a good pricing, you and investors might hear from us. Operator: Our next question comes from the line of Laurent Daure from Kepler Cheuvreux. Laurent Daure: I have 2 really quick questions. The first is on revenue trends during the year. I think if I take the midpoint of your guide minus 3%. How do you see the phasing from Q1 to Q4? And what are the main drivers of improvement? Do you still have some contract ramp-up that makes the revenue trend much better, maybe starting in Q2? Or is it comps impact? Any granularity on how you see the year shaping would be helpful. And my second question is on the bond buyback. To clarify, you made EUR 62 million. are you cautiously looking at your balance sheet? Could you do much more than EUR 62 million, like EUR 200 million, EUR 300 million? Is it a question of liquidity of those bonds? So anything on the strategy on that would also help. Philippe Salle: Yes. So in fact, for the -- we estimate Q2 will be around minus 6% and then positive in Q3 and Q4, the positive, then you calculate whatever you want. The central scenario, let's say, at minus 3% for me probably is okay. And of course, if you have minus 11%, minus 6%, then plus and plus, if you divide it after that by 4, you are probably around this minus 3%. So I would say the central is around minus 3%. The worst case is at minus 5%. Then for the bond buybacks, the question for us, of course, we have probably plenty of cash, as you can imagine. And also, in fact, we're going to produce some cash this year. So if we start at minus EUR 50 million, of course, we're going to produce EUR 50 million plus now in the coming quarters. We want to buy, in fact, 1.5L bond, in fact, and that's the one we are looking at that is below EUR 100 million. So I think it's a good, let's say, buy for the group because it's cheaper than, I would say, the par, in fact, on -- for the bonds. And remember that the bond is around 9% yield. We are -- remember that we are also looking at refinancing. So that's why we have to be a little bit cautious between the refinancing. And remember also that we have some repayments of the 1.5L with the proceeds of M&A that should occur, in fact, at the end of the year. So it's an equation, I would say, with all these variables. So we will see if we continue to buy back bonds or we refinance first and then we continue to buy back also, we will see. Laurent Daure: So at the end of this year, you have to pay back with this half of your proceeds from M&A. Is it right? Philippe Salle: Exactly. The proceeds of WorldGrid, the proceeds of Latin America of [indiscernible], of course, it's small amounts for the 2 and the proceeds of Bull, it could be EUR 500 million plus. So remember that we have this EUR 500 million plus cash out that will happen at the end of the year. Jacques-François de Prest: May I complement, Laurent, this is as part of the credit documentation. We have a couple of moments in time in the near future where we are going to do the liquidity test. There is a bar at EUR 1.1 billion of liquidity. At the end of June, we are testing that on a forward-looking basis meaning that the company will -- we will do our forecast internally and the amount which are above EUR 1.1 billion at the end of December, we will use them to reimburse as a mandatory early repayment the 1.5 lien tranche. That's the first test. And the second test is we take the liquidity position, the actual liquidity position at the end of December. And again, against the EUR 1.1 billion, the amounts coming from the M&A proceeds will be used to repay early some -- the EUR 1.5 billion lien capped at the amount, which leaves us above the EUR 1.1 billion position. I hope it's clear. Laurent Daure: To be even clearer, if you do all that, what is your best estimate in terms of interest savings in '27 versus 2026 at the group level? Jacques-François de Prest: I'm afraid there are too many unknowns in the question to give you a number. Philippe Salle: If we do the refinancing, there are a lot of things that could happen again in the course of this year. So it's too soon to give you already, let's say, guidance on interest rates for '27. We can probably give this with the Q3 results. So probably in October I think we will have a better view. Operator: Our next question comes from Benoit De Broissia from Keren Finance. Benoit De Broissia: I have just one very quick question. It's -- you had one black contract in the U.K. involving Aegon. I noticed that Aegon sold its U.K. subsidiary in the weeks -- in a few weeks ago. Do you think that you could renegotiate with the purchaser, the contract you have and that is set to terminate in a few years in 2034, '33, if I'm not wrong. Philippe Salle: It's a very good question. Yes, the end of the contract is 2034. Yes, you have noticed that Aegon U.K. has been sold. So we are talking now to the buyer. It will be in May. In fact, we need to wait. And of course, the buyer has already a platform. So the good news is that do they want to keep only one platform or not and then stop the platform of Aegon, which then, of course, will stop the contract. It's too soon because, of course, we haven't talked yet, I would say, to the buyer. So we will have, of course, a better view in the coming months. But I think for us, it's a good news because I definitely think that they will not keep -- in terms of economies of scale, it doesn't make sense for them, I would say, to have 2 platforms. I think that their platform also is very efficient. So we will see how they want to play this. So there is a possibility effectively that they ask us to stop the platform that we have and then transfer the data to their new platform. So it means that the contract can end in the course, for example, of 2027. We will see. I don't know yet. It's too soon. But it's a very good question. It gives a good opportunity for us, yes. Operator: Our next questions will come from the line of Ryan Flew from PVTL Point. Ryan Flew: Just one quick one for me. So you've given quite clear guidance on sort of the cash add-backs or the adjustments to net change in cash to get to a true sort of unlevered or pre-debt repayment cash generation. Can you just help steer us on your '26 guidance? And clearly, there's a range there, but it feels from the adjustments you've discussed that actually the net change in cash will be considerably better than just positive. So just any further sort of color you could give would be really helpful. Philippe Salle: Jacques-Francois? Jacques-François de Prest: Well, Ryan, thanks for your trust and your faith. At this stage, our commitment and our guidance is to be free cash flow positive. I'm sorry, I will not deviate from that. Bear in mind that we have -- Philippe mentioned, the Genesis cash out impact is between EUR 150 million and EUR 200 million. So that's not nothing. And we have all the other lines of the cash flow statement, which are still consuming some cash. So yes, we're shooting for more, but our commitment is to be free cash flow greater than 0. Philippe Salle: But as you say, it's probably a conservative guidance, let's say. Operator: Our next question comes from Derric Marcon from Bernstein. Derric Marcon: Two questions from me. The first one on the book-to-bill. I just want to understand if it's -- the 87% is applied to the reported figures or the fully planned scope. And in this book-to-bill, talking about in absolute term, what's the proportion between renewal and new business? That would be helpful to have this figure. And my second question is on the M&A, the EUR 257 million you mentioned, can you reexplain what is included in this figure? Philippe Salle: Okay. So the 87%, it's Atos and Eviden. Atos only is 89% because as I say, Eviden has suffered from the war more than -- I would say the impact is more influenced, I would say, than Atos. And Eviden is more Europe, Middle East, in fact. So that's why probably I think the impact is higher. We definitely think that the rebound will come, but of course, we need to have more, let's say, stability. Then the book-to-bill between renewables. Derric Marcon: Is it from the go-forward perimeter or on the reported perimeter? Philippe Salle: Yes, the go forward... Derric Marcon: EUR 1.7 billion or the EUR 1.6 billion. Philippe Salle: No, no, it's only on the perimeter without Latin America and Bull. So 87%, 89%. 87% is the go forward and 89% is only Atos, okay? And it's Atos without Latin America, 87% is with Eviden without Bull. Then the renewals versus -- we don't have this number available right now. I cannot tell you. So we will come back to you on this one. And remember also, you're right that with renewals, of course, as I said, it inflates also the book-to-bill. And that's why it's a proxy for the book-to-bill. Be careful on this. It's not because the book-to-bill is below 100 that we're not going to grow on the company. I definitely think that it's possible. And in fact, we have shown this in the U.K. Then for Bull. So Bull, in fact, remember, there is a lump sum of EUR 300 million at the beginning, plus 2 earn-outs. The EUR 300 million is the EV, the EUR 250 million is the equity. So in fact, we went from EV to equity without the provisions and the pensions, okay? So it means that the EUR 250 million was the equity check that we had for Bull without the 2 earn-outs. Then the EUR 250 million, we take out the carve-out cost. We estimate around EUR 50 million. A part of it was expense, I would say, in the course of '25, the rest, of course, in Q1. We estimate around EUR 50 million. So it means that the net cash for us is close to EUR 200 million, okay? Remember also that Bull has a negative cash flow in Q1. We don't know how much. So we need to take this also into account. So the EUR 200 million will be probably less, EUR 170 million, EUR 180 million. I don't know yet exactly how much. As I said, it depends on the working capital we're going to have on Bull, but it's quite tricky for us to calculate the working capital of Bull, because, in fact, for some of activities of they were on the same company as Atos or the other, Eviden. And that's why even on the bank accounts, unfortunately, we need to look line by line on the cash, I would say, to reconstruct, let's say, working capital. And that's why we're going to give you the figures with the H1 figure, in fact. So that's roughly EUR 200 million without carve-out cost and I would say, equity check, probably less with the cash outflow of Bull in Q1. And then we still have the earn-out. The first one is maximum EUR 50 million, and we estimate we can gain around, let's say, EUR 40 million plus. We will see, I would say, they need to close their accounts. And it's, I would say, linked to the gross margin of Bull. And then the second earn-out is on the EBIT of Bull in '26. But of course, as you can imagine, the EBIT of Bull in '26 is not in my hand, unfortunately. So it's difficult to see what is going to happen on the second earn-out. So we will see what happens on the first one. It's going to be a negotiation that will start, I would say, after the closing of the accounts. Unfortunately, Bull is not very, let's say, quick on the closing accounts. So we will have probably -- numbers probably after the summer. Derric Marcon: And so to get -- Philippe, to get to the EUR 257 million mentioned in the liquidity position. So you have Bull EUR 200 million after carve-out, if I understood correctly, plus other things like Scandi or Latin America... Jacques-François de Prest: So I can say the angle Philippe took was the angle of explaining the story for Bull. Now in the carve-out costs, some of that has been spent in '25 already, a little portion in Q1 '26, and there is a bit more to come in the rest of '26. The vast majority of the EUR 257 million you can see is coming from Bull, the vast majority of that. You have then a plus EUR 10 million and the minus EUR 10 million, which comes from the disposal of some other relatively small assets and some deduction for the carve-out cost for Cartier, but you can assume that 95% of that is Bull. Derric Marcon: Okay. And Latin America and Scandi will come later in the year? Jacques-François de Prest: Scandi has been closed. Scandi has been closed already. That's what I was referring to as other proceeds. That has been completed in Q1 already. And for Latin America, the closing is scheduled in the coming weeks. So there is not a penny yet of proceeds from Latin America in our Q1 numbers. Operator: We have no further questions from the line. Allow me to hand the call back to management for closing. Philippe Salle: Okay. Can you ask one more time if there are other questions or not, and then we can close. Operator: [Operator Instructions] Philippe Salle: Okay. If there are no more questions, then thank you, everybody, for this morning. We have some, let's say, a small road show, I would say, with some investors today and tomorrow. And we, of course, remain at your disposal if you have any questions. But overall, I would say we are very confident on the rebound of the company. I'm very pleased, I would say, on the results and very confident that this year of the rebound and in terms of cash flow, I think there is no surprise for us, neither on, I would say, the profitability and cash flow and the rebound will occur in the course of H2. So next time, I will talk to you end of July. So have a good day, and see you in 3 months. Bye-bye. Operator: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

