AI Investor Insight

FITB 2026 Q1 财报电话会议

Operator: Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Fifth Third Bancorp Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to [ Matt Curoe ], Director of Investor Relations. Please go ahead. Matt Curoe: Good morning, everyone. Welcome to Fifth Third's First Quarter 2026 Earnings Call. This morning, our Chairman, CEO and President, Tim Spence; and CFO, Bryan Preston will provide an overview of our first quarter results and outlook. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results as well as forward-looking statements about Fifth Third's performance. These statements speak only as of April 17, 2026, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Bryan, we will open up the call for questions. With that, let me turn it over to Tim. Timothy Spence: Good morning, everyone, and thanks for joining us today. At Fifth Third, we believe great bank distinguish themselves based on how they perform in uncertain environments, not in benign ones. We prioritize stability, profitability and growth in that order. We deliver them by finding ways to get 1% better every day while investing meaningfully in the future. Today, we reported earnings per share of $0.15 or $0.83 excluding certain items outlined on Page 2 of the release. Results reflect the February 1 closing of the Chimeric acquisition. Revenue was $2.9 billion, up 33% year-over-year and adjusted net income was $734 million, up 38%. Credit performance was in line with expectations with net charge-offs at 37 basis points. Both NPAs and criticized assets improved modestly. In the quarter, we closed the largest M&A transaction in Fifth Third's history. We delivered an adjusted return on assets of 1.12% and an adjusted return on tangible common equity of 13.7%. Our tangible common equity ratio rose to 7.3% and tangible book value per share increased 1%. We are the only bank among our peers who have reported to date to increase both of these key metrics during the quarter. Fifth Third's legacy strategies are continuing to produce broad-based growth while we execute the [ Comerica ] integration on plan and on schedule. In commercial, legacy Fifth Third C&I loan balances grew 6% year-over-year. Production remained healthy with the strongest activity in manufacturing and construction supported by reshoring and infrastructure investments. [indiscernible] acquisition more than doubled, led by our Southeast markets, and 35% of new clients were fee led with no extension of credit. Importantly, our commercial loan growth continues to come from relationship-based lending and knock from nonrelationship sources. In commercial payments, Newline continue to scale with revenue up 30% and deposits up $2.7 billion year-over-year. During the quarter, [indiscernible] launched a new payment product built on Newline, joining other marquee clients like Stripe and Circle and we advanced preparations for the second quarter launch of the new Direct Express platform. In Consumer, the legacy Fifth Third franchise delivered 3% household growth and 4% DDA balance growth. Southeast households grew 8%, led by Georgia and the Carolinas, and we opened 10 additional branches in the region during the quarter. Consumer and small business loans grew 7%, led by auto, home equity and our Provide fintech platform. Now turning to Comerica. Thanks to timely regulatory approvals, we closed earlier and originally expected on February 1 and have continued to make progress at an accelerated pace. Our top priority is our people, and we're working hard to become 1 team. Since Legal Day 1, leaders have been on the ground in Comerica's major markets nearly every week, and we visited every branch in the Comerica network. We've also hosted product showcases to highlight the breadth of our combined capabilities. Organizational design and leadership decisions are complete, and I'm very excited about caliber of our combined team. On technology, we remain on track to convert all systems over Labor Day weekend with our first full [indiscernible] conversion later this month. As a result, we remain confident that we will deliver $360 million of net cost savings this year and reached an $850 million annual run rate by the fourth quarter. We're also already building a strong pipeline of revenue synergies. In commercial, we're seeing early wins by bringing capital markets, payments and specialty lending to existing relationships. In the first 60 days, our capital markets team completed fuels and metals commodity hedges and executed an accelerated share repurchase for Comerica clients. We also booked our first Comerica to Fifth Third loan win in asset-based lending while Fifth Third referrals helped to build the largest ever pipeline in Comerica's National Dealer Services business. Commercial Payments has presented our managed services solutions to over 100 Comerica clients with 65 of them interested in moving forward. In Consumer, we launched our first Comerica branded deposit campaign in Texas in February. Response rates and average opening balances were broadly consistent with the results that we generate in our legacy Fifth Third markets, and nearly half of new savings customers also opened to checking account. We've hired more than half of the mortgage loan officers and auto dealer representatives that we plan to add this year in Comerica's footprint and pipelines in each of those businesses [indiscernible] build. We'll open our first Fifth Third branded branches in Dallas and Fresno this month, and we now have letters of intent in place or in progress for 81 of our targeted 150 de novo branches in Texas. As I wrote in our annual letter to shareholders, the global economy is a complex adaptive system and such systems react to change in unexpected ways. We're closely evaluating the direct impact of the [indiscernible] on the energy and other commodities as well as the implications for prices, interest rates and customer activity. In an environment where we may not see the macro tailwinds that many expected at the start of the year, the Comerica merger expands Fifth Third's organic opportunity set, and we do not need a perfect backdrop to deliver on our commitments. Before I turn it over to Bryan, I want to take a moment to say thank you to our colleagues. Earlier this month, we surpassed $300 million in total assets for the first time an important milestone that reflects the work we do together to serve customers, support communities and show up for one another. I know many of you are putting an extra effort to support the integration, whether it adds helping customers, learning new products, meeting new teammates or navigating change. Your commitment to getting 1% better every day and your dedication to our clients and to each other is what gives me confidence in what we're building and the opportunities ahead. With that, Bryan will provide more detail on the quarter and the outlook. Bryan Preston: Thanks, Tim, and good morning. Our first quarter results reflect the strength of what we have built and the discipline with which we are executing. Results exceeded our March expectations, driven by stronger NII, disciplined expense management and integration execution on plan. Adjusted ROA was 1.12% and adjusted ROTCE excluding AOCI was 13.7%. The Comerica acquisition closed without tangible book value dilution and and TBV per share grew 1% sequentially and 15% year-over-year. The earnings power of the combined company is intact, and the integration is on track. Given the magnitude of the acquisition, standard year-over-year and sequential comparisons obscure more than they revealed this quarter. What matters is how we exit, a larger, more granular loan portfolio, a lower cost deposit base and larger diversified fee income businesses. Each of those is a deliberate outcome and each positions us to generate stronger and more durable returns as the integration delivers. Now diving further into the income statement, starting with NII and the balance sheet. Net interest income was $1.94 billion for the quarter, above our March expectations. Net interest margin expanded 17 basis points to 330 basis points, driven by the impacts of the Chimeric acquisition. That includes 7 basis points from securities portfolio marks and repositioning basis points from cash flow hedge termination and 2 basis points from purchase accounting accretion on the loan portfolio. A full quarter of these impacts will benefit NIM by a few additional basis points in the second quarter. End-of-period loans were $178 billion, up 2% sequentially from pro forma combined year-end balances. Average total loans were $158 billion, reflecting the February 1 close. The growth was broad-based, strong middle market production, a rebound in line utilization and continued momentum in home equity, auto and our Provide fintech platform. In commercial, line utilization ended the quarter at 40.7%, up approximately 120 basis points from the pro forma combined year-end level and notably held steady throughout the volatility in March. Clients are cautious, but active. On a legacy Fifth Third basis, commercial loans grew 6% year-over-year. Combined with the Comerica addition, shared national credits now represent only 26% of total loans, a deliberate and ongoing reduction in concentration risk. On the consumer side, first quarter auto originations were the highest in 2 years with average indirect secured balances up 10% year-over-year. Home equity balances grew substantially, supported by both the acquisition and strong underlying production. We achieved the #1 HELOC origination market share in our legacy Fifth Third branch footprint. With an average portfolio of FICO of 773 and average loan-to-value of 64%, the production strength is real, and the credit discipline behind it is equally real. Turning to deposits. Average core deposits were $207 million, and the end-of-period core deposits were $231 billion. Noninterest-bearing balances comprised 28% of core deposits at quarter end, up from 25% at the same point last year. That improvement reflects the combined benefit of Comerica's commercial DDA franchise and our continued organic consumer DDA growth. The household growth can strip is showing up directly in our funding costs. On a legacy third basis, consumer household growth of 3% over last year, supported 4% consumer DDA growth. Total deposit costs, including the benefit of noninterest-bearing balances were 158 basis points in the first quarter, a funding cost profile that compares favorably across the peer group. Interest-bearing deposit costs were 215 basis points, down 27 basis points year-over-year, reflecting both that organic deposit mix improvement and the benefit of the Comerica balance sheet. Despite the larger balance sheet, our approach to balance sheet management is unchanged. We prioritize granular insured deposit funding over large wholesale holds. We maintain strong liquidity buffers, and we proactively manage the overall cost of funds. That discipline showed up again this quarter. Average wholesale funding declined 3% year-over-year, even with Comerica balances included. That favorable mix shift lowered the cost of interest-bearing liabilities by 36 basis points. We also maintained full Category 1 LCR compliance at 109% and a loan-to-core deposit ratio of 76%. Now turning to fees. Adjusted noninterest income, excluding securities losses and the other items listed on Page 4 of our release was $921 million, slightly above the midpoint of our March expectations. The most significant milestone here is that both wealth and commercial payments are now generating fee income at the run rate necessary to deliver $1 billion each in annualized noninterest income. That outcome reflects years of consistent, disciplined investment in both businesses and the recurring nature of the revenue. Looking further at wealth, fees were $233 million and total AUM ended the quarter at $119 billion. Legacy Fifth Third AUM trends remained strong, up $10 billion or 15% over last year. Fifth Third Securities delivered strong retail brokerage results, with revenue up 15% year-over-year. These are businesses that we have been consistently investing in and the returns are compounding. Commercial payment fees totaled $218 million for the quarter. Direct Express contributed $14 million in fees for the quarter and approximately $3.7 billion in average deposits for the month of March. New line continues to drive strong fee growth of 30% year-over-year and related deposits reached $5.5 billion, up $2.7 billion from last year. Capital markets fees were $134 million, up 11% sequentially. Increased hedging activities and commodities and FX and strong bond underwriting fees combined with 2 months of [indiscernible] activity were the primary drivers of this growth. Turning to expenses. Page 5 of our release details certain items that had a larger impact on the noninterest expense this quarter, primarily $635 million in merger-related expenses. Adjusted noninterest expense was $1.77 billion, consistent with our guidance. The adjusted efficiency ratio was 61.9%, which reflects the addition of Comerica and normal first quarter seasonality associated with the timing of compensation awards and payroll taxes. On the synergy front, we remain confident in our ability to achieve the $850 million of annualized run rate cost savings in the fourth quarter of this year. Integration activities are progressing as planned against our established milestones and savings are being realized. The expense benefit will build steadily over the first 3 quarters of this year with a more significant increase in the fourth quarter. Once the system conversion and branch consolidations are completed in early September. Shifting to credit. The net charge-off ratio was 37 basis points for the quarter, in line with our expectations and the lowest level in 2 years. The NPA ratio was 57 basis points compared to 65 basis points last quarter. Commercial net charge-offs were 26 basis points, also a 2-year low with stable trends across industries and geographies. Consumer net charge-offs were 58 basis points, down 5 basis points from last year. The consumer portfolio remains healthy with nonaccrual and over 90 delinquency rates relatively stable across all loan categories. We have been deliberate about where we choose to grow. Our exposure to nondepository financial institutions represents only 7% of our total loan portfolio, well below the industry average. Our 3 largest categories are subscription lines supporting capital call facilities, corporate credit facilities to traditional institutions such as payment processors, insurance companies and brokerage firms, and secured lending to residential mortgage-related entities. These are long-standing portfolios. We have deep underwriting expertise in each of them, strong collateral visibility and structural protections where needed, including borrowing base requirements and advance rates that provide significant loss absorption before we would recognize $1 of loss. On private credit, we have chosen not to participate meaningfully in lending to private credit vehicles and business development companies, which combined represent less than 1% of total loans. That was a deliberate decision, not a missed opportunity. The structural complexity embedded in these exposures introduces risks that are harder to assess through a cycle. We would rather grow in categories where we have more transparency to the collateral and have direct relationships with the underlying borrowers. On software and data center lending, we have maintained that same disciplined posture. We believe in the long-term demand for AI infrastructure, but we have also seen how quickly these build cycles can overshoot. We have remained selective and our exposure is intentionally limited. Software-related exposures is less than 1% of total loans, with the portfolio performing in line with expectations with no material migration in the quarter. ACL as a percentage of portfolio loans and leases decreased to 1.79%, primarily reflecting the [indiscernible] acquisition. The ACL as a percentage of nonperforming assets increased to 316%. Provision expense included $83 million for merger-related day 1 ACL build. Our baseline and downside cases assume unemployment reaching 4.5% and 8.5%, respectively, in 2027. We made no changes to our macroeconomic scenario weightings during the quarter. though a qualitative adjustment was applied to reflect the direct impacts of the elevated energy and commodity costs as well as the broader implications for economic growth, inflation and unemployment in the current geopolitical environment. Moving to capital. CET1 ended at 10% and reflecting the impact of the Comerica transaction and strong RWA growth. Under the proposed capital rule, our estimated fully phased-in pro forma CET1 ratio is 9.6%. The RWA benefit to capital ratios associated with the new rule is nearly a 100 basis point improvement, primarily due to credit risk RWA reduction. The proposed rule recognizes the granular, well-secured and relationship-based nature of our loan portfolio. The same portfolio characteristics we have been deliberately building toward over the past several years. The [indiscernible] should expand the ability of the banking industry to support the economy through increased lending capacity. Additionally, our tangible common equity ratio, including the impact of AOCI and the Comerica acquisition increased to 7.3%. Over the last 12 months, the impact of unrealized losses included in the regulatory capital under the proposed rule has decreased by 16%, a 25 basis point improvement to the pro forma capital ratios despite an 11 basis point increase in the 10-year treasury rate. That is the direct result of our strategy to concentrate our AFS portfolio and securities that return principle on a known schedule, which represents approximately 55% of the fixed rate holdings within our AFS portfolio. We expect continued improvement in the unrealized losses as the securities [indiscernible]. Moving to our current outlook. Our outlook reflects the forward curve at the end of March, which assumes no rate cuts or hikes in 2026. Given the updated rate outlook and our more asset-sensitive balance sheet, we are updating our full year NII outlook to a range between $8.7 billion and $8.8 billion. We will continue to take actions to move the balance sheet to a more neutral rate risk position over time. which could include investment portfolio and/or other hedging actions. Our outlook for full year average total loans remains in the mid $170 billion range. Full year noninterest income is expected to be between $4.0 billion and $4.2 billion, reflecting continued revenue growth in commercial payments, capital markets and wealth and asset management. Full year noninterest expense is expected to be $7.2 billion to $7.3 billion, including the impact of $210 million of CDI amortization and $360 million of net expense synergies in 2026. This outlook excludes acquisition-related charges. In total, our guide implies full year adjusted PPNR, including CDI amortization, up approximately 40% over 2025. We remain on track to exit 2026 at or near the profitability and efficiency levels consistent with our 2027 targets. For credit, we expect full year net charge-offs between 30 and 40 basis points. Turning to capital. With the release of the proposed capital rule, we are updating our CET1 operating target to a range of 10% to 10.5%. We expect to resume regular quarterly share repurchases in the second half of 2026 with the amount and timing dependent on the balance sheet growth and the timing of the remaining merger-related charges. Our capital return priorities are unchanged, pay a strong dividend, support organic growth and then share repurchases. For the second quarter, we expect average loans of $178 million to $179 million, driven by growth in C&I, home equity and auto, is projected to be $2.2 billion to $2.25 billion with NIM expanding another 3 to 5 basis points. Noninterest income is expected to be $1 billion to $1.06 billion, and noninterest expense is expected to be $1.87 billion to $1.89 billion. Finally, net charge-offs are expected to be 30 to 35 basis points. The first quarter established the foundation. NII above expectations, tangible book value per share growth intact credit at a 2-year low integration on track and early revenue synergies beginning to show. Those results matter, not just for what they are, but for what they signal. The core business is performing. The integration is delivering. And as we move through the year, the financial profile of Fifth Third will continue to improve in ways that are visible, measurable and consistent with everything we have committed to when we announced this combination. We have the balance sheet, the business mix and the team to get there. With that, let me turn it over to Matt to open up the call for Q&A. Matt Curoe: Thanks, Bryan. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to 1 question and 1 follow-up and then return to the queue if you have additional questions. Operator, please open the call for Q&A. Operator: [Operator Instructions] We'll go to our first question from Mike Mayo at Wells Fargo. Michael Mayo: As you highlighted, this is the biggest acquisition in your firm's history. And it sounds like it's on track from your prior guidance with the Labor Day integration, $850 million run rate savings by the end of fourth quarter. I think we kind of knew that already, but what's incremental in the last 3 months or since your last presentation that you think is maybe going better than expected? Is that any of that higher NII guide due to the expansion in Texas and the promotions? And also, where are you seeing some of the snags? There's always issues with these things, what do you need to make sure you work out and doesn't kind of let down the progress? Timothy Spence: Yes. Mike, it's Tim. I'll take an initial crack at that one, and then I'll let Bryan clean it up. So yes, I mean, we think we did a pretty good job of summarizing the past. As you know, when it comes to these large transactions, the absence of any surprises is a positive, right? So getting 1 quarter closer to a point where we're operating on a single common platform is an important milestone unto itself. In terms of just the core integration, I think things have gone really well. There really haven't been big surprises. We have all the -- we completed the Walk-the-Wall planning exercise that we run all the customer day when deliverables have been locked. I think there are 46 new to Fifth Third applications, which, as we mentioned, from a technology perspective previously primarily support the Tech and Life Sciences business and the Dealer Services business. plus a couple of things in payments. I think the data strategy and the data conversion, that work is completed. All the risk-based process reviews we needed to get done which are essentially the click down from the work that got done in diligence have been completed, and we know where the product gaps are that need to get filled. The org charts are done, as I mentioned in my remarks, and we've selected the key leaders. I'm pleased it's very early days. So this is not by any stretch of the imagination declaration of success. But that sort of employee attrition is actually running a little bit below the historical levels. So we're not seeing any sort of elevation in attrition. I think the positive surprise is actually what is happening in Texas and then even more broadly across the Southeast, is it related to promotional activity. We got a lot of questions after we announced the deal about whether the playbook that's worked so well for Fifth Third and the Southeast would work in Texas and in the Southwest more broadly. So that initial mailing that I referenced in my prepared remarks was a test, right? It was the test and learn process so that we could reground our targeting and expected balance models on empirical data in Texas. We mailed 700,000 households. Response rates were good. The fact that more than half of customers open checking even in an environment where there are still -- all the legacy tech limitations that Comerica had are still in place. I think is very good. But maybe the more exciting thing is that having regrounded the models, we dropped the subsequent mailing on the 10 to 11 of this month to 6 million people and the very early results there are super positive. Like with the sort of reground of the analytic models, like we're getting 3x the response rate that we see at this stage in a campaign packets. And we actually expect that campaign alone to generate $1 billion in deposits across Texas, Arizona and California, which would be great. Now that is all incorporated in the guide to be clear. That's not above and beyond the guide. But it just speaks to a, the fact that the tactics that we are using in the Southeast are going to work in the Southwest and B, the fact that Comerica had not run any sort of external consumer marketing in 13 years. means it's a relatively unsaturated market for us. And therefore, if anything, I think my optimism about our ability to gain share there has improved. Then in terms of what what's not working. We got a little bit of an internal civil war here between people who like their Chile with beans, no beans or on spaghetti. So that we're going to have to solve before we can truly say we're one company. Michael Mayo: All right. That's kind of like my weakness as I work too hard. But okay, I'll [indiscernible] so just I guess is just interesting, like you guys said had very old last century, all these mailings and stuff, but 6 million mailings it sounds like you're getting $1 billion of deposits that will pay off. But how does -- this is all America accounts right now, right? And so after Labor Day, they're all going to become the third accounts. And so seems like that transition has some risk too, going from America to actually branded Fifth Third. How do you manage that transition? Timothy Spence: Yes. I mean the tech conversion, as you know, right, is the single largest point of risk in a transaction because I think we've got a very good employee value proposition here. we've got, on a combined basis, more capability than either company had to serve clients and those things are good for people that the Code Red event that could occur would be if you made a mistake on the tech conversion and either people couldn't access their accounts or you had service issues or processing issues or otherwise. So we're definitely always mindful of that. Assuming that we execute the conversion well, the way that we did with MD as an example, then I actually think the tech conversion is a positive. There'll be a bake-in period where people will need to learn to navigate new interfaces, whether that's the consumer mobile app or the commercial portals and otherwise. But the capabilities that are [indiscernible] in Fifth Third digital channels are much broader than exist inside Comerica's current channels. The point I made about the managed services, like those are software solutions that we offer in commercial payments. The fact that we've shown those things to 100 Comerica clients, we have 2/3 of them as qualified leads in the sales pipeline sort of speaks to the tech quality. What the conversion will allow us to unlock though, is all the digital marketing channels. Like the reason we're not doing digital marketing to support the Southwest markets today is because Comerica can't open consumer deposit accounts digitally. And therefore, there's no sense in using them. once we're under the Fifth Third brand and on the Fifth Third tax stack, the 50% of our direct marketing that gets done via digital today, all of a sudden then becomes viable in the Southwest and all the household growth tactics that we use in addition to the deposit growth tactics and the Southeast become viable as well. Operator: We'll move to our next question from Scott Siefers of Piper Sandler. Robert Siefers: Maybe Bryan hoping to start with you something you can speak to some of the underlying drivers in the core margin. I think I know you suggested the reported level should expand another few basis points in the second quarter due to the full quarter's impact of Comerica. But maybe you could sort of speak to dynamics such as overall rate positioning, which I think you touched on, but maybe competitive dynamics on the loan and pricing side, just those kinds of things that you're seeing? Bryan Preston: Yes. Absolutely, Scott. Thanks for the question. As I mentioned in my prepared remarks, we are asset sensitive today. That is certainly a factor that we are focused on as we think about trying to move to a more neutral position over time. We feel very good about how we're positioned, and that's obviously one of the things that's gone well for us with. The current volatility in interest rates, it's given us some opportunity to do some things in the investment portfolio and put a few positions on in the quarter at pretty attractive levels. So we do feel good about that. From a driver perspective, we do expect some additional improvement from fixed rate asset repricing over the remainder of the year. From a magnitude perspective, it's a little bit less impactful than it has been because 1/3 of our balance sheet was effectively repriced on the with the Chimeric acquisition. So we are still seeing some good trends there. on the legacy Fifth Third portfolio. But obviously, that's just a smaller percentage of the balance sheet now. That's probably 1 basis point, 1.5 basis points kind of pick up each quarter through the end of the year and feeling good about trajectory that gets us approaching to exiting the year closer to 340 from a NIM perspective. So a lot of things going well from a net trajectory perspective. The environment, obviously, it's competitive, we're in an industry that is always competitive, both on the lending side and on the deposit side. I would tell you that it is competitive but not irrational right now. Loan spreads have come in a little bit, but aren't crushing at this point. And we are just seeing normal deposit competition with the Midwest continues to be the most competitive deposit market that we're seeing from a consumer perspective, more competitive than the Southeast, and we're still trying to get a better sense of what Southwest looks like, but it does not look like it's going to be an outlier relative to other markets. Robert Siefers: Okay. Perfect. And then maybe a higher level question here. You all talked about the fourth quarter of this year, representing sort of the time when we really see the full run rate accretion, returns, efficiency. Basically, all the benefits from the Comerica transaction. Basically, all your numbers are going to be at or near best-in-class. As we start to look to a post sort of post Comerica time like into next year when those benefits have really become realized how will you sort of think about balancing additional improvement in profitability, returns, efficiency? Or will those at that point represent sort of steadier states as you do things like invest to just ensure that the levels you reach remain durable over time? Timothy Spence: Yes, that's a good one. And we've been getting a variant to that Scott, over the last, call it, 90 days about, hey, are the synergies durable? Or do they need to be reinvested? I have been telling people if you have to spend it in some other way, that's not an