27天前Insight Analytics约5分钟阅读

TSCO 2026 Q1 财报电话会议

Operator: Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's conference call to discuss first quarter 2026 results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded. I would now like to introduce your host for today's call, Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead. Mary Pilkington: Thank you, Victoria. Good morning, everyone. We appreciate your time and participation in today's call. On the call today, participating in our prepared remarks are Hal Lawton, our CEO; Kurt Barton, our CFO; and Seth Estep, our Chief Merchandising Officer. In addition to Seth, we will also have Rob Mills, John Ordus and Colin Yankee, join the call for the question-and-answer portion. Following our prepared remarks, we will open the floor for questions. Now let me reference the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company. In many cases, these risks and uncertainties are beyond our control. Although the company believes the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results may differ materially from expectations. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that statements will remain operative at a later time. Tractor Supply undertakes no obligation to update any information discussed in this call. As we move into the Q&A session, please limit yourself to 1 question to ensure everyone has the opportunity to participate. If you have additional questions, please feel free to rejoin the queue. We appreciate your understanding and cooperation, we will also be available after the call for any further discussions. Now let me turn the call over to Hal. Harry Lawton: Thank you, Mary Winn, and good morning, everyone. Before we begin, I want to thank our more than 52,000 Tractor Supply team members. Their commitment and passion for life out here continue to set us apart and their dedication to delivering legendary service remains the foundation of our leadership in rural retail. The retail environment remains cautious but stable, with spending focus on needs and small indulgences with some evidence of trip consolidation. Within farm and ranch, the broader market has slowed, though we continue to gain share. In fact, we estimate we had one of our best share performances in Q1. In Pet, the category remains pressured. And while we are holding our share, our performance is below our expectations. A good example of the consumer spending is around their tax refund behavior. While refunds did come through and we captured our fair share, customers are using these dollars more cautiously. A significant portion is going towards essentials, savings and debt reduction rather than discretionary spending, consistent with the broader environment we're seeing. Our needs-based model continues to perform as expected in this environment, demonstrating its resiliency. We are seeing that in consistent demand across our core categories and continued engagement from our customers. In the first quarter, that played out in distinct phases, driven by weather timing. We ended the year lapping 2 years of significant storms, which created a slower start, followed by a major storm event that drove a pickup in demand. Trends then normalize through the middle of the quarter before a mixed finish with a good start to spring in the South more than offset by continued weather pressure in the North. Overall, weather was neutral to our performance in the quarter. Against that backdrop, I'm very pleased with our execution in the quarter. The team responded well to winter storms, activated strong events and around holidays and regionalized our marketing based on weather patterns. And we executed a clean transition into spring and chick days with encouraging early results. We remain focused on executing across the business. Advancing new store growth, expanding exclusive brands and maintaining disciplined SG&A control while continuing to make progress on our strategic initiatives. Gross margin remained in line with our expectations with ongoing pressure from tariffs, cost inflation and freight, which we continue to actively manage. Turning to our customers. Growth was driven by new stores and our existing customer base with store traffic increasing in low single digits and conversion in their stores roughly flat. Active customer counts grew though visit frequency declined modestly. We saw continued strength in our high-value customers with solid retention and engagement, supported by continued growth in Neighbor's Club penetration and higher engagement from our most valuable members, while new customer acquisition remains softer and was most reliant on new stores. Turning to our first quarter results. Net sales increased 3.6% to $3.59 billion, driven by new store openings. We opened a record 40 traction supply stores in the quarter and new store productivity remained in the 65% to 70% range. New stores remain a hallmark of our performance. Diluted earnings per share were $0.31. Comparable store sales increased 0.5% with average ticket up 1.6% and transactions down 1%. Four of our 5 product categories were positive and 6 of our 7 geographic regions delivered positive results, reflecting the broad-based strength of the business. With the exception of companion animal, our consumable, usable and edible categories delivered consistent performance in line with our expectations, led by poultry feed, bedding, livestock feed and equine feed. Companion animal performance reflects a number of structural headwinds. Sales were below the chain average, reflecting these dynamics. Dog ownership, particularly in larger breeds, has come under pressure, and our mix remains heavily weighted towards dog where we over-index by roughly 20 points. Cat ownership is growing and gaining share, and that's where we under index. Both species are also shifting towards fresh and premium nutrition where again, we are under-indexed. And our pace of share gains in both dog and cat has slowed. All this said, we are taking clear and decisive actions to strengthen our position, include expanding our Freshpet offering, increasing cat assortment, and enhancing our services and Rx capabilities, and Seth will walk through these and more in detail. Seasonal categories developed more gradually early in the quarter with spring category strengthening as the season progressed. Overall, we saw solid performance across both our winter and spring assortments. Big ticket categories performed above the chain average with strength in tractors and riders, generators and welding, partially offset by softness in chicken coops, trailers and recreational vehicles. Our digital business also continues to perform at a very high level with strong double-digit growth in the quarter. And we saw meaningful increases in traffic, along with improved conversion, reflecting the strength of our omnichannel experience. We've made targeted enhancements across our platform, including improvements to how customers shop and navigate our assortment as well as upgrades to our subscription offering as well as our order management and checkout experiences. These efforts are driving a more seamless and efficient experience and supporting continued momentum in the business. As we look beyond the quarter, we continue to make progress on our Life Out Here 2030 priorities. On localization, results are encouraging as we tailor assortments to local needs with more than 200 stores now localized and delivering improved performance and stronger customer engagement. In direct sales, momentum continues to build as we expand our sales force and deepen relationships with our higher-value customers, and this is driving increased productivity, larger basket sizes and repeat engagement. In Final Mile, we're scaling our delivery network, adding hubs and increasing delivery volume, supporting the continued strength in our digital business while improving efficiency and reducing our cost to serve. Within pet and animal Rx, we're seeing encouraging progress across both Allivet and tractorsupply.com as we expand our offering and enhance convenience for customers while driving engagement with new and reoccurring purchases. As we look ahead, we're seeing our typical seasonal ramp take hold as we build towards Memorial Day with stronger seasonal penetration and improving trends in the North, we expect sequential improvement in comparable sales relative to the first quarter. We continue to see strength across our customer base and in the majority of our business. We're taking targeted actions in areas of opportunity while continuing to execute on our strategic priorities. We remain focused on what we can control, investing with discipline, managing costs and most importantly, as always, serving our customers. That approach continues to position us to drive market share gains and long-term value. Lastly, we are reaffirming our full year outlook. And with that, I'll turn the call over to Kurt. Kurt Barton: Thank you, Hal, and good morning, everyone. Let me complement Hal's top line commentary by briefly covering the underlying drivers. Overall, our net sales performance was modestly below our expectations for the quarter. New store sales outperformed expectations in both timing and the number of new stores opened. This was offset by comp store sales performance below our expectations as we planned for Q1 comp sales to be at the low end of our 2026 guidance range. The primary driver of this performance was the softness in companion animal, which represented just over a 100 basis point drag on our comparable store sales. To further break down comp sales performance, average ticket increased 1.6%, driven primarily by higher average unit retail, reflecting a combination of inflation and category mix. Retail price inflation was the primary driver to the average ticket increase at approximately 150 basis points contribution along with a category mix benefit, principally from big ticket sales growth. This was partially offset by a modest decline in units per transaction. The mid-single-digit growth in big ticket categories was generally in line with our expectations. The growth in average ticket was partially offset by a 1% decline in transactions, reflecting customers' continued focus on value and prioritization of spending as Hal mentioned earlier, leading to reduced shopping frequency and trip consolidation. As expected, ticket outpaced transactions in the quarter. Turning to gross margin and SG&A. Gross margin was 36.2%, flat to prior year. The gross margin rate was generally in line with our expectations and reflects supply chain efficiencies and continued execution of our everyday low price strategy, offset by a higher mix of digital and other delivery-related sales, along with the continued pressure of tariff costs. This stability reflects the team's continued focus and cost management in a dynamic environment. And on tariffs, the impacts remained in line with our expectations with pressure largely contained and mitigated through our ongoing cost management efforts. SG&A increased 6.1% to $1.07 billion and as a percent of sales, was 29.7%, an increase of 70 basis points. There were 3 primary drivers of the deleverage. First, fixed cost deleverage given the level of comparable store sales below our 2% breakeven threshold. Second, continued investment in strategic initiatives across the business as we do not begin to cycle the step-up in investments for direct sales in Final Mile until Q2. And third, an accelerated new store opening cadence with 40 stores opened in the quarter. These were partially offset by ongoing productivity initiatives and cost management. As we shared last quarter, we expected Q1 to carry a heavier SG&A burden and that played out in line with our expectations. Our inventory remains in good shape with the average inventory per store increase principally reflecting inflation, inclusive of tariff costs and the timing of spring seasonal purchases. We continue to manage inventory effectively, supporting in-stock levels in key categories while maintaining overall quality and balance across the network. We also remain committed to returning capital to shareholders. Our dividend increase in February marked our 17th consecutive year of dividend increases. Turning to our outlook. We are reaffirming our full year 2026 guidance as outlined in this morning's earnings release. We continue to target comp sales growth in the range of 1% to 3% for each of the remaining quarters. Please keep in mind that we manage the business on the halves and not the quarter. From a margin standpoint, we expect gross margin to strengthen in the second half as comparisons ease and benefits from our new distribution center begin to flow through. SG&A deleverage will be higher in the first half, driven by the timing of new store openings, more normalized incentive compensation and the lapping of prior strategic investments. Our 11th distribution center remains on schedule, with shipping expected to begin in early Q4, and we expect approximately $10 million of incremental expense this year, primarily in the second half. Consistent with our outlook as we entered the year, we expect stronger EPS growth in Q2 and Q4 given the prior year's compares. On tariffs, the current environment remains fluid. We are managing the business based on what we know today and have not assumed any incremental benefit from refunds in our outlook. In closing, the quarter reflects a resilient business with consistent performance across the majority of our categories. We remain confident in our ability to deliver on our full year expectations and drive long-term value for our shareholders. With that, I'll turn it over to Seth. Seth Estep: Thanks, Kurt, and good morning, everyone. Tractor Supply's merchandising strategy is focused on meeting customers where they are today while positioning the business for where demand is going. We are taking deliberate actions to drive relevance, expand our reach and strengthen our position as the dependable supplier for Life Out Here. I'll start with our pet business, where we have a focused structured plan to accelerate performance and capture growth, then followed by key merchandising initiatives across the broader portfolio. As Hal mentioned, the category is evolving with macro trends in dog ownership, growth in cat and a continued shift toward premium fresh and more digitally enabled solutions. While our assortment has historically been well aligned to our core customer, particularly in dry kibble and larger dog formats, incremental growth is increasingly being driven by adjacent segments as we actively expand our presence. To address this, our plan is centered on 4 key areas: first, assortment transformation; second, exclusive brand innovation; third, digital capabilities; and fourth, customer engagement, all supported by continued investment in talent and category leadership. Starting with assortment. We are expanding into the fastest-growing segments of the category. We are aggressively scaling fresh and frozen pet, moving from approximately 80 stores today to more than 250 stores by the end of May with a path to 700 stores by year-end. While still early, we are encouraged that approximately 1/3 of customers purchasing Freshpet in our pilots are either new or reactivated to the category at TSC, demonstrating the traffic-driving potential of this segment. In parallel, we are expanding our presence in cat. Increasing space across our fusion stores, expanding both dry and wet assortments and improving presentation to better capture the opportunity in this rapidly growing segment. In dog, a comprehensive chain-wide upgrade of our food business in Q2 extends into key adjacencies, such as shreds, treats and meal enhancers, while introducing new brands like Stella and Chewy, and broadening the assortment of leading national and differentiated brands like Purina Pro Plan, Hill Science Diet, Victor and Sports Mix. We are also incorporating more localized assortment decisions to ensure relevance by market and customer. A second key pillar is accelerating innovation across our exclusive brands. For Health remains a cornerstone of our strategy with strong scale and continued share gains. We're expanding the brand across multiple formats, including the launch of New for Health shreds formulas and extending into higher growth segments, such as Ambient Fresh and meal enhancers with differentiated offerings. In addition, the Retriever portfolio will be relaunched in Q3 with enhanced formulations, expanded SKUs and updated packaging, further strengthening our value proposition across good, better and best years. Moving to our third pillar. We are accelerating our digital capabilities to better serve pet customers and capture reoccurring demand. Our online pet business grew mid-teens in Q1 led by subscription, which grew by triple digits driving new customer acquisition, strong retention and increasing repeat purchase behavior in core consumables. In addition, we've expanded our Pet Rx offerings across both Allivet and tractorsupply.com, while leveraging our last-mile delivery network to improve the fulfillment experience and lower cost, particularly for large format pet food. Fourth, customer engagement is a key priority with enhanced engagement through Neighbor's Club and continued leverage of our pet services ecosystem to drive higher frequency and lifetime value. Through Neighbor's Club, we have the opportunity to deliver more personalized experiences, reactivate customers and acquire new customers through targeted outreach. We also see a meaningful opportunity to convert our large animal customers into pet customers, leveraging our highly engaged base. Our services offerings continue to play an important role. In Pet wash, we have more than 1,200 locations with strong growth in usage, including double-digit increases in comparable units. This reflects the value customers are placing on this offering. And PetVet mobile clinics performance remains solid, with sales growth building on strong prior year trends with a 2-year stack of nearly 25%. We see continued opportunity to expand access and scale this offering with additional clinics planned in the near term. These services help us drive frequency, attract new customers and strengthen long-term relationships, reinforcing our competitive position in the pet category. We expect to continue expanding these capabilities over time. In supporting all these efforts, we are investing in talent and leadership across the pet category, ensuring we have the right expertise, focus and execution capabilities to drive sustained improvement. All these actions in companion animal are designed to accelerate performance and position the pet business for improved growth and share gains. Importantly, beyond pet, we are very excited about our broader portfolio, which continues to perform with strength and building momentum. We are leaning into our seasonal moments, particularly as we transition into spring and summer. Chick Days is off to an encouraging start, with strong engagement from both new and existing customers, and we are on track to sell a record number of birds this season. This event continues to serve as a powerful traffic driver and a key entry point into our broader animal care ecosystem, driving demand across feed, coops and accessories. In our seasonal big-ticket categories, performance is exceeding expectations, led by live goods and our zero-turn mower lineup. This lineup featuring brands such as Bad Boy, Cub Cadet, Toro and Husqvarna is performing well. And our new flagship stores are driving improved presentation, attachment and overall productivity. Our stores are ready for the spring planting season as we have nearly 50% of our stores with either a garden center or a live goods tenant. We're well positioned for the season with the right assortment, the right presentation and the right momentum to capture the seasonal opportunity. Moving to livestock feed. We recently completed a comprehensive private label network review to ensure consistent quality at the lowest cost to serve, strengthening both our retail and our direct sales capabilities, we've been one of our most important heritage categories. We're also expanding our assortment with key regional brands such as Total Equine, Bluebonnet and Buckeye, allowing us to better localize our offering and meet customer needs across different geographies. We also continue to invest in our exclusive brand portfolio, a key differentiator for Tractor Supply. A great example of this is Field & Stream, where our new product introductions are performing well. The brand is on track to hit over $100 million in sales this year, joining the ranks of 13 other exclusive brands at this sales milestone. We're excited about the continued launch of new programs across our wildlife and recreation department where the Field & Stream brand is helping anchor this strategy. Our in-store conversions of our dedicated wildlife and rec department are off and running, and we are pleased with the early results. As such, we are increasing our outlook from around 500 to approximately 700 store conversions by year-end. Together, all these initiatives are designed to drive near-term performance and strengthen our long-term position ensuring that we continue to meet our customers where they are and support the way they live and work. And with that, I'll turn the call back over to Hal. Harry Lawton: Thanks, Seth. Stepping back, what you're hearing is a clear and focused approach. The fundamentals of our business remain strong with consistent customer engagement and continued strength across our needs-based categories. At the same time, we're operating with discipline in a dynamic cost environment and taking decisive actions to improve performance in companion animal and accelerate growth across our strategic initiatives. We're moving with urgency in areas where we see opportunity. As part of our Life Out Here 2030 strategy, we're making meaningful progress in building capabilities to support long-term growth. We're strengthening what we do best, while continuing to scale new initiatives that expand how we serve our customers and grow our share of wallet. As we look ahead, we expect to build momentum through the year, supported by these actions and continued execution across the business. With that, we'll open the line for your questions. Operator: [Operator Instructions] Our first question comes from the line of Peter Keith with Piper Sandler. Peter Keith: I think I just want to kick it off with companion animal since that was a focus here. Is that category getting worse? Like I guess if you could talk about the trend through the quarter. Then you've got a bunch of initiatives to help stabilize it. Do you think those are starting to kick in now? Or could things get worse before they get better? Harry Lawton: Peter, it's Hal, and thanks for joining the call this morning and appreciate your question. On pet, first off, I'd say a few things. As I mentioned in my opening remarks and Seth did as well, we view our share performance in pet to be stable, and it's been in that kind of stable run rate really for the last 4 or 5 quarters, albeit it's below our expectations. The overall structured dynamics in the industry continued to be under pressure as both Seth and I articulated. And then we also have some additional pressures given the mix and the structure in the industry given our weight on -- towards dog and also our weight outside of the Fresh and Frozen. But as Seth mentioned, we're taking actions on both of those dimensions, expanding our assortment in cat and then also aggressively getting into the fresh and frozen market. More broadly on -- and so I'd say our comp trends have been stable for really the better part of 6, 7 months now in that category, and as we roll into Q2 are stable in that range and then also our share performance stable. As we look forward, while Pet is a kind of headwind in the moment for us, a couple of things I'll just comment. First off, I really, first I'll articulate that we have a kind of broad portfolio inside of the business that we play against, whether it's Q, seasonal, big ticket and certainly as our digital business, as we mentioned, exceeded expectations in Q1. So we do see multiple offsets throughout the balance of the year. The other thing I just want to highlight is the pet over indexes in Q1 by nearly 5 points relative to the average through the balance of the year, and it under-indexes in Q2 before kind of moderating in the back half. So there is a kind of mix impact that we had in Q1 on that as well. But the guidance, and we reiterated guidance today, our plan and forecast assumes that we'll have continued pressure for some time in that category, and then we'll kind of see gradual improvement as those initiatives take hold. But again, a portfolio of categories that we play in [indiscernible] slate out a number of the actions were taken in pet, but also a number of the actions we've taken out -- taken more broadly. We're midway into Q2 now and feel good about the sequential improvement we've seen in the business as the season ramps. Thanks so much, Peter. Operator: Our next question comes from the line of Michael Lasser with UBS. Michael Lasser: It comes on the heels of your comments just now Hal, which is how long do you think it will take to effectuate an improvement within the pet category. And if we assume that Tractor Supply, the updated algorithm may be more like 2% to 3% comp growth rather than the expected range of 3% to 5%, what does that do to the earnings outlook for the business over the longer run? Harry Lawton: Michael, and good to hear from you, and thanks for joining the call today. On the -- how long the improvement, as I mentioned earlier, our plan for the balance of this year assumes continued pressure in that category. As I mentioned, we see number of offsets and a variety of ways that we'll continue to operate in the context of our full year guidance. We are very much operating in that -- the middle of our full year guidance range here kind of almost 4 weeks into Q2. So I feel good about our trends so far into Q2. Remind that no less than 2 quarters ago, we delivered a 4% comp, and our seasonal ramp and execution are building momentum. And so certainly, we have actions and plans around pet, but the performance, I think, will be both dictated by our actions, but also how the overall market continues to evolve. There was 96 million dogs in the market in 2023, that dropped down to about 94 million in 2024. And then I think most folks thought it would kind of stabilize around there. And then in 2025, you had a couple of million more dogs of decline going down to approximately 92. So that will dictate some of the performance. That will dictate equally the performance as well as our actions as we look forward to the balance of the year. And then as it relates to our overall growth algorithm, we're certainly not addressing that today. But I'd just say our business is need based. We do not see this as a structurally lower growth business. Right now, our customers are -- they're playing the macro. They're stable. They're performing. We continue to have strong share gains in farm and ranch, and our customers are shopping to their need now. And we certainly don't see it as a structurally low-growth business. We just see our business and customer shopping as they need right now, and it's certainly a little bit more of a tepid consumer environment in the moment. Operator: Our next question comes from the line of Peter Benedict with Baird. Unknown Analyst: This is [ Zach Back ] on for Peter. Maybe one on the macro kind of in 2 parts. Hal, I know you mentioned seeing consumers kind of use those tax refunds more cautiously. Just curious, any changes in behavior from your core customer, maybe observed since the start of the Iran conflict about 6 or 7 weeks ago. And then secondly, just on oil prices, can you give us a sense of what level of oil prices are embedded in guidance? Maybe what is the sensitivity around this? And how should we think about the impact on margins if oil would stay kind of in that higher range of around $100 a barrel? Harry Lawton: Yes. Zach, and thanks for joining our call this morning. I'll hit both of those topics. First, on the macro, I'd start by a little bit building off of the answer that I just had with Michael. Our customer remains very stable. They're focused on needs-based spending in the moment. We have continued strength in Q more broadly across the business in our essential categories. I'd highlight our high-value customers as remaining very engaged and retained. I think you're hearing that broadly across retail. Our active customer accounts are growing, albeit there's a modest reduction in their frequency and also in their basket at this time. And I think that really just reflects a focus on value, not really demand deterioration when you look at the underlying fundamentals there. So we feel good about our customer. As I said, they're shopping to need. They're engaged, and we're retaining them. And as their spending habits improve, we expect our comps to moderate as well. On oil, our current forecast, their guidance, we've updated our internal numbers to reflect kind of the latest outlook on fuel pricing. And so kind of I would say we're very conservative on that front in terms of having the higher fuel cost kind of forecasted certainly for the foreseeable future in the business, Q2 and into Q3. And then we'll update more so as we get into the back half of the year. But we -- we certainly have been cautious and conservative, and that's incorporated overall guidance, which we reiterated today and feel very comfortable in our ability to manage gross margin in that context. Operator: Our next question comes from the line of Kate McShane with Goldman Sachs. Katharine McShane: We wanted to specifically ask about new customer acquisition remaining softer and that it's being mainly driven by new stores. Could you maybe double-click on that a little bit more? And then just kind of in the same vein, what kind of comp performance are you seeing in the localized stores which you highlighted is about 200 stores at this point? And can you remind us -- remind us for the rollout of this initiative? Harry Lawton: Kate, and thanks for the question today. On new customers, as we mentioned in our prepared remarks, our new customer growth is really right now predominantly relying on new stores, not uncommon in retail, but certainly, we would like to be driving new customer growth in our existing stores as well. But in our existing stores right now, it's mostly active customers that we're retaining and driving the business with. More broadly, if we step back, well, the second part of the question was on -- that's right, localization, -- sorry. If we step back more broadly on localization, I'd start really more with our store base. So we're about 60% of our stores now are in the fusion format. About 400 to 500 of those are new stores that have been built in the last 5 years. Those stores, as you can see in our new store performance curves are having outstanding comp results. Then you look at the balance of the remaining of our 60% of our stores that are in the Fusion format. Those stores are performing at or above the comp average. Certainly, the ones that we've done the localization treatment on in the last year to 1.5 years are now at 200 stores of localization are outperforming the rest of the Fusion store base. And then you take the remaining 40% of stores that are not infusion and not new stores. And those are the ones that are underperforming relative to our overall comp base. So not uncommon in what you see in a store base where you're kind of older stores that have not been remodeled are kind of dragging the comp. Your Fusion remodel stores are slightly above the overall comp and helping pull it up with the localization, meaning they're outperforming, as we've talked about, by that low to mid-single-digit comp run rate and then you get the balance of that performance coming from our new stores. So feeling great about our fusion format, feeling very good about the benefits of localization. And obviously, our focus over the next few years is continuing to move about 175 to 200 stores a year into the Fusion format and continue to drive that improvement in our store base. Operator: Our next question comes from the line of Chris Horvers with JPMorgan. Christopher Horvers: So I want to follow up on companion pet to make sure I got the math right. You talked about the category being a 100 basis point headwind to comps in the first quarter, that would suggest it was down 3%, and that's been a consistent trend over the past 6, 7 months. Guess more fundamentally, how do you think about the headwinds in the category between sort of like structural versus a mix sort of headwind related to what you're assorting and -- the dog, cat side and versus like online penetration. So think about Amazon pushing deeper into rural markets versus not a sorting fresh. And then on the cat side, appreciate that you're expanding an effort to focus more on Cat. Do you think your core customer simply under indexes to the cat category and over-indexes to large dog and sort of so -- perhaps the effort around cat faces some just inherent headwinds relative to who your customer is? Harry Lawton: Yes, Chris. And just to reiterate maybe some of the points we made earlier. So we're about 80% dog, 20% cat versus the market that's 60-40. We've always talked about our customer owns -- about 75% of our customers own a dog. Over 50% of our customers own a cat. And over 50% of our customers own more than 1 dog. So we have heavy pet population counts in our customer base. As we expand into cat, and we've been doing that now for about 6, 8 months, we started talking with you all about that middle of last year. We are seeing performance improvement in the stores that we expand our cat in. And as we roll out more fresh and kind of air drive and heavy nutritional products on the dog side, we're seeing improved performance in that as well. We have no reason to believe that as we expand Cat moving forward that we won't continue to drive performance there. To your point, it's a very competitive industry. You see grocery channels starting to pick back up. Certainly, you see pet specialty trying to recover share, although they continue to lose share at a pretty decent clip. And as you said, you see the balance of the share shifting into online. But the category overall right now is kind of flat to negative in total growth. And certainly, that's the case when you exclude the services piece of it, grooming and the bet element of the pet category. Operator: Our next question comes from the line of Spencer Hanus with Wolfe Research. Spencer Hanus: Just on new store growth. I'm curious what you're seeing from a cannibalization effect. Have you seen any step-up in that? And is that driving any of the softness here? And how are you thinking about that longer term. And then just one more on companion animal. You gave us some interesting stats on the dog population. Do you invent that continuing to decline as we look out here? Or do you expect that to stabilize? Kurt Barton: Spencer, this is Kurt. I'll take the first question on new stores and cannibalization. I'll flip it over to Seth on your follow-up question on dog population. Our new stores are performing really strong. You heard that in Hal's prepared remarks. We continue to see even when we opened up 40 stores this year, averaging over 100 in the last 4 quarters that the new store productivity is performing at the high end of that range of 65% to 70%. Part of that -- I'll just follow up on the earlier question. Localization is also helping the store -- new stores come out the gates strong as we ensure we're offering the right best product assortment in those new markets and those new stores. Now in regards to your question on cannibalization. Cannibalization continues to be modest. In many cases, we'll look at some of that to be healthy cannibalization as we put a second store in a market that's really strong. We look at and review and approve our new stores based on the IRR and incremental benefit net of cannibalization and our cannibalization level is pretty consistent with the last few years, and we measure our performance on our stores as to the net increment to comp sales, net of any level of cannibalization, and we continue to just have a modest and manageable level of cannibalization indicating our new store growth is still in a very healthy position. Seth, maybe turning it over to you on the follow-up question on dog. Seth Estep: Yes. Just one follow-up question on the dog. Just in general, I would just say that we're not currently assuming really any changes in the trend at this point. Obviously, it's macro based a little bit. But obviously, we're staying very close to where those trends are going. But more importantly, it's more about the actions we're taking to make sure that we can make sure that we're not only like remaining in keeping our share, but returning to share growth. And that does go back to, again, our assortment transformation initiatives, our exclusive brand growth, our digital acceleration and all the things that we're doing to work through our customer engagement, whether that be through pet services, Rx, Neighbor's Club, et cetera. We've continued to evolve with this category over time, and we're very confident in what we've been piloting, and we believe that as these continue to roll out a little bit later here in Q2 and into Q3 and start to build all these initiatives to scale that at that point, we'll start to see some kind of incremental and sequential improvement as we close the year and kind of move into next year. Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: Back to companion animal. Are you willing to share what level of comp growth you're targeting? Should it be within the middle of this year's comp range? Or is it in the long-term range? Or is it above the range? Curious what you're targeting, if you're willing to share how far off you are, I know someone offered a level of which you might be growing or shrinking at this point. And then any more on what's gotten better thus far in Q2? Is it that mix effect on the total business? Is it some outdoor categories? Can you share some of those details. Kurt Barton: Simeon, it's Kurt. I can offer up some color on your question in regards to the expectation on companion animal and our guidance and then how we see that playing out. I'll go back to Q1, and we made commentary in our Q4 call on the guidance that on our 1 to 3 comp, some of the stronger categories and some of the weaker categories, we said companion animal being under pressure in general at that time, would lag the chain average. And so for the year, we expected flat to slightly positive comps in companion animal. To the point that we made that 100 basis point pressure on the quarter definitely showed that we were running a negative comp in there. We anticipate that to be additionally pressured throughout this year. So companion animal going forward, we believe there's ability to see growth in that performance as the year progresses and our actions take hold. But we anticipate that companion animal will be under some modest pressure and likely to be at a flat or slight negative comp throughout this year. And that's embedded in our expectation for the rest of this year and part of our consideration when we say that we still believe we can run the future quarters within our guidance range of 1% to 3%. Seth Estep: Simeon, this is [indiscernible] second question on Q2 and whether some improvements. Just to recall to some of the commentary we had in Q1 as well. 4 of our 5 merchandise categories were positive. And as Hal mentioned as well, mix in Q1 is much heavier part of that mix than it is as we go into Q2. With that, we are very encouraged with the strength that we're seeing right now in our seasonal business. Mentioned earlier around Live goods is performing very strong. Our Big Ticket categories and seasonal like with our zero-turn lineup, assortment continues to perform. And also like digital continues to be incredibly strong as well. So we're leaning into the categories of strength. We talked about our wildlife and recreation area, some of our men's and women's apparel that we continue to evolve are doing well. And obviously as well, things like our traditional businesses like in Ag, sprayers and chemicals are core areas are well are continuing to perform as we go into Q2. And we see those really being in that range and give us confidence in that 1% to 3% range for our comp guidance. Operator: The next question comes from Chuck Grom with Gordon Haskett Research Advisors. Charles Grom: A question for Seth and maybe Rob too. Can we zoom in on Neighbor's Club, Garden Centers and Direct Mile and maybe double click on the opportunities on each of these fronts. And then my follow-up is for Kurt. Can you remind us any mix implications as you lean into the -- sorry, the category more? And should we be mindful of any investment in price that you may want to take across the Pet business to stimulate demand? Mary Pilkington: Chuck, do you want to kind of narrow down maybe that first part of the question? I just said that we get it because it was kind of mixed in there. Charles Grom: Yes, just maybe just zoom in on Neighbor's Club, Garden Centers and Direct Mile. Just a little bit of an update on each of those fronts. And then just on the margin side for Kurt, any mix implications from the expansion into cat that we should be mindful of? Harry Lawton: Thanks, Chuck. I'll hit real quickly on Neighbor's Club, Garden Center pricing, and then I'm going to turn it over to Colin to talk about Final Mile. Neighbor's Club continues to perform very well. We have not been disclosing as a recent our Neighbor's Club membership. I think it continues to grow at about the same pace as it has the last handful of quarters. So really straightforward there. Retention remains strong. Spend per member remains strong. As we commented several times, our active customer base remains very core and engaged in our business. On Garden Centers. Our Garden Centers are performing very well. Seth highlighted live goods as a -- off to an excellent start for us this year. We are over 1,000 stores now collectively with garden centers and/or live good tents, and both concepts performing very well. And then on pricing, really, nothing of -- that I would call out from a mix difference between cat and dog, the margin structures are reasonably comparable in the food side of things, reasonably comparable on the snack side of things. So as we make assortment shifts there, it's very manageable within the department. I'm going to shift it over to Colin now to talk about Final Mile, which is [indiscernible] a great first quarter and really is kind of one of the core underlying levers that's driving that 20% plus digital growth this -- in the first quarter and continuing here into the second quarter. Colin Yankee: Thanks, Hal. Chuck, good to hear from you. As Hal mentioned, our Final Mile program is exceeding our expectations. Programs really resonating with our customers as they're choosing to have more of their needs delivered, especially for those larger order quantities, and we're lowering the cost per delivery across the entire portfolio as we roll out this program. Reminder, 2 big unlocks for Final Mile. First is enabling demand, whether that's for direct sales or digital. And then the second is that more efficient and lower cost per delivery. We saw it in the volume in Q1, delivery volume was up double digits compared to last year. And I think what's really unique about what we're doing is how we're orchestrating our inventory upstream. So we're making choices about how we deploy inventory, whether it flows through a DC to a store or resource that delivery through the store. And then the partners we're using to get that product from the store out to the customer's property. For those small and medium type items, we're using a series of trusted delivery partners where we really want to get our team members delivering is in those large, extra large and huge kind of deliveries, it's amazing. We'll go to put a Final Mile delivery hub in and all of a sudden, we'll see 250 bags of shavings get ordered, [indiscernible] 16-foot fence panels, just these big orders that nobody else can deliver at scale nationally like we can and something we've never been able to do, and our customers are really responding to it. Last year, we stood up about 200 Final Mile hubs. This year, we're on plan to open up 176 more, and those hubs are trending ahead on our utilization of our expectations. So really pleased. We know we have a lot of work to do still as we build out this program. But all signs point to this being a massive enabler for us digitally and on direct sales. Operator: Our next question comes from the line of Seth Sigman with Barclays. Seth Sigman: I wanted to ask about pricing. So inflation was 150 basis points in Q1. I think that's actually down from where it was in the fourth quarter. Did you guys actually lower prices? Or is that just a mix dynamic this quarter versus last quarter? And then can you also speak to elasticity, the experience that you've had to date? And then just finally on pricing. A lot of the inflation has been tariff-related up until this point. What is your view on commodity-related inflation? How does that play out from here? Seth Estep: Seth, this is Seth. Thanks for the question. As always, when you think about pricing, we've got a very experienced team. We've got all the tools in place set for years that we've been able to really have a good draft on the costs that are coming at us and flowing through the system as well as being able to monitor kind of, call it, the competitive index in our categories out there to ensure that we are priced right in the market. Our strategy on that has not changed. EDLP is our true north. We're going to make sure that we are competitive and in a position to drive share. Relative to the current environment, I'll tell you, though, like there's a lot of dynamics that obviously you're flowing through, whether that be to your point around some of the EDLP tariffs and how that, a little bit put some pressure on the inflationary environment. But obviously, now we're shifting and flowing into some other potential cost pressures relative to fuel, oil, some other inputs, et cetera. And we're just monitoring those closely. I mean there's a lot of uncertainty as we look ahead. But as of right now, we're in a position to continue to operate within kind of our guided range and the expectation of that inflation, call it in that kind of 1% to 2%. And a lot of that would come from price relative to some of the cost pressures that had been there and there's no change to that kind of expectation at that time. Operator: Our next question comes from the line of Scot Ciccarelli with Truist. Scot Ciccarelli: I believe PET is about 25% of total sales and it's also your highest frequency segment. So assuming those statements are both correct. Contractors, comp transactions turn positive, if pet stays negative just given the frequency related to that category? And then secondly, just a clarification. Was overall Q above or below company average? Kurt Barton: Scot, this is Kurt. A couple of clarifications on that. Pet is a traffic driver in some cases, it is an add-on in other cases, to just kind of set the expectation on or at least clarification on the biggest frequency and traffic driver, it's really the large animal. It's the feed category that is the, by far, the biggest traffic driver. So just clarification on that. And then to your point on companion animal and the mix, as I was mentioned earlier, Q1 being a smaller sales quarter, that's really more the routine. It overindexes in feed and pet food in those and lesser in other quarters. And so while it being not the primary traffic driver, and while it's still a solid business for us with a lot of our strategic initiatives with in Q2, with it being a heavy seasonal type category. And as a reference point, you see this in our disclosures, companion animals roughly like 21% in Q2 versus 27%, 28% in Q1. We've got the right drivers. And as Hal mentioned, a majority of our categories are solid in performing. A majority of the markets are performing well. So I wouldn't over-index. We're not over-indexing. We're managing the halves. We believe the customer is still engaged. And to your question, we can comp positive and expect to be able to target that in future quarters even if there's some softness in headwind in the pet companion animal category. Operator: Our next question comes from the line of Steven Forbes with Guggenheim. Steven Forbes: Hal, maybe a 2-part question on companion animal trends just to hit this topic again. The first is I'd be curious just to hear you speak to how you think rural migration household formation, existing housing turnover trends have impacted the outlook for pet as a whole as you see it today? And then secondarily, as you think about your member base, you commented that 50% of members have a dog and cat. So I'm curious if you can just maybe help explain to the group here what you're seeing as it pertains to wallet share of movement across those key customer cohorts where you maybe don't serve them to the level you need to be serving them? How long does it take to onboard them post localization? Like what gives you really the conviction that you can pull them back? Harry Lawton: Yes. Steven, I appreciate the question. On rural migration, I'd say 2 things there. One, certainly the post COVID, so since 2020, when you look at mobility stats, there's been a strong reversal of trends kind of versus pre-Covid. So kind of pre-COVID that you saw urban mobility increasing at the expense of ex-urban, rural and even to some degree, suburban. Post COVID, you've seen the exact opposite with urban exodus, I would say, through '21, '22 and '23, that was -- the Exodus was much stronger in ex-urban. I think now you're seeing it more balance between suburban and ex-urban. But you're still seeing mobility out of urban markets into suburban, ex-urban and rural. I'd also just add that when we look at our store base versus those sorts of geographic cuts, the more rural the store, the stronger the comp is, to a little insight there on our overall customer trends. On our member base, I'd say that not -- what we see with them on their pet purchases is very much a natural just ongoing evolution of the structure that's out there right now. You're seeing pet populations decline on dog, you're seeing pet populations modestly increase on cat. And you're seeing that play out in our business. So more broadly, like if you look at dog food, we were up somewhere in the mid- to high single basis points of comp share gain in Q1. If you look at cat similarly, we were up mid- to high single basis points in share gain in that category in the quarter. But because of mix because we have such a much lower share in cap versus dog, our overall share and overall food between dog and cat was flat. So share is stable. Actually, when you look at it by species, modestly growing. Now what we -- we were growing at about 20 basis points of overall share gain collectively across those categories back in '23 and in '22. So that's the actions that we're taking now to kind of step back into that overall share gain. But to be very clear, we are gaining share in dog food by itself in cat by itself, but when it mixes, it makes us to a flat share on food in total. Operator: Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Charles Cerankosky: You mentioned that weather was neutral for the quarter, but we had some very distinct national weather trends, for example, lack of snow and warm in the Rockies and cold and snowy in the Northeast. How is that set up for the second quarter as we move into spring and when might it do to your salesman? Harry Lawton: Yes. Chuck, I appreciate the question. As I mentioned in my prepared remarks, Q1 really unfolded in phases. And as we exited in March, you had an anomaly where you had kind of a cooler is north going and you had kind of the south warming up. As we mentioned, we saw strong spring sales in the South as we were exiting Q1, but kind of not yet the demand kicking in, in the north as we knew would [indiscernible] turned into April and kind of gotten past Easter and the lapping of Easter last year, you now see the north with the weather having improved, really kicking in. The South is holding. And we're in the midst of that seasonal ramp right now. As Seth commented, we've seen strength in almost all of our garden businesses and all the related garden businesses. So whether it's things like agriculture, ag fencing, even some of the hard lines that are out in the agriculture space. Certainly, things like sprayers and chemicals, lawn and garden tools, live goods, riding lawnmowers, which is a critically important business for us right now as having an excellent year-to-date. So we feel really good about our business as we've turned the corner here into Q2, kind of 3.5 weeks in, as we mentioned, the business is running very much solidly in the range of our overall comp guidance for the year, and that's our expectation for the quarter as well. Thanks so much, Chuck, for the question. Mary Pilkington: So Victoria, that will wrap our call today. We will plan to release our earnings tentatively on Thursday, July 23 for our second quarter earnings. So please join us then. If you need anything, please don't hesitate to reach out. Thank you very much. Operator: Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your lines.