expense synergy. It's a capital application play. So we absolutely believe we can sustain the level of profitability that we expect to achieve in the fourth quarter and continue to improve it. I grew up in the cradle of distance runners and Nike posters as [indiscernible] on my wall going up. So the view here is like there's no finish line, right? We just have -- we've so much in front of us, right? So you want to generate a strong return on equity under any circumstances. But then you want to make the decision at the margin. So if we're at 19%, and we've got a 53% efficiency ratio, the decision on the margin should always be do we utilize continued strength in operating performance to drive higher profitability and boost the TBV the TBV multiple -- or do we focus on growing tangible book value per share or doing a little bit of both of those. I just think we're going to have the ability to continue to do both. Like when I got here 11 years ago, under [indiscernible] 1/4 of the U.S. population lives in our footprint. Today, more than half of the U.S. population does as Bryan mentioned in his remarks, 17 of the 20 fastest growing large metro areas in the U.S. are now in the footprint, and we have a credible as the top 5 market share in all of them. I think we have the freshest branch network. If you just look at it by age of any of the [indiscernible] 3 or 4 banks and maybe any of the LFI banks. We've got this payments business now that's benefiting when nonbanks actually take share from banks, which is great. And we have this huge influx of bankers from Comerica who have the shackles off of them, right, in terms of not being capital or liquidity constrained. And I'm proud of the track record we have for tech innovation. So we will continue always to invest in the core business with the expectation that at 19 -- like 19% ROTCE is great. And if we run out of ideas, then we'll focus on getting 19 to be 20 or 21 or 22. And otherwise, it will be about growing book value per share. Operator: Next, we'll go to Gerard Cassidy at RBC Capital Markets. Gerard Cassidy: Tim, did you have a [indiscernible] poster too with Steve's poster? Timothy Spence: I had Steve and Dick [indiscernible] At my height my lack of foot speed, you had to go with the field athletes as well. So [indiscernible] Gerard Cassidy: Got it. Good for you. When I look at your utilization trends that you gave us, and you touched on it in your prepared remarks, in the appendix, I think it was -- it jumped up nicely from 34.9% in the fourth quarter to 40.7%, and then you give it ex Comerica. Can you give us some color in 2 areas: one, legacy Fifth Third, what you're seeing there? And then also legacy Comerica what are they seeing? Bryan Preston: Yes. From a utilization perspective, Gerard, I would tell you, it's fairly consistent what we're seeing across the Fifth Third Platform and the Comerica platform. which is middle market customers, we're starting to see use a little bit more activity there. We also saw a nice rebound from a corporate bank perspective. I do think part of it was some of the activity that we were seeing from a capital markets perspective because we did see less pay down this quarter from a capital markets payoff perspective. But it was really a -- and we think it was the rebound that we were expecting associated with some of the tax bill benefits coming through, where we just saw some more active spending happening as customers were working through the environment. And then obviously, later in the quarter, obviously, some impacts associated with the situation in the Middle East. Timothy Spence: Yes. Maybe the one thing I'd add there, that is at least based on the cursory read I did other banks that have reported thus far as one thing we didn't see that a lot of other people size. We didn't get a lot of the loan growth from private equity or price capital. So if you look at the growth in loans, less than 10% of it, in our case, came from private equity or private capital. And my quick read through it may be as high as 80% of a lot of other places. One of the things that's comforting about the Comerica portfolio is, they're a lot like Fifth Third in the sense that we bank [indiscernible] businesses, right, primarily privately real economy businesses. People make things or move them or warehouse them or sell them or core services like health care. And otherwise, between the 2 of us, we were both on the low end of the as a percentage of total commercial loans tables. And it just hasn't been a growth focus for us. I think the other thing I might flag there since I know it's come up as we have less than $100 million of funded exposure to data centers, what we definitely have been on the more skeptical end of the spectrum on that front. We talk internally about the fact that we wouldn't underwrite an energy loan without a petroleum engineer looking at the projections. And I don't think there are a lot of us employing AI researchers the cost that they are to help underwrite data center facilities. It's just there's such a long history of overbuilding tech infrastructure anytime there's a platform shift. And the obligors are a little less clear than we personally would prefer. So that is where the growth wasn't coming from in our case. Gerard Cassidy: Very good. And then just one follow-up on the credit quality, which brand you pointed out, the guide for [indiscernible] is very good in the numbers in the quarter are good. One question in the commercial side of the portfolio. And I know this number moves around because of the nature of it. But the 30 to 89 delinquency numbers, even though low. When you look at the commercial and industrial going to 38 basis points of the CRE going up, any -- is it -- anything there that we should just keep an eye on? Or is it just because of the combination of the 2 companies and people maybe didn't know where to send payments. I know that sounds kind of strange, but any color there? Timothy Spence: Yes. It's not quite as basic as they didn't know where to send payments, but the majority of the increase there, Gerard, was 2 credits, and the payments got made on April 1. So if we could have reported all of this as of April 2, you wouldn't have seen the jump that materialize there. Operator: Our next question comes from Ebrahim Poonawala at Bank of America. Ebrahim Poonawala: I had a question first just on deposits. As we go through all these updates does feel like funding is a much bigger constraint for banks as we move forward than capital. Just talk to us around this Southeast strategy what seems like an intense environment. How we -- how are you converting clients acquired through promotions into core checking accounts. Is that happening? Just kind of remind us on where that stands? And maybe tied to the -- one of the previous questions, Tim, when you think about opening these branches in Texas 3 to 5 years from now, just a degree of confidence that branches will still be as relevant 5 years from now as a client acquisition tool as there today? Bryan Preston: Yes, good question. So Yes. I think your point is an important one, your ability to convert relationships into essentially new clients, right, whether you attract them through rate or cash bonus or because of the new branch opening or otherwise, in the primary long-tenured relationships. That's effectively the seed corn for everything that we do because we have an acquirer once and then maximize wallet share strategy. That's the reason we keep disclosing the household growth rates in the Southeast, like those are primary households. If accounts going active, they get washed out of that number. And so you could trust that the 3% overall and in this case, the in household growth in the Southeast, the sort of 7%, 8% range we've been running at as a real number. It's active accounts in 1 period divided by active accounts in the same period the year before, minus 1, right? Timothy Spence: So the population growth in the Southeast is 1.5% to 2% per year in any given market. Our growth rates have been 7% to 8%. So we're generating 3 to 4x the growth on a net basis that the market is experiencing on a net basis. which I think should be the sort of best proof point you can rely on that we're making the conversion. Savings promotions don't count in that number. anything we do with loan products, home equity, et cetera, that doesn't count in the number that's primary checking customers. In the Southwest and in Texas, that we have 81 or 82 of these properties locked up. We're going to have branches opening next year, not in 3 to 5 years, just to be clear. And I think the measure of their importance, like I actually like to think about branches, if you don't think about them as stand-alone mechanisms to generate new account growth, the other way to think about them is attributes, which boost response rates to direct marketing, whether that's digital or male. And there is a nonlinear decay function in response rates and expected value. The further you get away from a Fifth Third branch by drive time in our models today. It's 1 of the more powerful variables in dictating who gets a digital offer, like the IP range or the ZIP code in the case of a mailer actually drive whether or not you see Fifth Third promotions. And as long as that decay function exists, the branches are playing a role in driving our ability to grow the franchise. And I just don't expect human behavior to change that quickly. it certainly hasn't ever in the past. Ebrahim Poonawala: Got it. And just one quick follow-up. You mentioned this a few times in terms of do you mean anything between NBFI growth versus non-NBFI. One, like do you see -- like why do you not -- like do you see the embedded risks in that lending that you don't like? Just give us a sense of like when you evaluate why is it attractive for so many of your peers and not so much when you assess that for Fifth Third. Timothy Spence: Yes. I mean I'm not making a call on private credit and viability. I don't personally believe it's going to go away as a category. I think our view generally has been that the private credit industry is going to be much smaller in the future than people were worrying about like their 2 strategies for growth were retail money, which was always a bad idea and which has been demonstrated again to be a bad idea and by promising returns of 8% to 9%. And which we just viewed as being unrealistic, right? Banks run at like 8 to 10x leverage to get a 15% return. And we have loan revenue, deposit revenue, fee revenue in the mix. the idea that private credit could deliver 8% to 9% with, call it, 2x to 3x leverage with loan-only revenue, just always felt like it was unrealistic. So is there a place in the investment spectrum or on the efficient frontier for something that offers a return between corporate bonds and equities, like absolutely. It just doesn't feel like it's going to be anywhere near the size. Now we're not a very big player in this market. Comerica and Fifth Third together had somewhere around $1 billion of private credit or BDC activity. So I can't speak to the leverage points a lot of others are. The reason we avoided is because we couldn't figure out what total leverage was in these structures between the portfolio companies the back leverage and the NAV lending and the lending to the companies that were doing the NAV lending and the capital call and all the rest. And we don't like things that we don't understand. I think for me, at least, though, the bigger reason to avoid it is it's -- that is not an industry that like lending to is not a place where banks are going to build competitive barriers, which means the return profile is just eventually will gravitate to cost of capital. And we want to generate returns in excess of cost of capital. So when you let your line of business, get too addicted to getting growth from something that's going to be a cost of capital hurdle. It distracts them from focusing on the things that could generate excess returns like primary relationship lending, like managing wallet share, like establishing lead-left positions -- and so that is where we want to get the growth from. It's stuff that can generate a 19-plus percent return over time, not something that's going to generate 11%, 12%, 13%, 14% return over time. Operator: We'll move next to Manan Gosalia at Morgan Stanley. Manan Gosalia: I think in the prepared remarks, you mentioned that the proposed rules recognize granular, say, for well-collateralized loans. So I think you were pointing to opting into ERB. So first, I just wanted to clarify that. And then my main question, Tim, when you think about EBA given that it would allow banks to hold less capital against higher quality loans. Do you think it creates some sort of disincentive or negative credit selection for banks that don't opt in? Bryan Preston: It's Bryan. At this point, we're still evaluating whether or not we will opt in to era. It's not necessarily the driver of creating the big benefit for us. [indiscernible] is probably an incremental 10 or so basis points relative to the numbers that I quoted. And then obviously, there's some complexities associated with data and models and systems in place necessary to do some of the calculations. So that's something that we're still evaluating. There is always some regulatory arbitrage out there, whether it's within the existing capital rules and use of securitization style structures from just general lines or how private credit participates in in the regulatory landscape as well. So there is always that aspect of competition and ultimately, how you think about capital allocation across I don't think it will have ultimately [indiscernible] would have a really big impact ultimately on competitiveness across the industry and between the banks that opt in and those that don't. Timothy Spence: Yes. And I guess the only thing I'd just add there is it sort of depends on how you underwrite like not every bank, just at least 15 years ago when I was a consultant -- not every bank underwrote to the same binding constraints. Not every bank thought the same way about how they calculate returns. The binding constraint here. Obviously, we think about Red Cap and the return on Red Cap in terms of the performance of the company as a whole. But when we look at individual credits, we look at into the amount of economic capital that those credits should attract given the way that we risk rate the credits both in terms of default probability and loss given default. So if all you were looking at was the same capital charge for every loan you underwrite like in a non-urban environment. I think you run into that risk. But certainly the way that we approach it. The decision to opt in or out is going to get made at the macro level. and the individual underwriting decisions and the return calculations get done at an individual company level. Manan Gosalia: Got it. That's really helpful. And then now that we have the proposals for capital I think the focus has been turning to the liquidity rules. I guess the question for you is, what would you like to see there on the liquidity side? And is there something that you want to see that would cause you to manage your liquidity differently from what you're doing? Bryan Preston: Yes. I think the most valuable thing for the industry is some credit and the liquidity rules associated with your secured lending capacity at at places where you know the liquidity is going to be there. Think about your FHLB borrowing capacity against your securities, discount window or repo facilities like those will be areas where getting some credit associated with that off-balance sheet liquidity would be very valuable for the industry. That is probably one of the more significant. We would also like a little bit more rationality on deposit outflow assumptions. That is an area where there has been significant pressure on the industry across the old horizontal liquidity exams that were occurring. And I just think we've ended up in a spot where the assumptions that are embedded in most liquidity stress tests today are just absurdly high relative to some of the core banking relationships, in particular, the operational deposits that are attached to treasury management services. Operator: We'll go next to Chris McGratty at KBW. Christopher McGratty: Tim, I want to come back to the comment about the Midwest being more competitive in the Southeast. It seems somewhat contrary to where all the capital is being allocated from a lot of the banks. Can you unpack that a bit? Timothy Spence: Yes. I mean Chris, this has been true. It's like one of the interesting factors that just been true for a very long time. I think you had 2 dynamics in the Midwest that are a little bit unique relative to the rest of the country. One, historically, you've had a lot more regional banks headquartered in the Midwest, right, and less in the way of trillionaire market share and less consolidated markets tend to be more competitive. That's just -- that's not a blinding insight on my part. That's just economics 101. The second factor is credit unions play a much more prominent role in a lot of the Midwestern markets than they do other places elsewhere in the country. And credit unions tend to be optimizing for very different factors like do not help do a profit mandate and therefore, they tend to be optimizing around just absolute levels of liquidity needed or otherwise. And so the sort of combination of more fragmented markets and an actor that's optimizing around a different set of goals just produces higher levels of deposit competition. That, I think, for us has been 1 of the interesting things as we moved into the Southeast as we have this double benefit of both having a small existing share and, therefore, a low cannibalization cost of any new marketing campaign that we run, right, which is a little bit like Judo you're using your opponent's weight against them. And the fact that at the margin, the marginal dollar in the Southeast is still a little bit cheaper to raise than the marginal dollar in the Midwest. It means we can be more aggressive and still have a very nice impact on the franchise overall. Christopher McGratty: Great. Yes, definitely, with the Chicago being one of the more competitive markets and fragmented. Timothy Spence: I don't know that there's another state with 3 regional banks headquartered in it either the way that Ohio has [indiscernible] Fifth Third and [indiscernible]. Christopher McGratty: Sure. And then, Bryan, just on the full synergies, the cost saves mapping out, can you I guess, help with exit run rate on efficiencies. It feels like low 50s in this year and you kind of go into next year from a pretty good position. But just could you find in that for me? Bryan Preston: Yes. I mean we're -- the expectation is -- that we talked about as being in that 53% range in 2027. Our fourth quarter efficiency ratio is always our lowest efficiency ratio for the year. So I would expect us to be a good point, 2 points below that 53% in the fourth quarter. Operator: We'll go next to Peter Winter at D.A. Davidson. Peter Winter: I was just wondering -- when you first announced the Comerica acquisition, you were targeting a 27% EPS of 4.89. But now that you spent more time with the company, you're getting some early wins on the revenue synergy side, do you see upside to that number because it did not include any revenue synergies? Bryan Preston: Yes. I mean, obviously, that's something that's part of the deal that we would not contemplate any revenue synergies. So anything that we are seeing would be upside. So we do feel good about kind of the progress there. I think we will be striving to outperform what is there? Obviously, 2027 is a long time away and the environment, the rate environment and a lot of other things can change. But we certainly are more positive today about the opportunity in front of us, even though we were incredibly positive at the time of the acquisition. So a lot of things are going well, and we feel good about the trajectory of the company. Peter Winter: Okay. And then if I could just follow up, just -- if I think about Fifth Third, one of the strengths has been managing the balance sheet in different interest rate environments. But Bryan, where are you in the process of repositioning Comerica's balance sheet? You mentioned it's you're asset sensitive now, but how quickly do you want to get back to neutral? Or would you slow walk it just given the higher for longer rate environment? Bryan Preston: The higher for longer rate environment and our outlook and like we are very cautious around what could happen out the curve. So we are trying to make sure that we're balancing capital risk as well with a downrate risk. And all the things that's happened even over the last month or so when you think about what it's going to do to inflation and what is honestly still a fairly reasonably strong economic activity that we're seeing. We just see that there is more bias right now for the higher for longer outlook. So with that, we're probably moving a little bit slower. But as that outlook changes, we would have an ability to accelerate. There's probably in the neighborhood of $30 billion to $40 billion of kind of notional exposure that we could move out the curve as our rate environment out changes. That gives us a lot of flexibility as we navigate this environment. And we think even if you were to start to see some more significant cuts again that what you're likely to see is some amount of steepening that gives you some opportunity for us to deploy and maintain and even grow NII even in a falling rate environment. Operator: And next, we'll go to Erika Najarian at UBS. L. Erika Penala: Just one question because I know we're pushing the limits of length of time. But Bryan, given that there's no cuts in the curve, could Fifth Third maintain deposit costs even if there are no cuts Tim, your ears must be burning because even your money center peers are talking about your competitiveness in their markets. So just wondering what the deposit cost outlook is in an environment where the Fed is not cutting. Bryan Preston: Yes. We absolutely think we can maintain deposit costs even in an environment where the Fed is not cutting. The real wildcard there is ultimately what the balance sheet needs from a growth perspective. If we see a more aggressive loan growth environment, that is an environment that would put a little bit more pressure on deposit costs, but in a fairly rational kind of normalized growth environment, we think we could -- we think we have a lot of optionality to be able to maintain deposit costs where they are. Operator: And next, we'll move to John Pancari at Evercore. Unknown Analyst: This is [indiscernible] on for John. Just one on the fee side. Solid results in the quarter, healthy guide despite the volatility in headlines if this subsided at all, you see this driving much upside from the billion quarterly run rate. I think our wealth and capital markets like you mentioned, I think about how much conservative might be baked in the guidance now again versus potential upside? Bryan Preston: Yes. I mean there's always a little bit of conservatism we put in place relative to capital markets. which we've been talking about hoping for a kind of more stable productive environment now in the hedging environment for a couple of years. So we do think there's opportunity for that as a more stabilized environment to come out. Obviously, that will be helpful from an M&A perspective as well. The rest of the few businesses have been doing fairly well without or even with the uncertainty that we've been facing. So we feel like the tailwinds there and the investments we've been making from a sales force and a production perspective, positions those businesses to continue to grow as well as the investments from a payments perspective and just the categories that we're attached to. So certainly, we think that there is opportunity from a fee perspective to continue to see good outcomes. Operator: We'll take our next question from Ken Usdin at Autonomous Research. Kenneth Usdin: Just one question, just given that it's a partial close quarter. I just wanted to understand the moving parts a little bit. Can you help us understand the dollars of purchase accounting accretion that we're in what you're expecting for 2Q and just how that cascades in terms of the schedule? Bryan Preston: Yes. If you look at the -- we tried to lay that out in our slide deck and our NIM walk. So if you see, there was about $12 million of purchase accounting accretion associated with the loan portfolio in the first quarter. And I think the easiest way to think about that is it's really just 2 months of activity. And it will burn down relatively gradually over the next few years. Most of that is associated with combination of commercial portfolio. So that has a little bit shorter tail on it than if it were residential mortgage exposures. That is kind of the main piece from a purchase accounting accretion perspective. the securities, kind of what was embedded from a securities perspective is basically bringing those securities to current market rates. So the assumption there should there should just be based off of how you think about where market yields are going through the securities. Unknown Analyst: Okay. So basically, that if that's one line that you mentioned in your prepared remarks that [indiscernible] becomes a little bit more in the second quarter. So it's really just that 12% kind of run rating. Is that the only -- I just want to like understand the magnitude of how much of help that is going forward? Bryan Preston: Yes. Well, basically the 12 becoming probably closer to mid-teens when you think about adding a note [indiscernible] for next quarter. Unknown Analyst: Okay. And then just a real quick one. You mentioned also in your prepared remarks that you might get back into the buyback in the second half. Your CET1 with AOCI still on the lower end of peers. Any way to think about like what that looks like when you get to that point? Bryan Preston: Yes. I think in the normalized -- I think in a normalized environment, we would be talking about kind of $200 million to $300 million of buybacks is what our quarter was what our historical run rate has been. Obviously, it's going to be very dependent upon how much we need to support organic growth because being able to lean into lending is an area that is obviously a priority for us always because we'd rather deploy the capital. And earn a higher return, as Tim was talking about, our ability to attract customers and generate high-teens returns is we think, is the best outcome for shareholders. For this year, it's probably going to be a little -- it's going to be less than that as we get into the second half, but we still think there's going to be some opportunity to restart buybacks. Operator: Next, we'll move to David Chiaverini at Jefferies. David Chiaverini: Question on dividend finance. It looks like the deceleration you anticipated is starting to come through in the related uptick in NCOs there is beginning to occur as well. How high should we expect this NCO rate to trend so that we're not surprised given the slowdown is fully anticipated. Bryan Preston: Yes. I think -- it's a good question, and it's one that we think the range we're in right now is probably a reasonable range to expect for a period of time. Obviously, this is an industry that is facing a significant amount of disruption as a result of the tax bill and basically creating a war the leasing product is economically advantaged relative to the lending product. That was not an environment that when we did the original acquisition that we were expecting. We're having a -- we're working through it, and it's obviously not a growth asset for us anymore. But I think the range we're in right now from a charge-off ratio perspective is probably where [indiscernible]. David Chiaverini: Very helpful. And then shifting over to HELOC. The HELOC growth is off to a very strong start in the first quarter, and more than offsetting that headwind on dividend finance. What's driving the strong growth in HELOC? Is it Fifth Third's pricing? Or is it grassroots loan demand from customers? And what is the outlook for this business? Bryan Preston: Yes. The first quarter benefit some from the [indiscernible] acquisition as well. This -- of their consumer lending categories, HELOC was one of the categories that had some loan balance. So that is a driver of probably about half of the first quarter growth. But beyond that, what we're seeing is actually just good grassroots activities. We've made a lot of improvements to that business. and the customer experience in that business over the last couple of years. So it's put us in a spot where we have a really nice engine that's running right now. We're seeing good activity from a branch perspective. The improvements that we've made from a technology and underwriting experience perspective has made it a product that is easier for the bankers to sell. It has just been something that we're seeing a lot of good activity on, and we've also been able to actually lean in to a little bit of marketing in the space as well. And customer acquisition tactics. And honestly, when you just take a step back and think about the dynamics of the amount of home equity that is out there in the market right now and the lack of housing turnover that's occurring. It's just -- it's an area that we think you're going to continue to see significant growth in for some time. I mean we're 2 years -- 2-plus years in now seeing consistent growth equity perspective. Timothy Spence: Yes. The 1 thing I'd just add there is, I think, as Bryan said in his remarks, #1 in market share in our footprint in home equity originations and in the bottom half in terms of pricing. And there's very good pricing data available through aggregators. So we are not competing on lice. It's great originations volume effectively at better spreads than others. Operator: And we'll take our final question today from Christopher Marinac at Brean Capital Research. Christopher Marinac: I want to ask you and Bryan about the NBFI reserve allocation. Would that number necessarily not go up much this year because you're avoiding some of the higher-risk, lower-return pieces of [indiscernible] Bryan Preston: Yes. We're not seeing anything in our [indiscernible] portfolio that would cause us to have any need to build significant reserves related to what we're doing very well secured, very well performing, just not an area where we're seeing in [indiscernible]. Timothy Spence: Yes, absolutely. Before we wrap it, I just quickly want to say congratulations to Keith Horwitz on his retirement and on his 30 years in the community. -- my sense is that he's going to prove out the adage that old [indiscernible] never die. They just stop updating their outlook. So we appreciate Keith for all the years of coverage here and wish him the best in the next phase. Operator: And that concludes our question-and-answer session. I will turn the conference back over to Matt for closing remarks. Matt Curoe: Thank you, Audra, and thanks, everyone, for your interest in Fifth Third. Please contact the Investor Relations department if you have any follow-up questions. Audra, you may now disconnect the call. Operator: Thank you. And this concludes today's conference call. We thank you for your participation. You may now disconnect.