27天前Insight Analytics约5分钟阅读

IDHC.L 2025 Q4 财报电话会议

Ahmed Moataz: Hello, everyone. This is Ahmed Moataz from EFG Hermes, and welcome to IDH's 2025 Results Conference Call. I'm pleased to be joined with Dr. Hend El Sherbini, Chief Executive Officer; Sherif El Zeiny, VP and Group CFO; and Tarek Yehia, Director of Investor Relations. As usual, the company will start with a brief presentation, and then we'll open the floor for Q&A. IDH's management, please go ahead. Tarek Yehia: Good afternoon, ladies and gentlemen, and thank you for joining us for the full year results. My name is Tarek Yehia, I'm Head of Investor Relations. Joining me today Dr. Hend El Sherbini, our CEO; and Mr. Sherif El Zeiny, our CFO. Dr. Hend will begin the call with a summary of the main highlights from the year. After that, I will discuss in more detail the main macro and geopolitical trends seen across our markets. After my presentation, Mr. Sherif will offer a deeper analysis of our financial performance. We will then open for Q&A. With that, I will hand it over to Dr. Hend for her introduction. Please, Dr. Hend. Hend El Sherbini: Thank you, Tarek, and good afternoon, everyone. I'm Dr. Hend El Sherbini, CEO of IDH. I'm pleased to report that 2025 was another very strong year for the group with robust operational and financial performance across our core markets and continued progress on our strategic priorities. The results we are presenting today reflect not only improving market conditions in key geographies, but also the tangible impact of the strategic initiatives we have been implementing over the past 2 years, particularly around network expansion, service diversification, digitalization and operational optimization. Throughout the year, we continue to strengthen our leadership in Egypt and Jordan while making very encouraging progress in Nigeria and Saudi Arabia. We are also very pleased with the sustained improvements in profitability across the income statement, which continue to validate the scalability of our model and our ability to translate growth into stronger returns. More broadly, we are encouraged by the increased resilience of our platform, which today combines scale, a richer service mix and improving efficiency across markets. Turning to our performance in more detail. During 2025, we continue to build on the strong momentum established over the prior year, delivering 37% revenue growth year-on-year supported by growth across both volume and value metrics. Test volumes increased by 11% during the year, with all operation geographies contributing to this expansion, supported by stronger patient engagement, deeper penetration in both walk-in and corporate channels and improving refer flows. At the same time, our average revenue per test rose 24%, and reflecting a richer test mix, broader uptake of radiology and specialized diagnostics [indiscernible] of the pricing actions introduced earlier in the year. These trends also helped us further strengthen our average test per patient metric, which reached 4.6 tests per encounter, demonstrating the continued depth of patient relationship and our success in expanding cross service utilization across our platform. In Egypt, momentum remained very strong throughout the year, supported by solid growth in both volume and value alongside strong brand equity and a more supportive macroeconomic backdrop. Test volumes in Egypt continue to expand steadily, while average revenue per test saw a strong uplift driven by favorable mix dynamics, including higher value radiology, radiotherapy, specialized diagnostics and corporate channels. Egypt remained the core engine of the group performance, contributing 84.6% of total revenue in 2025 and continuing to demonstrate strong scalability, resilience and operating efficiency. The continued expansion of our physical network in Egypt remained a key growth driver during the year. Over the past 12 months, we added 137 new branches in Egypt, bringing the total to 724 locations nationally at year-end. These new sites have helped deepen our presence, not only in Greater Cairo, but also in underserved and fast-growing regional cities. Allowing us to better serve both contract and walk-in patients. Our household service remains a strategic differentiator, sustaining its strong contribution of around 20% of Egypt's revenues continues to demonstrate the effectiveness of our post-pandemic strategy and reinforces our position as an early mover in home-based diagnostics in the region. Al Borg Scan continues to demonstrate strong momentum as a key component of our long-term strategy to build a more integrated diagnostics platform. During 2025, we took an important strategic step with the acquisition and integration of Cairo Ray for Radiotherapy, which broadened our capabilities in radiotherapy and strengthened our position in oncology diagnostics. This transaction enhances our ability to participate more meaningfully in higher-value specialized diagnostics and supports our ambition to build a more comprehensive offering for patients and referring physicians. We expect radiology and radiotherapy to play an increasingly prominent role in our growth mix over the coming period, supported by expanding service capability, greater patient awareness and growing demand for specialized imaging and treatment support service. Over the past 2 years, a key strategic priority for IDH has been the successful launch and upscale of our Saudi operation. I'm pleased to share that our presence in the Kingdom continued to progress very encouragingly during 2025. With strong momentum supported by growing demand, deeper market visibility and sustained improvement in both volume and value metrics. During the year, Biolab KSA generated SAR 5 million in revenue, representing a 252% year-on-year growth as test volumes and patient throughput increased sharply, and the business benefited from the expansion of the network to 3 branches. This growth continues to highlight the effectiveness of our ramp-up strategy in the market, which is designed to accelerate revenue growth and establish Biolab KSA as a recognized provider in the large but highly fragmented [ Saudi's ] diagnostics market. At the same time, we continue to advance our growth approach, which includes targeted marketing campaigns to build brand recognition, selective promotion initiatives to drive patient acquisition and ongoing efforts to strengthen physician and patient engagement. While still in the early stages of development Biolab KSA is demonstrating strong operational traction and reaffirming our belief in the long-term potential of Saudi Arabia as a key pillar in the group's regional growth strategy. As always, profitability remains a core focus for us, and we are very pleased to see sustained improvement across all levels of the income statement. We continue to benefit from strong operating leverage, tighter cost controls and better resource allocation across our subsidiaries, including Nigeria, where Echo-Lab delivered a full year of positive EBITDA, marking a key milestone in its turnaround and confirming the potential of this high-growth market. Overall, both COGS and SG&A as a share of revenue continued to decline, supported by disciplined cost management and our growing digitalization efforts. COGS to revenue fell from -- fell to 57.3%, while SG&A declined to 15% from 16.9% last year, underscoring the success of our optimization initiatives. Consequently, our EBITDA margin expanded to 34.9% from 29.7% last year, while gross profit margin rose to 42.7% compared with 38.1% in 2024. These efforts, combined with strong top line growth and improved pricing and mix have translated into meaningful margin expansion and greater earnings quality with adjusted net profit increasing 79% year-on-year. I'm also very pleased to share that the Board of Directors has declared a dividend of USD 0.0085 per share for the year ended December 2025, presenting a total distribution of USD 4.9 million. This reflects our commitment to delivering sustainable shareholder value while preserving the flexibility to fund attractive growth opportunities. In parallel, we remain prudent in our capital allocation approach, and we'll continue to reassess distribution in line with evolving market conditions and investment needs. Before handing the call back to Tarek, I would like to briefly touch on how we view the business as we move into 2026. We entered the year with a stronger platform, broader geographic footprint and improved profitability profile, which we believe positions us well to continue expanding access to high-quality diagnostics while driving sustainable growth. Our focus remains on deepening our leadership in Egypt, accelerating the ramp-up in Saudi Arabia, building on the turnaround achieved in Nigeria and continuing to improve operating efficiency across the group. At the same time, we remain mindful of evolving regional developments including the escalation of the U.S., Israel conflict with Iran in early 2026, which may introduce heightened uncertainty across the region, particularly in markets such as Jordan and Saudi Arabia. With that, I'll hand the call back over to Tarek and Sherif, who will take you through key trends across our markets and a more detailed breakdown of our financial performance of the year. Thank you very much. Tarek Yehia: Thank you, Dr. Hend. So far this year, we have continued to operate in a relatively stable condition with supportive macro trends and constructive trajectory across all our key markets. In Egypt, we saw inflation continue to ease materially compared to prior periods, helping support a more constructive operating environment for both business and consumers, improve ForEx liquidity and a stronger investment confidence continue to a more stable backdrop for Egyptian pound during much for the year, which in turn supported planning visibility and reduce pressure on imported inputs. More recently, however, management has been closely monitoring, evolving regional developments, including escalation of U.S. conflict with Iran in early 2026. Similar to Egypt, Nigeria also saw gradual improvement during 2025 with reforms and relative currency stabilization, helping support a recovery in patient activity and more predictive operating conditions. Over in Jordan and Saudi, the health care demand backdrop remained broadly supportive through 2025. Also both markets continue to be exposed to wider regional geopolitical developments. Jordan continued to benefit from a stable health care system supporting consistent demand for diagnostics, while Saudi continued to benefit from structural reforms momentum under Vision 2030. Recent geopolitical development in the region have increased uncertainty and continue to monitor the potential implication for economic activity and patient volumes. Turning quickly to our latest full year results. Egypt continued to deliver a strong broad-based growth with revenue rising 41% year-over-year supported by both volume expansion and significant increase in average revenue per test, particularly driven by radiology, radiotherapy and higher value diagnostic. Meanwhile, Jordan continued its solid performance reporting revenue growth in both Egypt and local currency terms, test volumes increased by 21% year-on-year, supported by Biolab ongoing promotional digital outreach and loyalty initiatives. In a market where volume-led growth remains critical for long-term sustainability, we are pleased to see Biolab's strategy continue to support strong demand and patient retention. In Nigeria, Echo-Lab achieved a full year of positive EBITDA, supported by successful implementation of turnaround strategy and improving operational conditions. We are increasingly confident in the long-term potential of our Nigeria subsidiary to expand its service offering and capture significant upside offered by this growing market. In Saudi, the ramp-up continued very encouraging with revenues increasing supported by stronger brand visibility, network expansion and patient growth. With the third branch now operating and the group aiming to launch 3 additional branches over the coming months, we expect a further growth in revenue and scale in the Kingdom. Finally, in Sudan, operation remains significantly constrained by the ongoing conflict with only 1 branch partially operating and no material change to the report at this stage. I will now hand the call over to Mr. Sherif, who will provide a more detailed overview of our cost, profitability and balance sheet position for the year. Sherif Mohamed El Zeiny: Good afternoon, ladies and gentlemen, and thank you for your time today. As Tarek mentioned during my presentation, I will focus on costs, margins, profitability and our working capital and liquidity position before we open the floor to your questions. In line with the priorities we set out at the start of the year profitability for fiscal year '25 improved materially supported by our group-wide efforts to enhance operational efficiency and maintain tight control over spending. A major focus area over the past 2 years has been digitalization where we have continued integration data tools and analytics into our internal platform, procurement systems and financial planning process to improve decisions making and cost discipline. These efforts, combined with stronger operating leverage and better resource allocation helped drive meaningful improvements in efficiency with both COGS and SG&A as a share of revenue declining versus last year. More specifically, our COGS to revenue ratio improved to 57.3% in '25, down from 61.9% in '24, supported by disciplined inventory management and stronger purchasing costs. The most notable improvements came within raw materials, which decreased to 19.3% of revenue from 22% last year, reflecting our scale advantages and smarter procurement practices. At the same time, total wages and salaries as a share of revenue remained well controlled, underscoring our balance between supporting our staff with operation -- appropriate salary adjustments and continuing to optimize headcount and productivity. As you can see in bottom right chart, these efficiency gains translated directly into stronger profitability with gross profit margin expanding to 42.7% from 38.1% last year and adjusted EBITDA margin rising to 34% from 29.7% in '24. On the SG&A front, spending remained well contained. With SG&A as a share of revenue declining to 15% despite continued investment in strategic growth initiatives. The main increases within SG&A were in wages and salaries as well as advertising and marketing expenses, reflecting annual salary adjustments, selective additional -- additions to support growth and continued marketing investments in Saudi Arabia alongside targeted campaigns in Egypt and Jordan. Even with these investments, the group continued to capture operating leverage highlighting the scalability of the business and the impact of tighter cost discipline across function. Moving to our bottom line. We reported net profit of EGP 1.3 billion in '25, up 29% year-on-year. As highlighted earlier, fiscal year '24 included elevated ForEx gain, which created a high comparative base and distort direct comparisons. When controlling for ForEx expects in fiscal year '24 and nonrecurring items in fiscal year '25, adjusted net profit increased 79% year-on-year to EGP 1.26 billion with an associated margin of 16.1%. As always, we maintain a disciplined approach to working capital management while supporting growth and preserving a strong liquidity. Similarly, we saw our cash conversion cycle improved further to reach 104 days in December '25 versus 155 days at the end '24. It is also important to mention that, as expected, we saw a decline in Days Inventory Outstanding, a stronger sales momentum and more efficient inventory turnover during the second and third quarter of the year following the seasonal Ramadan slowdown in March. Finally, as 31st of December '25. Our total cash reserves stood at EGP 2.1 billion compared with EGP 1.7 billion in '24, with a net cash balance of EGP 472 million versus EGP 226 million last year. This strong liquidity position supported the Board's decision to declare dividends of USD 4.9 million while preserving flexibility to fund attractive growth opportunities. Thank you for your attention. We now welcome any questions you may have. Thank you. Ahmed Moataz: [Operator Instructions] We've actually received a couple of questions in the chat. I'll take them one by one, so that you're not confused. Within the volume growth that you've seen in Egypt, would you say that it has been driven by both existing and recently opened branches or it's entirely driven by recently opened ones and the like-for-like within the mature ones are either flat or declining? Tarek Yehia: Actually, it is both the new branches that we opened during the year and all the existing ones, both were contributing to the sales. Ahmed Moataz: Understood. The second question is on your plan for Saudi in terms of branch openings. Do you have a set in place number of branches you intend to open in '26 and beyond? That's one. And the second, would you be able also to provide us on when you expect EBITDA breakeven for the operations in Saudi and maybe also revenue contribution, not just right now, but maybe a longer-term revenue contribution? Tarek Yehia: Saudi during 2025 have existing 3 branch, and we are planning for next year is 6 branch -- in 2026, another 6 branch to reach by end of 2026, 9 branches across all Saudi as much as we can. And EBITDA is turning positive by 2028. Ahmed Moataz: All right. The following question is on Sudan update, but you've already mentioned that till now, there is no update. You only have 1 branch opened. Another question is on guidance for 2026. If you can provide on that? And also, if you can also disclose the magnitude of price increases that you've already done in January of 2026. Tarek Yehia: For 2026, we are expecting an increase of 25% on sales, a 10% increase in prices and 15% from volume. We're keeping an EBITDA of range -- same range of EBITDA of around 33% to 34%. Ahmed Moataz: Understood. The last part is with the recent weakness in the Egyptian pound and also the geopolitical issues that are somewhat reflecting in higher either freight costs or importation cost, maybe also raw material costs. How do you see this impacting the business? And also how much coverage of inventory do you already have that is secured into the business that would kind of save -- act as a safe haven before you start to see that impact on your P&L? Tarek Yehia: Business till now is not affected in Egypt, and we are securing inventory in order to keep the operation up and running, and we secured the inventory until August. Ahmed Moataz: Understood. [ Jena ] has 3 questions. You've answered -- the first one, I'll just say it out loud, so that's covered by everyone. Please provide revenue, EBITDA and net income guidance for 2026. You've already answered this, but maybe if you have guidance for net income. You've mentioned revenue and EBITDA. The second is -- you've answered most of the second question. The only thing is, that hasn't been answered, what's the percentage of total test kits that are imported? And another follow-up is how many months of test kit stocks do you have? I'm not sure if when you answered and said till August, this covers the test kits or your entire raw materials? Hend El Sherbini: So we import all our kits. So nothing is produced in Egypt, almost nothing. We -- and yes, we have a coverage till August. Ahmed Moataz: All right. And for the entire business, what is the annual target for a number of branch openings going forward? Tarek Yehia: Around 200 across Egypt, Saudi and Jordan. Ahmed Moataz: This is for 2026? Or this is an annual target in general? Hend El Sherbini: This is for 2026, but it includes clinics and hospitals. So they are not -- they're just the regular branches. Ahmed Moataz: Okay. Understood. Andrea is asking -- or actually, first, congrats on the results. Can you please provide any details and guidance on the share of radiology revenue as a percentage of total as it has stayed flat at 4.7% despite the Cairo Ray acquisition. Tarek Yehia: It's still 5% of revenue. Ahmed Moataz: You mean the target in general is 5%, right? Tarek Yehia: The actual is 5%, and it will be increased over years when the business is picking up more and more. Ahmed Moataz: Okay. [ Jena ] is asking with almost $40 million of cash on your books, are you looking to do a buyback? Hend El Sherbini: We have -- we actually have an approval for a buyback. However, we haven't decided to do that. But it is an idea that we're discussing. Ahmed Moataz: Understood. Someone is asking a follow-up on a prior question, which is do you have any revenue targets for Saudi Arabia in 2026? Tarek Yehia: Yes. The target is SAR 18 million. Ahmed Moataz: Right.[ Zoher ] is asking your branch openings target in 2026 for Saudi was 6. Why has this now been pushed out? Tarek Yehia: No, it is the same 6. We have 3 existing in 2025, and we're increasing by another 6 in 2026. Total will be by end of 2026 is 9. Ahmed Moataz: All right. Another follow-up from [ Zoher ] is why decide such a low dividend payout when the CapEx in Egypt ahead is low, given the clinic and hospital model that you have? Tarek Yehia: As we are balancing between investing and distributing dividends, we declared these dividends, and we are seeking more investments in order to grow. So we will revisit if needed, but still we keep it as it is now. Ahmed Moataz: Understood. [ Anup ] is asking household service percentage of revenue has been stable at around 20%. Is this the level of saturation for the service? Or is there further potential to increase household service contribution to total revenues? Hend El Sherbini: We're continuously expanding household service, expanding the team and the service and the value creation for our patients. Right now, it's 20% of revenue. However, the revenue itself is increasing. So the -- I mean the revenue coming from household is also increasing. But I think we still have a big room for growth in household. Ahmed Moataz: Understood. [ Zoher ] is asking if you can provide CapEx forecast or budget for 2026? And if you can break that down by geography? So Egypt, Jordan and Saudi. Tarek Yehia: CapEx is around 5.9% of total sales versus last year of 4.8%. The main CapEx will be for Egypt. Some will go for the new branches. Some goes for IT warehouse, then followed by Saudi and followed by KSA. Ahmed Moataz: [Operator Instructions] So the final question we've received for the time being is how much of your Egypt expansion do you expect will come from hospitals and clinics. Tarek Yehia: It's around 9% coming from this new business, we are going in-house and clinics -- hospitals and clinics. Ahmed Moataz: All right. We haven't received any further questions. So I'll pass it back to you in the case you have any concluding remarks. Otherwise, I can conclude the call now. Hend El Sherbini: Thank you very much, everyone. Ahmed Moataz: All right. Thank you very much to IDH's management and to everyone who participated today. Have a good rest of the day, everyone. Sherif Mohamed El Zeiny: Thank you very much. Bye-bye.