32天前Insight Analytics约5分钟阅读

CNS 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Friday, April 17, 2026. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen Steers. Please go ahead. Brian Heller: Thank you, and welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Mike Donohue, our Interim Chief Financial Officer, and Jon Cheigh, our President and Chief Investment Officer. I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying first quarter earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicles. Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Mike. Michael Donohue: Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. A reconciliation of GAAP to as adjusted results can be found in the earnings release and presentation. Yesterday, we reported earnings of $0.79 per share as compared to $0.81 sequentially. Revenue for Q1 increased from the prior quarter by 0.3% to $144.3 million. The change in revenue from the prior quarter was driven by higher average AUM, partially offset by 2 less days in the quarter. In addition, and as we noted in last quarter's earnings call, there were $1.7 million of performance fees recognized in Q4 related to certain institutional accounts. We typically don't recognize such fees early in the year and we have few performance fee accounts. Our effective tax rate during the quarter was 58.2 basis points. Excluding nonrecurring items, our fee rate was 58.4 basis points which is slightly lower than the prior quarter. Operating income was $50.7 million during the quarter compared to $52.4 million sequentially. The and our operating margin was 35.1% compared to 36.4% in the prior quarter. Ending AUM in Q1 was $93.1 billion, which was up from $90.5 billion at the end of Q4. This end of period change in AUM was driven by positive net inflows during Q1, primarily related to open-end funds. In addition, end-of-period AUM was positively impacted by market appreciation of $2.7 billion during the quarter. As a result, average AUM increased during Q1 to $94.4 billion as compared to $90.8 billion in the prior quarter. Joe Harvey will provide additional insights regarding our flows and pipeline shortly. Total expenses were higher compared to the prior quarter primarily due to increased comp and benefits and distribution and service fees expense. Compensation and benefits was higher compared to prior quarter as a result of the year-to-date compensation accrual true-up to actual that reduced compensation expense in Q4. The compensation ratio for the quarter was 40%, which was in line with the guidance we provided. Distribution and service fee expense was up due to the increase in average AUM, and G&A expense remained consistent with the prior quarter. Regarding taxes, our effective rate was 25.5% for the quarter on an as adjusted basis. Our earnings material presents liquidity at the end of Q1 and prior quarters. Our liquidity totaled $343 million at quarter end, which represents a decrease of $60 million versus the prior period. This quarterly change in liquidity is in line with prior years and driven by the annual incentive compensation cycle for the firm, which occurs in Q1. Let me now touch on a few items regarding guidance for the remainder of 2026. With respect to compensation and benefits, we would expect our compensation ratio to remain at 40% as we experienced in Q1. We expect G&A to increase in the mid-single digits for the year as compared to the prior year. Lastly, regarding 2026 guidance, we expect our effective tax rate to remain consistent at 25.5% on an as-adjusted basis. I will now turn it over to Jon Cheigh, who will lead the discussion of our business performance. John Cheigh: Thank you, Mike, and good morning. Today, I'd like to cover three topics: our performance scorecard, our 2026 outlook given the recent geopolitical events, and last, our long-term structural view of the economy, the market regime and some asset allocation implications for investors. Beginning with our performance scorecard. We continue to build on our record of consistent, long-term outperformance. On a 1-year basis, 86% of our AUM has outperformed its benchmark, while our 3- and 5-year outperformance rates are both above 97%. 95% of our open-end fund AUM is rated 4- or 5-star by Morningstar, which is up from 90% last quarter. In short, we continue to meet our primary objective of providing outstanding long-term performance for our investors. Turning to the investment environment. Coming into 2026, we expected both an acceleration and a rebalancing of global growth with a corresponding broadening of market leadership. While that outlook was spot on early in the year, the current Middle East conflict may have brought that market leadership shift into question. U.S. and global REITs were both up about 10% through February, well ahead of flattish equity markets. As we saw market rotation into the relative laggards of the last several years. While events in March raised some of those gains, REIT still posted positive absolute performance for the quarter with U.S. and global REITs up about 4% and 1%, respectively. Listed infrastructure performance was resilient, up 8% for the quarter. Businesses such as utilities and midstream energy continue to demonstrate their criticality in the world of short-term energy scarcity and the continued power buildout, needed to serve increasing industrialization and AI-related demand. Diversified Real assets rose 12% for the quarter, with strong gains in commodities and natural resource equities. As we saw in 2022, real assets have been a clear winner and diversifier for a 60-40 stock bond portfolio. The asset allocation case for real assets continues to be made. Preferred securities and fixed income classes broadly declined slightly in the quarter as renewed inflation concerns indicate that monetary policy could be tighter for longer. So as we update our economic and market outlook for the rest of 2026, our expectation is that the Middle East military deescalation that began several weeks ago, and will continue, including just this morning over the coming -- over the course of the coming weeks and months. We know it will have its starts and stops. But as long-term investors, our focus is on the trajectory of where we are headed. As a result, our initial 2026 view of broadening economic growth and financial markets remains intact. Now thinking beyond 2026, we believe investors must see recent developments, not as a one-off or a surprise. But instead, as another chapter in a book, which will continue to shape markets for the next 10 years or more. For some time, we have stated that the global economy is undergoing a structural transition one that looks meaningfully different than the prior 30 years. And there are four major themes that we expect will serve as important drivers of asset allocation shifts. First, deglobalization or what we would call geopolitical fracturing. For 20 years, the global economy enjoyed friendly trading relationships and uninhibited delivery of just-in-time resources. In the 2000s, this drove a buildup of global supply chains, primarily in Asia, but a [ deindustrialization ] for much of the developed world. For nearly 10 years now, we've seen repeated reminders that this system, while leading to lower consumer goods prices and higher profit margins was fragile and exposed the global economy to tail risks. In the last 6 years, we've seen four consecutive supply shocks, the pandemic, followed by the War in Ukraine, then tariffs and now the conflict in the Middle East. These are not one-off events. But again, an outcome of shifts in global power dynamics and alliances. This geopolitical fracturing will drive significant fixed asset investment boom greater than what the 2,000 saw from China, driven by reindustrialization and remilitarization. The second major theme is AI and technological disruption. Artificial intelligence is a transformational force on its own. But importantly, it is not a software but rather a hardware story. AI leadership will ultimately be about compute capacity and the marginal cost will likely be about the cost and availability of power. The third theme is inflation uncertainty. In the last decade, inflation consistently undershot expectations. In contrast, inflation in recent years has consistently surprised to the upside, confounding forecasts that expected a quick return to the old normal of low and stable prices. Even as headline inflation has moderated from recent peaks, underlying pressures remain. As you all read in our forthcoming capital markets assumptions, Cohen & Steers forecast consumer inflation to average 3% annually in the U.S. over the next 10 years. Below recent peaks, but well above the 1.6% experienced in the last cycle and significantly higher than the Federal Reserve's long-term 2% target. While AI may produce a productivity boom, which could prove highly deflationary, the investment needed to produce that deflationary boom is highly inflationary. The job of any central banker over the next 10 years will be challenging. Our conclusion is that while inflation is likely to be higher than markets expect. The precise path and pace of inflation represents a major market uncertainty and risk factor. The final important trend is the end of low interest rates. Some of this is about inflation and some is about persistent fiscal deficits. Importantly, we also believe that the market continues to underestimate that we will live in a more capital-intensive world, we took interest rates and credit spreads wider. Hyperscalers shifting from being highly cash flow positive -- [ CASM ] of this shift. Given these four major themes in the next phase, some of last cycle's winners may remain winner, but areas of structural change tend to disrupt market leadership new faces emerge, incumbents decline and entirely different parts of the economy of these shifts are natural resources and the picks and shovels of the global economy. Notably energy, infrastructure and the plumbing that supports construction, transportation and power delivery. This represents a tremendous investment opportunity but also one that comes with challenges of higher and more volatile inflation, as I mentioned earlier. So for our clients, our advice is simple. First, diversification not just in terms of asset classes or listed versus private but instead diversification of investment exposure to different economic drivers, inflation regimes and factors. Second, hard assets, including real assets must be a meaningful allocation sourced from equity and fixed income as a diversifier and as a total return opportunity. Third, investors should use a broader toolkit with some private exposure when it provides unique exposure or an illiquidity premium. But in a highly uncertain world, where the old models may not work, the cost of illiquidity is very high and should be used thoughtfully rather than just for quarterly statement diversification. We believe the first quarter is the continuation of the market's recognition of this major turn in leadership, which will unfold with the remaining chapters of this book. And with that, let me turn it over to Joe. Joseph Harvey: Thanks, Jon. You may be able to hear a fire arm in the background, everything is okay, we're going to proceed. Today, I will review our key business trends in the first quarter and provide an update on our growth initiatives. While we started the year with accelerating fundamentals on February 28, the world changed with U.S. military operations and Iran. As is typical in these situations, business activity slowed for a period as investors attempted to calibrate how long the conflict will last and what the short- and long-term ramifications could be for economies, geopolitics and asset allocation. If the U.S. economy Pre-Iran was reflationary with an upward bias in growth, consensus post war is for stagflation with the key unknowables being how much and for how long. Not to be forgotten, prewar investors were very focused on the existential risk of AI on certain industry groups in addition to credit and liquidity risk and private credit. We believe our liquid real asset strategies fit the so-called halo trade very well, that is heavy or hard assets, low obsolescence with liquidity becoming a more valued investment characteristic. The first quarter's fundamental highlights include net inflows of $497 million a strong one unfunded pipeline of $1.7 billion, characterized by good velocity with continued fundings and new mandates, stable fee rates strong absolute performance and neutral relative performance, while 1-, 3- and 5-year relative performance continues to be excellent. We made good progress with our growth initiatives, including active ETFs, offshore SICAV open-end funds, our non-traded REIT and our recently launched listed private real estate for institutions. Flow highlights by investment strategy include: multi-strategy real asset inflows totaled $142 million, the best quarter since third quarter of 2022. Preferred Securities generated $133 million of net outflows for its strongest quarter since the fourth quarter of '21. And global listed infrastructure recorded its fifth straight quarter of net inflows totaling $96 million after a record year in 2025. The firm-wide net inflows of $497 million represent positive organic growth for 6 out of the past 7 quarters. We recorded our seventh straight quarter of net inflows into open-end funds, with U.S. open-end fund inflows of over $300 million and broad-based contributions of over $100 million into each of our U.S. real estate, preferred securities and our multi-strategy real asset strategies. Our active ETFs continued their momentum with $224 million of third-party net flows in the quarter. Our international SICAV continued their streak of net inflows in 25 of the past 27 quarters. The SICAV recorded $62 million this quarter across a range of countries most notably in the U.K. and South Africa. The most popular SICAV allocations were to our multi-strategy real assets and global listed infrastructure strategies. Looking at institutional trends, our advisory channel had its second consecutive quarter of net inflows with $210 million in the quarter, comprised of five new mandates totaling $287 million partially offset by $76 million termination. Sub-advisory experienced $269 million of net outflows in the quarter with $164 million in outflows from Japan. While we experienced net outflows in Japan sub-advisory for the past 2 quarters, as real estate flows have been challenged industry-wide amidst flows into local bond funds and equity funds, we have slightly improved our industry-leading market share in Japan. The other sub-advisory outflows were due to normal rebalancing by existing clients, partially offset by two new mandates funding $83 million. Looking through the Iran conflict, I like our core strategies as it relates to inflation, deglobalization, AI, rotation to heart assets, among other trends. As we continue to experience inflation, we believe our multi-strategy real assets portfolio is a great solution, which investors are increasingly recognizing. With the long-term criticality of energy back and focus our future of energy strategy, which invests in both conventional and renewable energy could be upgraded to more than just a tactical allocation. Resource equities probably have the best supply-demand future of any strategy I can think of. And the Iran conflict has clearly demonstrated the strategic importance of these businesses due to the profound impact that resource scarcity can have on resource pricing and markets. Real estate returns could be tempered by stagflation, but remember, valuations have reset versus normalized interest rates. The fundamental cycle has turned positive and investors are rotating into tangible assets. Our global listed infrastructure strategy has shown both strong absolute and relative performance and is a beneficiary of the capital investment cycle underway. In addition, we have all been watching the growing concerns in the private wealth channel about liquidity strengths in private vehicles and private infrastructure is probably the most illiquid private strategy being brought to wealth. We, therefore, see global listed infrastructure as a winner and wealth, either as a stand-alone allocation or as a complement to private with proper liquidity protection. Our corporate strategy for active ETFs is going very well. Total AUM for our first five ETFs is currently $675 million. Flows are strong, investment performance is good, and we are gaining traction and scale. Our platforming efforts for ETFs are accelerating. And in the first quarter, we received our first placement on a major broker-dealer platform. We announced the conversion of our future of Energy open-end fund to an ETF which should occur sometime midyear. We intend to launch a version of our multi-strategy real assets portfolio later this year, and we filed for ETF as a share class as many other managers have done. We want full optionality to deliver all of our core strategies in the ETF structure. Our nontraded REIT Coasters income opportunities REIT has established a portfolio of 11 properties owned or under contract totaling $650 million in assets and continues to provide investment performance at the top of the real estate peer group with 10.6% annualized returns since inception against a 4.3% peer average. Our focus on open-air shopping centers has helped drive performance as occupancies of 97% on average translate into very strong pricing power for landlords. A key question for CNS REIT short term is how redemption constraints in private wealth vehicles will affect investor appetite for evergreen vehicles generally. As an industry, we must position these allocations as private strategies with liquidity provisioning as available. And emphasize the importance of liquidity frameworks to protect investors and effectively deploy a long-term investment strategy. In the case of real estate, it is possible that since the return cycle has returned positive -- has turned positive, the category to garner allocations that previously were taken by private credit. The early data in March show increased redemption activity in private credit and an uptick in sales in real estate and infrastructure. Time will tell. We remain constructive on the long-term benefits of blending listed and private real estate and wealth portfolios. And believe we offer compelling solutions across the liquidity spectrum for investors. We've previously discussed the launch late last year of an LP vehicle that invests in core private property funds and listed REITs together. The goal is to deliver a better core allocation to institutional investors using an indexed approach to core funds, combined with listed reach to enhance returns without adding too much volatility and implying an asset allocation overlay. We now have $250 million of fundings or commitments and the strategy is earning the support of a growing list of asset consultants. I wanted to also comment on our short duration preferred strategy. We now have three open-end vehicles with the launch of a SICAV and an active ETF over the past year to complement our $1.9 billion open-end mutual fund and our $1 billion closed-end fund. Our open-end vehicles have yields just shy of 6%, durations of 2.5 years and investment-grade credit profiles of BBB-. Taxable investors in the U.S. realized an additional 100 basis points of tax equivalent yield. Relative to corporate bonds of similar duration, short duration preferreds provide nearly 300 basis points of additional tax equivalent yield to compensate for just three notches of credit quality moving from A- to BBB. As yields on cash and other fixed income allocations have declined, these strategies are starting to see more investor interest. Related in our core preferred strategies, we saw a return to positive flows in the quarter, perhaps as a substitute for private credit. I wouldn't be surprised to see investors accept a lower headline yield with tax benefits for a portfolio of strong, transparent credits dominated by banks, insurance companies and utilities, in the midst of greater uncertainty and less transparency around credit quality within private credit. I'll close with a brief update on distribution, which we've highlighted as a priority for 2026 and 2027. We've made great strides on our plan to invest in distribution, including increased coverage of RIAs and expanded international coverage. All key hires have been made, including a new Head of Japan, a newly created Chief Operating Officer for distribution and additional RIA sales roles. We also promoted [ Brad ] is path to lead wealth and brought in a wealth sales leader on [ Brad's ] team. Our approach to expanding the sales team from here will be success-based, meaning additions will be tied to organic growth. That concludes our prepared remarks. Julianne, please open the lines for questions. Operator: [Operator Instructions] Our first question comes from John Dunn from Evercore ISI. John Dunn: First on the advisory channel. You mentioned it's been 2 straight inflow quarters. Do you think you've moved to kind of a more sustainable place? And is it coming from more existing clients or new ones? And are you seeing potential for clients looking at multiple strategies? Joseph Harvey: Thanks, John. As we've been talking about for the past 3 or 4 quarters, we've seen an improvement in our institutional advisory business as broad conditions have become more favorable, more flexible in investor portfolios. An end toward upping allocations to fixed income and clients continuing to deal with liquidity in their private parts of their portfolio. But we now have a very strong pipeline, I think, for the third straight quarter at $1.7 billion. I talk about the velocity, meaning in the quarter, we were awarded $74 million of new mandates. There was another $45 million that was won and funded in the quarter. And then we also had another $490 million fund in the quarter. So that's good velocity and demonstrates that things have been loosening up in the institutional channel. We also just see more from an intangible perspective, increased activity by clients. It's not RFP business anymore, but we've seen a couple of large RFPs recently. So combined with the outlook that John laid out for our investment strategies, we're optimistic that the institutional advisory channel will continue to perform better and better. John Dunn: Got it. Maybe a little more on ETFs. I mean just -- could you give a flavor of how you're finding clients' acceptance of the vehicle? And are you seeing any cannibalization? And then maybe just could you describe kind of the demand of the different buckets in wealth management? And any potential for any activity for institutional down the road? Joseph Harvey: The tone in active ETFs is very good. You can see that as our flows ramp. And most importantly, it starts with delivering strong performance, which we have done. And the design of these ETFs are to present our core strategies. For distribution considerations, some of them have some slight differences versus our core strategies, but our performance has been very good. The so-called use cases make us very bullish on these vehicles. It starts with the RIAs, many of whom are converting their businesses to use exclusively ETFs compared with open-end funds. We're gaining scale, so that allows us to be placed into models. And as I mentioned in my remarks, with our real estate vehicle, which is now the largest and is what we're best known for, we've achieved platform placement on a major broker-dealer providers. So I would say I'm very bullish on this vehicle. Everything that we're seeing validates the decision to invest in this. And as I said, we're going to continue to get all of our core strategies in these vehicles. As it relates to institutional interest, they're going to need to scale up. We can see -- we've had discussions with different asset consultants about using the vehicles. So I think there are some use cases, but large institutions generally want to have a separate account. John Dunn: Right. Okay. And then you went through the component pieces of the private real estate effort. Are you seeing rising demand? And since you don't have a lot of legacy assets and you're entering or ramping up in a good part of the cycle. Is that a big part of the pitch? And maybe where do you expect demand to come from? Joseph Harvey: I'm not sure I understand the question, John. But as it relates to the private real estate business, when you look at private allocations in wealth, real estate has been the laggard. Private credit has been the leader, as I mentioned, that inflected in March, we'll see if that continues to play out. Infrastructure continues to have good growth. But we believe that based on our views and other views on the real estate cycle that you can see a rotation into the real estate strategies. We're seeing a little bit of that, but it's still early. Our approach to the wealth channel is that we believe that investors should have an allocation to both listed and private, and we're trying to coach our clients on how to do that and how to optimize those portfolios. With our nontraded REIT, as I mentioned, we have -- we're at the top of the leaderboard in terms of performance. And as we gain scale, we believe we'll have the ability to get platformed on more RIA as well as [ wirehouse ] platforms in the future. John Cheigh: Yes. Yes, that's what I was driving that. And then maybe just one more, thinking about the theme of rotation of some money moving to non-U.S. strategies. Global real estate was positive this quarter. Are you seeing any like interest in diversifying? And is that -- could that drive positive flows for global real estate in this year and next? Joseph Harvey: We have been seeing more of that. Go back 1 year, 1.5 years, there weren't a lot of flows into global strategies except for global infrastructure. So I'm talking primarily about global real estate. That was primarily related to U.S. exceptionalism and related stock market performance. But as the world has turned geopolitics have turned, and we've started to see better performance in international markets broadly. We've seen more interest and flows into our global real estate strategy. So I would expect that to continue. It's magnitude. I can't say, but I definitely would expect to see our global portfolios have more interest. Operator: [Operator Instructions] Our next question comes from Mac Sykes from Gabelli Funds. Macrae Sykes: Joe, I wish -- I wanted to ask a question about sort of historical context of shifts to real estate strategies. And I guess, as we think about some of the items you've mentioned this morning. When you're looking at educating capital allocators at some of these bigger platforms that do shifts in these models, what are some of the catalysts for that? Is it sort of adviser interest, is it returns that have just happened, so outperformance of the asset class interest rate. I guess, if you could just dig into some of the things we can watch for in anticipation of more sizable allocations to real estate. John Cheigh: Mac, this is Jon Cheigh. Well, first of all, of course, we're talking with all of the intermediaries about real estate. But of course, all of our asset classes, including infrastructure, preferreds and natural resources. But specifically to real estate, look, it's a combination of investors thinking about the interest rate cycle as well as the fundamental or supply and demand cycle. And so I've said a few times that when you look over the last 3 or 4 years, sometimes people would say, "Oh, well, real estate is done poorly because interest rates are higher." And that's really only half the story. The other reality is that we had too much new supply that got built. So fundamentals weakened. So over the last several years, REIT earnings have probably grown 2%, 3%, 4%, while the S&P was growing 10%, 11%, 12%. So yes, it's an interest rate story, but it's also a fundamental story. So when they revisit the story today, what they're looking at is the S&P is a lot more expensive from a valuation standpoint than it was 3, 4 years ago. It seems like the earnings growth is beginning to decelerate and we all know about the market concentration within the S&P and in some cases, concerns about the significant amount of CapEx that's occurring. So there's -- how is the S&P looking on a price-to-earnings basis versus on a free cash flow basis because you know just as well how capital-intensive the S&P 500 is becoming at the top end. So some of it is as far as real estate versus broader equities is valuations look better. The interest rate adjustment has happened. So being in this 4% to 5% -- 4% to 4.5% range is the new normal, as I talked about. But what we're also talking to them about is the reacceleration of earnings or fundamentals. So that 2% to 3% growth of REITs will probably be more like 5% or 6% this year, 7% or 8% next year. So I'd say that's I'd say the fundamental inflection is probably the bigger thing that our investors are focused on. And this kind of goes back to one of the earlier questions on shifts we're seeing on the advisory channel. We've had a lot of conversations with investors for the last few years. And I think they understood the valuation story, but they were focused on is today the right day? Why 2024, why 2025, why 2026? And real estate fundamentals are slow moving. They're not going to go from being below average to above average in 1 quarter. And so it's taken a couple of years. We've digested some of that excess supply. And that's why I think the story for 2026 to 2027 is about improving fundamentals and stable interest rates and attractive valuations. And that's why we're seeing some of those shifts, whether it's in the public markets but also within the nontraded REIT side, again, a lot of money went into private credit. But as Joe talked about, as that money is looking for the next opportunity you're beginning to see it in the flow data, but we're certainly starting to hear it of -- well, real estate lag, other things have gone up. It seems like a place to pivot back to. So I think we're early in that pivoting process. Macrae Sykes: Just one other question on the private credit side, as you compete, I think a lot of the sales channel adviser-driven component has been some of the fee structures with some of these products. coming with pretty large fee structures and incentives to the adviser. And with your products, actually much more rationally priced and compelling, I believe. But how do you sort of compete with that where the adviser centers? Maybe a more compelling yield perspective from you and liquidity and all that stuff, but yet they come with lower adviser incentives in terms of the sales component. Joseph Harvey: Well, I'm not too familiar with the adviser incentives that you're talking about. But what we think about every morning we would get up is delivering investment performance and managing risk. So we -- as it relates to the private real estate strategy need to deliver a good total return with a balance between current income and capital appreciation and not take undue risk. Unknown Executive: So as it relates to the fee structure for that vehicle, we've made it very investor-friendly compared with the peer group. Operator: [Operator Instructions] we have no more question [Audio Gap]. Joseph Harvey: Thank you, Julianne. We look forward to reporting our second quarter results in July. Meantime, if you have any questions, please reach out to [ Brian Meta ], and we'll talk to you soon. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

32天前Insight Analytics约5分钟阅读

WAFD 2026 Q2 财报电话会议

Operator: Welcome to a WaFd Inc.'s Second Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Goode, Chief Marketing Officer and Investor Relations Manager. Please go ahead. Brad Goode: Thank you, Kevin. Good morning, everybody. Happy Friday. Let's dive into our second quarter earnings report. You can find our earnings press release, along with our detailed fact sheet and investor scorecard on our website, that's wafdbank.com. During today's call, we will make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. Information on risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the Form 10-K for the fiscal year ended September 30, 2025. Forward-looking statements are effective only as of the date they are made and WaFd assumes no obligation to update information concerning its expectations. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings material. With us this morning are President and CEO, Brent Beardall, Chief Financial Officer, Kelli Holz, and our Chief Credit Officer, Ryan Mauer. I'd now like to hand the call over to Mr. Beardall. Good morning. Brent Beardall: Thank you, Brad. Let me start by saying I thought we had an outstanding second quarter, and we are excited to elaborate on the results. This morning, we will cover four areas. First, Kelli Holz, our CFO, will provide you with a detailed review of our balance sheet and our income statement for the quarter. Next, Ryan Mauer, our Chief Credit Officer, will provide comments on the current status of our loan portfolio and credit quality trends. Third, I will provide my insights on the quarter potential for growth capital management strategies and regulatory developments. Finally, we will be happy to answer any questions you have at that point. Kelli, please walk us through the quarterly results. Kelli Holz: Thank you, Brent. As announced, WaFd Inc. reported net income available to common shareholders of $61.9 million or $0.82 per diluted share for the quarter ended March 31, 2026. This compares to net income to common shareholders of $0.65 per share for the second quarter of fiscal 2025 and $0.79 per share for the December 2025 quarter. The $0.03 increase in earnings per share for the quarter was a result of a modest increase in net interest income, controlled expenses as well as 2.7 million shares repurchased during the quarter at a weighted average price of $31.85 per share or 1.05x tangible book value. Our share repurchase spend currently has a remaining authorization of 8 million shares, which depending on share price, provides a compelling investment alternative. For the balance sheet, loans receivable increased $119 million during the quarter, primarily due to an increase in our active loan types Commercial Real Estate, Multifamily, Construction, land A&D, C&I and Consumer, which combined, increased by $359 million. Loan originations and advances for the quarter outpaced repayments and payoffs in our active loan types with originations of $1.5 billion and repayments and payoffs of $900 million. For the inactive loan type, advances were $21 million with repayments and maturities at $276 million. The weighted average rate on originations was 6.22% for the quarter, and the weighted average rate on repayments and payoffs was 6.12%. Please see the tables in our fact sheet that provides a breakdown between our active and inactive loan types. Total investments and mortgage-backed securities increased $191 million during the quarter, funded by borrowings, which increased $626 million. Investment purchases were primarily discount-priced agency mortgage-backed securities with an effective yield of 4.8%. The increase in mortgage-backed securities as part of our overall investment strategy currently replacing the single-family mortgage loans balance runoff. Total deposits decreased by $292 million during the quarter, with noninterest-bearing deposits decreasing $115 million or 4.3% and interest-bearing deposits remaining stable, decreasing just $4 million and time deposits decreasing $174 million or 2%. Deposit outflows in the first calendar quarter reflect predictable seasonal patterns, including annual distributions, tax payments and bonus disbursement. Core deposits ended the quarter at 80.4% compared to the December quarter at 79.7% and up from the September quarter at 77.9%. Noninterest-bearing deposits ended the quarter at 12.2% of total deposits. The loan-to-deposit ratio ended the quarter at 94.5%. WaFd's capital profile remained strong. We estimate our CET1 ratio at quarter end to be 11.4% and our total risk-based capital ratio to be 14.4%. Liquidity is strong with $4.2 billion of on-balance sheet liquidity, a robust core funding base, low reliance on wholesale borrowings and significant off-balance sheet borrowing capacity. For the income statement, net interest income increased $6.5 million from the prior quarter. The effect of the reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by 5 basis points. The net interest margin was 2.81% in the March quarter compared to 2.7% for the quarter ended December 31, 2025. For the spot rate as of the March quarter-end, the yield on interest-earning assets is 5.06%, the cost of interest-bearing liabilities, 2.78% and the margin at 2.81%. Comparing the linked quarter, I'll walk through from the December to the March margin, a 5 basis point net improvement with deposit rates, repricing more favorably than loan rates, a 7 basis point improvement recognizing nonaccrual interest during the quarter, a 6 basis point improvement for day count February being 28 days. We have 50% of our loans and 75% of our securities on a [indiscernible] accrual basis. Offsetting the increases was a 5 basis point decrease related to our securities growth, the mortgage-backed securities purchases at a net spread of approximately 1%, although it puts pressure on the margin, it does add $1.5 million in net interest income per quarter. Absent any changes in interest rates, we expect our margin to be flat in the near term, acknowledging the day count for the March quarter and the funding of loan growth and deposit activity. One piece of good news that will materialize going forward for us is the accretion of $167 million of deferred income related to the interest rate mark on the Luther Burbank loan portfolio. Currently, this is being accreted into income at a rate of $6 million per quarter. We expect this to accelerate as these loans begin to adjust or repay. Total noninterest income decreased $400,000 compared to the prior quarter to $19.8 million, contributing to noninterest income is $6.7 million in commission revenue from our WaFd Insurance subsidiary compared to $4.4 million in the prior quarter, offset by losses of $1.1 million taken on certain equity method investments in the quarter compared to losses of $408,000 realized in the prior quarter. As a reminder, the December 2025 quarter also included a $3.2 million gain from the sale of a branch property. Total noninterest expense increased $4.1 million or 3.9% from the prior quarter as a result of increased compensation and technology expensed reflecting annual merit increases, implement taxes and continued investment in technology. The company's efficiency ratio for the quarter was 55.7% compared to 55.3% in the prior quarter. I will now turn the call over to Ryan to share his comments on WaFd's credit quality. Ryan Mauer: Thank you, Kelly, and good morning, everyone. As reflected in our earnings release, we had a solid quarter of new loan production along multiple product lines. As Kelli indicated, total production in our active portfolio was $1.5 billion for the March quarter. This loan production was centered in Commercial and Industrial of 37%; Commercial Real Estate of 15% and Construction of 35%. Importantly, we were able to achieve this level of loan production with a consistent approach to underwriting that maintained a moderate risk profile. Adversely classified loans decreased by $65 million in the quarter and now represent 2.6% of net loans compared to 2.9% as of the December quarter, and 2.5% as of March 2025. Total criticized loans decreased by $65 million to 4.2% of net loans compared to 4.6% as of the December quarter and 3.3% as of March 2025. It should be noted that the criticized loans are not concentrated in any one business line or industry and are reflective of the economic environment where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers. In addition, an asset being criticized does not imply that loss exposure exists. Rather, it is a representation that the borrower is experiencing some level of financial stress that needs to be addressed. Nonperforming assets decreased to $132 million or 0.48% of total assets from $203 million or 0.75% at December 31, 2025. The change is due to nonaccrual loans decreasing by $67.5 million or 35% since December 31, 2025. REO decreased slightly to $8.1 million and other property owned decreased to 0 with USDA receivable proceeds received. Delinquent loans decreased to 0.78% of total loans at March 31, 2026, compared to 1.07% at December 31, 2025, and 0.27% at March 31, 2025. While still elevated in comparison to recent periods, these credit metrics are trending positively, remain modest in light of WaFd's loan loss reserve and capital position and are indicative of our culture of early and proactive portfolio management. It is important to note here that delinquencies and nonperforming assets are impacted by a large commercial relationship over 90 days past due. Outstanding balances for this relationship amounts to $51 million. Although appropriately placed on nonaccrual per policy, there was no charge-off taken upon revaluation at this point, and we are actively collaborating with the borrower to resolve the issues. If nonperforming assets and delinquencies were adjusted for this relationship, NPAs would be 0.3% of total assets compared with 0.6% at September of 2025, and delinquencies would be 0.52% of total loans compared to 0.6% at September 30, 2025. The net provision for credit losses in the quarter was $4 million, the provision is primarily the net result of increased commercial loan originations. Net loan charge-offs for the quarter represented a nominal 1 basis point annualized of gross loans at March 31, 2026. The allowance for credit losses, including the reserve for unfunded commitments, provides coverage of 1.05% of gross loans at March 31, 2026, compared to 1.01% in March of 2025. For the commercial portion of the portfolio, the allowance represents 1.33% of net loans compared to 1.24% as of March of 2025. Credit metrics at March quarter end, while still elevated from prior quarters, are trending positively, remain at healthy levels overall and continue to be impacted by two primary drivers. First, the elevated interest rate environment has impacted borrowers' expense structures. Second, the economic uncertainty originally driven by tariffs with further expected impact by war in the Middle East and energy supply shocks will continue to impact borrowers' top line revenue results as well as operating costs. Looking forward, these factors remain headwinds for credit quality. With that, I will turn the call over to Brent for his comments. Brent Beardall: Excellent. Thank you, Ryan. No question, the headline for this quarter is loan growth in my opinion. After over a year of seeing our loan portfolio contract, this quarter, we saw growth in the overall net loan portfolio, including inactive segments. More impressive, we saw a 12% increase on a linked quarter basis in the active portfolio. And if you included the yet to be funded loans, gross active loans outstanding increased by 20% on a linked quarter basis. I am pleased to report that the biggest contributor to that growth came from C&I lending segment from a percentage standpoint. Bottom line results for the quarter improved nicely with 4% linked quarter EPS growth and 26% year-over-year, even better if you compare the first 6 months of the year, versus the prior year, we improved earnings per share by 35%. With all of the discussion, an understandable worry about loans to non-depository financial institutions, so-called NBFI loans. I'm very happy to report that NDFI loans at WaFd are only a rounding air at $35 million or 17 basis points of our loan portfolio. We have historically been very skeptical of lending money to others that are going to turn around and lend it out to consumers and businesses, typically at credit standards that are looser than our own. One of the great ironies we see with the surge in NDFI [indiscernible] in the industry over the last few years is that it represented the bulk of C&I loan book. The crowd rushed to get out of CRE assets, or fear potential losses. And many went into what I think were riskier NDFI loans, all for the sake of diversification. We have long believed that concentrations can be a double-edged sword. It all depends on what concentration is in. That is why we remain bullish on well-underwritten commercial real estate loans that typically have a diversified cash flow, real underlying collateral, significant upfront equity and strong sponsor support. Our strategic plan, Build 2030 is designed to fully shift our focus to where we can add the most value for our clients and shareholders, serving the banking needs of businesses. This shift takes time, discipline and effort and comes with specific goals. The most important goal is increasing our noninterest-bearing deposits the total deposits from 11% last year, up to 20% by 2030. Today, we sit at 12.2%. It is an ambitious goal, but it is what we need to do as it will also drive increased loan demand and branch utilization. The way our peers achieved their lower cost of funds is to focus on serving small businesses, which is exactly what we are doing. Here's what we've accomplished so far. It was just last January that we recognized or we reorganized our frontline bankers in three teams. We kick off, Build 2030. During that time, we have become a preferred SBA lender, 99% of our branch managers, formerly specializing mortgage lending have now passed our Small Business Certification process. And we are formed into three business lines: first, our business bank and what commercial credit needs up to $10 million and all small, medium-sized business needs and consumer deposits. This includes our 208 branches. Our corporate [indiscernible] handles all of our large commercial credits and treasury clients and their treasury management leads. Lastly, our Commercial Real Estate Bank, recognizing our historical strength and expertise in CRE, we have a dedicated team to serve the credit and treasury needs of real estate developers and investors. We acknowledge that we have work to do to improve our profitability. As you have heard, our margin was 2.81% from this last quarter with our return on tangible common equity of 10.8%. If we can get our margin up to a little bit higher to 3%, which is our short-term goal over the next 2 years, everything else being equal, ROE or ROTCE would be 12.5%. The key from my perspective is growth in direct C&I loans and low-cost deposits, supported by growth in CRE loans while running an efficient bank. I'm pleased to see our efficiency ratio remain near the top end of our target range at 55.7%. We believe that we have products and the teams in place to grow our active loan portfolios by 8% to 12% going forward. Looking forward, our lending pipeline continues to be quite strong, building on the very strong second quarter we had of $1.5 billion of originations. It is also very encouraging to see new deposit pipeline increased by 66%, on a linked-quarter basis. To give you some specific numbers, our lending pipeline actually decreased from $3.6 billion as of December to $3.2 billion, but that's because of the robust originations we have. The lending pipeline has actually grown down 12.7%. Our deposit pipeline, however, increased from $264 million as of December 31 to $439 million as of March 31. So a 66% increase. It is fun to see the traction [indiscernible] are gaining. Let me speak on deposit competition. As you are all well aware, competition for low-cost deposits is robust and growing. Between the two big [indiscernible] banks that have the advantage of the implied guarantee of the federal government on all deposits, to other regional banks to credit unions and fintechs, there is no shortage of competition and that looks to be getting even more challenging with the upcoming entrants of Elon Musk into the space with this new product X Money. Early indications are they are going to be very aggressive in looking to take market share, advertising 6% rate on FDICEC insured deposits and 3% cash back on debit card purchases. Both of these are fairly loss leaders. What gives me [indiscernible] is the fact that the sponsor is the richest person on earth and confirm losses to take market share for an attending period of time, if he chooses to do so. The good news. We are a relationship bank. We are not priced at the high end of the market today, and I think most consumers will see through the loss leader, [indiscernible] and be skeptical about what the long-term value proposition will be. All of that said, I think X Money could be to traditional banking, what Tesla has been to the auto industry, and it certainly has our full attention. We launched [indiscernible] management on August 31 of last year with the hiring of an experienced team of professionals from a [indiscernible] firm here in Seattle. Our goal is to organically grow wealth management to $1 billion in assets under management in the first 2 years. Early indications remain very positive. AUM amounted to just under $450 million as of March 31, and it is nice to fill a hole we have had [indiscernible]. We see wealth as an essential element growing noninterest income and commercial deposits as many prospects want to find one bank for their full banking relationships. Two significant developments regarding technology. As many of you have -- know we have established a subsidiary, [indiscernible] Labs, that is dedicated to building software for the benefit of our customers. We are the only bank, our size in the country that I know of, that has built its own consumer online and mobile applications. Coming up in this third quarter, we are excited to launch the next generation of our mobile app, which will reduce the time it takes from launch of the app, until a client can see their balances by more than half. Speed matters to our clients, and this will be a huge upgrade. This will also enable us to launch additional differentiated features like consumer positive pay and real-time peer-to-peer payments within the WaFd ecosystem. The developments in AI technology were perhaps the biggest news in the market over the last year. We are actively using AI to assist our software developers which is increasing the pace of development by over 2x. Additionally, this next quarter, we will be launching our AI Call Center Agent that I am really excited about. Our goal is that customers will be able to get the answers to their questions immediately 24 hours a day, 7 days a week, which will provide bandwidth for our bankers to deepen relationships. Let me be clear, customers will always be able to access a live banker, if that is their preference. Our perspective is technology is a tool for clients and bankers to make us better bankers. It is not a replacement for bankers. We sincerely believe that everyone deserves a banker. Turning next to capital. With our stock price written near tangible book value, for some of the last quarter as Kelli mentioned, we were aggressive in repurchasing shares. We repurchased 2.7 million shares at a price of $31.85 or just 105% of tangible book value. This represents 3.6% of the shares outstanding on December 31, 2025. That's still a staggering to me that in 1 quarter, we were able to buy back 3.6% of the company. We continue to believe that with our robust capital levels, when our share price is compressed, share repurchases are the best use of capital. Considering our 10.8% return on tangible common equity this last quarter. Last month, the Federal Reserve announced potential changes to capital calculations that could have a material positive impact for WaFd if approved. The proposal would adjust risk weightings for different loan categories. Specifically, single-family residential loans with the loan to value below 60% would go from a 50% risk weighting to a 25% risk weighting. As of quarter end, the weighted average loan-to-value of our 7.5 -- $30 single-family loan portfolio is less than 40%. What does all this mean? Our initial estimate is, if approved, it would increase WaFd regulatory capital levels by approximately $400 million. This would give WaFd, [indiscernible] and management more options going forward. With a solid preference to fund additional loan growth, followed by returning capital to shareholders, and lastly, looking at strategic M&A. For years, WaFd has been telling all that we're missing a little risk there is in these low loan to value single-family loans. It is gratifying to see regulators acknowledging that with this new rule. At this stage, it is just a proposed rule in making, but we will be paying close attention. By comparison, WaFd should benefit more than peer banks by this proposed rule because of large concentration of single family loans we have. For the past year, we have repeatedly heard from investors that they understand our plan and agree with why we are making the changes [indiscernible] the strategic plan. The only pushback has been they wanted to see execution on the plan. We hope this quarter and future results begin to answer that question. Finally, I want to acknowledge all of the incredible bankers that call WaFd home, to make these results possible. Our most valuable asset is our team. We have bankers that care and want to serve our clients. What we are doing is challenging, but we are making significant progress to becoming a business [indiscernible]. With that, Kevin, we'll open it up to questions. Operator: [Operator Instructions] Our first question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: Kelli, I wanted to ask about the margin. You mentioned 7 basis points on nonaccrual improvement. Is that the linked quarter swing, I think last quarter, you had some headwinds associated with it? Or was that just this quarter alone, positive impact to margin? Kelli Holz: So that's the linked quarter swing. So bringing one of our large nonperforming credits current and bringing back the interest income on to accrual and recognizing that is where you get to 7 basis points. So there was about $2.2 million that was recognized this quarter that is really from prior quarter activities. Jeff Rulis: I see. So the -- I guess, the go-forward kind of flat expectation is sort of absent nonaccrual impact the core flat -- I wanted to check back in -- you've mentioned the path towards 3% in a couple of years. And I guess, as you scratch out gains, where do you see that from? Is that on the funding side mostly? Just trying to kind of get to that 3% figure in over the same time frame? Brent Beardall: Yes, Jeff. So I'll opt in on that one. I think when we say kind of 3% over the short term, that's absent of changes with interest rates, right? Because the who knows where rates are going. We know, who the [indiscernible] of the fed would be at this point. We think just organically, as we reprice the mortgage loans and performance come due. We have that accretion to come into income and then we get a pickup yield as the sort of repriced to come into current market remits on more commercial loans. Then you compound that and drive lower cost deposit growth, there's even more upside with deposits. That's how we think. Jeff Rulis: And Brent, you did allude to the fact of securities growth is actually a net headwind, but a benefit to NII. But that's all sort of baked into the gradual increases, assumption of the positives you mentioned, but maybe additional maybe securities investment kind of headwind margin? Is that all kind of baked into the expectation? Brent Beardall: That is kind of baked in. And you've seen we've been pretty aggressive with the security repurchase -- purchases to this point. we'll probably take our foot off the gas on that as well going forward. So there won't be additional headwind from that. Jeff Rulis: Great. And then my other question was just on the growth or I should say net growth I think, encouraging to see some low single-digit pace so far. If we were to kind of extend that out, and we'll stop short of guidance, but thinking about how you're feeling about the inactive runoff versus active growth. Was this an outlier? Or do you think kind of trying to keep a low single-digit net growth pace is possible in future quarters? Brent Beardall: No, I would say we're very bullish on being able to continue the pace. It feels like we're getting traction, and I think you can see that with our pipeline. And so to have the 12% net growth on the active portfolio and you look at all our growth. So we've overcame what was $275 million of repayments of the inactive portfolio. That's huge [indiscernible] producing that [indiscernible]. I think in the, we've said it kind of 8% to 12% growth on the active portfolio. I think the higher than that range appears very reasonable for us. Operator: Our next question comes from Matthew Clark with Piper Sandler. Matthew Clark: First one for me, just on the loan growth. solid increase in C&I. I just want to get a sense for how much of that growth may have come from [indiscernible] or club deals and where that portfolio sits today? Brent Beardall: Yes. I don't think any of the growth came from [indiscernible] club deals at this point. We have a couple in the pipeline, but no sort of direct originations for this -- and Kelli, you have the overall portfolio of our club yields and a last i checked, we were around $500 million total bookings. Kelli Holz: I can get that number and get back to that. Matthew Clark: Okay. And then on the fee income run rate straight out the noise, it looked like a good result from insurance commissions. I know you've got some wealth is a growth area and SBA gain on sale is as well. But how should we think about that a $20 million run rate that you put up this quarter going forward? Should we cut that down a little bit? Or do you think that's sustainable? Brent Beardall: No. I think that's sustainable. And you mentioned exactly where we want to go, but let me be clear, right now, well we're still working to get profitable. So right now, wealth not a net [indiscernible] item to us, as we understand as part of the business plan and the SBA gain. Right now, we're looking for every earning asset we can. So we're not finding [indiscernible] SBA portion. So this is just good organic fee income and the insurance side. So about $20 million, we think it's very sustainable. Matthew Clark: Okay. And then just on the CD repricing, the CDs that are coming due this quarter, what's the renewal rate we should assume on that slug? Brent Beardall: Yes. So the CDs have gotten more expensive lately because [indiscernible] the market's [indiscernible]. We don't know the rate decreases are coming in [indiscernible]. So we're seeing actually some of the wholesale corporate deposits pricing [indiscernible] those treasuries. So we have balance of $4.2 billion of CDs repricing at 3.68%. And I think right now, we're [indiscernible] to 3.60% rates. Matthew Clark: You said 3.60%? Brent Beardall: Yes, 3.40% to 3.60%. Operator: Our next question comes from Kelly Motta with KBW. Kelly Motta: I didn't [indiscernible] to slide that it was a great quarter for loan growth in the active portfolio. It's really nice to see the commercial growth. Squaring your margin expectations to get to 3% over time clearly requires some -- bringing on some low-cost funding. I think you gave some color about the deposit pipeline. But I was wondering, clearly, part of this plan to shift towards commercial is for the strength of funding. Wondering understanding that some of these relationships take time for deposits to come over. If you could size like how much of this new commercial funding is coming with a core deposit relationship over time? That would be helpful. Brent Beardall: Great question. And Kelly, thank you for acknowledging. We believe this was just a fantastic quarter for us from a lower growth standpoint. The first net growth that we've had in over 5 quarters. So thank you for acknowledging that. And every one of these commercial relationships [indiscernible] operating accounts. So when you get the accounts, the question is how much do they have in deposits. And so typically, we don't get very much new deposit balances, but you get the accounts. So we're seeing a number of accounts continue to be an increase, the balances [indiscernible], and that's just the nature of what we're trying to do. Kelly Motta: Got it. That's helpful. And then I understand that these aren't [indiscernible] or club deals. I'm wondering if you could provide just given how strong the growth was at the average size of the new relationships coming on? Brent Beardall: Yes. We'll follow up with that. It's broad-based because you've got those -- the smaller deals coming in from the branches and the branches are on average between the deals, there are probably $200,000 each on the C&I side, then we've got some larger true commercial deals that are in the $20 million to $40 million range. But we'll follow up with that number for you. Kelly Motta: Last question for me and then I'll step back. Expenses were up quarter-over-quarter, pretty understandable given the strength of growth and and the revenue growth that you had, and there's some seasonality. I know you don't give guidance, but wondering within that, that's a good number to build off of or any sort of puts or takes or special seasonality considerations impact in Q2? Brent Beardall: Yes. No. Good question, though. This is the quarter where we see the annual merit increases kick in and, of course, the increase in taxes for the first calendar quarter. So this is a good run rate for now. But if we continue to produce at these lines, I would expect compensation to increase its -- some of our variable compensation increases, but we want to do that and we're driving value for our shareholders. I think it's a good solid run rate. It could go up slightly from here. We continue to prove outperform, if you will, in terms of [indiscernible] production. Operator: [Operator Instructions] And I'm not showing any further questions at this time. I'd like to turn the call back over to Brad for any further remarks. Brad Goode: Kevin, thank you so much. Thanks, everybody, for joining the morning's call. Please contact me if you have any questions? Have a great rest of the day and a great weekend. Appreciate you being here. Thanks. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