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GNGBY 2026 Q1 财报电话会议

Operator: Welcome to Getinge Q1 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Mattias Perjos; and CFO, Agneta Palmer. Please go ahead. Mattias Perjos: Thanks, and welcome, everyone. Thanks for joining the call today. As mentioned in the intro here, it's me and our CFO, Agneta Palmer, with you today. And in today's conference, we'll go through performance and some of the highlights in the first quarter of 2026 before opening up for a Q&A. So let's move directly to Page #2, please. And I'd like to start by looking at the development of some of our strategic KPIs. And as you can see here, it's evident that we continue to clearly track in line with plan to increase the share of sales from recurring revenue and also accelerating the share of sales from higher-margin products like, for example, our ECLS offering, our consumables in Infection Control and our BetaBags within the Sterile Transfer product category. This is all supported, of course, by solid and effective quality processes. And if we look at the specifics here, you can see that sales from recurring revenue continue to make up 2/3 and high-margin products closing in on about 70% right now. When it comes to quality, the number of field actions in relation to sales has decreased significantly, and we see this positive trend sequentially continue also into the beginning of 2026. And these improvements, we always act with -- in line with thinking of responsible leverage and an attractive long-term return on invested capital. We can move to Page #3, please. So if we then look at some of the key takeaways from the first quarter, we managed to beat last year's record quarter and grow top line organically. Net sales grew by 0.8% organically with positive development specifically in Life Science and in Surgical Workflows. And on the order intake front, we saw an organic increase of 3.9%. When it comes to our adjusted gross and EBITA margins, they were down in the quarter, mainly due to the strong headwind from currency and from tariffs. And adjusting for the SEK 226 million in currency and tariff headwinds in the quarter, the EBITA margin was about 50 basis points higher than last year's Q1. So the conclusion from that is that the underlying performance in business -- in our business continues to be strong, and it's developing according to the plans, the long-term plans that we have laid out. We also have a strong cash flow and continue to have a solid financial position. So our financial leverage is at 1.5x and well below the 2.5x EBITDA that we have kind of as an internal threshold. We can then move over to Page #4 and some of the key events during the quarter. And if we start with our product offering and our customers, I think one situation that is, of course, evolving on a daily basis is the situation in Middle East, and we continue to monitor this closely. Our first priority is, of course, to tend to our employees in the region and continue to support our customers. And if you look at the region as such, it makes up about 2% of our sales and where Saudi Arabia is half. And so far, the impact on top line and on cost has been very limited for us. To our Life Science customers, we launched a new steam sterilizer dedicated to larger items for use for labs and for research applications. And when it comes to the sustainability and quality perspective, I'm very happy to see that we got the CE approval for Cardiohelp II in the quarter, and I'll talk more about that on the coming slide here. In addition to this, we have in our implants business received EU MDR certificate for the Intergard Synergy, which is a vascular graft with an antimicrobial coating, to minimize the risk of infections. Furthermore, in the quarter, we released our annual report for 2025, including our sustainability statement and the annual report provides a lot of good information on Getinge. So I encourage you to have a look at this if you haven't done so already. We can then move to Page #5, please. So just wanted to elaborate a moment on the positive news about the CE approval for Cardiohelp II. And just to remind everybody, this is a market segment where we are already the global market leader within ECLS therapy, thanks to our strong existing portfolio. With the launch of Cardiohelp II now, we become even more relevant for our customers. And some of the systems' key features are that it's even more lightweight and transportable, meaning that it can be used for both in-hospital and intra-hospital use. It also has an attachable gas blender as an option, which is something that is highly appreciated by our customers. And from an interface standpoint, we have an interface now that is even easier for users to operate, and it includes also several smart monitoring functionalities for better decision support for our customers. We have initiated a limited market release now in the beginning of the second quarter to a handful of customers and very happy to see how positive the reception from our customers have been for this important product. The plan now is to do a full CE market release at the beginning of the third quarter. And when it comes to the important U.S. market, the plan is still to make the submission of the Cardiohelp II system, including our HLS Advanced consumables in the second half of this year. We can then move to Page #6 and talk about the top line for a moment. So overall, we had a solid top line performance in Life Science and in Surgical Workflows. And when it comes to order intake for the group, we grew 3.9% organically. The order intake for Acute Care Therapies decreased mainly due to the temporarily high comparative figures in ventilation, where one competitor last year drastically exited the market. So we're very successful in capturing some of that market share. At the same time, we saw really good growth when it comes to ECLS consumables across the board. And this is, as you know, one of our key categories. In Life Science, the organic order intake increased in the quarter, for example, because of an anticipated improvement from low levels that we've seen in bioprocessing for quite some time. And this is something that [indiscernible] and it's good to see some of the momentum here. [ Surgical Workflows ] grew double digit in the quarter, mainly on the back of the strong development across all our product areas, which is also encouraging to see. Net sales there, we had growth of 0.8% organically for Acute Care Therapies. Organic net sales decreased mainly on the back of last year's consolidation in the ventilation market, that I just mentioned. In Life Science, they had a really strong quarter in terms of deliveries, and they grew organic net sales in all product areas. BetaBags and Sterile Transfer continues to show significant traction and momentum. In Surgical Workflows, the organic net sales increased primarily thanks to growth in Infection Control consumables within service and within our operating table category. With that, we can move over to Page #7, and I hand over to you, Agneta for a moment. Agneta Palmer: Okay. Thank you, Mattias. So overall, the headwind from tariffs and currency continued in the first quarter. Even so, we managed to hold up margins, thanks to continued pricing and productivity. Starting with adjusted gross profit for the group, adjusted gross profit amounted to SEK 3.828 billion in the quarter, heavily impacted by currency and tariffs. Adjusted gross margin was down by 0.7 percentage points in total in spite of healthy contribution from price and mix. If we then look at adjusted EBITA, cleared for currency, adjusted gross profit effect on the EBITA margin was plus 0.3 percentage points, while OpEx adjusted for currency had a negative impact on the margin by about minus 1 percentage points in the quarter. And FX impacted by minus 0.3 percentage points. So all in all, this resulted in an adjusted EBITA of SEK 824 million and a margin of 11.1%. Let's then move to Page 8, please. And here, we can clearly state that we remain in a solid financial position. Free cash flow amounted to SEK 842 million in the quarter. Compared with last year, free cash flow was impacted by improved operating profit and changes in capital. Working capital days continued to be well below 100. We are now at roughly 90 days. On operating return on invested capital, we are at 11.4% on a rolling 12-month basis, which is well above the cost of capital. At the end of Q1, net debt decreased to SEK 9.3 billion. If we adjust for pension liabilities, we are now at SEK 7 billion. This brings us to a leverage of 1.5x adjusted EBITDA, which is well below the 2.5x that we have set as an internal threshold. If we adjust for pension liabilities, leverage is at 1.1x adjusted EBITDA. Cash amounted to approximately SEK 4 billion at the end of the quarter. So all in all, we can conclude that the financial position continues to be strong. Let's now move to Page 9, please, and back to you, Mattias. Mattias Perjos: Okay. Great. Thank you, Agneta. Just a moment then to focus on the impact from tariffs and FX in the quarter. So this was, in total, a drag on adjusted EBITA in Q1 of more than SEK 200 million, so SEK 226 million altogether. Tariffs made up just over SEK 100 million of that. And if we exclude the impact of tariffs and currency, our adjusted EBITA margin in Q1 would have been 12.6%. And there, as you can see, showing then an underlying improvement. As tariffs were first implemented in Q2 of 2025, then we expect the year-on-year comparison to be a little bit cleaner from Q2 and onwards if tariff levels remain. And that's, of course, something we'll continue to update you on. We can then move over to Page #10, please. So I want to talk a little bit more about the long term as well. So zooming out and returning to what we said at the Capital Market update that we had in May of 2024. There, we talked about an adjusted EBITA margin of 16% to 19% by the end of 2028. And I think we're on a steady path of reaching that despite the headwind factors that we have seen, that we were not aware of when we announced this target. The main drivers which will enable this are growth, mix and productivity. From a growth perspective, from regulatory approvals and key strategic product launches such as Cardiohelp II in ECMO that we've talked about here and also launching our low-temp sterilization in the U.S., having the sales restrictions removed for Cardiosave in our Intra-Aortic Balloon Pump business. It's just to mention a few factors here. Specifically, when it comes to Cardiosave, I'm happy to say that we, at the end of last week, got the release for sales in CEE countries in line with the plan for Q2. We also expect that the investment fatigue that we've seen in the pharma industry will improve and some of the decision anxiety that we've seen in the last year will go away here as well. We will also, in addition to this, get our share of the announced U.S. investments and benefit from the recovery in bioprocessing. And of course, we will also continue our diligent and successful work with realizing price increases annually. When it comes to mix, we have been successful in our strategic intent to steer our business towards a continued rotation to high-margin products and consumables. And if possible, we prefer to have products made up of a competent hardware with captive consumables attached to it, similar to what we have in our ECLS offering with Cardiohelp and HLS and in the Sterile Transfer offering with Alpha Ports driving the consumption of BetaBag. Our strong R&D and innovation pipeline is, of course, set to support this. When it comes to productivity, here, we've already done a lot in different parts of the business, and we are still excited that there remain quite a few opportunities across the business as well. One thing to mention, I think, is the heightened extraordinary quality costs connected to the product uplift of Cardiosave and Cardiohelp that is expected now to go down in the second half of 2026 and that we will be on a lower level in 2027 and '28. Furthermore, we will, of course, continue with our production excellence effort, where we also have some very tangible measurable benefits and helping us further optimize our supply chain and remain with an overall tight cost control across the company. So this all supports our assessment that our target for 2028 is still within good reach. Then we can move over to Page 11, please. So for the remainder of 2026, we confirm the financial outlook for 2026. As we all know, there are some geopolitical uncertainties that we need to navigate. But based on the underlying demand and the dialogue that we have with our customers on a daily basis, our expectation remains for an organic net sales growth in the range of 3% to 5%, adjusted for the phaseout of the surgical perfusion product category. Surgical Perfusion is still expected to have some net sales in 2026, but declining from about SEK 250 million last year to SEK 50 million this year. We can then move to Page 13, please. So in terms of summarizing here, the key takeaways from the first quarter. We did achieve organic growth in our top line despite the record quarter last year. Tariffs and FX continue to be a significant headwind, but our underlying performance is improving. Cash flow in the quarter was really strong in the quarter, and our financial position remains solid as well. For 2026, we reiterate our guidance for organic net sales growth of 3% to 5% adjusted for the phaseout of the Surgical Perfusion. And when it comes to our priorities for 2026, you've heard them before, we are focused on addressing the remaining challenges when it comes to quality remediation in Acute Care Therapies. We focus on sustainable productivity improvements and cost consciousness when it comes to navigating the geopolitical uncertainty and also addressing the impact from tariffs. And most importantly, we continue to focus on the work hand-in-hand with our customers, adding value for them and the patients that they serve. With that said, I open up for questions. Operator: [Operator Instructions] The next question comes from Sten Gustafsson from ABG Sundal Collier. Sten Gustafsson: A couple of questions. First of all, with regards to the ventilator headwinds you had here in Q1, if I remember correctly, you had pretty good sales development for ventilators also in Q2 last year. So is it fair to assume that the headwind will continue into Q2? That would be my first question. Mattias Perjos: Maybe to some extent, it's not something -- it's not going to be a significant factor, I think, for Q2, but it certainly won't be a big help either. Sten Gustafsson: Okay. Excellent. My second question is regarding Cardiohelp II. And what kind of gross margin should we assume for that product compared to the existing Cardiohelp product? Is it going to be accretive? Or is it fairly similar gross margins on those 2 products? Mattias Perjos: Yes. We don't guide on and disclose gross margin levels on any of our products and Cardiohelp II is no exception. Generally, though, when we work with product development and new launches, we make sure that the products that form the next generation of any therapy or product category have a better gross margin than the generation that they replace, and Cardiohelp II should be no exception to this. Sten Gustafsson: Okay. And one final, if I may. You talk about these lower extraordinary quality costs going forward. Could you please sort of quantify those? I mean we've heard SEK 800 million in the past. And where we are today? How low those will be going forward? Mattias Perjos: Yes. Yes, I think you're right. We said that they peaked at about SEK 800 million in 2024. We saw a small decrease in 2025. We expect another small decrease this year and then a slightly bigger decrease from 2027 onwards. And the end game here is to at least halve those costs. Operator: The next question comes from Erik Cassel from Danske Bank. Erik Cassel: First, I want to get some more color on the composition of the ACT decline. I mean, obviously, you talked about ventilators, but you're also talking about Cardiac Assist, et cetera. And I think last quarter, you said that the demand for Cardiac Assist was quite positive on the hardware side. So I wanted to ask if something has changed on that side. And if you could, if possible, give some more color on how much the ACT Americas part declined by the different parts? Mattias Perjos: Yes. No, thanks for the question. We don't dissect the business that much. What I can say on Cardiac Assist is that we had hoped to be able to resume deliveries in Q1 already of balloon pumps in CEE markets. And that was not the case. We only got the final approval to start this last Friday. So it will be a Q2 event. So that's been a little bit of a drag on sales. And also, it has a direct impact on order intake as well because customers don't order new pumps unless they have received what they're expecting to be delivered. Erik Cassel: Can you say anything on how much the ventilator decline did on that 8.5%? Mattias Perjos: No, we don't disclose subcategory financial parameters, unfortunately. Erik Cassel: But can you say anything if it would have been, say, positive organic growth if it wasn't for ventilators? Mattias Perjos: No, I can't answer that either, unfortunately. Erik Cassel: All right. Fair enough. I got to try. Then on the guidance side, I view it as the wording is a bit softer, perhaps the visibility is worse now and maybe you're even seeing a bit more, say, negative outlook. Can you just talk a bit about what you're seeing for the rest of '26 in terms of the, say, customer behavior and dialogues that you're referring to? Has it become slightly more negative? Or is this just a wording change that I'm dwelling too much on? Mattias Perjos: Yes. No, that was not the intent of the wording change at all. It was really just a way of recognizing that we do operate in a rather volatile environment, and we're mindful of that, but we feel confident reconfirming our guidance here even if the word, semantics, had changed a little bit. Erik Cassel: Okay. Just a last question then. Surgical Workflows, obviously quite strong in terms of order intake, especially for Americas and Digital Health. Is there some specific projects that this relates to that sort of makes it nonrecurring? Or are you seeing a more upbeat environment in the U.S. specifically for Surgical Workflows? Mattias Perjos: It's a bit of both. If you look at DHS, it's always lumpy. I mean they tend to be rather large projects, and we do have that, but there's also a little bit of an underlying better confidence, I think, generally in the market and also, I think in the way we operate in this business as well. We made some tweaks to how we organize ourselves, which hopefully also for the long term has a better, more positive impact. But there's absolutely a bit of -- you cannot call them one-offs because they're not. It's just project business that is a little bit fluctuating by nature. Erik Cassel: Okay. Can I ask one short one? Will you tell us anything on the potential impact of the change in steel content tariffs? Or is that something you're going to not disclose? Agneta Palmer: What we can say there is that it's still under analysis, how it impacts us. It's fairly recent. But the preliminary evaluation is that it's mainly if it hits us. It's components and spare parts, not complete products. And the absolute majority of our exposure is on the complete products. Erik Cassel: So the SEK 500 million for full year still holds, you think? Agneta Palmer: I don't think that we have guided on this, but that sounds like a fair assumption given the current levels, yes. Operator: The next question comes from Filip Wetterqvist from SB1 Markets. Filip Wetterqvist: I have a couple. First one, given recent pricing hikes that we have seen on raw materials such as plastic, steel, aluminum, it seems like you do not see any material effect of this in Q1, and I assume contracts are negotiated a few quarters in advance. But do you anticipate any higher input costs in the coming quarters? Or do you not expect any effect at all from this? Agneta Palmer: Yes. Thank you for that question. If we dissect it a bit into parts. When it comes to freight, which is the more direct near-term impact, we have very limited impact in Q1. But if it's prolonged, yes, there will be some impact in Q2 onwards. When it comes to plastics, et cetera, it's too early to say that we have any effects there. Filip Wetterqvist: Okay. And at the Q4 call, you indicated price increases of around 2% for 2026. Did that materialize here in Q1, meaning the 0.8% organic growth was hampered by lower volumes? Or -- and do you -- are you able to accelerate price increases further there if you see increasing costs here in the coming quarters? Agneta Palmer: Yes. We still stand by that, roughly 2%. It is a gradual rolling during the year. So it's slightly less than that in Q1, but we are progressing well towards that level. Filip Wetterqvist: Okay. But let's say, we see -- so if costs are increasing, you won't be able to translate that onwards to your customers, you still anticipate only a 2% price increase then? Agneta Palmer: This is always an ongoing discussion that we have with the -- all the commercial dynamics and the cost levels that we have. So of course, we will adapt our ways of working if we see that we get higher inflation, but it's not an automatic or sort of something that we can directly pass on. Mattias mentioned it for tariffs and it's similar then for raw material. But we do have very active pricing. Operator: The next question comes from Kristofer Liljeberg from DNB Carnegie. Kristofer Liljeberg-Svensson: I have a few short ones. I hope that's okay. First of all, is it possible to quantify at all the positive effect you expect here from the new ECMO approval in Europe or whether that potential positive effect is more a factor of when and -- yes, when you get the U.S. approval, again? And then could you just clarify a little bit about the Cardiosave status here in Europe and the U.S. filing? And then finally, on tariffs, if it's fair to assume really neutral effect here year-over-year from the second quarter? Mattias Perjos: Yes. I think we can't quantify. But of course, there is a positive effect from the launch of Cardiohelp. I mean this is an important part of our product range. So definitely a net positive, but I can't give you a magnitude of that. When it comes to the Cardiosave status, we got approval to start shipping last Friday. So the first pumps are being delivered in CEE markets this week. And the U.S. filing, there is no change here. We still expect to do that before the half year mark. Agneta Palmer: And then when it comes to tariffs, it's dependent, obviously, on the tariff level, but also on the product mix of imports. But generally speaking, yes, it sounds like a fair assumption to assume that. Operator: [Operator Instructions] The next question comes from David Adlington from JPMorgan. David Adlington: Maybe could you quantify the impact of foreign exchange hedges in Q1, how they roll off through the next 12 months or so? And then secondly, obviously, we're a quarter in now, still no margin guidance. Just wondering if you're willing to give us an idea around how you're seeing margins for the year, whether up, down or sideways? Agneta Palmer: Yes. If we start with FX, we have not changed anything specifically regarding our hedging strategy, and we will not disclose that. But just a reminder, I think we have talked about it on this call before, looking at the natural hedge, around 60% of what we sell in the U.S., we also produce in the U.S. And then the second thing maybe to mention regarding natural hedging and FX exposure is that we work very actively with our payment flows to compensate or offset as much as possible. So those are the 2 things to highlight there, but no quantification of the hedging effects as such. Mattias Perjos: And on the margin guidance, I mean, there's still [Technical Difficulty] said in the presentation, we are confident about the long-term margin guidance of 16% to 19%. David Adlington: Sorry, Mattias, you broke up again. I might have missed the first part of that. Would you mind just repeating the margins for this year? Mattias Perjos: Yes. I just said that we -- there's a lot of uncertainty in the world, as you know. So we are not going to do any margin guidance for 2026. We remain with the top line guidance only, and we remain with the long-term margin guidance of 16% to 19%. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. I just have a follow-up on ACT. So on ECLS consumables continued to grow despite being up against a rather tough comparison numbers. And I assume there was some flu-related headwinds here given the lower hospitalizations Q1 '26. So I just wonder if there were any one-offs or stocking of consumables that you saw here in the quarter or if it's rather the underlying run rate? Mattias Perjos: You broke up for a second. Can you repeat the question on the ECLS consumables, please? Ludvig Lundgren: Yes. So it seems pretty strong considering the quite tough comparison. So I just wonder if you saw any stocking or one-offs here in the quarter or if it rather reflects the underlying run rate? Mattias Perjos: Yes. No, there were no abnormal events in Q1. I think your analysis of this seems correct. It's a good underlying demand. Ludvig Lundgren: Yes. Okay. And can you just confirm that like the flu-related sales was lower this quarter versus Q1 '25? Mattias Perjos: [indiscernible] confirm that we see the same flu data as you when it comes to hospitalizations. How our customers use the product they buy, whether it's for treating flu or something else, we don't have perfect insight into it. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Mattias Perjos: Okay. Thank you very much. I think I already made the summary before the Q&A. So I just wanted to say thanks, everyone, for joining, and I wish you a good rest of the day. Thank you very much.

27天前Insight Analytics约5分钟阅读

NTRS 2026 Q1 财报电话会议

Operator: Good day, and welcome to the Northern Trust Corporation First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jennifer Childe, Director of Investor Relations. Please go ahead. Jennifer Childe: Thank you, operator, and good morning, everyone. Welcome to Northern Trust Corporation's First Quarter 2026 Earnings Conference Call. Joining me on our call this morning is Michael O’Grady, our Chairman and CEO; Dave Fox, our Chief Financial Officer; John Landers, our Controller; and Steve Carroll and Trace Stegeman from our Investor Relations team. Our first quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 21 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through May 21. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Please refer to our safe harbor statement regarding forward-looking statements in the back of the accompanying presentation, which will apply to our commentary on this call. [Operator Instructions] Thank you again for joining us today. Let me turn the call over to Mike O’Grady. Michael O'grady: Thank you, Jennifer. Let me join in welcoming you to our first quarter 2026 earnings call. We're off to a strong start in 2026, reflecting our ability to capitalize on a constructive market and rate environment while continuing to advance our One Northern Trust strategic priorities. Against this backdrop, first quarter trust fees increased 11%, net interest income grew 15% and total revenue rose 14%, all on a year-over-year basis. While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage, driving our pretax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%. Return on average common equity reached 17.4%, which is at the higher end of our new medium-term target range, and we returned $510 million to shareholders, representing a total payout ratio of 100%. This included $359 million in share repurchases in the first quarter, contributing to a 5% reduction in share count as compared to the previous year. These results confirm that our One Northern Trust strategy is driving steady improvement in organic growth, consistent efficiency gains and resiliency in a volatile environment. AI is increasingly embedded in how we operate, enabling our teams to deliver more value with greater consistency and speed. Moving forward, we are accelerating this deployment in ways that will further advance our strategy and financial objectives. We're applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise while maintaining the resilience, governance and client confidence that define our franchise. Our AI strategy is anchored in 3 outcomes: hyper-personalization, AI-generated alpha and infinite scalability. Together, these outcomes focus investment where it matters the most, enhancing the client experience, improving decision quality and increasing operating leverage. Hyper-personalization allows us to move toward highly contextual tailored engagement. A tangible example is our One Wealth Assistant, which integrates the Northern Trust Institute insights directly into workflows. With future enhancements, this will equip our wealth management advisers with real-time client-specific context. Connecting market insights, portfolio considerations and client objectives to support more informed, high-touch conversations with speed at scale. AI-generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insight. Within asset management, AI-assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured data sets, identify patterns more quickly and test scenarios more efficiently. This enhances both investment decision-making and operational execution, supporting stronger client outcomes without adding complexity. Infinite scalability is a key driver of operating leverage. By digitizing work through agents, we further disconnect the relationship between growth and staffing, allowing for consistent execution across value chains and supporting stronger controls, all of which enable us to scale while maintaining rigorous risk management. With that backdrop, let me now turn to business performance for the quarter, beginning with Wealth Management. Momentum from last year carried into the first quarter as improved organic growth underpinned by both strong advisory and product fees drove low double-digit trust fee growth. The regions delivered another quarter of solid results with trust fee growth accelerating to 11%, supported by especially robust performance in the Central region. We made good progress implementing various client acquisition initiatives across talent, centers of influence and digital channels. Talent is our most important growth driver. We're advancing plans to increase revenue-generating roles by high single-digit percentages by year-end. This includes significant increases in critical producer roles. Centers of influence, which include attorneys, accountants and other professionals, are a vital referral source, driving nearly 25% of our new business activity. In the first quarter, we introduced a more robust and structured outreach framework to engage key centers of influence, including hiring a senior leader to accelerate this initiative, targeting a 10% increase in opportunities in 2026. Digital channels also continue to be an increasingly important source of new business. To boost the transition from interest to conversion, we're enhancing data integration, lead qualification and personalization at scale. Notably, the opportunities originating from digital channels in the first quarter grew by nearly 50% year-over-year. Within our Global Family Office business, strength in international markets and investment management fees drove healthy performance. We also continued to scale family office solutions with early traction and client wins across several new markets. Expanding our investment offerings, particularly within alternatives, remains an important focus area. We had 7 funds in the market during the first quarter, up from 5 in the previous quarter. Looking ahead, we will continue to build out our alternatives platform with a number of new alternative investment funds and strategies planned for launch later this year with the goal of increasing alts fundraising by 25%. These offerings spanning areas such as venture capital, co-investments and secondary funds will broaden access and flexibility for clients seeking diversified sources of return while maintaining our disciplined approach to portfolio construction and manager selection. Collectively, these initiatives are strengthening our ability to generate repeatable, scalable growth while enhancing both the client and employee experience. Turning to Asset Servicing. The business delivered another quarter of solid organic growth and strength in profitability, driven by disciplined execution of our strategic priorities. Trust fee growth of 10%, coupled with significant NII and capital markets activity fueled over 700 basis points of year-over-year pretax margin expansion. Our differentiated service model, deep institutional expertise and strength in supporting complex client needs continues to resonate, particularly with global asset owners. During the quarter, we secured 9 new mandates across foundations, endowments and health care institutions, including 4 not-for-profit health care systems. As a result, we now serve 3/4 of the top 50 health care systems in the United States. Within alternatives, we remain a market leader with assets under administration approaching $1 trillion across hedge funds, private capital and semi-liquid vehicles. Demand for scalable institutional-grade services remains strong, supported by more than a dozen wins during the quarter. These included Igneo's planned second quarter launch of a new private equity fund focusing on energy infrastructure in Europe, further expanding our global relationship across Europe, Australia and the U.S. We also announced an expansion of our CLO middle office services, delivering a unified operational and compliance framework that supports the full life cycle of CLOs as interest in this offering continues to grow. Strong momentum in capital markets continued in the first quarter as elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees. We're also seeing continued interest in our digital asset strategy, particularly in custody, reporting and servicing of tokenized assets as tokenization moves towards scale. During the quarter, we onboarded 5 new clients, providing custody and other services for tokenized real-world assets, U.S. stablecoins, European money market funds and carbon credits. Turning to Asset Management. NTAM made good progress in the first quarter with strength across liquidity, alternatives and equities, positioning the business well to meet its 2026 targets. Within liquidity, we extended our streak to 13 consecutive quarters of positive flows with associated AUM increasing to $350 billion. Importantly, we continue to diversify our funding sources across global liquidity vehicles and third-party platforms while gaining overall market share. We also launched the tokenized share class for our NIF treasury instruments portfolio during the quarter, marking Northern Trust's entry into the digital asset marketplace. By applying tokenization to institutional-grade liquidity strategies, we're offering clients a modern digital-first way to access money market investments while maintaining our high standards for risk management and service. Within equities, ETF momentum remains strong with a fourth consecutive quarter of positive flows. This was supported by the successful launch of the Northern Trust U.S. equity ETF, our latest active ETF designed to deliver tax-efficient outcomes for investors. We also launched our first Saudi Arabia equity index strategy with $1 billion in client capital, reflecting our expanded presence and strategic partnerships in the Middle East. NTAM continued to broaden its alternatives capabilities through active fundraising, which included 3 new sizable custom solutions and advisory mandates spanning secondaries, private credit and private equity. Earlier in the quarter, we announced an important milestone in our third-party distribution strategy. Our institutional quality direct indexing capabilities became available on Envestnet's platform, the largest independent TAMP, which supports approximately 1/3 of all financial advisers in the U.S. This will enable advisers to access our diverse lineup of equity strategies, empowering them to personalize portfolios at scale while managing tax outcomes. Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals, NTAM was recognized by Barron's as a top fund family in 2025, ranking fourth overall and fifth in general equity out of 46 fund families. To wrap up, as we enter the second quarter, our priorities are clear, and we remain focused on disciplined execution. With that, I'll turn it over to Dave to walk through our first quarter financial results. David Fox: Thanks, Mike. Let me join Jennifer and Mike in welcoming you to our first quarter 2026 earnings call. Let's discuss the financial results of the quarter, starting on Page 4. This morning, we reported first quarter net income of $526 million, earnings per share of $2.71 and our return on average common equity was 17.4%. We're off to a strong start to the year. We delivered our seventh consecutive quarter of positive organic growth, positive operating leverage and year-over-year improvement in our expense to trust fee ratio, all excluding notables. We also returned 100% of our earnings to shareholders. Relative to the prior year, currency movements favorably impacted our revenue growth by approximately 120 basis points and unfavorably impacted our expense growth by approximately 130 basis points. Relative to the prior period, currency movements were immaterial to both revenue and expense growth. Trust, investment and other servicing fees totaled $1.3 billion, an 11% increase compared to last year, driven by favorable markets, currency and new business generation. Other noninterest income was up 33% year-over-year, reflecting very strong FX trading and securities commission and trading income, which benefited from elevated macro volatility and uncertainty. Net interest income on an FTE basis was up 1% sequentially to $662 million, a new quarterly record and up 15% from a year ago. Our assets under custody and administration were down 1% sequentially, but up 10% compared to the prior year. Our assets under management were also down 1% sequentially and up 11% year-over-year. Overall, our credit quality remains very strong with all key credit metrics in line with historical standards. We recorded a $3 million reserve release in the first quarter, driven by improvements to the C&I portfolio, which was partially offset by a small number of nonperforming loans. Our effective tax rate was 25%, down 150 basis points from the previous quarter due to higher benefits associated with share-based compensation. We still expect the effective tax rate in 2026 to be approximately 26% to 26.5%. There were no notables in either the first quarter of 2026 or the first quarter of 2025. Turning to our Wealth Management business on Page 5. Wealth Management started the year well with strength in trust fees across both GFO and the regions, spanning both advisory and product channels. Assets under management for our wealth management clients were $498 billion at quarter end, down 2% sequentially but up 11% year-over-year. Trust, investment and other servicing fees for wealth management clients were $601 million, up 11% year-over-year with particularly robust organic growth within GFO. Average deposits within Wealth Management were flat sequentially, while average loans were up 1%. Wealth Management's pretax profit rose 9% over the prior year period, while the pretax margin remained flat at 37.1% as we continue to reinvest in the business to support future growth. Moving to our Asset Servicing results on Page 6. Our Asset Servicing business also had a good start to the year, boosted by healthy new business generation, coupled with robust capital markets activity. Assets under custody and administration for Asset Servicing clients were $17.3 trillion at quarter end, reflecting a 9% year-over-year increase. Asset servicing fees totaled $741 million, up 10% over the prior year. Custody and fund administration fees were $498 million, also up 10% year-over-year, largely reflecting the impact from strong equity markets, favorable currency movements and net new business. Assets under management for Asset Servicing clients were $1.3 trillion, up 11% over the prior year. Investment management fees within Asset Servicing were $169 million, up 11% year-over-year due to favorable markets and new business activities. Asset Servicing average deposits were unusually strong, increasing 11% sequentially, while average loan volume decreased 2% from fourth quarter levels, albeit off a small base. Asset Servicing pretax profit grew 59% over the prior year period, and the pretax margin expanded 740 basis points year-over-year to 28.3% benefiting from elevated deposit levels, higher volatility-driven capital markets activities and the pivot in our new business approach. Moving to Page 7 on our balance sheet and net interest income trends. Our average earning assets were up 7% on a linked-quarter basis as higher deposit levels drove an increase in money market assets and in our securities portfolio. The fixed percentage of the securities portfolio remained flat at 52% in the first quarter, including the impact of swaps. The duration of the securities portfolio dipped slightly to 1.44 at the end of the quarter, and the duration of our total balance sheet continued to be under 1 year. Deposit levels were higher than expected throughout the quarter as a result of both elevated volatility and general uncertainty in the marketplace. Average deposits were $129 billion, up 8% compared to fourth quarter levels and 11% year-over-year. In the deposit base, interest-bearing deposits increased by 8% sequentially and noninterest-bearing deposits increased by 5%, remaining at 15% of the overall mix. Net interest income on an FTE basis was up 1% to $662 million sequentially and up 15% compared to the prior year. Sequentially, NII was favorably impacted by higher deposit levels, including growth in noninterest-bearing deposits, along with the impact from fixed asset repricing and deposit pricing actions we've taken, which was partially offset by the full quarter's impact from the fourth quarter rate cuts. Our net interest margin on an FTE basis decreased sequentially to 1.75%, primarily reflecting several large short-term institutional deposits and the absence of the higher FTE adjustment recorded in the fourth quarter. Turning to our expenses on Page 8. Expenses increased 6% year-over-year. We delivered 410 basis points of trust fee operating leverage and 740 basis points of total operating leverage and our expense-to-trust fee ratio, while seasonally higher at 112.4% was down 440 basis points year-over-year. This translated to a pretax margin of 32%, up nearly 500 basis points year-over-year. Turning to Page 9. Our capital levels and regulatory ratios remained strong in the quarter, and we continue to operate at levels well above our required regulatory minimums. Our common equity Tier 1 ratio under the standardized approach decreased by 60 basis points on a linked-quarter basis to 12%, driven by an increase in RWA related to elevated capital markets activities. Our Tier 1 leverage ratio was 7.3%, down 50 basis points from the prior quarter, driven by our larger balance sheet. At quarter end, our unrealized after-tax loss on available-for-sale securities was $446 million. We returned $510 million to common shareholders in the quarter through cash dividends of $151 million and stock repurchases of $359 million, reflecting a 100% payout ratio. Turning to our guidance. For the full year, we now expect NII to grow by mid- to high single digits over the prior year, which is an increase from our previous guide of up low to mid-single digits. We still expect to generate more than 100 basis points of positive operating leverage, and we expect to return at least 100% of our earnings to shareholders. Before we open it up for questions, I'd like to take a moment to thank Jennifer Childe, our Head of Investor Relations, and congratulate her on her upcoming retirement. Steve Carroll, currently the CFO of Northern Trust Asset Management, will be stepping into the role and will work closely with Jennifer over the coming weeks to ensure continuity. Jennifer has been a trusted partner to me and the leadership team, and we're very grateful for her many contributions over the years. And with that, operator, please open the line for questions. Operator: [Operator Instructions] We'll now take your first question coming from the line of Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess maybe just 2 questions. One, just at the very top of the house, when we look at the pretax margin, the ROE performance this quarter, including in asset servicing, but for the entire business, given just -- there's a component of the macro being very strong for Northern, but there's also a self-help component that was kicked off about a couple of years ago. As we think about the sustainability of the ROE or the pretax margin, just maybe frame for us where you think there might be a little bit of cyclical tailwinds that's leading to over-earning on these relative to structural actions that have been taken over the last couple of years that may improve the resiliency relative to what we reported for 1Q? Michael O'grady: Sure, Ebrahim, it's Mike. I'll take that. So our goal is to be a consistently high-performing company. And as you pointed out, that's something we put out there a few years ago, along with our One Northern Trust strategy. So we're very focused on executing on the 3 pillars of that strategy. We'll do that in different environments. And this past quarter was a very constructive environment. And so there's no question that we got a lift in our financial performance as a result of that. Equity levels are still relatively high. The level of volatility is attractive for our capital markets business, and there's a fair amount of liquidity, broadly speaking, in the market, which helps us with deposits, with money market funds as well. So very constructive on that front. That said, we also, to your point, think about it from a self-help perspective and try to just execute as well as possible, whether it's a really strong environment or not so strong. As far as the targets at the last earnings call, we put out medium-term targets. Some of those, as I mentioned, we've kind of largely hit or close to. That said, it was in this strong environment. So we're going to keep driving towards those medium-term targets. Ebrahim Poonawala: Got it. And I guess maybe just switching to the Global Family Office. It's been a strong business over the last few years. Maybe talk to us around the win rate and the competitive landscape there and just the evolution of that client once they are on board, how do you think about just the growth runway and the opportunity to improve the ROI on the client once they're on board at Northern. Michael O'grady: Sure. So the Global Family Office business is absolutely one of our strongest businesses. It's an area where truly we can deliver the entire firm. It's the best of all 3 of the businesses and working together for these largest families and their family offices. And as you pointed out, it's grown at a high rate. And once again, here in the first quarter, the organic growth rate for GFO was above the average for the businesses. And there's a number of dynamics that are allowing us to continue to grow at that high rate. One is certainly just the competitive position that we have and our offering on that front. But second is that it's still largely a U.S. domiciled or focused business. Right now, international is less than 15% of the client base and the revenues, and yet it's growing at a faster growth rate. And we do believe that this is something that is not only, I'll say, attractive offering globally, but also is something that is scalable globally. And then to the latter part of your question, you're absolutely right that often the relationship with the family office can start with a more limited breadth of offering. So it may focus primarily on custody and reporting to start, but then that's the opportunity to do much more with the family office when it comes to other opportunities, particularly along the lines of investment management. And you saw some of that in the first quarter as well. So we think it's a great business and continues to have a lot of upside. Operator: Your next question will come from the line of Manan Gosalia with Morgan Stanley. Manan Gosalia: I wanted to start on the operating leverage side. I mean, 740 basis points of operating leverage this quarter, really strong. I think you reiterated the guide of generating over 100 basis points of operating leverage this year. Can you help us just think through how we should think about, I guess, expense growth this year? Are there any investments that were maybe got pushed out? Any timing differences or anything else we should be considering here? David Fox: Our expense growth methodology hasn't really changed. If you think a little bit about the expense growth in this particular quarter, most of it was driven by incentives, and there was some noise from currency as well. So actually, when you make more money, you obviously are going to have a rising expense line. We still have in process the idea behind productivity funding investment and then solving for an expense growth as a result of that. And so we haven't changed. And what I would say is the productivity targets for the first quarter hit their target. The investments that we wanted to make, we were able to make and the expense growth we managed to was pretty much spot on where we thought it would be. And so that discipline and flexibility is built into our planning, which is why at the beginning of the year, I talked more about operating leverage than I did about attaching myself to a finite expense growth number. We wanted to have the flexibility to react when markets were conducive, but also have the discipline to be able to flex down in environments that are less. So when I think about expenses, I think about a dynamic expense line that basically is something we look at on a very continuous basis. And so -- it's very much driven today by the productivity and the investment side of the equation. Manan Gosalia: Got it. And then maybe to pivot over to capital. Any thoughts on the new Basel endgame proposal and maybe how it impacts your capital deployment strategy going forward? David Fox: Yes. I think it's too soon to think about how it might impact the capital return part of it. I will say that on measure, our preliminary view of it is it is a net -- could be a net positive for us as it relates to, obviously, the commercial loan side and the operational risk is something that we probably have less of than some other peer banks. And so net-net, we think that it's going to be a positive for RWA. But it's still early days. We're in the comment period. And so I would say it's taking a cautious look to it. I don't think it's going to have a massive impact. But if it does, it will certainly be net positive at this point. Manan Gosalia: Congrats, Jennifer. Operator: Your next question will come from the line of Mike Mayo with Wells Fargo Securities. Michael Mayo: Look, wealth is growing double digits. As you said, firm-wide revenues up 14%, the higher end of return targets. So it seems like it was working this quarter. But what got my attention is, I think, new news that you look to grow wealth producers by 7% to 9%. I think that's this year. And so -- and correct me if you disagree, but I think this is the most competitive market we've seen in the wealth business like almost ever. So the question is, I'm not saying it's a wrong strategy. The question is, why now do you look to increase the wealth producers? And what's your pitch? Because I think every -- literally every large bank, large brokerage firm is looking to expand wealth at this time. What's your pitch when you try to get the new producers? Michael O'grady: Thanks, Mike. So you're right. We are focused on hiring and investing in talent in the wealth management business. And you're absolutely right, it's a very competitive marketplace for the best talent, which is what we're looking for. And we are trying to focus on roles that are revenue generating for us and within that producer roles. And part of it is, as we look back over the last several years, although that group has grown, it has grown at a lower rate than the growth of the business itself. And so there's an acknowledgment that we need more talent to increase the growth rate, the organic growth rate within wealth. As far as being able to have an attractive value proposition for wealth management professionals and advisers, we think we have a very different value proposition. We have an excellent brand. We are positioned within the upper tiers of the market, which, I'll say, the highest levels of expertise want to be able to not only serve that client base, but look to bring on new clients on that front. We've been investing in the platform to do that. We've talked a lot about family office solutions, which we believe really is a differentiated offering. It's, in our view, better and more attractive than stand-alone virtual family offices because it brings the full set of resources and banking capabilities that we have. And yet it's also an opportunity to leverage the history and the fiduciary capabilities that we have and trust capabilities. So we think for an adviser or a professional that's looking to be able to apply their trade, if you will, and succeed, we offer the best platform for them to be able to do that. So that's a big part of it. It is a different model here at Northern. And that -- as you know, that's part of why we think it's more attractive. Michael Mayo: And as part of this increased investing for growth, whether it's wealth or firm-wide because you rattled through a lot of growth initiatives. Is that -- and maybe I got this wrong, but you're still guiding for 100 basis points of operating leverage this year, but you had over 700 basis points of operating leverage in the first quarter. Is the reason for no change in that guide just conservatism or also because you think you might be ramping up some spending as you bring on these new producers? Michael O'grady: Yes. So as I mentioned before, obviously, it's a very constructive backdrop and macro environment for us. So there's definitely some acknowledgment that the strong revenue growth here was driven and supported by that backdrop. We don't know what's going to happen as we go through the year. And there are also some tough comps in the sense of last year, we had strong second, third, fourth quarters. So acknowledging that, that's ahead of us as well. And as Dave mentioned, we've really tried to align our, I'll say, resource deployment strategy based on productivity and looking to ensure that we're driving productivity to fund that investment. And so we haven't pulled off of that. Yes, we expect to continue to invest in these areas that we talked about, but the plan is to try to generate more productivity to do it and not necessarily change the expense growth profile that we've been on. David Fox: Yes. And I'd just like to add to that, the direction of travel on expenses is down for the remainder of the year. Operator: Next question will come from the line of Brennan Hawken with BMO Capital Markets. Brennan Hawken: So Dave, you flagged strength as far as the deposit growth goes. And it looks like a lot of -- from the presentation, a lot of the deposit growth was driven by the servicing business. You also flagged some large institutional deposits weighing on NIM. So was that part of that deposit strength, some large institutional deposits? And how should we be thinking about the profile of deposits as we move forward and what your expectations are for that through the course of the year? David Fox: Yes. Yes, we had some largely unexpected extremely large deposits. I mean you've heard me speak in the past about why we keep our capital ratios where we keep them. And we want our balance sheet to be open at all times for our largest clients. And so occasionally, some of our clients will do some strategic repositioning -- and we want to be in a position to capture those deposits when they do that. They're not core operational deposits. They weren't there for a long period of time, but we want to be able to accommodate them. So in this particular quarter, it really drove up the average deposit level significantly. And that isn't going to obviously translate into a Q2, although I do think the increase was roughly $9 billion, and I think we're going to keep $4 billion to $5 billion of that. So in terms of average deposits. But at the end of the day, that's really what you saw there was client-driven specific very large deposits from just a handful of just really important big clients. Brennan Hawken: Got it. Okay. That makes a lot of sense. And you also spoke to robust organic growth in the GFO business, but we didn't see a lot of deposit trends. We certainly saw the revenue look good. Is the organic growth in that business less tied to deposits the way we normally think about that, and therefore, that's the divergence? And also maybe could you give a little color around your new efforts around the GSO and how that's going? And when you guys talk about GFO, do you categorize those 2 together? Michael O'grady: Sure. So just on the liquidity part of the question there, Brennan. So these family offices have significant liquidity, which they are, I'll say, utilizing and moving around quite a bit. And so it can move from on the balance sheet as deposits to into our money market funds or short-term treasuries. So it's, I'll say, a pretty active management of liquidity that we do, I'll say, on their part and for them. And so from quarter-to-quarter, for example, those deposit numbers can move up and down. And to your point, it's less of an indicator, I would say, of the organic growth and more of an indicator of just their activity. To the second part of your question, we have the benefit of having this strong family office business, which we've been in for quite a while and have built up the capabilities. And to your point, what we've looked to do with family office solutions is leverage those capabilities, but in such a way that we can create the virtual family office experience for a family that doesn't want to have to set up their own office. So it's not run as one business together, but I would say 2 businesses that are very closely related and highly coordinated in what they're doing because they're leveraging some of the technological capabilities, some of the expertise that cuts across that. And it's just a different service model where we're acting as essentially the head of that family office for them as opposed to that person and team being employees of the client's family office. Brennan Hawken: Jennifer, congrats on your retirement. Operator: Your next question will come from the line of Alex Blostein with Goldman Sachs. Alexander Blostein: So Mike, top of the house question. So the tone in your prepared remarks and to some of the Q&A feels like leans on organic growth acceleration a little bit more than we heard from you guys in the past, and you talked about some of the investments you're making to sort of support that. Can we talk through maybe the areas where you see the most opportunity to accelerate growth? And ultimately, what you think Northern's organic fee growth, so, ex markets, should look like over the next couple of years if you achieve these goals, both across the institutional business and the wealth? Michael O'grady: Sure. So I would start, Alex, by saying that we see the organic growth opportunity across all 3 businesses. The nature of it is going to be different. We talked somewhat on the call here about wealth management. A lot of the investment, but also then the opportunity on the wealth management front is to add talent to that to increase the growth rate. So I think we've talked through that part of it. But it also cuts across other aspects that drive growth. In thinking about marketing, I talked about digital marketing that we're doing, a focus on centers of influence. There are other areas where we're trying to essentially bring in more opportunities at the top of the funnel in order to increase that growth rate. And many of them require investment to be able to do that. And I would also say on that front, that's an area where we believe that AI is going to create opportunities for us to continue to transform the client experience and the adviser experience, particularly as you work down the wealth tiers. So we're excited about that, but that also does require investment to be able to drive that. Within the Asset Servicing business, as we've talked about there, the real goal is around scalable growth. And I would say staying focused on our current footprint, our current offerings, the segments that we're in, that's where we expect to get this continued growth at a very profitable level and expect to continue to drive the margins up in that business. And then within asset management, really, you've seen a lot of growth that's come from the core products for us, certainly liquidity. But where we're really investing there is on the ETF front as well as tax-advantaged equity and also quant. And that requires investment in the sense of building out our distribution capabilities for third party. But we believe that's an avenue, which right now represents a relatively small part of our asset management business that could grow at a much higher growth rate. So that's the -- I'll say, the combination across the businesses. And we've talked about an organic growth rate that we've targeted around 3%. And certainly, from what I talked through there, that's going to drive the 3%, but we hope above that as well. Alexander Blostein: Got it. And then a quick follow-up just around capital management. With the Visa shares become available to you guys this year. Can you maybe just talk through the amount of proceeds you expect the use of these proceeds and timing when it comes to potentially bigger buybacks? David Fox: Yes. So we'll roughly get half of our position, let's say, $470 million pretax, so $350 million posttax depending on the share price. And we've only just begun to sort of think about what we're going to do with it. I don't think we're going to use the same, obviously, playbook we had a few years ago. We've got other options at this point, but we're going to weigh it against all our other priorities and take a look at what to do at that point in time, but haven't landed yet on that. Operator: Your next question comes from the line of Ken Usdin with Autonomous Research. Kenneth Usdin: I want to ask a question just about the balance sheet. You mentioned that the benefits that came through the size of the balance sheet and the deposits, maybe some of that doesn't stay, maybe some of it does. But just given the higher for longer environment, how do you think just about duration of the securities portfolio and any other changes to that? Or is it really more of a wait and see because you're not 100% sure if this elevated size of the balance sheet lingers? David Fox: Yes. So when you think about the upside to our balance sheet and to our NII during the course of the year, there's a bunch of different things we think of and trying to figure out what we're going to guide. And so the first one would be the investment securities maturity replacement. Obviously, we still have back book repricing, and we can take advantage of that through the full year in '26. We did take some deposit pricing actions as well towards the end of last year, let's say, third and fourth quarter, and we haven't lapped those yet. So those are built-in increases that we see coming in the year. We've been leaning a bit more into some incremental investment strategies around higher-yielding opportunities. We've been looking at our wholesale funding mix a little bit more, leaning a bit more into FICC repo as well. And so when you put all those together, and then obviously, the deposit growth. So we still are -- we're thinking about having some deposit growth in line with the businesses. And we also no longer have the potential headwind in our mind anyway of rate cut in the U.S. and taken that off the table and may even have some rate increases in Europe. And so you put all that together, and that's sort of how we come up with it. It doesn't -- we're not going to reach for yield. We're not going to materially change our profile in terms of duration to try to get there. We don't need to, to be honest with you, to get there. We feel we can do it without that. So -- and there's a lot of uncertainty out there. So I think our positioning right now is pretty stable. Kenneth Usdin: And just a bigger picture follow-up. We've got potential new Fed chair coming on, talks about potentially shrinking the size of the Fed balance sheet. That Fed balance sheet has already been down $2.5 trillion and trust bank deposits keep growing. But can you just remind us of the rule of thumb to think about if the Fed balance sheet continues to shrink over time, how insulated is your balance sheet from that in terms of deposits? Michael O'grady: So Ken, I would say that is something that we are obviously observant of and what's happening. And frankly, I'll say a little surprised that liquidity levels have remained so high on our balance sheet and in our funds given that the Fed has reduced its balance sheet as much as it has. To the extent that we're in, I'll say, some level of stabilization there, I think that's good because that means our deposit levels and money market fund levels will grow with our organic growth. So yes, there is definitely some exposure to the extent the Fed were to really shrink its balance sheet more. I think that pulls liquidity out of the marketplace. And our model as well as others, it tends to expand and contract with that somewhat. So yes, some exposure on the downside, I think less on the upside. Operator: Your next question will come from the line of Steven Chubak with Wolfe Research. Hang Leung: It's actually Sharon Leung filling in for Steven today. Just wanted to ask on the margins in the business segments. The margin in Asset Servicing has expanded nicely, but in Wealth, the margin was flat year-on-year despite like some strong revenue growth. So just wanted to understand like what are the components that are going to drive the, I guess, the path towards your medium-term target of 33% in the margin? Michael O'grady: So the goal of the Asset Servicing business, as I mentioned, is scalable growth. And as much as we did have a strong pretax margin here in the quarter, this is something that we're trying to consistently move up. And so the expectation is that we will continue to try to see a higher margin in the Asset Servicing business. We've talked about a particularly strong macro backdrop here. So capital markets, very strong, NII, very strong in Asset Servicing. So that definitely contributed to the higher pretax margin for this quarter. But we want to make that even more sustainable, if you will, and a more resilient high level of margin. So there's more opportunity on that front. On Wealth Management, where we have had a very attractive pretax margin, that's an area you've heard a lot where we've talked about growth and making investments for growth. So we feel like we're in, I'll say, a good range for that margin, but we are emphasizing growth as opposed to trying to see that margin go up. And to the extent we did have some pressure on the Wealth Management margin as we make some of these investments in the near term, the expectation is that we'll more than make up for those with improvement in asset servicing. Operator: Your next question comes from the line of David Smith with Truist Securities. David Smith: On organic growth, you cited 7 consecutive quarters of positive growth for the business as a whole, and then there's a 3% target that you put out there, but you think there's opportunity to do better over time. Can you help us get a sense of where organic growth is today and where you were a year ago? We know GFO is above average, but is Asset Servicing and the regional part of Wealth fairly positive today, 1% or so, 2% or so? Sure it can bump around some quarter-to-quarter, but maybe over the past year, what kind of organic growth have each of those businesses earned and then where were those, say, like the year prior? Michael O'grady: Sure. So to just start with this quarter, each of the 3 businesses had positive organic growth. And that would also be true within the major segments of the business. But to your point, if we look at each of them individually and a little bit, I'll say, over time, within Wealth Management, the organic growth has been closer to a consistent, I'll say, 1% with GFO being above that and the regions being a little bit below that. And that's where we're looking certainly for GFO to continue to grow at a high rate, but it's more with the regions incrementally increasing that growth rate as we go forward this year and into next year to move it up in total above the 3%. So made progress this quarter. But again, it's all about consistency. In the Asset Servicing business, just given the nature of some of the larger mandates, that organic growth rate can, I'll say, swing or vary more from quarter-to-quarter or even in a year. So we did -- if you went back a few years, we did have some periods where we had some business that rolled off that did bring that down to kind of flat to negative organic growth. As I mentioned, it's positive right now, again, in about the same range as the Wealth Management business, but we see the opportunity likewise to continue to see that growth rate increase, but with the focus on profitability and scalability for it. In Asset Management, overall, a lot of the organic growth more recently has been primarily driven by liquidity, but we're seeing greater diversification in the growth with that business as well. So in the past quarter here, likewise, some of the areas that I mentioned around ETFs and for some time period, tax-advantaged equity have had nice organic growth across that front. So once again, in about the same range there and same expectation to see that increase. David Smith: Got it. And do you expect over time, all the major businesses to be doing 3% organic? Or medium term, would you expect to get there for the company as a whole, but some to be above and some to be below? Michael O'grady: Yes. So the target is for all of them to be above the 3%. But just given the way that it varies, I'll say, from quarter-to-quarter or even year-to-year, they may not all be, but that's the benefit of having the 3 businesses. Operator: Your final question will be coming from the line of Gerard Cassidy with RBC. Gerard Cassidy: Mike, I think you called out in your prepared remarks that you saw outsized growth in the Wealth Management area in your central region. Can you highlight what drove that? Michael O'grady: Sure. You're right, Gerard, we did. And I would say, often, given that the company has been in the central region and headquartered in Chicago for a very long time, we have a very strong business here. And often, people think that it's a mature business that is not going to grow at the same rate or even a higher rate. But the fact of the matter is the team and the leadership of this region, particularly under John Fumagalli and his team, have consistently leveraged that strength to be able to grow at a higher rate. And one of the areas, I would say, more recently is around the family office solutions that I talked about. That's the area where we started with that solution set and with that offering. It's already gained momentum in this region, and now we're in the process of rolling that out to the other regions in the same way. So that's part of the driver of the strong quarter. Gerard Cassidy: Very good. Obviously, the dominance of questions are all about the Wealth Management and the Custody business. So I want to pivot because it's always good to ask you folks about credit quality since it's always so superb. You guys obviously don't take a lot of risk in lending. Your portfolio is not that big relative to your asset size. Can you share with us what are you guys seeing in the credit quality trends? They're very strong, we understand that. Have things changed meaningfully from the financial crisis and pandemic that customers are more resilient today? Any color there? Michael O'grady: Sure, Dave. David Fox: Yes. I mean -- so just keep in mind, when I look at Northern's portfolio that we have a very -- we're very tilted toward investment grade on the corporate side. And then -- and our clients in Wealth, we're usually doing secured facilities. And so at the end of the day, for those to be in the stress scenario, it would take quite a bit of downside to do that. So that's why you see our credit quality so high. And we're not obviously also exposed to the same extent in the private equity and/or private credit space either where there's some pressure right now. We don't lend on the valuation or performance of the underlying fund investments. And so we do subscription facilities where the underlying obligor, which most of whom are institutional borrowers are really quite strong. And so from our perspective, we're not in the high-yield market. We're not in the leveraged loan market, if you will. So we're not seeing the same kind of pressures that other firms might be experiencing in that regard. Operator: And it appears there are no additional questions at this time. I will now turn the call back to Jennifer Childe for closing remarks. Jennifer Childe: Thanks for joining us, and we look forward to speaking with you again in the future. Michael O'grady: Once again, Jennifer, thank you very much. David Fox: Thanks, Jennifer. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