32天前Insight Analytics约5分钟阅读

ALSMY 2026 Q4 财报电话会议

Operator: Welcome to the Alstom conference call. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Martin Sion: Good evening, everyone. Thank you for joining us tonight at short notice. I'm Martin Sion, Group CEO of Alstom. Joining me is Bernard Delpit, Executive Vice President and Chief Financial Officer. We'll start with a few opening remarks on tonight's announcement, and then we'll open the line for Q&A. First, let me be very clear from the start. This is not the way I was expecting to start my mandate. The financial result on cash generation are not at the level you should expect from a market leader, especially with a EUR 100 billion backlog in a growing industry. After the last 12 months, we delivered strong organic sales growth of 7%, but this did not lead to margin improvement. And in a year of record commercial activity with EUR 28 billion of order intake, free cash flow generation should have been much stronger. Multiple factors are at play here. The production ramp-up of new rolling stock platforms has not been as steep as what we expected in the fourth quarter. On other projects that met challenges early in their life cycle, we've not been able to turn them around as planned. And fair to say that the current situation in the Middle East has been an additional constraint. Taken together, this factor will have knock-on effects on near-term financial performance. Over the last 2 weeks since my arrival, I've been visiting factories in Italy, France and Germany. I've got -- I went into the detail of financial reviews and processes. I met people that are highly committed and highly competent. I met teams on the shop floor. I met engineers, project leaders and obviously, the regional management. But one conclusion is very clear. Our ability to stick to planning is not strong enough. In a project business, sticking to planning is essential. And today, development, industrialization and manufacturing across multiple sites are not always aligned, creating complexity. In some cases, productions move ahead while homologation is still pending. That's why my priority is to drive deep operational changes and improve execution quality. In short, this means tighter day-to-day execution, stronger planning discipline and better coordination across engineering, supply chain and production. We will also start a broader reflections about adopting a more focused product and commercial strategy. Of course, in parallel, we will continue to further improve results in Services and Signaling, where I see more opportunities and we'll continue the work done in recent years to improve the quality and risk profile of the order intake across all product lines. As I'm new in the role, I will also be reviewing the portfolio and industrial footprint. This includes reviewing the industrial transformation plan already in place and assessing where adjustment or acceleration is required. Restoring performance in rolling stock is a major opportunity for the group. It is achievable with discipline. This is a necessary step to execute the backlog and prepare the group for sustainable cash generation and profitable growth. We will keep you informed on our progress, and we will outline our action plan later this fiscal year. And I now hand over to Bernard. Bernard-Pierre Delpit: Thank you, Martin. I will now comment on the preliminary unaudited figures for the fiscal year '25, '26 as well as the preliminary outlook for the next fiscal year. Starting with orders. Alstom recorded EUR 27.6 billion of orders in the fiscal year, representing a book-to-bill of 1.4. The second half saw a higher proportion of services contracts compared to the first half. Overall, order intake was well balanced by product line over the full year with both rolling stock and services at a book-to-bill of 1.4. Turning to operations with a particular focus on car production. The group produced 4,284 cars during the fiscal year, down 2% year-on-year. In the fourth quarter, car production came in below our January expectations as some rolling stock projects are ramping up more slowly than anticipated and homologations have shifted. Moving to sales. Alstom recorded EUR 19.2 billion of sales in the fiscal year, up 4% compared to last year. After adjusting for negative currency and scope effects, organic sales grew by 7%. All production lines contributed to organic growth with the exception of systems, which faced a tough comparison base. Turning to profitability. Adjusted EBIT margin for fiscal year '25-'26 lands at around 6%. At constant currency and scope, adjusted EBIT margin is broadly stable compared to the prior fiscal year. On the one hand, execution of contracts signed over the recent years and tight control over SG&A supported margins. On the other hand, this was more than offset by a slower-than-expected execution on some large rolling stock projects and therefore, with associated costs, all those most visibly in the fourth quarter, but also stronger-than-expected execution headwinds on a limited number of late-stage projects in rolling stock as well as higher R&D expenses, it has a negative impact on adjusted EBIT. Altogether, adjusted EBIT margin is coming lower than last year and to the guidance. Moving to free cash flow. Free cash flow for fiscal year '25-'26 amounted to around EUR 330 million. Despite execution challenge, adverse currency effects and effects of geopolitics on payments related to Middle East contracts, we've achieved free cash flow in the guided range. Contract working capital increase was offset by down payments, reflecting strong commercial momentum and by favorable trade working capital. This is not particularly satisfying having met cash guidance 2 years in a row that we are not reconfirming the cash plan for the next fiscal year. Financial net debt is coming as expected, around EUR 400 million at the end of fiscal year '25-'26. Liquidity is solid with a gross cash position of EUR 2.3 billion at the end of March '26, revolving credit facilities of respectively, EUR 2.5 billion and EUR 1.75 billion and a EUR 2.5 billion commercial paper program. Turning now to the preliminary '26-'27 outlook. Commercial activity should remain strong, and we guide for a book-to-bill ratio above 1. Organic sales growth should be around 5%. We expect the adjusted EBIT margin to return to around 6.5% in fiscal year '26-'27. With R&D expenses expected to increase as a percentage of sales, the improvement will be driven by a rebound in gross margin back to levels seen in fiscal year '23-'24. Gross margin in the backlog now stands at 18%. We expect positive free cash flow for year '26-'27. On the one hand, we expect commercial activity will be robust, driving solid down payments. On the other hand, lower margin than previously anticipated. CapEx to support the growth of services being put forward as well as trade working capital changes will weigh on the cash compared to what we previously planned. This concludes our introduction remarks. Now Martin and I will open the floor to your questions. Operator: [Operator Instructions] The next question comes from Gael de-Bray from Deutsche Bank. Gael de-Bray: I guess the first question is for Mr. Sion. I'm wondering if you had time to go through some of the projects yourself. I mean, if the project review, I guess, is not finalized, but I guess I'm trying to judge whether there will be a second round of adjustments potentially later in the year. So that's question number one. Question number two is around the free cash flow guidance, which apparently you expect to remain positive in the upcoming year, although with a negative free cash flow that is expected to be around EUR 1.5 billion in H1. So I don't really get how you hope to turn it into a positive free cash flow for the year given the pretty slow start. And then lastly, at the end, I mean, do you expect the group's net debt to decrease or increase by the end of the next fiscal year? Martin Sion: Bernard, maybe I take the first one and you take the two other. What did I do in the last two weeks? I shared my time between [Technical Difficulty] regional reviews and product line reviews. We were concentrating on the budget process, which was being achieved. So regions by regions, we had the concatenation of all programs and with an overview of all the challenges and also all the achievements of each program. So I did not do a specific program review for each of the programs, but it was regions by regions and product line by product line. The other half of my time, I was in the different sites in France, Germany, and Italy [ and other ] sites to confront what was assumptions -- operational assumptions, which will be behind the financial figure. If we look at today’'s situation, I acknowledge the situation that this is what I know today. It’s true that we have already identified areas where we can put in place immediate improvement in terms of operational excellence and our priority is to secure execution of the projects to deliver what is mentioned in this guidance. Bernard? Bernard-Pierre Delpit: Yeah. As you said, Gael, we expect a strong seasonality in the next year, both in H1 negative around EUR 1.5 billion, you spotted it well. In H2 with a very positive free cash flow expected. By the way, when you look at the track record of those last years, H2 has been stronger and stronger year-over-year. So yes, I confirm strong H2 expected, bringing the cash flow for the year in positive territories and regarding the debt, I expect it’s going to be stable or a slight increase. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: I don't know if you can hear me because I couldn't hear your answer to the last question. There seem to be some distortion on the line, but I'll try anyway. I just -- it's a philosophical question really. And if we think about the last 20 years, free cash conversion has been about 50%, 60%. It's been a long-standing topic. And if we take the free cash, including your new guidance for the 7 years since the merger, you're talking about declaring EUR 1.2 billion of free cash, but probably closer to EUR 2.5 billion of free cash burn if we adjust for hybrid and lease payments and minorities. I have to confess to believing with a number of the managerial changes in the last couple of years that you would be able to change the free cash management of the company to deliver an improved outcome, which we now appear not to be able to achieve. I guess the question would be when you look at the last couple of years, Bernard, and you compare it to, say, your main competitor making a high single-digit free cash margin, what is it you think you've come to understand about the challenges of delivering an improved free cash flow? Bernard-Pierre Delpit: James, to make it very simple, execution makes a difference. And that's where we have -- we are facing some challenges here. So there is no magic trick here. We need to improve execution. So again, I said that I was not really happy with having met the guidance in the last years and semesters and not doing it again next year. I will not answer over the longer cash conversion because what was Alstom 20 years ago is totally different from what Alstom is today. And our plan is to have Alstom very different in the next years from what Alstom has been since the merger in 2021. So we are in this phase, true. And we'll discuss the bridge on free cash flow on the 13th of May when we will have some detailed analysis on what makes the gap to the EUR 1.5 billion that we planned 2.5 years ago. And so we'll make it clear that project execution -- simply project execution makes the difference. Martin Sion: And if I may complete, I mean, the project execution is really concentrated on rolling stock and among rolling stock in the part of the projects, which are -- significant part of the problems are in a part of the projects where we are developing new products, and there are a lot of new products which are being introduced in service. And the end of development, homologation and ramping up production, is a challenge in some sites. The good news is that when we are in serial production, the products are produced efficiently with a good quality and customer satisfaction. So I don't want to give the feeling that it's all the projects on all phases. There are some topics where we should concentrate the effort. James Moore: And Martin, maybe if I could follow up and very nice to meet you, but I noticed a huge improvement in the operational performance in your previous business, Arianespace. And I wondered if you could talk about some of the levers that you use to improve that performance and what you think is relevant for your current role? And from your early exploration of the company, what you identify as topics that could be changed in the way that you perhaps previously changed them in that position? Martin Sion: Yes, I was [ in just 3 ] previous years, CEO of ArianeGroup, which is also a project company with 2 big projects and the one you're mentioning is Ariane 6. And it's clear that one of the levers that we use on Ariane 6 was to really focus all the management in order to secure first as the first flight date and then the production ramp-up. There are levers which are, I would say, usual levers of improvement, which exist in all industrial company. And in a project company, we need to have a strong focus on planning adherence, which is clearly a key even more than in other companies. At the same time, one of the specificity of Alstom compared to Ariane Group is that we've got hundreds of projects. We have an industrial footprint which is very different. We are multi-local. And so it will not be a copy-paste from things we have done before. But I believe that with the people I met in the factories, on the site, we do have the resources in order to improve operational excellence. It will not be something which will be from day 1 to day 2, but there are things that we can start very rapidly. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I got 3 questions as well. My first one is a follow-up to previous question when you answered that the problems are in some rolling stock projects. So I mean, we have heard before that Alstom in a given year is working on hundreds of projects in a year. Can you quantify, are we talking about issues in just a handful of projects? Or is it more widespread across the organization, which means that it might take significantly longer to fix? So that's number one to quantify how many projects out of the total projects that you're working on are really this problem child. The second one is on balance sheet. So when you -- when we look at your cash flow guidance and you're guiding EUR 1.5 billion outflow in first half, when you speak to rating agencies, is your balance sheet strength enough to cope with this first half cash outflow? Or do you think that some action might be required to strengthen the balance sheet? And then the third and final one is on contract assets. When I look at your revenue for last fiscal year as well as guidance, I don't see any haircut on your revenues, which to me doesn't indicate that you are -- you have taken any haircut on contract asset or you are planning to take any haircut on contract asset. And can you confirm if that is really the case? Martin Sion: So what I can say is that there are several projects which are in difficulty, but it's obvious that there are some big projects. And when we are late, then you've got domino effect with significant consequences. But an addition of small projects which are late can have also consequences on the -- for the company. So what we really consider is that we have to improve execution throughout our rolling stock activity, and it's not a topic of solving 1 or 2 or 3 projects. It's more something that we have to address in general and concentrating on the critical phase, which is the ramp-up, which is the headwind that we had this year. By the way, you also know that we have also some projects which are at late stage of execution with low margin, but I think that has been already discussed in the past. Bernard-Pierre Delpit: Yes. Akash, I will take the next one. Yes, I believe the balance sheet is strong and robust enough to deal with the seasonality of H1. Credit metrics are estimated in line with previous fiscal year with solid cash position. The business plan confirms consistency with Baa3 rating expectations. And we are, of course, totally committed on investment-grade rating and further credit metrics improvement. We have an open dialogue with credit agency, but I would not -- and I cannot speak on behalf. But we have an open and transparent dialogue with the agency. And on your last question, contract assets, no indeed, no haircut on contract assets. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 2 as well. But I just wanted to actually understand in the last 3 months, since you had reiterated the 7% guidance before, exactly sort of like all of these -- was it just all of these projects coincided on that? Was it a bit of Middle East pause? Or is it pretty -- a very big chunk and with like 100% drop-through lost? How come you -- that everything just came now or you just found it out now and you had to do adjustments maybe to what was going on before just -- because it was fairly shortly that you've actually had reiterated the 7% margin guidance. Bernard-Pierre Delpit: I will take this one, Daniela. It's true that the operational situation was not the same at the end of December, at the end of Q3. And you remember that we said since the very beginning of the year that the ramp-up was back-end loaded and Q4 was key for volumes and for homologation, for project milestones. So it's true that what happened in Q4 has changed our view on the way to address project reviews that are happening, by the way, in February, March and beginning of April. So that's absolutely true. The situation has changed in the last quarter. But in a way, it was expected that the Q4 was kind of a critical time for the full year. Daniela Costa: Got it. And then just thinking about sort of like the margin guidance for next year and what you factored in, is it sort of the whole versus what you had before, just continuing to roll these problems for longer? Or how much have you factored in already from things like the new way the Section 232 is calculated in the U.S. where it seems like final products now get 25% and the USMCA is overwritten and just general inflation? And then how different are you in being able to deal with this general inflation versus what you were able to do like 2, 3 years ago when we had a similar situation? Bernard-Pierre Delpit: Frankly, Daniela, I don't see the inflation topic as totally crucial for the way we assess our margins going forward. I don't know if it's the time now to give you a proper bridge in terms of moving parts from gross margin in '25-'26 to '26-'27. But for sure, we see a strong improvement from last fiscal year to the next one. And on top of that, you have also to consider volumes. You need also to take into consideration some -- maybe some cautiousness in the way we assess next year challenges because as Martin said, we are in the ramp-up phase. We have not been able to be totally successful, the least we can say in Q4 this year. So the ramp-up continues, and it will be on our agenda -- top of the agenda for H1 this year. And that's why, by the way, we have this kind of seasonality. So inflation, I do not see that as a major topic because as [ you ] said before, we are -- we think, well protected. We look at -- very carefully at everything that happens on logistics and commodities. But I do not think that's the main point that we wanted to raise by updating the margin in '25-'26 and '26-'27. Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: I have 2 groups of questions. I'll start with first on free cash flow. The guidance is up to EUR 1.5 billion cash outflow in the first half. But at the same time, you -- I understand plan to make some positive EBIT in the first half. So can I ask why this gap between cash flow and earnings just keeps widening. The other one, why swings between first half and second half cash flows are just getting bigger and bigger every year? And maybe finally, on cash flow, which component of trade working capital will be driving a big cash outflow in the first half? Is it contract assets or contract liabilities? Bernard-Pierre Delpit: I will try to answer to your question. So it's true that we have a strong seasonality. EBIT has also kind of seasonality. But let me take a step back. When I try to explain what is missing in the cash with the previous plan, it comes from FX, it comes from CapEx, but it comes also from EBITDA. So from that point of view, I think we have very good consistency with what we were saying on EBIT and margin and what we are seeing in terms of free cash flow. Now to your last question, what we see for the working capital, it has to do first with the seasonality in terms of contract liabilities. I mean we think that the phasing of down payments will be more pronounced with less in H1 and more again in H2. And we also have trade working capital in H1 that would be adverse with some payables increase in H1. So I don't know if you can -- it answers all your questions, but please that, that are the moving parts in the equation of free cash flow next year. Vladimir Sergievskiy: Can I also ask then on the balance sheet? It looks like you could have net debt in excess of EUR 2 billion in September and intra-period potentially even higher. Do you think in principle, this is the right balance sheet for a project business, which carries sizable multibillion prepayments? And also, just to clarify, did you manage to speak to Moody's already on those numbers or this conversation is yet to happen? Bernard-Pierre Delpit: Okay. So I say again what I said. We have an open dialogue with Moody's, but I will not share more on that with you. We speak, of course, with Moody's on regular occasions, so they are aware. And second, on the balance sheet, I keep saying the same for the last 2 years. We need to have a strong balance sheet. I think we need to be net cash considering the size of the backlog and the kind of activity that we have. It's not that different from other integrators with some seasonality in what they do. So I have not changed my mind. We need a strong balance sheet to operate in this business. But looking at it with another angle, our liquidity is ample today, and I do not see that at all as an issue. Operator: The next question comes from Jonathan Mounsey from BNP Paribas. Jonathan Mounsey: Just really thinking back to -- obviously, we had a -- we had to clear the [ decks ] exercise in, I think, 2024 and '25 rights issue, hybrid bond, as I remember it. And on the hybrid bonds, my remembering is that the plan was probably to redeem it at the first opportunity, which I think is like 5 years, isn't it 2029? And from memory, if you don't do that, it's almost 3% margin on top of the going rate. Do you think -- I mean, obviously, we're not going to generate at least EUR 1.5 billion to the end of '27. I don't know what comes after, but the starting point on the margin is only 6.5% now. It should have been somewhere in the 7s, high 7s by the end of '27. It's not going to be so now. So all points to less cash generation. What's going to happen to that hybrid now? I understand you've got liquidity for now, but your liquidity would be greatly reduced if you had to redeem that bond? Or is there a potential here that we're just going to turn it into equity? Bernard-Pierre Delpit: Jonathan, I mean, as you said, [ it's an uncalled 5 that we have -- an uncalled 5.25% ], by the way, that we have issued in May 2024. So that's not a question for the short term. And we have not discussed and we will not discuss free cash flow beyond March '27. So it's not a question for today. And the way we will deal with hybrid is something that we discuss at a later stage. But I take your point, but I don't think it's on the agenda for the coming, I would say, months and quarters. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Bernard-Pierre Delpit: Thank you very much. Just want to reiterate that we were dealing with preliminary figures and preliminary outlook. So we will talk to you next on the 13th of May with our fiscal year results and usual financial communication. Thank you very much. Good evening. Operator: The conference is now over. You may now disconnect.

32天前Insight Analytics约5分钟阅读

ALO.PA 2026 Q4 财报电话会议

Operator: Welcome to the Alstom conference call. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Martin Sion: Good evening, everyone. Thank you for joining us tonight at short notice. I'm Martin Sion, Group CEO of Alstom. Joining me is Bernard Delpit, Executive Vice President and Chief Financial Officer. We'll start with a few opening remarks on tonight's announcement, and then we'll open the line for Q&A. First, let me be very clear from the start. This is not the way I was expecting to start my mandate. The financial result on cash generation are not at the level you should expect from a market leader, especially with a EUR 100 billion backlog in a growing industry. After the last 12 months, we delivered strong organic sales growth of 7%, but this did not lead to margin improvement. And in a year of record commercial activity with EUR 28 billion of order intake, free cash flow generation should have been much stronger. Multiple factors are at play here. The production ramp-up of new rolling stock platforms has not been as steep as what we expected in the fourth quarter. On other projects that met challenges early in their life cycle, we've not been able to turn them around as planned. And fair to say that the current situation in the Middle East has been an additional constraint. Taken together, this factor will have knock-on effects on near-term financial performance. Over the last 2 weeks since my arrival, I've been visiting factories in Italy, France and Germany. I've got -- I went into the detail of financial reviews and processes. I met people that are highly committed and highly competent. I met teams on the shop floor. I met engineers, project leaders and obviously, the regional management. But one conclusion is very clear. Our ability to stick to planning is not strong enough. In a project business, sticking to planning is essential. And today, development, industrialization and manufacturing across multiple sites are not always aligned, creating complexity. In some cases, productions move ahead while homologation is still pending. That's why my priority is to drive deep operational changes and improve execution quality. In short, this means tighter day-to-day execution, stronger planning discipline and better coordination across engineering, supply chain and production. We will also start a broader reflections about adopting a more focused product and commercial strategy. Of course, in parallel, we will continue to further improve results in Services and Signaling, where I see more opportunities and we'll continue the work done in recent years to improve the quality and risk profile of the order intake across all product lines. As I'm new in the role, I will also be reviewing the portfolio and industrial footprint. This includes reviewing the industrial transformation plan already in place and assessing where adjustment or acceleration is required. Restoring performance in rolling stock is a major opportunity for the group. It is achievable with discipline. This is a necessary step to execute the backlog and prepare the group for sustainable cash generation and profitable growth. We will keep you informed on our progress, and we will outline our action plan later this fiscal year. And I now hand over to Bernard. Bernard-Pierre Delpit: Thank you, Martin. I will now comment on the preliminary unaudited figures for the fiscal year '25, '26 as well as the preliminary outlook for the next fiscal year. Starting with orders. Alstom recorded EUR 27.6 billion of orders in the fiscal year, representing a book-to-bill of 1.4. The second half saw a higher proportion of services contracts compared to the first half. Overall, order intake was well balanced by product line over the full year with both rolling stock and services at a book-to-bill of 1.4. Turning to operations with a particular focus on car production. The group produced 4,284 cars during the fiscal year, down 2% year-on-year. In the fourth quarter, car production came in below our January expectations as some rolling stock projects are ramping up more slowly than anticipated and homologations have shifted. Moving to sales. Alstom recorded EUR 19.2 billion of sales in the fiscal year, up 4% compared to last year. After adjusting for negative currency and scope effects, organic sales grew by 7%. All production lines contributed to organic growth with the exception of systems, which faced a tough comparison base. Turning to profitability. Adjusted EBIT margin for fiscal year '25-'26 lands at around 6%. At constant currency and scope, adjusted EBIT margin is broadly stable compared to the prior fiscal year. On the one hand, execution of contracts signed over the recent years and tight control over SG&A supported margins. On the other hand, this was more than offset by a slower-than-expected execution on some large rolling stock projects and therefore, with associated costs, all those most visibly in the fourth quarter, but also stronger-than-expected execution headwinds on a limited number of late-stage projects in rolling stock as well as higher R&D expenses, it has a negative impact on adjusted EBIT. Altogether, adjusted EBIT margin is coming lower than last year and to the guidance. Moving to free cash flow. Free cash flow for fiscal year '25-'26 amounted to around EUR 330 million. Despite execution challenge, adverse currency effects and effects of geopolitics on payments related to Middle East contracts, we've achieved free cash flow in the guided range. Contract working capital increase was offset by down payments, reflecting strong commercial momentum and by favorable trade working capital. This is not particularly satisfying having met cash guidance 2 years in a row that we are not reconfirming the cash plan for the next fiscal year. Financial net debt is coming as expected, around EUR 400 million at the end of fiscal year '25-'26. Liquidity is solid with a gross cash position of EUR 2.3 billion at the end of March '26, revolving credit facilities of respectively, EUR 2.5 billion and EUR 1.75 billion and a EUR 2.5 billion commercial paper program. Turning now to the preliminary '26-'27 outlook. Commercial activity should remain strong, and we guide for a book-to-bill ratio above 1. Organic sales growth should be around 5%. We expect the adjusted EBIT margin to return to around 6.5% in fiscal year '26-'27. With R&D expenses expected to increase as a percentage of sales, the improvement will be driven by a rebound in gross margin back to levels seen in fiscal year '23-'24. Gross margin in the backlog now stands at 18%. We expect positive free cash flow for year '26-'27. On the one hand, we expect commercial activity will be robust, driving solid down payments. On the other hand, lower margin than previously anticipated. CapEx to support the growth of services being put forward as well as trade working capital changes will weigh on the cash compared to what we previously planned. This concludes our introduction remarks. Now Martin and I will open the floor to your questions. Operator: [Operator Instructions] The next question comes from Gael de-Bray from Deutsche Bank. Gael de-Bray: I guess the first question is for Mr. Sion. I'm wondering if you had time to go through some of the projects yourself. I mean, if the project review, I guess, is not finalized, but I guess I'm trying to judge whether there will be a second round of adjustments potentially later in the year. So that's question number one. Question number two is around the free cash flow guidance, which apparently you expect to remain positive in the upcoming year, although with a negative free cash flow that is expected to be around EUR 1.5 billion in H1. So I don't really get how you hope to turn it into a positive free cash flow for the year given the pretty slow start. And then lastly, at the end, I mean, do you expect the group's net debt to decrease or increase by the end of the next fiscal year? Martin Sion: Bernard, maybe I take the first one and you take the two other. What did I do in the last two weeks? I shared my time between [Technical Difficulty] regional reviews and product line reviews. We were concentrating on the budget process, which was being achieved. So regions by regions, we had the concatenation of all programs and with an overview of all the challenges and also all the achievements of each program. So I did not do a specific program review for each of the programs, but it was regions by regions and product line by product line. The other half of my time, I was in the different sites in France, Germany, and Italy [ and other ] sites to confront what was assumptions -- operational assumptions, which will be behind the financial figure. If we look at today’'s situation, I acknowledge the situation that this is what I know today. It’s true that we have already identified areas where we can put in place immediate improvement in terms of operational excellence and our priority is to secure execution of the projects to deliver what is mentioned in this guidance. Bernard? Bernard-Pierre Delpit: Yeah. As you said, Gael, we expect a strong seasonality in the next year, both in H1 negative around EUR 1.5 billion, you spotted it well. In H2 with a very positive free cash flow expected. By the way, when you look at the track record of those last years, H2 has been stronger and stronger year-over-year. So yes, I confirm strong H2 expected, bringing the cash flow for the year in positive territories and regarding the debt, I expect it’s going to be stable or a slight increase. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: I don't know if you can hear me because I couldn't hear your answer to the last question. There seem to be some distortion on the line, but I'll try anyway. I just -- it's a philosophical question really. And if we think about the last 20 years, free cash conversion has been about 50%, 60%. It's been a long-standing topic. And if we take the free cash, including your new guidance for the 7 years since the merger, you're talking about declaring EUR 1.2 billion of free cash, but probably closer to EUR 2.5 billion of free cash burn if we adjust for hybrid and lease payments and minorities. I have to confess to believing with a number of the managerial changes in the last couple of years that you would be able to change the free cash management of the company to deliver an improved outcome, which we now appear not to be able to achieve. I guess the question would be when you look at the last couple of years, Bernard, and you compare it to, say, your main competitor making a high single-digit free cash margin, what is it you think you've come to understand about the challenges of delivering an improved free cash flow? Bernard-Pierre Delpit: James, to make it very simple, execution makes a difference. And that's where we have -- we are facing some challenges here. So there is no magic trick here. We need to improve execution. So again, I said that I was not really happy with having met the guidance in the last years and semesters and not doing it again next year. I will not answer over the longer cash conversion because what was Alstom 20 years ago is totally different from what Alstom is today. And our plan is to have Alstom very different in the next years from what Alstom has been since the merger in 2021. So we are in this phase, true. And we'll discuss the bridge on free cash flow on the 13th of May when we will have some detailed analysis on what makes the gap to the EUR 1.5 billion that we planned 2.5 years ago. And so we'll make it clear that project execution -- simply project execution makes the difference. Martin Sion: And if I may complete, I mean, the project execution is really concentrated on rolling stock and among rolling stock in the part of the projects, which are -- significant part of the problems are in a part of the projects where we are developing new products, and there are a lot of new products which are being introduced in service. And the end of development, homologation and ramping up production, is a challenge in some sites. The good news is that when we are in serial production, the products are produced efficiently with a good quality and customer satisfaction. So I don't want to give the feeling that it's all the projects on all phases. There are some topics where we should concentrate the effort. James Moore: And Martin, maybe if I could follow up and very nice to meet you, but I noticed a huge improvement in the operational performance in your previous business, Arianespace. And I wondered if you could talk about some of the levers that you use to improve that performance and what you think is relevant for your current role? And from your early exploration of the company, what you identify as topics that could be changed in the way that you perhaps previously changed them in that position? Martin Sion: Yes, I was [ in just 3 ] previous years, CEO of ArianeGroup, which is also a project company with 2 big projects and the one you're mentioning is Ariane 6. And it's clear that one of the levers that we use on Ariane 6 was to really focus all the management in order to secure first as the first flight date and then the production ramp-up. There are levers which are, I would say, usual levers of improvement, which exist in all industrial company. And in a project company, we need to have a strong focus on planning adherence, which is clearly a key even more than in other companies. At the same time, one of the specificity of Alstom compared to Ariane Group is that we've got hundreds of projects. We have an industrial footprint which is very different. We are multi-local. And so it will not be a copy-paste from things we have done before. But I believe that with the people I met in the factories, on the site, we do have the resources in order to improve operational excellence. It will not be something which will be from day 1 to day 2, but there are things that we can start very rapidly. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I got 3 questions as well. My first one is a follow-up to previous question when you answered that the problems are in some rolling stock projects. So I mean, we have heard before that Alstom in a given year is working on hundreds of projects in a year. Can you quantify, are we talking about issues in just a handful of projects? Or is it more widespread across the organization, which means that it might take significantly longer to fix? So that's number one to quantify how many projects out of the total projects that you're working on are really this problem child. The second one is on balance sheet. So when you -- when we look at your cash flow guidance and you're guiding EUR 1.5 billion outflow in first half, when you speak to rating agencies, is your balance sheet strength enough to cope with this first half cash outflow? Or do you think that some action might be required to strengthen the balance sheet? And then the third and final one is on contract assets. When I look at your revenue for last fiscal year as well as guidance, I don't see any haircut on your revenues, which to me doesn't indicate that you are -- you have taken any haircut on contract asset or you are planning to take any haircut on contract asset. And can you confirm if that is really the case? Martin Sion: So what I can say is that there are several projects which are in difficulty, but it's obvious that there are some big projects. And when we are late, then you've got domino effect with significant consequences. But an addition of small projects which are late can have also consequences on the -- for the company. So what we really consider is that we have to improve execution throughout our rolling stock activity, and it's not a topic of solving 1 or 2 or 3 projects. It's more something that we have to address in general and concentrating on the critical phase, which is the ramp-up, which is the headwind that we had this year. By the way, you also know that we have also some projects which are at late stage of execution with low margin, but I think that has been already discussed in the past. Bernard-Pierre Delpit: Yes. Akash, I will take the next one. Yes, I believe the balance sheet is strong and robust enough to deal with the seasonality of H1. Credit metrics are estimated in line with previous fiscal year with solid cash position. The business plan confirms consistency with Baa3 rating expectations. And we are, of course, totally committed on investment-grade rating and further credit metrics improvement. We have an open dialogue with credit agency, but I would not -- and I cannot speak on behalf. But we have an open and transparent dialogue with the agency. And on your last question, contract assets, no indeed, no haircut on contract assets. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 2 as well. But I just wanted to actually understand in the last 3 months, since you had reiterated the 7% guidance before, exactly sort of like all of these -- was it just all of these projects coincided on that? Was it a bit of Middle East pause? Or is it pretty -- a very big chunk and with like 100% drop-through lost? How come you -- that everything just came now or you just found it out now and you had to do adjustments maybe to what was going on before just -- because it was fairly shortly that you've actually had reiterated the 7% margin guidance. Bernard-Pierre Delpit: I will take this one, Daniela. It's true that the operational situation was not the same at the end of December, at the end of Q3. And you remember that we said since the very beginning of the year that the ramp-up was back-end loaded and Q4 was key for volumes and for homologation, for project milestones. So it's true that what happened in Q4 has changed our view on the way to address project reviews that are happening, by the way, in February, March and beginning of April. So that's absolutely true. The situation has changed in the last quarter. But in a way, it was expected that the Q4 was kind of a critical time for the full year. Daniela Costa: Got it. And then just thinking about sort of like the margin guidance for next year and what you factored in, is it sort of the whole versus what you had before, just continuing to roll these problems for longer? Or how much have you factored in already from things like the new way the Section 232 is calculated in the U.S. where it seems like final products now get 25% and the USMCA is overwritten and just general inflation? And then how different are you in being able to deal with this general inflation versus what you were able to do like 2, 3 years ago when we had a similar situation? Bernard-Pierre Delpit: Frankly, Daniela, I don't see the inflation topic as totally crucial for the way we assess our margins going forward. I don't know if it's the time now to give you a proper bridge in terms of moving parts from gross margin in '25-'26 to '26-'27. But for sure, we see a strong improvement from last fiscal year to the next one. And on top of that, you have also to consider volumes. You need also to take into consideration some -- maybe some cautiousness in the way we assess next year challenges because as Martin said, we are in the ramp-up phase. We have not been able to be totally successful, the least we can say in Q4 this year. So the ramp-up continues, and it will be on our agenda -- top of the agenda for H1 this year. And that's why, by the way, we have this kind of seasonality. So inflation, I do not see that as a major topic because as [ you ] said before, we are -- we think, well protected. We look at -- very carefully at everything that happens on logistics and commodities. But I do not think that's the main point that we wanted to raise by updating the margin in '25-'26 and '26-'27. Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: I have 2 groups of questions. I'll start with first on free cash flow. The guidance is up to EUR 1.5 billion cash outflow in the first half. But at the same time, you -- I understand plan to make some positive EBIT in the first half. So can I ask why this gap between cash flow and earnings just keeps widening. The other one, why swings between first half and second half cash flows are just getting bigger and bigger every year? And maybe finally, on cash flow, which component of trade working capital will be driving a big cash outflow in the first half? Is it contract assets or contract liabilities? Bernard-Pierre Delpit: I will try to answer to your question. So it's true that we have a strong seasonality. EBIT has also kind of seasonality. But let me take a step back. When I try to explain what is missing in the cash with the previous plan, it comes from FX, it comes from CapEx, but it comes also from EBITDA. So from that point of view, I think we have very good consistency with what we were saying on EBIT and margin and what we are seeing in terms of free cash flow. Now to your last question, what we see for the working capital, it has to do first with the seasonality in terms of contract liabilities. I mean we think that the phasing of down payments will be more pronounced with less in H1 and more again in H2. And we also have trade working capital in H1 that would be adverse with some payables increase in H1. So I don't know if you can -- it answers all your questions, but please that, that are the moving parts in the equation of free cash flow next year. Vladimir Sergievskiy: Can I also ask then on the balance sheet? It looks like you could have net debt in excess of EUR 2 billion in September and intra-period potentially even higher. Do you think in principle, this is the right balance sheet for a project business, which carries sizable multibillion prepayments? And also, just to clarify, did you manage to speak to Moody's already on those numbers or this conversation is yet to happen? Bernard-Pierre Delpit: Okay. So I say again what I said. We have an open dialogue with Moody's, but I will not share more on that with you. We speak, of course, with Moody's on regular occasions, so they are aware. And second, on the balance sheet, I keep saying the same for the last 2 years. We need to have a strong balance sheet. I think we need to be net cash considering the size of the backlog and the kind of activity that we have. It's not that different from other integrators with some seasonality in what they do. So I have not changed my mind. We need a strong balance sheet to operate in this business. But looking at it with another angle, our liquidity is ample today, and I do not see that at all as an issue. Operator: The next question comes from Jonathan Mounsey from BNP Paribas. Jonathan Mounsey: Just really thinking back to -- obviously, we had a -- we had to clear the [ decks ] exercise in, I think, 2024 and '25 rights issue, hybrid bond, as I remember it. And on the hybrid bonds, my remembering is that the plan was probably to redeem it at the first opportunity, which I think is like 5 years, isn't it 2029? And from memory, if you don't do that, it's almost 3% margin on top of the going rate. Do you think -- I mean, obviously, we're not going to generate at least EUR 1.5 billion to the end of '27. I don't know what comes after, but the starting point on the margin is only 6.5% now. It should have been somewhere in the 7s, high 7s by the end of '27. It's not going to be so now. So all points to less cash generation. What's going to happen to that hybrid now? I understand you've got liquidity for now, but your liquidity would be greatly reduced if you had to redeem that bond? Or is there a potential here that we're just going to turn it into equity? Bernard-Pierre Delpit: Jonathan, I mean, as you said, [ it's an uncalled 5 that we have -- an uncalled 5.25% ], by the way, that we have issued in May 2024. So that's not a question for the short term. And we have not discussed and we will not discuss free cash flow beyond March '27. So it's not a question for today. And the way we will deal with hybrid is something that we discuss at a later stage. But I take your point, but I don't think it's on the agenda for the coming, I would say, months and quarters. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Bernard-Pierre Delpit: Thank you very much. Just want to reiterate that we were dealing with preliminary figures and preliminary outlook. So we will talk to you next on the 13th of May with our fiscal year results and usual financial communication. Thank you very much. Good evening. Operator: The conference is now over. You may now disconnect.