27天前Insight Analytics约5分钟阅读

ELISA.HE 2026 Q1 财报电话会议

Vesa Sahivirta: Good morning, everyone, and welcome to Elisa's First Quarter 2026 Conference Call. We start with a presentation given by CEO, Topi Manner; and CFO, Kristian Pullola. And after that, we move on to Q&A. And I think we are ready to start, and I give word to Topi. Please go ahead. Topi Manner: Thank you, Vesa, and good day, everybody. Welcome to this Elisa Q1 earnings call. And let's get right down to business and briefly go through the Q1 highlights. During the quarter, our revenue decreased by 1.3%, and this was to a large extent driven by lower equipment sales impacted especially by higher device prices due to the shortages of memory chips worldwide. Telecom service revenue increased by 0.5%, driven by fixed service revenue. The mobile service revenue declined by 0.1% as the full impact of intense campaigning in Q4 was visible in the MSR. International software services revenue increased by 6.9%. During the quarter, however, we sold a small software business in Brazil. Adjusting for this, the comparable organic revenue growth was 7.7% in Elisa Industriq. Comparable EBITDA on group level increased by 2.2%, especially driven by our cost efficiency measures. Cash flow continued to develop strongly during the quarter and increased by 15.7%. What was notable during the quarter was that the churn decreased to 17.2% from 23% level of Q4. So this 6% decrease -- 6% unit decrease in churn is a bigger decrease than the typical seasonality would be. Post-paid voice subscriptions decreased by 2,700. And in the fixed broadband subscription base, we experienced strong growth, 14,000 on the back of the strong customer demand that we are seeing on the market. The transformation program, where we are targeting EUR 40 million of cost savings during the calendar year of '26 is progressing well according to the plan, and we will deliver the communicated savings during this year. So it was indeed a quarter of slower growth, as stated, driven by equipment sales. What impacted the revenue was a small divestment that we made, EpicTV that impacted the revenue with EUR 3 million. However, it did not have any EBITDA impact as such. The biggest increases in revenue came from the international software services and from digital services. EBITDA during the quarter landed at EUR 203 million in accordance with our own expectations. EBITDA margin increased to 37%, partially reflecting the little bit different mix of revenue resulting from the decrease in equipment sales. In telecom service revenue, as stated, we grew with 0.5%. And there, we did see the full impact of the lower price levels in Q4. The upsells from 4G to 5G, however, continues intact. I will come back to this a little later. And then certainly, in the fiber broadband, we saw growth as described a moment ago. The churn during the quarter was 17.2%, and this is broadly in line with the long-term average churn on the Finnish market. And what is notable is that the churn also decreased to a lower level than it was in Q1 2025. So then looking into the mobile KPIs in a little bit deeper fashion. It is good to note that our new sales prices in mobile subscriptions on the consumer side of the business returned to Q1 '25 levels in March. So in the upper right-hand corner in the graph, you are seeing the prices of new consumer mobile subscriptions. And what you also see there is that during the year '25, we saw gradual pressure to new sales margins culminating in the campaigning of Q4. And now we have been seeing the mentioned return to Q1 '25 levels. What is also noteworthy that going forward, there will be a bit of time lag in how the new sales prices turn into mobile service revenue as there are fixed term contracts in the customer base of our competitors. And when we acquire those customers to us, there typically is a time lag of some months before the new prices actually come into effect. The churn we already discussed in terms of sales and marketing costs. During the Q4 last year, we had EUR 5 million of more sales and marketing costs. And then those campaigning-related costs were decreased during Q1 in line with the churn development. However, the sales and marketing costs are still a tad higher than they were during Q1 '25. But all in all, these metrics are pointing to the right direction. Then briefly going through the business segment by segment. In consumer customers, the revenue continued to be weighed by the competitive situation and the mentioned equipment sales. However, the cost savings measures were effective and EBITDA improved with 1.4%. Broadly, the same story in corporate customers business. The equipment sales impacted the revenue negatively. So very much the same phenomenon related to equipment sales was seen also on the corporate side of the business. Our traditional fixed network, PSTN will be ramped down at the end of June altogether. And there we are seeing a decreasing number of customers, and that is weighing on revenue a bit. But as stated, the cost savings measures also on the corporate side of the business were successful and the EBITDA grew with 2.1%, in line with the total Elisa number. International software services, the comparable organic revenue growth was the mentioned 8%. And we took a step forward in terms of profitability during the quarter. The EBITDA grew to EUR 3 million in this business from the EUR 2 million on the same period last year. So we are seeing gradual improvement in the Elisa Industriq profitability, and we expect to continue to see that when we go forward. However, in software business, you will need to remember that there is a little bit different type of seasonality in Elisa Industriq. Q1 and Q4 are typically the strongest, whereas Q2 and Q3 are seasonally softer. In Estonia, our revenue increased by 3.4% and EBITDA increased by 2%, in line with the rest of Elisa. The churn number remained on the level of previous quarters in Estonia and is 11.7%. We are very focused on implementing our strategy. In the mobile part of the business, you saw the key metrics and the development during the Q1 as stated, there's a bit of time lag in the new sales prices turning into mobile service revenue. But during the latter half of this year, we expect to see improved momentum in mobile in line with the guidance that we have been giving. In the fiber business, we see strong customer demand, and we are investing in FTTH as well as FTTB. And also the data center connectivity, fiber connectivity for data centers is a tangible business opportunity. And during the course of this year, we would expect to see some deals coming through in this customer category. In international software services, we are continuously improving the profitability, and we do see further potential in that one by accelerating the growth, but also by integrating the multinational business and various business units better together and realizing synergies in the process. In terms of productivity, we are progressing with our transformation program. And as stated, we will be delivering the targeted cost savings during the course of this year. At the same time, we have taken note of the development of LLMs recently, and that's a clear indication that there is further productivity potential in AI, meaning that we will also continue the AI-driven transformation going forward during the coming years. So these 3 areas, 5G and fiber, international software services and productivity will be the main levers to take us toward the strategy targets that we have communicated. 5G penetration at the end of the year passed 15% -- 50% milestone. And that upsales trend continues to be intact. During the quarter, we reached 53% penetration. And we are especially seeing now big corporates on the corporate side of the business increasing their 5G subscription take-up rate. The average billing increase when we upgrade customers from 4G to 5G continues to be intact. That monthly billing increase is EUR 3. And also in terms of value-added services, we have continued to increase the penetration of security features in our mobile subs -- customer base, by means of new sales. And now the hard bundled security features have been taken up by 700,000 of our consumer customers. During the quarter, we also launched a new value-added service called Who's Calling service, which enables customers to see the caller ID even if they don't have that recorded in their phone previously. And this has been very well received by our customers. We already by now have 130,000 paying customers for this service. What is also notable related to the Estonian market is that in Ookla Speedtest Awards, we got the award for the best 5G network in Estonia, giving us competitive advantage. In the fiber business, in the mentioned way, the momentum is strong, and we continue to invest in fiber. In new -- in digital services related to home services, during the quarter, we published a fifth season of Ivalo, which is the most popular of our Elisa Entertainment original series, getting good reviews from customers. On the corporate side of the business, we continue to win new customers. Earlier this week, we announced that we have been winning the cyber and network business of Valmet, a global large Finnish company, also clearly outlining that we have the capability to serve our large corporate clients globally in these areas. In International Software Services, we continue to have a record high backlog. And the order intake, the bookings during the quarter were strong. We won a number of new customers, big, large global customers in these areas. Some of these are not public references. Some of them are. Boygues Telecom in France is one. And then also for Gridle for our energy optimization business, we won Vantage Towers as a customer in Spain, Vantage Towers being the tower company of Vodafone, the biggest tower company in Europe. What is also worthwhile to mention that in Elisa Industriq business, we saw some revenue delays from customers in Middle East due to the war in Iran. And that brings me to the outlook and guidance for this year. So the guidance remains unchanged with the range of EBITDA that we have been communicated previously, the CapEx guidance and then the guidance-related assumptions, especially related to the telecom service revenue, where we are indicating a range of 1% to 3% growth during the course of the year. So with that, I will hand over to Kristian. Thank you. Kristian Pullola: Good. Thank you, Topi, and also welcome on my behalf. In Q1, we saw solid EBITDA performance despite lower revenues. This was helped by our transformation efforts coming through as well as good cost discipline in general. As Topi said, the temporary sales costs were lower on a sequential basis, however, still slightly up year-on-year. Some of the revenue decline that we saw in Q1 related to divestments and ramp-downs of older technologies. The EBITDA impact of these was limited. The same is true for the decline in the equipment sales, which was driven by increased uncertainty as well as higher device prices on the back of especially memory component shortages. One note here, Elisa has somewhat seasonal business when it comes to Q1 versus Q2. Both are positive -- both of these 2 drivers are positive for Q1 and negative for Q2. As Topi said, in Industriq, we typically see strong licensing revenue in Q1 as a result of annual renewals. And in that sense, there's a negative seasonality going into Q2. Also in TechOps, we do see higher network-related costs in the second quarter when the overall construction activity starts in spring. And for this year, spring has arrived early in Finland, so we will see somewhat more of this impact. Also then maybe a second reminder, just on the yearly dynamics. Last year was solid when it comes to the first half and weaker when it comes to the second half, especially Q4 was weak on the back of the competitive intensity. Thus, we will have a tougher compare in Q1 and Q2 and then kind of easier compares as we work into the second half and especially for Q4. Then when it comes to CapEx, our strict disciplined continued. Our investments are focused on the areas of improving our technology leadership and which will enable us to continue to upsell both 5G and work on the -- work with the fiber momentum. In addition to this, our investment is going into us renewing our IT infrastructure so that we will be able to drive both simplification as well as productivity longer term. On the cash flow side, the first quarter was a continuation of our strong cash performance. We have now seen 5 consecutive positive quarters of positive development for net working capital. We will continue to drive improvements in cash flow as we move on. But of course, improvements in net working capital is going to be tougher and tougher to achieve when we have optimized the different items. Inventories are already at good levels. As I said last quarter, there's more work to be done on both receivables as well as on the payable side. But overall, a solid quarter from a cash flow development point of view. As a result of that, our capital structure continues to be solid. Our maturity profile is good. We did not have any material -- we did not have any material transactions during the quarter. And during the remainder of the year, we will start to focus on proactively refinancing the '27 maturities that we have. Then on capital returns, Elisa continues to have industry-leading capital returns. We saw a slight uptick as a result of having somewhat lower cash balances at the end of Q1 compared to the slightly elevated levels that we saw at the end of the year. And we do believe that with cash flow focus and continued strict discipline on CapEx, we will continue to produce industry-leading returns also going forward. With that, Vesa, back to you, and let's start Q&A. Vesa Sahivirta: Thank you, Kristian. And now we move on to Q&A part. And we have many questions on the line, so we appreciate that we'll keep them short. Thank you. Operator: [Operator Instructions] The next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: I had 2 questions. Firstly, on your cost or sales and marketing costs. And then secondly, on your visibility on the mobile service revenue trends through the year. On the sales and marketing costs, you mentioned -- you highlighted they're still above where they were a year ago. Can you explain why that is, given churn is back to average levels and the pricing environment recovered? What's driving that heightened sales and marketing cost competition? And then secondly, just on the mobile service revenue trends, it sounds like the first quarter is the trough for mobile service revenue growth. But could you just help us understand how we should see that improvement come through in the second quarter and then into the second half? It sounds like it will be a more meaningful improvement into Q3 than into Q2. How that's going to be balanced between volume and ARPU? And how much visibility you have on that given the lags that you mentioned? Kristian Pullola: So maybe if I start on the sales and marketing costs. You're right, the costs were still somewhat elevated compared to a year ago, but down sequentially. And I think the logic here is that you don't pull back your sales and marketing efforts before you see evidence of the market environment being such that it justifies lower spend. And we started to see the evidence during the quarter. And because of that, we took down the temporary costs during the quarter, and thus, they were still a bit up on a year-on-year basis. Topi Manner: And then, Andrew, related to your question about MSR. So, starting with the metrics that we just went through. So the new sales prices during the quarter returned to Q1 levels in March. And the churn was notably lower than it was in Q4. And now the churn is in line with our long-term average. When you consider the mechanics of how the new sales prices turn into mobile service revenue, you will need to factor in a time delay of some months, approximately a quarter. This is because mobile operators in this market have fixed-term contracts in their portfolio. And when we win customers from our competitors, we do the deal now, but the mobile's subs actually transforms into our customer base with the agreed pricing a little bit later when the fixed-term contract with the competitor actually ends. So this is a mechanic that will need to be factored in. And then related to Q2, what is perhaps a useful reminder is that last year, in Q2, we started the rollout of the security features, the hard bundled security features to our mobile subs, supporting the MSR for that particular quarter. There is no similar initiative in the plans for this year. And thus, when you consider mobile service momentum, that momentum should be visible on the latter half of this year, increasing towards the end of the year. And all this boils down to our telecom service revenue guidance where we are guiding a range of 1% to 3% during the course of the year where mobile service revenue is the main contributor. Andrew Lee: Can I just follow up, so just on the sales and marketing costs. So it sounds like you're reducing those through Q1. As things stand today, late April, sales and marketing costs now today where they were a year ago? Or are they still not back to normalized levels? Kristian Pullola: So I think we are here to discuss the first quarter. But as I said, we are responding to the market situation with our costs. And because of that, the costs started higher during Q1 and ended up lower during Q1. Operator: The next question comes from Ajay Soni from JPMorgan. Ajay Soni: My first is on the cost savings. You mentioned EUR 40 million. Just wondering what's been delivered in Q1 and how you expect that phasing to look for the remainder of the year? And then my next question was just around the MSR into Q2. You mentioned that you're not going to have the support of security features, which got launched this time last -- well, Q2 last year. But surely, you will still have a better improving effect because you're going to have more people moving on to security versus Q2 last year because you would assume you'd have ramped up that business. So isn't that still going to be a tailwind in Q2? Kristian Pullola: So maybe if I start with the cost savings. So as Topi mentioned, we are on plan on delivering the full EUR 40 million. And as we have said earlier, the majority of the cost savings kicked in during the first quarter. Some of it is visible in our lower operating expenses and impacting positively the personnel costs because a large chunk of the savings that were implemented came from there. But of course, we also have driven activities outside of headcount reductions, which is visible. Some of it is also coming through the CapEx line item and thus coming through as depreciation -- lower depreciation at a later point. And so in that sense, there will not be much more acceleration of the impact as we move through the quarter because of the fact that the majority is already up and running as we speak. Topi Manner: And then related to your question about MSR and the security features, so if we look at MSR development in Q1 and we decompose that a bit, then clearly, the impact of intense campaigning and the lower prices in Q4 introduced a drag to mobile service revenue during Q1. And that drag was offsetted by the continued upsales from 4G to 5G and the value-added services where the security features are the most important element. And actually, when you look at the upsales isolated. And when you look at the value-added services isolated, they continue to provide the consistent growth that we have been seeing in the past. Then in terms of security features and the mechanics of security features supporting the MSR during the course of this year. What you need to remember is that when we started the rollout of security features last year, we rolled that out to that part of our customer base, roughly 600,000 customers where the customer contracts were of ongoing nature in force until further notice and the terms and conditions allowed us to change the offering and with that, change the pricing of those customers. Now that back book rollout has largely been completed. And what we are now doing is that we are offering the security features to customers in new sales. And the 100,000 pickup that you saw during the quarter is a result of new sales. Operator: The next question comes from Andreas Joelsson from DNB Carnegie. Andreas Joelsson: I was just a little bit curious and I hope you can help us understand a little bit the experience that you have from the higher churn environment that you had in Q3 and Q4. If something similar would happen again, would you react the same way as you did last year? Or have you -- some new experiences that will make you change that action that you took at the end of last year? Topi Manner: No, I think that -- I mean, our market is competitive and every situation in the market is unique. And we continue to monitor the market, and we continue -- and we focus on developing our own competitiveness, our own services in the market. And when you look at the things that we have been doing recently, as an example, we have been increasing the penetration of fixed-term contracts in our customer base as a churn prevention measure. And that measure has been bearing fruit in Q1, as you see in the churn number. Andreas Joelsson: Perfect. Maybe a follow-up on the mobile post-paid subscriber base. It is continuing to decline. Can you explain or tell us a little bit more where that decline is? And then I talk about excluding machine-to-machine, of course. Topi Manner: Yes. I mean if you look at that number, what is important to remember is the market trend in mobile broadband. So mobile broadband subscriptions are declining for us, and they seem to be declining on the whole market when customers are transitioning partially to fiber connections. And we do see a pickup in fiber connections as witnessed by our numbers. So this is something that you will need to factor in. And then when we look at the post-paid voice subscriptions and the development of net adds in that number, then as stated, the churn decreased notably during the quarter. Also, our intake of new customers decreased during the quarter. And this was because we did not respond to all of promotions that we saw on the market. Operator: The next question comes from Fredrik Lithell from Handelsbanken. Fredrik Lithell: Just a follow-up on your last comment that you described in Q1 that you did not respond to all of the promotions you saw in the market. Is that the same to say that you have seen sort of more activity in terms of campaigning in Q1 compared to earlier -- not compared to Q4, but maybe compared to Q1 '25, i.e., they don't need to be more aggressive, but more of them in the market. Is that a fair point? Topi Manner: The market continues to be competitive in Finland. But I think that here, I come back to the slide that we presented. So during the quarter, we saw the new prices -- new sales prices return to Q1 levels in March, and we saw the sales and marketing cost decrease. We saw a significant drop in churn that is clearly more than the typical seasonal drop in Q1 would be. Fredrik Lithell: Okay. That's perfect. My original question was really about the ISS, if I may. I mean you had 7% growth in the quarter, and you depicted a few details around your situation there with the pipeline that seems to be growing and some delays in Middle East. How are these sort of contracts structured? They are not perpetual licenses. Are they SaaS type of contracts with some variable components in them for revenue to grow with volume? Or how does it work in these contracts? Topi Manner: Yes. Absolutely. So as stated in Elisa Industriq business, the organic growth during the quarter was 8%, and we saw a step forward in terms of profitability the way we would like to see in this business. And if we decompose the contract structure a bit, then part of the revenue is driven by licenses. Part of the revenue is driven by recurring revenue, SaaS model and maintenance. At the end of last year, the share of recurring revenue was 50%, and there's some quarterly fluctuation in that share based on how many licenses we have been selling on a given quarter. And then part of the revenue is also driven by implementation projects with customers. And here, in that category of revenue, the revenue recognition is dependent on how the implementation projects move forward with customers. Operator: The next question comes from Derek Laliberte from ABG Sundal Collier. Derek Laliberte: So I wanted to come back on pricing. You mentioned this selective price increases in early Q1. Can you elaborate a bit on the scope and customer response of this? And during Q1 and into early Q2 now, are you still seeing improved rationality amongst the competitors? Or are there still pockets of sort of aggressive or increased aggressiveness on pricing? Topi Manner: Yes. I think that we will need to come back to the Q2 developments when we report the Q2 during the summer. In terms of the market development in Q1, what I would just like to come back to is the slide that we presented that our new sales prices returned to Q1 '25 levels in March and then the decrease in sales and marketing cost and the notably significantly lower churn. So looking at those numbers, I think that you get a good picture of the market development during Q1. Derek Laliberte: Okay. Great. And then strategically for you, I mean, has there been any change here given the current environment in terms of how you're prioritizing ARPU versus subscriber growth? Topi Manner: Yes. I mean our long-standing target on the market has been that we maintain our market share, and we will continue to do so going forward. That is part of our strategy. And what we have also communicated already in our Capital Markets Day a bit more than a year ago is that we focus on providing customer value. Upsales from 4G to 5G in mobile services is a big growth driver for us and so is value-added services, namely security features. So we continue to focus on that strategy, and we bring new value elements, new offerings to customers and to the market all the time. And then during this quarter, a good example is the Who's Calling service that already has 130,000 paying customers. Derek Laliberte: Okay. And finally, on the B2B trends, apologies if you mentioned this, but you have flagged some pressure there. So what did you see in Q1 in terms of, say, demand pricing and the contract renewals? Topi Manner: Could you please repeat the question? So was it about broadband or what... Derek Laliberte: About B2B -- no B2B corporate trends. Topi Manner: Yes. In B2B corporate, if we talk about mobile services, it continues to be a competitive marketplace. Our offering in B2B mobile services is strong with the value-added services and for example, with AI tools, where we clearly differentiate from competition. And then if you look at the other product categories of B2B business, IT services, cybersecurity and these kinds of things, we continue to enjoy some momentum in that one. We are clearly competitive on a market that is tough. The market is characterized by sluggish macroeconomic situation in the Finnish market, impacting corporate customers' willingness to invest. And that, of course, impacts the competitive landscape on B2B business. But at the same time, we are clearly competitive, and we are winning customers, both in IT and especially in cybersecurity, where our capabilities are really strong today. Operator: The next question comes from Abhilash Mohapatra from BNP Paribas. Abhilash Mohapatra: I just want to come back to the topic of cost cutting, please. Obviously, this year, you've got a big benefit from the EUR 40 million of savings. And you referred to earlier in the call, the idea of sort of using AI to drive further savings. As we look into next year, do you anticipate a sort of similar sized benefit from your cost measures? Or in other words, do you think you can continue to do a similarly sized sort of big headcount reduction? Or should we expect the cost-cutting benefits to normalize as we head into next year? Kristian Pullola: So again, we have nothing new to tell here in addition to the EUR 40 million transformation program that we announced last year. And as I said earlier, which is now kind of up and running in our P&L as savings. In the prepared remarks and in our report today, we do acknowledge that we live in a world where transformation will need to be on the agenda for now, and that's what we're going to do. Transformation related to AI means both improving your competitiveness and driving revenues through that as well as then driving productivity improvements on a structural as well as on a continuing basis. There is no new program or no new amounts to be announced here. We feel that we need to do this to be able to achieve our strategic targets that we have set for ourselves. Topi Manner: And generally speaking, related to the AI, we clearly see that our industry and Elisa in specific, will be benefiting from AI. AI will be increasing our bread and butter business, namely mobile and fixed connectivity. And we have an opportunity to use AI for digital services growth and for software growth. And then in the areas of productivity or in the productivity-related areas, we are working continuously in improving the automization of our customer service. And where we do see possibilities is in the area of AI-assisted coding -- prompting to be exact, improving the productivity of our software development. Operator: The next question comes from Siyi He from Citi. Siyi He: I have 2, please. The first one is really on your comments earlier about the interest in the market of taking on fiber products. I'm just wondering if you can share with us about your fiber investments, whether you think it could be a good opportunity to organically expand your fiber footprint or you could be looking at some infrastructure opportunities if some of the network is up for sale? And the second question I have is really on your comments earlier about the -- pushing the upgraded security features into your base. I think last year, when you talk about the rollout I had an impression that you would -- it's possible to roll out throughout the base within 18 to 24 months of the launch. But now I think you're commenting on you are actually adding on new sales. Just wondering whether that could create a particular delay of this 18 to 24 months time frame? And if so, any reason behind that? Kristian Pullola: So maybe I'll take the fiber-related question first. So as I said in the prepared remarks, we do see momentum in fiber. Customers want reliable and fast connections for their homes, for their base and fiber is now from an affordability point of view at the price point where consumers are responding well to it. We will -- on the back of this, we are investing in fiber, building additional fiber. As I said a quarter ago, we are leveraging a joint venture structure that we announced last year for the majority of that build. And at the same time, we will be pragmatic and look at, are there more cost-efficient ways of doing that by also looking at the existing assets. And if they are at sale at reasonable cost, then we'll evaluate that against building new fiber ourselves. Topi Manner: And related to your question about the rollout of the security features, yes, the rollout schedule of security features has been prolonged. And the driver of this is that during the -- due to the competitive situation last fall, as a churn prevention measure, we increased the share of our fixed-term contracts notably. And now we have a larger share of those fixed-term contracts in our customer base. And for those contracts, we cannot do the back book changes in similar fashion than we can do for those contracts that are in force until further notice. However, all of this is something that we have already factored in into our guidance. And the guidance assumptions where we are stating that the telecom service revenue is increasing during this year within the range of 1% to 3%. And that mobile service revenue is the main contributor. Operator: The next question comes from Felix Henriksson from Nordea. Felix Henriksson: I have 2. One is very simple, just to double check on MSR. Do you think that growth will further decelerate in Q2 versus Q1 before turning better in H2 given the time delay that you discussed as well as the tough comps? And then the second question is relating to the data center connectivity, which you have started to talk about. Could you expand a bit on the opportunity? What could the potential contract structures in this domain look like? And how large deals are we talking about? Topi Manner: Yes. So coming back to the mobile momentum and mobile service revenue. As mentioned earlier in this call, when we look at the new sales prices and how they translate into mobile service revenue, it's good to understand the mechanic and the time delay, when we win customers from our competitors, a meaningful portion of those customers are having fixed-term contracts with their old providers. And that means that even though we do the deal today, those customers might be moving to our customer base 2 months from now, 3 months from now. And that delay needs to be understood. And then as stated in Q2 last year, we started the rollout of the security features, which provided support for MSR for Q2 last year. Putting all of this together, we should be seeing improved mobile momentum during the latter half of this year, in line with the guidance that we have been giving on telecom service revenue. And then to your question related to data centers, I mean, this market is about to take off in Finland, and we have been seeing data center operators reserving land and quite a bit of that has taken place. We have been also seeing announcements for new data centers starting to come in during the course of this spring. So this leads us to expect that during the course of this year, we will be seeing sizable data center announcements on the market. And we do have a business opportunity in that. We are naturally advantaged in a sense that we have the most extensive backbone network, fiber network in the country, and it's shorter distance to connect to that backbone. And then therefore, we feel that it's realistic for us to get a sizable chunk of that data center connectivity market going forward. It is an emerging market. During the course of this year, we will be seeing most likely deal announcements and then the revenue starts to come in, in '27 and onwards. Operator: The next question comes from Paul Sidney from Berenberg. Paul Sidney: Just 2 questions. Just coming back to Finnish mobile, price rises on new offers in Q1. I was just wondering, was this a deliberate action from Elisa to raise prices? Or did pricing just follow the market? Just wondering your previous comments that you did not respond to some promotions over the past few months. I'm just wondering, are you trying to lead the market as a rational incumbent? Or was it the MNO's pulling back in the quarter? And then just secondly, on cash flow, comparable cash flow is a clear focus for you, but we don't have cash flow guidance. So just 2 parts to this question. Can you clarify if free cash flow is expected to grow over the next couple of years? And secondly, how important is cash flow in assessing the success of the business? Is it as important to you as revenue growth, EBITDA, ROCE, all these other sort of financial KPIs? Topi Manner: Well, to your first question, we are the market leader in this market. And we certainly would like to think that we are rational in managing our business. So then looking at Q1, what you see in the mobile metrics is that we come back to Q1 levels in terms of new sales prices in March. And you see the churn decreasing significantly more than the seasonal drop typically would be and also the sales and marketing cost decreasing. So coming back to my earlier point, I think that, that gives quite a good picture of what happened on the market and for our business during Q1. Kristian Pullola: And again, on the cash question, cash is a critical KPI for us that we both drive as well as assess our success based on. You're correct that we haven't guided specifically on cash flow as of now, something for us to consider for the future. But clearly, it is a measure that we judge our performance based on. And if anything, we'll be doing more of going forward rather than less. Operator: The next question comes from Ulrich Rathe from Bernstein. Ulrich Rathe: I have one clarification and a question. The clarification is you pointed out the mechanics of the customer sale versus the contribution. Can I just confirm that you're not including these customers that you have signed up in your customer base that you report before they actually start to contribute revenues? The second question or the real question is, if we look back at what happened there in autumn, how confident are you, if you look at the market overall, about the sustainability of the current recovery away from this slump? In other words, how stable do you think the market environment is vis-a-vis the causes of what happened last autumn? Topi Manner: Yes. On the first question, so -- no, we count customers into our net adds once they move into our customer base and the revenue recognition starts. So that's it. And then in terms of the market dynamics, I think that, first of all, we just need to come back to this in the coming quarters when we report our Q2 and when we report our Q3. If you look at the long history of the market, you have been seeing previously also these kinds of periods of intense competition like we saw during the latter half of last year. Similar phase was gone through during the years of '17 and '18. Operator: The next question comes from Ondrej Cabejšek from UBS. Ondrej Cabejšek: Two questions from me as well, please. The first one, apologies, I may have misheard on your back book, but I wanted to -- on the back book comments that you made, but I wanted to basically understand if now that the market seems to be stabilizing and the macro situation in Finland seems to be also improving. Are you again planning to kind of put in effect some kind of back book price rises the same way and the same kind of quantum on the -- that you did in 2Q '25, I believe it was around 400,000 customers that you raised prices for. Is there something similar plan for 2Q '26 because I believe that was the kind of assumption going forward? That's the first question. And second question, if I may, on the promotions that have been kind of dragging effective pricing down, are we correct to assume that most of these people or subscribers are locked in for 12 months. And so as they come out of the heavily kind of promoted pricing, I guess, around 2H '25, the assumption would be that they get back to some kind of normal pricing levels? Or what do you expect there as they come out of contract? Topi Manner: Starting from your latter question. So yes, you would be correct to assume that those customers that we took in during Q4, to a large extent, were with fixed-term contracts for 12 months. And then that will be a factor that will be impacting the market, the mobile market at the latter end of this year. And then related to your first question about back book price increases and offering changes, the like of offering changes that we did in the spring of last year with the security features, as stated -- we are introducing new individual services to the market all the time like we, during Q1 did with the Who's Calling service that now has 130,000 paying customers. But we do not have bigger offering changes like the security features in the plans for Q2. On corporate side of the business, B2B side of the business, there might be some sort of inflationary price changes that will be conducted, which is part of the sort of normal cycle in the B2B business. Ondrej Cabejšek: And apologies if I may follow up because the line was a bit choppy. So last year, you mentioned there were -- part of the 2Q price rises were the hard bundled security features, and you do not plan to do something similar this year, but straight price rises is something that is kind of in the plan? And also, yes, if you could please answer that, this is the straight price rises, I guess, is that something that the market is now allowing you to do you think? Topi Manner: No such plans. Operator: The next question comes from Sami Sarkamies from Danske Bank Markets. Sami Sarkamies: I have also 2 questions. Still wanted to get a bit more color on the situation at ISS. I think you mentioned some delivery headwinds from the geopolitical turmoil in Q1. Are you anticipating more headwinds going into Q2? And any comments from sort of order intake during the recent months? And then secondly, you booked EUR 4 million of one-off costs in Q1, where this related to the EUR 40 million savings program? And do you still see more coming during later of this year? Topi Manner: Yes. Related to Industriq, we did see strong bookings in Q1 and then quite happy with that. And then related to the war in Iran and the Middle East situation, we saw some revenue delays in Q1, partially because for customers in the Middle East, some projects were delayed. And with that, the revenue recognition was delayed and then partially because the anticipated sales just was prolonged given the outburst of the war in Iran and the impact to places like Dubai. So those were the short-term impacts that we have seen. And then generally, the impact of war in Iran, as a business, I think that we are in a fortunate position that the direct impacts of war in Iran to our business are very, very limited. To Industriq, we will need to see what those impacts are. As stated so far, we have been only seeing limited impact to a handful of existing clients and prospective clients in the Middle East. Kristian Pullola: And I think on the transformation costs, yes, we did book some in the quarter. And yes, they relate to the measures that we have taken. And yes, based on our prepared remarks, we do see that in the current environment, there is an opportunity to do transformation on an ongoing basis. So I would expect that there would also be some such costs also in future quarters as we take the appropriate measures. However, not to the same extent as we had kind of higher costs in Q4. Operator: The next question comes from Max Findlay from R & Company Redburn. Max Findlay: Apologies if the first question has already been answered while I was struggling with the line. So last year in ISS, there were some delivery delays in Q1, which saw revenue deferred into Q2. And in your preprepared comments, you mentioned that there was some revenue delay in this year's Q1. So I guess I'm trying to triangulate these comments with other comments you've made about 2Q and 3Q being weaker quarters generally. Should we expect these quarters to be lower than the 8% achieved this quarter? And then there's been a change in ISS' leadership. Can we expect any changes to strategy to accelerate growth to achieve your 10% organic growth target? And any comments on further acquisitions and disposals? Topi Manner: Yes. So indeed, Mikko Soirola has been appointed as the CEO of Elisa Industriq business. He is a very experienced software leader, having worked in international software space for 20 years. And the better part of last decade, he has been a CEO of successful software businesses. So the job to be done for Mikko is to accelerate growth, to improve the profitability of Elisa Industriq, carry out bolt-on M&A and integrate the M&A and integrate the portfolio of businesses that we have today better to achieve synergies. So it is a new strategic phase that we are entering into in Elisa Industriq. And then related to the first part of your question, what I was referring to is that the typical seasonality in Elisa Industriq business and in many of the other software businesses for that matter, is that Q2 and then Q3 are sort of seasonally softer than the start of the year and especially Q4. So that is something that is good to keep in mind when understanding the sort of dynamics of the Elisa Industriq business on a stand-alone basis and the impact to Elisa numbers. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Vesa Sahivirta: Thank you, and thank you for participating in this conference call. Thank you, Topi. Thank you, Kristian, and we wish you a very great reporting seasons. Topi Manner: Thank you very much. Kristian Pullola: Thank you. Bye-bye.