32天前Insight Analytics约5分钟阅读

INDB 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for joining us. Welcome to the Independent Bank Corp. First Quarter Earnings Call. Before proceeding, please note that during this call, we will be making forward-looking statements. Actual results may differ materially from these statements due to a number of factors, including those described in our earnings release and other SEC filings. We undertake no obligation to publicly update any such statements. In addition, some of our discussion today may include references to certain non-GAAP financial measures. Information about these non-GAAP measures, including reconciliation to GAAP measures, may be found in our earnings release and other SEC filings. These SEC filings can be accessed via the Investor Relations section of our website. Finally, please also note that this event is being recorded. I would now like to turn the conference over to Jeffrey J. Tengel, CEO. Please go ahead. Jeffrey J. Tengel: Thank you. Good morning, and thanks for joining us today. I am accompanied this morning by CFO and head of consumer lending, Mark J. Ruggiero. When we last spoke in January, I highlighted several major areas of focus for Rockland Trust in 2026: organic growth, expense management, and capital optimization. Our first quarter results reflect progress in all of these areas. While reported loan and deposit growth were somewhat muted, I will talk later about why we remain encouraged with our ability to continue to grow organically. And we held the line on expenses and continue to proactively manage our capital. The first quarter also saw continued NIM improvement, increasing 13 basis points from the fourth quarter. This reflects pricing discipline across both our loan and deposit portfolios. Excluding loan accretion income, our adjusted NIM rose by 8 basis points. Mark will elaborate on our NIM during his comments. Excluding M&A charges, expenses were down 1.5% from the fourth quarter as we realized the impact cost savings from the Enterprise transaction, which was offset by seasonally higher employee and occupancy costs. Additionally, the quarter reduction benefited from the absence of certain outsized expenses incurred in the fourth quarter. With the investments we have made in people and technology over the past few years, we believe we have the scale to continue to grow without significant additions to our expense base. We returned $94 million of capital to shareholders in the first quarter, including the repurchase of 802,000 shares for $63 million. I would like to point out that despite our aggressive capital actions, tangible book value rose to $47.86. We also recently announced an 8.5% increase in our quarterly dividend. With expected further improvement in our profitability and moderate balance sheet growth, we expect capital management to remain a key priority for the balance of the year. There is a significant amount of work underway as we prepare to transition our core operating platform from Horizon to IBS, both part of the FIS ecosystem. The conversion is scheduled to take place in October. The new operating system will provide additional product capability and enhanced efficiencies that reflect the size and scale of our organization. This is an important milestone for Rockland Trust and will position us for future growth. Related, I would like to take a moment to talk about AI. This is obviously a topic on investors’ minds. In the first quarter, we established an office of digital innovation. We have established a governance framework around our AI activities to ensure we stay within the guardrails of our moderate risk profile and any actions are consistent with our award-winning culture. This governance framework includes a steering committee that will serve as a clearinghouse for AI use cases. This will allow us to make AI investments in those areas that have a meaningful payback and avoid the proverbial boiling the ocean. I expect us to start with some relatively easy use cases as we build muscle memory. Over time, this should enable us to gain confidence in our ability to execute and take on bigger, more impactful applications. I mentioned earlier that loan and deposit growth was somewhat muted in the quarter. Given the Iran war, the marked volatility in interest rates, and the lingering inflationary environment, it should be no surprise there is not a uniform consensus on the current business climate from our bankers and customers. The duration of the war and its impact on oil prices will dictate the ultimate effect on distribution companies, contractors with truck fleets, manufacturers, construction firms, and energy-intensive operators. Clients broadly expect prolonged energy and commodity price volatility to weigh on cost structures. While a notable share of our clients indicate that they have adjusted to the current rate environment, others suggest that the higher rates have delayed expansion plans. Lastly, inflation remains a dominant concern across sectors, particularly with respect to labor, health care benefits, materials, and utilities. Suffice to say, the environment is best characterized as somewhat challenging. I would summarize our customers’ mindset as cautious. Importantly, though, we have not seen any meaningful stress in our loan portfolios as a result of the current environment and our customers continue to manage through this very well. With that as a backdrop, our total commercial loans declined by $50 million from the fourth quarter. If we peel back the onion a bit though, underlying results were stronger than reported. For example, excluding the impact of the $39 million decrease in our dealer floor plan business, which we are exiting, our C&I loans rose at a healthy 7% on an annualized basis. In addition, we would note that the office portfolio contributed $56 million of the $94 million drop in commercial real estate balances for the quarter. Our CRE concentration now stands at 283%, and we believe we have achieved most of the targeted reduction in transactional CRE business. While we have reduced transactional CRE balances, we funded $179 million of relationship-based CRE loans in the first quarter and added $290 million of CRE commitments. We still like the CRE asset class and will continue to support our clients in this space the way we always have. This dynamic continues the rebalancing of our commercial lending business. C&I loans now represent 25% of total loans versus 22% at year-end 2024. It is important to note that our C&I growth is being driven by core relationship banking. We do not have any exposure to the NDFI or private credit segments that have driven much of the industry’s loan growth. In summary, we are optimistic about our market position. We have the product set and talent to drive commercial loan growth going forward. Our approved commercial loan pipeline totaled $313 million, up from $278 million at year-end. But importantly, we will not sacrifice credit structure or rate for new business. This is consistent with how the legacy Rockland Trust has always operated. On the funding side, period-end deposit balances were essentially flat. The 1.5% decrease in average deposits from the fourth quarter is consistent with prior years, as seasonality tends to adversely impact business operating balances in the first quarter of the year. DDAs represent 28% of overall deposits, and the cost of total deposits was 1.36% in the first quarter, highlighting the immense value of our deposit franchise. Similar to the loan portfolio, and as we have said many times, we will not sacrifice rate to show deposit growth with transactional one-product customers. With respect to asset quality, our net charge-offs were 11 basis points for the first quarter, and have averaged just 11 basis points over the last year. As we suggested last quarter, we are not out of the woods yet with respect to our office portfolio. This quarter, several office loans exited the bank while a couple of new office loans were added to criticized status. We continue to believe the challenges within our office portfolio are identifiable and manageable. As I have mentioned in the past, there is no quick fix here. We remain diligent in managing this portfolio segment. While we are confident the worst is behind us, we will continue to be transparent with the market as we work down this asset class. Our wealth management business continues to be a key fee income driver for us. Despite an incredibly volatile market, our AUA were essentially flat at $9.2 billion as positive net asset flows and strong relative portfolio performance mostly offset market-related declines. Importantly, we were pleased with the diversity of new client inflows. Revenues grew at an 11% annual rate driven by higher asset-based fee revenue and insurance commissions. We believe first quarter results represent another step forward in driving improved profitability at Rockland Trust. We remain focused on accelerating our organic growth, reducing our CRE office portfolio, and prudent capital management. These actions, coupled with our industry-leading deposit cost, disciplined expense management, and operational excellence, will return INDB to our historical market premium valuation. I feel particularly confident about Rockland Trust’s positioning across our markets, driven by the strength of our products, the dedication of our people, and the effectiveness of the strategies we put in place. I want to thank all Rockland Trust employees for their tremendous efforts in making the first quarter a success. Every measure of our success is a direct result of their commitment. On that note, I will turn it over to Mark. Mark J. Ruggiero: Thanks, Jeff. To summarize the quarter results, 2026 first quarter GAAP net income was $79.9 million and diluted EPS was $1.63, resulting in a 1.31% return on assets, a 9.02% return on average common equity, and a 13.67% return on average tangible common equity. Excluding $3 million of merger and acquisition expenses and the related tax impact, the adjusted operating net income for the quarter was $82.1 million, or $1.68 diluted EPS, representing a 1.35% return on assets, a 9.27% return on average common equity, and a 14.05% return on average tangible common equity. As Jeff alluded to in his comments, we maintained our robust CET1 capital ratio at 12.87% while repurchasing $63.3 million in capital during the quarter and increasing our common dividend 8.5% to $0.64 per quarter. With only $24 million left on the current repurchase authorization, we anticipate establishing another round here in the second quarter as we continue to prioritize capital return to shareholders amidst an uncertain economic environment. We saw this element of uncertainty play out during the quarter in a couple of areas. The first area I will note is in regards to pricing competition, particularly on the deposit side. As a bank that has never looked to lead with rate, we have seen some flow of excess customer funds leave for pricing that we are not willing to match. This dynamic, combined with seasonal volatility, led to the fairly flat deposit balances quarter over quarter. We operate with conviction that finding the right balance of pricing discipline while supporting our relationship customers is crucial. And we believe the Q1 results of flat deposit balances while reducing the cost of deposits 10 basis points is a strong outcome of this philosophy. On the lending side, we saw demand impacted in a few areas, as all of the macroeconomic uncertainty that Jeff just talked about is keeping some customers on the sidelines. Our largest commercial portfolio, multifamily, is one particular asset class where we have seen this impact. With the reduced CRE portfolio much more representative of our legacy relationship lending profile, and an overall concentration level now in the low-280% range, we are comfortable suggesting a forward growth strategy commensurate with our historical approach. While this CRE strategy continues to play out, we remain extremely optimistic over our near-term C&I growth prospects. Reiterating the $39 million decrease associated with our winding down of the dealer floor plan portfolio, other C&I balances increased $78 million during the first quarter, or 7% on an annualized basis. In addition, the rebuild of our approved total commercial pipeline should bode well for second-half growth in 2026. On the consumer side, typical seasonality drove reduced overall volumes in the mortgage business, but an increase in salable activity kept mortgage banking results relatively flat while absorbing runoff of lower-yielding portfolio balances. And home equity volume has remained consistently strong with the $10 million increase in balances despite continued lower utilization rates versus pre-COVID levels. Switching gears a bit, the combination of the deposit cost reductions that I just discussed along with loan and securities cash flow repricing dynamics drove a solid 8 basis point lift in the core margin. And with elevated purchase accounting accretion versus the prior quarter, the reported margin rose sharply to 3.9% for the quarter. The balance sheet remains very well positioned to continue to drive consistent improvement in the net interest margin, while providing flexibility to lever up or down as needed to stay neutral to any short-term rate changes from the Federal Reserve. Moving to asset quality, we highlight the following notable items for the first quarter. Total nonperforming assets increased to $98.7 million, or 0.52% of total loans, driven primarily by the downgrade of one office loan which has an approximately $2.8 million specific reserve established. Net charge-offs for the quarter were $4.8 million, or 11 basis points annualized, with $4 million related to a CRE relationship that was partially reserved for last quarter. And as a quick positive update, this $4 million charge-off loan was associated with a nonperforming office loan that actually repaid the full remaining balance subsequent to year-end, in fact, just a few days ago. The first quarter provision for loan loss was $5.5 million. And while total criticized and classified loans increased versus the prior quarter, Q1 levels of 4% of total commercial loans remain in the range we have experienced over the last year or so. The downgrades to criticized status during the quarter were primarily isolated to a few credits, with no identified loss reserve recognized at this point. Our fee income businesses performed in line with expectations for the quarter, coming in relatively consistent with the prior quarter results despite fewer days in the quarter. Jeff provided color on the positive momentum within our wealth management group, and we are also pleased with the continued expansion of our treasury management services as many of the newer C&I customers leverage the full suite of cash management products that we offer. On the expense side, I will first point out that we did have a final round of severance related to the Enterprise acquisition that made up the majority of the $3 million of M&A expenses for the quarter. Total core expenses of $139.9 million are slightly higher than our guidance due primarily to significant snow removal expenses, which were a little over $2 million for the quarter. We remain focused on analyzing all areas of the bank to ensure expenses are appropriate and justified as we move forward into an environment where we know technology will play a larger role. Along those lines, our work on the upcoming core conversion is ongoing, with approximately $1.1 million of expenses in the first quarter directly attributable to those conversion efforts. And lastly, as expected, the tax rate increased from the prior quarter to 23.38%. With that, I will now finish up by revisiting our 2026 guidance. First, we reaffirm our two primary profitability targets for 2026. The first is return on average assets of 1.4% and the second is return on average tangible capital of 15%. Regarding loan growth, we update our CRE and construction full-year estimates to now be flat to low single-digit percentage increases. All other loan and deposit estimates remain unchanged. For the net interest margin, we increase our estimate to suggest that 2026 fourth quarter margin will now be in the range of 3.9% to 3.95%, while still assuming a 10 basis point impact from purchase accounting accretion. All other guidance remains unchanged from the prior quarter. That concludes my comments. And with that, we will now open it up for questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Justin Crowley with Piper Sandler. Your line is open. Please go ahead. Analyst: Hey. Good morning, everyone. Hi, Doug. Good morning. Was wondering if you could start off on loan growth. Tweaked the guide a bit lower on the CRE side, of course. So I was just curious if you could expand even a little more on what informed that decision. And then also if you could just give us a sense, you mentioned some caution on the borrower side, but just as far as demand, how you have seen borrowers respond with some of the heightened macro volatility and how long you think that could maybe persist. Jeffrey J. Tengel: Yeah. On the CRE side, it is interesting because the commercial real estate market has gotten very, very competitive. It is really competitive at the low end with a lot of the smaller banks and the mutuals, and we see it at the larger end too with some of the larger banks. And it is a space where, as I said in my comments, we are not going to stretch for structure or for rate, and so we think that the environment is really very, very competitive. So we are continuing to support our existing clients where we can. The other thing that I think is providing a little bit of a cloud over the commercial real estate business in Eastern Massachusetts anyways is the prospect of rent control. And so a lot of the multifamily projects—these would be mostly construction loans—really are not happening. A lot of the investors are on the sidelines and they are not commencing with any of the historical pace that they would have in the construction space in that multifamily asset class. So we have definitely seen a marked slowdown there. With respect to the second part of your question, it is kind of hard to pinpoint when that is going to turn. If you could tell me when the war is going to be over and when the price of oil is going to return to where it was prior to the war, I think I might have maybe a little bit better answer, or maybe in listening to our clients have a better sense for how they are thinking about it. But I think caution right now is definitely the word I would use to express how generally our middle market and lower middle market client base feels. It does not mean there is no activity at all. We still have clients that are very healthy and very strong and they will continue to invest where they think it is prudent. But it definitely is causing the owner-operators that we typically bank—it is just giving them pause, and it probably makes them think a little bit long and hard. You know, the phrase about measure twice and cut once I think is definitely something that they are running through their minds. Analyst: Okay. Got it. That is helpful. Mark J. Ruggiero: Sorry. I was just—from a guide standpoint, I think all of that uncertainty certainly has increased a bit over the first quarter. And I think just a bit of a positive element to it that, you know, the $40 million office loan we had a sense could come to fruition here in 2026. But having that play out in the first quarter and creating a little bit more of a drag on net loan growth was—those are probably the two primary drivers to just being practical around the expectations going forward. But I think in terms of opportunity and the pipeline growing, as Jeff alluded to, there is still a lot of optimism and positivity there. I think it is just, you know, a little bit more uncertainty with the war and the office payoffs, to be quite honest, driving the guide reset. Analyst: Okay. Understood. And then just flipping to, you know, on the credit side, you saw nonperformers up a bit and then had the criticized inflow. Can you provide a little more detail on the drivers there? I think you mentioned office is a factor, at least on the nonperforming side, a bit. I am not sure of the extent when you looked at criticized balances. And then I know it is pretty formulaic at this point, but just how do you call the input, how that gets you to an allowance that was pretty flat for the quarter, and just where you feel or how you stand on credit quality? Jeffrey J. Tengel: Yeah. I will take the first part of that, Justin, and then I will let Mark take the second part. With respect to the criticized assets, we really had three larger loans that moved to criticized status that make up the bulk of that increase. And all three are in different asset classes. Only one of those is in the office asset class, one of them is C&I, and the other one I think is the multifamily space, which is really the first multifamily loan that I think has been criticized in quite some time. And in that particular instance, it is just a little bit slower lease-up, which we are not overly concerned about. It is just taken a bit longer, and we were just being prudent in moving it to criticized status. But still feel really, really confident that things are going to work out. So that is the quick overview of the increase in criticized loans. And as Mark pointed out, we are still well within the historical levels of criticized loans that we have operated at in the past. I will let Mark address the second part of your question. Mark J. Ruggiero: Yeah, I think from a provisioning standpoint, it dovetails into a bit of that answer, which is obviously the downgrades on those loans Jeff talked about drive a bit higher allocation in the model as you would expect. But they are not at a point now where we have any reason to suggest there is a specific reserve or actual loss reserve that needs to be set. So as a—call it a risk-rated 7 loan versus a risk-rated 6 loan—there is a higher allocation in the model, but it will not move the needle too much. So that drove a little bit of the need for provision. I talked about the $4 million charge-off in the quarter. That was a couple million dollars higher than what we had reserved as of last quarter. So that required a couple million dollars in provision. And then, you know, we are tweaking the model a bit to have a bit more of a conservative macroeconomic environment factor playing through. I think on the consumer side, we feel really good about the credit picture right now, but I think you would be naive to suggest there is not a little bit more pressure on the health of the consumer. So, you know, $1 million or $2 million of added reserve on mortgage and home equity portfolios is appropriate. So those would be the three main drivers behind the $5.5 million provision. Obviously, there was not much loan growth, so that helps from a provision standpoint, but it was really the charge-off, the downgrades, and a little bit of build on the consumer side. Analyst: Great. And then just one last one. You know, a good chunk of the buyback in the quarter. Obviously, a lot of volatility in the market. But with average pricing coming in about where we are at today, just curious if you could speak a little more on the ability and appetite to keep this sort of a pace as you look to reduce excess capital. Mark J. Ruggiero: Yeah. I can tell you it will absolutely be a priority. You know, the goal high level would be to keep capital relatively flat. Now we can lever up and down a little bit from there, but I think that is the right level that will allow us and afford us to do a bit of management over holding company liquidity, CRE concentration, and obviously optimizing capital. So I would—we have not announced a new plan yet. I am very comfortable suggesting we will likely put one in place here in the second quarter. But the level of buybacks should be at a pace where we are going to try and keep capital relatively flat. Analyst: Great. I appreciate it. I will leave it there. Thanks for the time this morning. Jeffrey J. Tengel: Thanks, Michael. Operator: Your next question comes from the line of David Conrad with KBW. Your line is open. Please go ahead. David Conrad: Yes. Thanks. Just really a follow-up on the capital and the buyback. I mean, your CET1 level is about 12.09. Mark J. Ruggiero: And you started the buyback, and it really did not budge. And I think earnings power is going to improve even if loan growth improves a bit. So maybe balance the discussion of why you would want or desire to keep that flat instead of working that down a bit, and how you weigh the environment with, like, narrowing credit spreads and excess competition with potential—using that for a potential buyback to offset that. Chris O’Connell: Yeah. It is a fair— Mark J. Ruggiero: question. You know, I think we are still feeling like there is a growth path that we would like to leave some level of capital flexibility. You know, ideally—I have said this a few times now—ideally, we would grow into that excess capital position, but we also are being realistic and recognize, you know, we are talking a lot about uncertainty in the environment. That is going to keep loan growth somewhat at bay. So we absolutely are looking at a minimum to basically keep flat. Doing more than that, David, to be honest, some of the practical limitations there will be funding. So in a holding company–bank structure, the way you will typically fund that ideally would be through earnings and through bank-to-holding-company dividends. Doing that at a pace that exceeds earnings puts some pressure on the ability to rely on that as a funding base. So we would have to go to the outside market to borrow if we really wanted to ratchet that up. And I am not saying we would not do it, but we are still weighing that pro and con. And then we are still being cautious about keeping CRE concentration at a range that we think is appropriate and allows us to grow when the market turns. So that 280% to 290% range, we are very comfortable with. But the more we do on the buyback side, the more that constrains keeping that CRE ratio in that range. We are trying to find that right balance of, like I say, at a minimum keeping capital flat. That will not pressure funding and/or CRE concentration. But when you start to exceed that, we would just have to weigh sort of the pros and cons. David Conrad: Got it. Fair enough. And then maybe a follow-up. Just regarding the Fed’s proposal for Basel III, just want to get any thoughts on risk-weighted assets with any potential benefit in your mortgage or CRE portfolio, given their guidance? Mark J. Ruggiero: Yep. Yeah. We have done some rough modeling on that and think we would be comfortable suggesting our impact would be aligned with probably what you are seeing as sort of the industry expectation. Meaning, with 25% of our book in the consumer space—mortgage, home equity—where our LTVs are, I think you would expect to see somewhere around 15 basis points of risk-weighted asset relief there. And then on the commercial side, in general, 5 basis points of RWA relief. So that probably pencils out to 7% or 8% sized basis points. So 5% reduction in RWA, 15% reduction on the mortgage side. It is about a 7% to 8% reduction in risk-weighted assets, which gives you about $150 million to $160 million of capital relief when this comes to fruition, which certainly allows for an expectation for even more buyback or, obviously, just more capital flexibility. Chris O’Connell: Great. Perfect. Thank you. Operator: Your next question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead. Mark J. Ruggiero: Hi. Good morning, guys. Jeffrey J. Tengel: Hi, Steve. Chris O’Connell: Hey, Jeff. Mark. Mark J. Ruggiero: Maybe just— Analyst: you know, going back to the loan pipeline here and loan yields, just good to see the step up in activity and the organic growth there. Just kind of curious, where are you guys putting on loans these days? Mark J. Ruggiero: Yeah. On the commercial side, Steve, it