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RBB 2026 Q1 财报电话会议

Operator: Good day, everyone. Welcome to the RBB Bancorp Q1 2026 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rebecca Rico. Rebecca Rico: Thank you, Kelly. Good day, everyone, and thank you for joining us to discuss RBB Bancorp’s first quarter results for 2026. With me today are President and CEO, Johnny Lee; Chief Financial Officer, Lynn Hopkins; Chief Credit Officer, Jeffrey A; and Chief Operations Officer, Gary Sand. Johnny and Lynn will briefly summarize the results, which can be found in the earnings press release and investor presentation. Please refer to the disclaimer regarding forward-looking statements in the investor presentation and the Company’s SEC filings. Now, I would like to turn the call over to RBB Bancorp President and Chief Executive Officer, Johnny Lee. Johnny Lee: Good day, everyone, and thank you for joining us today. The first quarter was a strong start to the year with continued earnings growth, expanding margin, and further improvement in operating metrics. We generated net income of $11.3 million, or $0.66 per share, which was an 11% increase from the fourth quarter and our highest quarterly earnings level in two years. Return on assets increased to 1.09%, and we continued to grow tangible book value per share. Net interest margin increased another 60 basis points to 3.15%, marking our fifth consecutive quarter of margin expansion. The increase was driven by both lower funding costs and higher asset yields. Our cost of deposits declined 10 basis points, and our spot rate on deposits ended the quarter at 2.79%, which gives us some additional opportunity for improvement in the second quarter. Loan growth was more modest in the first quarter, with loans increasing by approximately $11 million, or 1% annualized. We originated $131 million of new loans at an average yield of 0.4%, but that growth was offset by elevated payoffs and paydowns as some borrowers refinanced or sold assets. As we mentioned before, we remain disciplined on pricing and structure and have focused on profitable growth. Our pipelines remain healthy, and we continue to believe we are positioned to deliver stronger loan growth over the balance of the year. Deposits declined slightly during the quarter due to a reduction in wholesale deposits, but this was more than offset, from a quality standpoint, by another quarter of growth in retail relationships. We also continue to make progress on credit. Nonperforming assets declined 9% from the prior quarter and are down 24% from a year ago. Overall, we believe the first quarter reflected continued progress in returning RBB to its historical levels of performance. We continue to focus on disciplined growth, maintaining strong credit quality, and increasing long-term shareholder value. With that, I will hand it over to Lynn to talk about the results in more detail. Lynn? Lynn Hopkins: Please feel free to refer to the investor presentation we have provided as I discuss the Company’s 2026 financial performance. As Johnny mentioned, net income for the first quarter was $11.3 million, or $0.66 per diluted share, which compares to $10.2 million, or $0.59 per diluted share, in the fourth quarter. Despite two fewer days in the quarter, net interest income increased $1 million to $30.5 million and included a $1.4 million decrease in interest expense partially offset by a $390 thousand decrease in interest income. The decrease in interest expense was due mainly to the shorter quarter and lower rates on retail deposits, as we continue to benefit from the repricing of our deposit portfolio into the current rate environment following the Federal Reserve rate cuts made toward the end of 2025. Retail deposits increased by $50 million and included a shift from time deposits into a high-yield savings product. The decrease in interest income was due to the shorter quarter and lower cash and securities yields, offset by higher loan yields and the receipt of a $430 thousand FHLB special dividend. Our net interest margin increased to 3.15% in the first quarter from 2.99% in the fourth quarter. The increase included an 8 basis point increase in the yield on earning assets and an 8 basis point decline in the overall cost of funds. The FHLB dividend added 4 basis points to our NIM in the first quarter. Turning to credit quality, nonperforming loans remained basically unchanged. Substandard loans decreased $2.7 million, and special mention loans increased $5.5 million. All special mention loans are on accrual status. We had effectively no net charge-offs in the quarter, and we recorded a small reversal of provision for credit losses supported by paydowns on nonperforming loans, overall stable credit quality, and positive economic indicators in the underlying forecast. We believe that we are adequately reserved, and with credit quality generally improving over the past year, we expect future provisions to reflect that. Noninterest income increased $1.4 million to $4.3 million. The increase was driven primarily by an $890 thousand higher net gain on REO, $484 thousand in a recovery on a fully charged-off acquired loan, and $360 thousand of interest income on tax refunds related to purchased federal tax credits. Noninterest expense increased by $293 thousand to $19.3 million due mainly to higher payroll taxes and employee benefit costs at the beginning of the year. Even with the increase, our efficiency ratio improved to 55% from 59% in the fourth quarter. We expect noninterest expense for the next few quarters to be in the $18 million to $19 million range. Turning to the balance sheet, total assets were $4.2 billion at quarter end. Loans held for investment increased $11 million since year-end, and deposits declined $10.5 million. Importantly, the mix of deposits continued to improve as we reduced wholesale funding and grew lower-costing retail deposits. Book value per share increased to $31.10, and tangible book value per share increased 2% to $26.84. This concludes my prepared remarks. We will now open the call for questions. Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. Please hold for just a moment while we poll for questions. Your first question is coming from Brendan Nosal with Hovde Group. Please pose your question. Your line is live. Brendan Nosal: Hey, folks. Hope you are doing well. Thanks for taking the questions. Sorry—having a little trouble with the line. Can you folks hear me now? Okay, great. Maybe just starting off on asset quality. It is nice to see continued workout and improvement in ratios this quarter. Can you offer a little bit of color on some of the larger nonperforming assets you still have in the workout process? And then, to the extent that you are able to continue to work those out, what do you view as a normalized reserve-to-loan ratio as you work through the noise? Lynn Hopkins: Okay, how about I start with the end of your question and work backwards. We will acknowledge we are elevated on our NPLs, and we would expect those to normalize down to a much smaller percent of our total loans. I think you are familiar that 90% of our NPLs are represented by the same three relationships, so that remains stable and understood. As far as a normalized coverage ratio, given the composition of our overall loan portfolio, we could see it coming down somewhat relative to the levels it is now. But we do go through a robust process and have to take into consideration everything that is going on in the market. I think it has an opportunity to move lower. As you recall, last year it was much higher with those reserves that ultimately—after some charge-offs—supported resolved loans. So that is where we would say we are going forward. With respect to specific comments on the NPLs, I can turn that over to Johnny or Jeffrey. Johnny Lee: NPL actually is virtually unchanged during the quarter. However, there is a reduction of the number of the loans. There were two exits—one in [inaudible]—and those exits were successful workouts and then they paid off. One in there had just some technical issue that became nonaccrual. But virtually, it was a pretty quiet quarter. Lynn Hopkins: I will just add, we have represented that our largest one is working its way through a bankruptcy process, and we will continue to work on that. So we do see an opportunity for NPLs to be resolved during 2026. But it is a process. Johnny Lee: I will probably just add, they are still paying down. Brendan Nosal: Okay, that is super helpful color on that topic. Thank you. Maybe turning to capital. Ratios obviously remain quite strong. Asset quality is incrementally getting better from here with good line of sight. Any updated thoughts on deployment from here? I think you had a tranche of sub debt that was repricing and perhaps looking at the buyback at some point, but any updated color there would be great. Lynn Hopkins: Sure. We have stated that we have been focused on the sub debt that is coming up for repricing. We recognize that its capital treatment will start to sunset. It does reprice April 1. We view the sub debt as a capital instrument that we are going to address this year. I think there is also an opportunity for us to look at a stock buyback, but the sub debt is our first priority. Based on the current interest rate environment and how we are looking at the balance sheet, there may be a good reason to look to retire a good portion of it. We are working through that process. As everyone knows, it does require regulatory approval. Brendan Nosal: Fantastic. I am going to try and sneak one more here. On the margin, can I get your thoughts on whether that 4 basis points of margin from the FHLB special dividend is one-time in nature? And then, to the extent that we do not get any more Fed cuts for the foreseeable future, talk about your expectations for the margin path from here. Lynn Hopkins: Excellent question. There are definitely a few dynamics in our net interest margin. You are right: the FHLB special dividend is one time in nature. We would welcome a special dividend every quarter, but we do not view that as recurring. With the sub debt, our retirement dates are the first date of each quarter. In the near term, we will be absorbing the sub debt at a little bit higher price in the second quarter at least. The other thing I would point out is half of our mortgage portfolio is priced on a 30/360 basis, so we do get a bit of a benefit in the shorter quarters, and then it will normalize over the rest of the year. On one hand, we will have more days—which is usually higher net interest income—but from a margin perspective, it may push down a little bit. Having said all of that, I think we still have an opportunity to expand our margin from a more normalized basis, which is probably closer to or just above 3% with balance sheet growth in the current environment and some modest repricing of our deposits. That is where we are headed in the near term. Operator: Your next question is coming from Kelly Motta with KBW. Please pose your question. Your line is live. Kelly Motta: Hi, thanks for the question. Maybe on loan growth—the growth for the quarter was a bit more muted than we had expected. I think the pipelines coming into the quarter were quite strong. Can you provide any color as to where that variance came from, what drove that, and how pipelines are looking as we look ahead here? Johnny Lee: Hi, Kelly. Thanks for the question. Q1 is always somewhat seasonal and, with the geopolitical risk and everything, there is still a lot of uncertainty out there. We try to balance—quality first—and then look to see, based on the competition on the pricing side, whether it makes sense to aggressively compete on certain types of deals. We were not prepared to compete at market rates in the 5.5% to 5.75% range for multifamily, and even lower for some CRE loans. So we stayed pretty disciplined during the first quarter in keeping our rates above 6%, unless there were enhancements to the yield with ancillary business such as deposits or other potential fee income that might come with the relationship. In that sense, we did let go of a few deals during the quarter. There were also somewhat higher paydowns and payoffs during the quarter, which impacted net growth. As to the pipeline, it is still very healthy. For Q2, based on the build we have right now, we should be able to trend toward what we have achieved in past years for the same quarters. I am very positive about the pipeline overall, but again, we are looking for quality first and making sure any pricing we compete on makes sense. Kelly Motta: Got it, that is helpful. And then on the deposit cost, those came down quite nicely. You mentioned in your prepared remarks you had shifted some customers to different categories to help manage that. As we look ahead, barring rate cuts, is there still room to bring down deposit costs within categories outside time? And then within time, can you remind us of the roll-on versus roll-off rates? Lynn Hopkins: I think there is still some opportunity, though with the latest changes in interest rates and the belly of the curve moving up, there is probably less opportunity. We have historically had a very strong 12-month CD ladder, and as those CDs mature—98% mature over a 12-month period—those have typically repriced into a lower environment. For the amounts that are coming off, they are probably pretty similar to these higher interest rates and the competition we are seeing. We are seeing things as high as 4% now being offered by other banks, so the opportunity is smaller. Having said that, our spot rate at the end of the quarter is lower than what the average was over the quarter, so I do think there is still a little bit of opportunity. We did mention that a portion of our CDs moved to a higher-yielding savings product. Looking at both our CDs and this particular product, about a third is able to reprice in the first quarter, and it probably reprices similarly or maybe a little bit lower than what we saw in the fourth quarter. We still have a fair amount repricing into the current quarter, but maybe it is a few basis points. Kelly Motta: Got it, that is helpful. Last question, if I can just sneak it in, is regarding reports that there may be an executive order requiring banks to collect citizenship data on their customers. Have you looked at this, and any preliminary thoughts on how that could impact the way you do business? Johnny Lee: Are you speaking to the SBA-type executive order? Kelly Motta: I think this is broader. It is hypothetical, but there has been discussion about potentially requiring banks to collect citizenship data on their customers. Johnny Lee: The only thing that we are watching more closely is the SBA administration’s recent procedural guideline, which restricts applicants to only be U.S. citizens. That is the one we are watching more closely. Kelly Motta: You do have an SBA business—does that have any bearing on your expectations for that on a go-forward basis? Lynn Hopkins: Not yet. There is no impact based upon our assessment. Johnny Lee: We do not have any impact to that based upon our assessment. Kelly Motta: Got it. Thank you so much. Operator: Your next question is coming from Matthew Clark with Piper Sandler. Please pose your question. Your line is live. Matthew Clark: Thanks. Good morning, everyone. Just wanted to drill into the loan growth outlook a little more. Coming into the year, the expectation was for high single digits. It looks a little more challenging after the first quarter. Do you still think you can bounce back and get close to something in that high single-digit range? Lynn Hopkins: Let me make a couple comments, then I will turn it over to Johnny. We had loan production of about $145 million in the fourth quarter. We came into the first quarter with about $130 million, approximately the same yield, holding the line as we observed interest rates stop moving down, and even some talk of potentially moving up. We recognize our funding base. While we did not observe much of an impact from the government shutdown in our SBA business, I would say our originations in that area were a little lighter in the first quarter, so there is opportunity there. Our second and third quarters have historically been our highest producing quarters, so much so that they achieve that higher number. We are stringing together positive quarters. There is business to be done. With interest rates as high as they are, it will depend on whether people come off the sidelines and move forward. When I think about the range—high single digits—I would put it mid to high single digits. We are building off of a $3 billion and change portfolio. We are in big markets, and we should be able to participate. But to the extent that we are operating inside this interest rate environment, that might be tempered with maintaining NIM. Piecing together everything we are seeing—an attractive pipeline, and the fact that fourth and first quarters can be a little lower—we would still remain optimistic, but let us maybe anchor it in the mid to high single digits. Johnny Lee: I echo Lynn’s comments. I am comfortable with mid to high single digits. Our pipeline is healthy. We just want to be very disciplined in the types of loans we fund, quality-wise, and ensure we are generating appropriate returns for the bank with these new relationships. Matthew Clark: Great. The other one I had was to get a little more color on the CD repricing and the savings promotional product. Can you share the specific amount of CDs that are coming due and the related rate? And then it sounds like the renewal rate is similar—maybe a little bit lower—but I would like those specifics, including the promotional savings rate product. Lynn Hopkins: We are looking at about 60% of our deposits fitting into the CDs and the flexible savings product, and about a third of them repriced in the first quarter. Our observation in the marketplace is that the more rate-sensitive money is now costing between 3.85% to 4%. We have been successful a little bit lower than that, and that is what it is actually coming off at. Our ladder at the same time last year, when we were putting on 12-month money, was around the 3.75% level, and that is what is coming due. Interestingly, it is now 3.85% to 4%, despite short-term or Fed funds rates being lower. Yes, we still have about 60% of our funding base in CDs and savings. About a third reprices in the first quarter, and we have been kind of in the 3.70% to 3.75% range. We are competing heavily and have done a really great job, but we are observing rates at 3.85% to 4% when we look around at offer rates. Matthew Clark: Okay. Perfect. Thank you. Operator: Your next question is coming from Jackson Laurent with Stephens. Please pose your question. Your line is live. Jackson Laurent: Good morning. This is Jackson on for Andrew Terrell. Maybe coming back to the margin, I appreciate the color on the short-term glide path. But looking a little longer term—you have run at a 4% NIM in the past. Do you see a path to get back to that level? And if so, what is required to get back there? Lynn Hopkins: What you may be referring to is a point in time in RBB’s history where there was a very high percent of noninterest-bearing deposits. In order to move to a mid-3% net interest margin and beyond, it requires a high percent of noninterest-bearing deposits. We remain focused on building the commercial, or C&I, part of our business, which tends to have the more attractive deposits and funding base associated with it. Before we start talking about a NIM with a 4% handle, we need to squarely get into 3% to 3.25%. We believe we have the opportunity to do that, but it does require staying focused on our C&I business, growing that, bringing in more noninterest-bearing or less rate-sensitive customers, and continuing to work with our existing relationships so that we can move down our wholesale funding, which we did in the first quarter. Jackson Laurent: Got it, that is helpful. Thank you. And then just last one for me on fees. Could you talk about gain-on-sale margin trends and how we should think about loan sales versus loan retention going forward? Lynn Hopkins: Loan sales fall into two buckets. One is our mortgage banking business, which tends to be higher volume and lower premium. We like to test the secondary markets to make sure we have an off-ramp relative to our loan production, but generally we hold the majority of it, look at our prepayments, and then balance our mortgage portion of the portfolio against our overall total portfolio. We have kept that at about 50%. We would like to continue to grow our commercial side, which includes multifamily, CRE, C&I, and SBA. On the SBA loan sales, those are smaller dollar volume but higher premium, and we would expect to be at similar, if not higher, levels than what we were able to achieve in 2025. 2025 was a little bit lower than 2024, with a little bit of disruption from the government shutdown and some noise. We still see that as a good opportunity. We hired a couple of people last year, so I think there is still opportunity in fee income to have that move higher in other quarters compared to the first quarter. Jackson Laurent: That is all I had. Thank you for taking the questions. Johnny Lee: Thanks, Jackson. Lynn Hopkins: Thank you. Operator: There appear to be no further questions in the queue at this time. I would now like to turn the floor back over to Johnny Lee for any closing remarks. Johnny Lee: Thank you. Once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great day, everyone. Thank you. Operator: Thank you, everyone. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

27天前Insight Analytics约5分钟阅读