is low 6s—probably 6.10% to 6.20% range. Runoff is in the 5% to 5.25% range on the commercial side, so you are still getting that 100 basis point lift or so on the churn. On the consumer side, there is not a lot of portfolio mortgage going in, but that is probably a little bit lower yield, call it 5.75% to 6%. Most of the home equity volume continues to be prime, so that is obviously at a better rate. But the biggest driver on the commercial side, call it, low 6s replacing low 5s. Chris O’Connell: Okay. Analyst: And then in terms of the securities cash flows here that you have coming off, just curious—Mark, you mentioned deposit pricing, obviously saw some things run off. Are you thinking of using some of those cash flows to continue to manage higher-cost deposits lower, or are you thinking about parking those in securities here or just what is the dynamic of thinking going forward? Mark J. Ruggiero: Yeah. I think from a balance sheet position and liquidity management perspective, we would be looking to keep the securities portfolio pretty flat where it is. I probably would not want it to get too much lower. Where we are—maybe down to 11%–12% we certainly would be comfortable—but I think I would expect to see the majority of the cash flow go back into the securities portfolio. We are seeing good yields there, and we are very conservative in terms of managing that portfolio. We are buying deep-discounted, fairly matured mortgage-backed securities. We are not stretching for yield in that portfolio, but we are getting, on average, 4%–4.25% rate. And that is replacing—in the first quarter, actually $100 million that came off was at a 1.50% rate. I would expect more of what is going to run off in the second half of the year to be closer to 2%. But that dynamic, giving you 200 to 225 basis points of lift on the securities book, is another big driver of the margin expansion you saw. But I would—long way of saying I would expect us to keep that portfolio relatively flat. Analyst: Okay. Appreciate that color. And then in terms of just the multifamily business in Massachusetts, you guys have about a $2.9 billion book. Just kind of curious, with the rent legislation here, are you guys going to tighten underwriting standards? Are there any thoughts of adjusting the way you operate on that front? And could that be a little more of a headwind beyond just this year if it passes? Jeffrey J. Tengel: Yeah. I mean, the—the most obvious headwind would just be the muted new business coming from construction loans in the multifamily space. As I mentioned in my comments, I think a number of investors—and I have spoken to several of them—they will tell me, look, we have choices. We do not have to invest in Massachusetts. We can invest in Connecticut or New York or wherever. And so I think until that issue gets—there is some clarity around it, I think there is going to continue to be muted demand on the construction side. Within the existing portfolio, our multifamily portfolio is—I would suggest—pretty seasoned. It has been underwritten consistent with historical Rockland Trust conservatism. We do not underwrite to trended rents or any of those sorts of things. So we feel really good about the existing portfolio of multifamily loans that we have because we have not seen any signs of stress as we move through these quarters. So I think the biggest challenge is going to be with new business as opposed to feeling like our existing portfolio is going to experience stress. Analyst: Okay. Fair. And then in terms of just going back to the office credit here, just want to clarify with regard to the payoff and the charge-off. Is it fair to—did I understand correctly that you charged off the $4 million and then the remaining balance, which I am assuming is the $13.07 million on the—in the deck—was paid off just a few days ago? Or is it just the recovery? I am just kind of— Mark J. Ruggiero: No. No. We charged it off to the P&L to what we knew was going to be the sale price, then that sale went through this week. Chris O’Connell: That is what I expected. I just was not quite sure I heard it right. Okay. Great. And then one more thing just on the noninterest-bearing dynamics for the quarter. Just kind of curious—they went down quite a bit but EOP was flattish. Was there anything seasonal that maybe we should have been thinking about? Jeffrey J. Tengel: On the deposit side? Particularly? Chris O’Connell: Yes. On noninterest-bearing. Mark J. Ruggiero: Yeah. Yeah. There is definitely seasonality, particularly in our business segment. When you look at the data in the reporting for the quarter, we are encouraged by a couple of things. The first is we still brought in new relationships and deposit dollars associated with new relationships that outpaced closed relationships. So where we saw some of that average deposit pressure is in existing balances being utilized. And I would attribute that to a couple of things. One is typical seasonality—tax payments, distributions, whatever it may be. We always see the low point of our deposits in the first quarter of a calendar year. Second is, I think there is some level of just inflationary pressure that is probably increasing to some modest degree a level of spend. I think that is putting a little bit of pressure on outstanding deposit balances. And then third, to be very candid, there is some money that we knew we let go due to just not a willingness to match some of the rates that we are seeing in our market. So you may see a customer with X amount of dollars in their account. They are carving out a small piece and looking for top rate, and we are going to—sometimes that answer is we price up and match. Sometimes, depending on the overall relationship, we have been willing to not match. So all three factors are in play in the first quarter, but I would say the biggest majority is your typical usage that we would look to see rebound in the second quarter. Chris O’Connell: Okay. Great. I appreciate all the color here, and I will step back in the queue. Thank you very much. Operator: Your next question comes from the line of Laurie Hunsicker with Seaport Research. Your line is open. Please go ahead. Laurie Hunsicker: Yeah. Hi, Jeff, Mark, and Jerry. Good morning. I wanted to stay where Steve was on office. So just to go back to office for a minute because I am just a little bit confused. When I am looking at your office nonperformers of $53.8 million, that $18 million that repaid is already out of those numbers, correct? Mark J. Ruggiero: It is the $13.7 million that is out of those numbers. Laurie Hunsicker: It was originally $18 million, charged down to $13.7 million, and that paid off in April. Correct? Mark J. Ruggiero: Correct. Laurie Hunsicker: Okay. Perfect. Right. So—and then you initially had a $2 million reserve on that in the fourth quarter, so you took another $2 million before you charged it off, and then this new one came on, you took a $2.8 million specific reserve. So if I look at your loan loss provision for the quarter, it basically was all office. Am I thinking about that the right way? Mark J. Ruggiero: The new nonperformer, the $17.7 million, that has a $2.8 million reserve. We had already reserved $2 million of that last quarter. So there is—the appraisal suggests a bit more of the cure, so to speak, that would be needed. So it was only another, call it, $800,000 of provision needed to establish that reserve. So I’d say modest reserve build. Laurie Hunsicker: Perfect. Perfect. Okay. And then the $17.7 million that is new, is that a Class A or B? And do you have any occupancy—can you give us any kind of color around that? Mark J. Ruggiero: The $17.7 million new? Yes. Jeff, do you have whether that is A or B? I do not. But it is basically—the issue with that is it is a single tenant, life science tenant that has represented to us they will be exiting the facility. It is probably Class B would be my—if I had to venture a guess. So we do not expect sponsor support when that happens. So we would likely be looking at a future foreclosure, and the reserve that was established is based on an appraisal kind of on an as-is basis. Laurie Hunsicker: Gotcha. Okay. And just remind me, your life sciences book—how big is that? Jeffrey J. Tengel: It is not very big, Laurie. I do not have it in front of me, but I would say it is $100 million, plus or minus. It is not very big, and it is a little bit lumpy. I know we have a couple of larger loans in there. One in particular that—it was a construction loan, and we may have spoken about this in the past, but it continues to lease up really well, which is kind of bucking a trend in that space. And so it continues to get better. Honestly, that larger loan that I am referring to is criticized, and we think it is likely to get upgraded sometime over the course of 2026. Mark J. Ruggiero: Yeah. That is a $28 million loan that is in the Q4 maturity bucket. So that is $28 million out of the $54 million—that is life science. If you recall, it was once an empty building when we first started talking about this, so it has been a very positive development. Jeffrey J. Tengel: With good sponsorship, I might add. Laurie Hunsicker: That is great. And actually that segues to my other question. By the way, I love the slide 10 details. Thanks for continuing to include that. So yes, you touched on the $54 million that is coming due in 2026. Is there anything—kind of looking between the third and the fourth quarter, you have got $20 million coming due and obviously of the $54 million you just touched on the $28 million. Is there anything, or I guess maybe how should we be thinking about that? Is there any color you can give us on those loans? Mark J. Ruggiero: Yeah. To be honest, some of them we probably talked about in the past. I mean, they each have their own story. Based on those stories, if there is any loss exposure, we have reserved for it. But as you know, I think that we have probably talked about most of the loans that have a specific reserve on, and a lot of these either do not have a reserve because we expect full resolution or they are pretty modest reserves. So we feel genuinely good about that. I think to provide maybe one notable update—so I believe it is a fourth—yeah, one of the fourth-quarter maturity items now. It is about a $10 million loan that was originally intended to mature here in the first quarter, so if you went back to our deck from last quarter, I believe you would have seen a $9.9 million—or it would have been part of what was set to mature in Q1. That was extended to Q4. But that is a participation deal. The sponsor is looking to refinance or sell. Cash flow is improving. We felt a short-term extension was the right call to get that to a resolution that we still feel would get us paid out in full. So that one is probably one worth noting. But in general, like I said, the rest of the short-term maturities we feel—knock on wood—pretty good about. Laurie Hunsicker: Okay. And then just switching over to the dealer floor plan loan. So you mentioned you are discontinuing that book. How quickly does that book run off? And can you give us the current balance and just any color behind your reasoning for discontinuing? Jeffrey J. Tengel: Yeah. So the reason we decided to exit was we felt like we did not have scale to compete. The segment that we are in tended to be smaller—I will say relatively undercapitalized used car dealers. That industry, as you know, has consolidated quite a bit, and the larger, more well-capitalized companies did not really fit our traditional profile. And so as we looked at it, we said to ourselves, we are not very big in this space, and we do not really feel great about the prospects to grow it in a meaningful way. And I am not a big fan of hobbies, and I tell our people all the time, if we like the business and like the space, then let us put resources against it and let us grow it. If we do not, then let us exit because otherwise we are going to make a mistake and it will come back to bite us. And so this was a good example of where we just did not feel good about the go-forward strategy and our ability to be a meaningful player, and so we decided to exit. I think it started with, maybe, $100 million–$150 million roughly outstanding, and we are down to, I think, $70 million or $80 million. It has actually gone quite well, to be honest with you. Our team has done just a terrific job of facilitating the placement of a lot of these relationships with other banks so that the client—we are very trying to be very client-centric—the client is not disadvantaged. They are able to get financing from another local bank that is interested in being in this business. And so I think we have done a nice job of doing this without a lot of customer disruption or negative implications in the market. Mark J. Ruggiero: I just looked it up. I think we are actually a little—it is only about $50 million, a little over $50 million, left. So I would imagine, Laurie, that will play out over the next year—probably nine to twelve months. Yeah. We will probably be substantially done by year-end. Laurie Hunsicker: Okay. That is great. Okay. And then expenses, obviously, great guidance that you gave on 05/15. But if I am just looking very high level, so you are at $143 million for this quarter—$3 million of merger dollars, $2 million of snow, and then $1 million of core conversion systems—that takes you down to $137 million. And then, obviously, this quarter had the FICA. How much was the FICA? Mark J. Ruggiero: Payroll taxes quarter over quarter are up $1.2 million. I would not suggest that goes back down. You know, that will gradually reduce over time. So if I had to predict, Laurie, it is probably—you get $300,000 or $400,000 of expense relief in Q2 versus Q1, if you follow me. Laurie Hunsicker: Okay. I mean, that is—yeah. I am just looking and—just seems like your core expenses, taking out that core, seems—I mean, you are running better, lower. Right? Am I thinking about that the right way? Or is there some other where—something that we do not know? Mark J. Ruggiero: You are. You are seeing the full cost save. There was a little bit here in Q1 that I admit we did not capture—a little bit left of M&A. So you actually had that in for half of the quarter in the expense base as well. We are also cognizant that April is when we do our annual merit increases. So you will see an uptick in salaries, all other things being equal, just from annual merit—call it 3% on average. So I think it is holding the line. That is the mentality we are talking about—hold the line in all the major areas. I would hope and expect to see kind of in that $138 million-ish, $139 million range. Jeffrey J. Tengel: And just as an anecdote, Laurie, we have talked a lot about the number of bankers that we have added over the last six to twelve months, mostly in the C&I space, and we have been able to do that without any net incremental increase in our FTEs in that commercial banking space. It has been people who either have retired or we have performance-managed out or whatever. So when you look at the totals of our salespeople in our commercial space, it is relatively flat despite the fact that we have added a lot of really talented people over the last twelve months. Laurie Hunsicker: Gotcha. Okay. That is great. And then, Mark, just one quick question. You flagged the outsized loan accretion income, and I appreciate that. But do you have a spot margin for March—maybe even a spot margin—core? Mark J. Ruggiero: Core spot for March was—it was 3.72%. So in line with the total quarter. February actually had a little bit of a lift. We saw some more securities accretion with a little bit elevated payoff. So I still expect it to increase, obviously, off of that number, but spot was 3.72%. Laurie Hunsicker: Okay. Great. And then, Jeff, last question for you. I know you have been penciled down on M&A. Any sort of refresh now that EBTC is fully digested and your core systems conversion is right around the corner? How are you thinking about that? Jeffrey J. Tengel: Yeah. So just to be clear—pencils down on bank M&A. We still remain interested in—if it was in the wealth space or if there were unique deposit opportunities, whether it was branches or other ways that we could improve the overall franchise. But I would say we are still pencils down on bank M&A. The conversion that we have coming up in October is really a big deal. And so we are pretty focused on getting that done and getting it done well. As I told a bunch of our people a few days ago, we have one chance to make a good impression through this conversion. So we have to get it right. And so we have been spending a lot of our time and energy making sure that we do that. We also feel like we have a lot of really positive momentum and a good path to growth in a number of our core businesses, whether it is the wealth business, which we talked about, the C&I business, which we have been talking about the last couple of quarters. So we feel like organic growth very much remains top of mind and one of the things that we are focused on in addition to getting the conversion done well. And that, coupled with the environment—the environment right now is, as you know, a little bit uncertain—but I would characterize our posture as pencils down. Laurie Hunsicker: Great. Thanks for taking my questions. Thanks so much. Jeffrey J. Tengel: You bet. Thanks, Laurie. Operator: Your next question comes from the line of Matthew Breese with Stephens Inc. Your line is open. Please go ahead. Analyst: Good morning, everybody. Mark J. Ruggiero: Morning, Matt. Jeffrey J. Tengel: Hey, Matt. Analyst: Mark, maybe to start with you. Can you provide, if you have it, the spot cost of deposits at quarter end and just maybe expand upon your commentary around competition? I would be curious in terms of where is the most aggressive—product-wise and competitor-wise? Are you seeing that mostly from the bigger banks or the mutuals? Mark J. Ruggiero: Yeah. Taking the latter—both, to be honest. Massachusetts is a bit of a unique environment. You still have a lot of mutuals at play that are good operators but can be a bit aggressive on pricing. And we are seeing offers even from larger banks, other typical similar-sized banks, a lot in the 4-handle on the deposit side. In some cases, even 4.25%. I think I saw a 4.50% offer out recently on a pretty large relationship. So it is very, very competitive. And it is those types of dynamics that I was alluding to where, of course, we are looking at the overall relationship, and if there is a portion of money that needs to be a 4-handle and the overall cost of deposits is where we would like it to be, that is the relationship we are going to continue to support. It is when you start to get the majority of a deposit looking for, in some cases, higher than 4% rates. That is a tough one to justify, in my opinion. So you are seeing some of that dynamic. And like I said, it is probably heightened by the level of mutuals. And I can appreciate in the markets where we—especially where we did the Enterprise deal—you have some competitors in that space that are going to look to be aggressive because they view it as an opportunity. The spot rate on the cost of deposits for March, I am pretty sure, was right in line, Matt, with the quarter—like around 1.36%. So we are at a point now where, you know, I think you are still seeing the Fed cut in December. We were able to make some reductions. You had a little bit of the CD book still giving us some benefit as that was repricing. You are basically at a point now where any CD maturities are going to be neutral to cost of deposits, and because of the competition, I would imagine new money coming on is going to challenge the 1.36% rate to some degree. But I think keeping deposits flat or slightly up in this environment will be a pretty successful profile. Analyst: Got it. And then maybe just transitioning that into the NIM and the NIM guide. The presentation suggests that you are going to end the year with a NIM in the 3.90% to 3.95% range. I am assuming that is the core NIM. Is that accurate? Mark J. Ruggiero: That is reported NIM with a 10 basis point accretion assumption. Analyst: So the 10 bps would be additive or—I am—is that all that is going to be—So let us work off of the low-3.70s core NIM this quarter. Expected, anticipated expansion is to 3.90% end of the year. Tack on another 10 bps, all-in NIM close to 4% or just over by the end of the year. That is the way to think about— Mark J. Ruggiero: No. I would suggest 3.72% core goes to, call it, 3.82% core. Tack on 10 to get you to the 3.90% to 3.95% range. Analyst: Got. Okay. So I guess with that in mind, just considering flat deposit costs, and then your roll-on versus roll-off dynamics are still accretive by, it sounds like, 100 or so basis points, it feels like the longer-term trajectory here is north of 4% on that NIM. Is that a fair—is that a fair assumption? Mark J. Ruggiero: I do think if the rate environment stays—if the longer term and longer part of the curve stays where it is and we could move the loan yield closer to 6%—then yes, I think a NIM above 4% is a realistic end goal. I think that the guidance now—call it, you know, 3 to 4 basis points of core expansion per quarter—does take into account the fact that we may see a basis point or two tick up in cost of deposits if we are being realistic. So I think that is a little bit of the development that I would suggest over the next three quarters—you are going to get the loan repricing benefit, you are going to get the securities repricing benefit. Our goal will be to keep deposits flat, but having the pricing pressure that is out there, I would say that is an area where you may see that eat into it slightly—where it is probably more like, as I said, a 3 to 4 basis point core margin expansion. Analyst: Got it. Okay. Jeff, maybe one for you. We talked about transactional commercial real estate a few times now. I am not sure I have ever seen a dollar amount put on it. What is the identified balance of transactional commercial real estate? Where was it? Where does it stand today? I think you said it is not as much of a headwind to growth. But maybe just characterize for us where you want it to be. Jeffrey J. Tengel: Yeah. That is a good question, Matt. I do not know that we have a specific number that I would point to in terms of what that is. We have actually talked about trying to get a bit more specific and then ring-fence it and be able to talk about our commercial real estate business as a core relationship, legacy Rockland Trust–originated business, and then a transactional book. But it is obviously less today than it was a year ago, year and a half ago. If I had to venture a guess, I would say it is probably somewhere between $300 million and $500 million—maybe towards the lower end of that, $300 million. But we have not really put pencil to paper to identify how much it is and then when it is running off. As you can imagine, some of the transactional real estate just has a maturity date that is well beyond the next year or two, and as long as it is performing, we are just going to have to continue to live with it. And that is not necessarily a bad thing because we are getting the income off of it as long as the credit profile is okay. It is really the ones where we feel like there is some stress that we have been a lot more proactive at addressing and looking to move off. Do not know if that answers your question. Analyst: No. That is great. The first one is just—I would love your view on which way the pendulum is swinging on the rent control. You know, just sort of kind of a quick Google search, it sounds like it is contested. I am just not sure to what extent. I would be curious what you think there. Is this, like, a likely outcome or not? Jeffrey J. Tengel: Yeah. I do not know. Maybe we need to go to the betting markets to see what they are saying about this. My own intuition—and this is not based on any inside baseball or anything like that—is I think there is a good chance it does not pass because there is so much research out there that would suggest that it is not a good thing for the economy or for commercial real estate. In general, it can have a muted impact on new affordable housing, new development, and that is clearly not what we would like. We want to continue to see investments in affordable housing and new development. But we are hopeful that that argument kind of wins the day, but I am no expert on this and my crystal ball is not all that precise. Mark, I do not know if you have— Mark J. Ruggiero: I was going to add—in terms of significant influence, our governor has publicly stated being against it. I think there is a lot of business community lobbyists, including a chamber that I am part of, that would likely start to weigh in and lean in on suggesting why this is not a good answer for the economy. So the question becomes whether those voices outweigh the voters—the consumers that on paper hear rent control and think that will help my pocket. So will the business community’s messaging of why, in the long term, this is not good help defend what probably has some consumer momentum to get it passed? But I think to Jeff’s point, there will be enough lobbyists and business offset to hopefully come against that. I think the other mitigant here, though, is even if it does get passed, Massachusetts—you look at the last decade historically—rent increases have been below 5%, which is the proposed cap of rent increases if this were to go through—greater of 5% or CPI. So this is a state where rent has been pretty well contained, and it is partly because there is so much demand and need for affordable housing. So I do think if this does get passed, there is a path forward here to suggest that it still works without a meaningful impact on our economy, but there is a lot of opposition against it. Analyst: Great. Last one. Jeff, you had mentioned at the onset some work into AI and putting some resources aside for it. Just curious what your initial impressions are—love your thoughts on impacts to the longer-term expense trajectory or maybe even revenue benefits. Just curious. That is all I had. Thank you. Jeffrey J. Tengel: It is probably a little too early to quantify what we think the benefits will be. I would say it is making—just for us, it is initially going to be around things like efficiencies, freeing up people’s time to reinvest in other activities if they are doing things that are very standardized and routine and we think can be easily accommodated through a chatbot or something like that. I am a believer in not trying to bite off more than we can chew, meaning I would like to get some wins under our belt here, which in my mind probably means a bit more modest use cases. And then once we get some wins under our belt, I think that will give us some confidence that we can continue to do this well. And I think, as I said in my comments, we can develop some muscle memory around how we roll this out. And then, as we think about use cases, the more confidence we get, the bigger the use cases we will take on, which will have a bigger impact on the company. My intuition would also be it is going to probably lean more towards the expense side of things versus the revenue side of things. But a lot of that is still TBD. Analyst: Appreciate it. Thank you. Jeffrey J. Tengel: Thanks, Matt. Operator: Your next question comes from the line of Jared Shaw with Barclays. Your line is open. Please go ahead. Analyst: Thanks. Good morning, guys. Just a couple quick ones to wrap up. So, Mark, I do not know if you have the securities accretion—you still called out some of the indirect impacts, but do you have the dollar of securities accretion this quarter, and maybe actually last quarter? Mark J. Ruggiero: I do not, only because it is basically just like any other discount on a bond is how we are capturing it. So I do not have the actual dollar amount, Jared. I would have to follow up on that just to give you—sort of the discount amortization, I guess, on the Enterprise bond is how I would quantify that. Analyst: Right. Okay. And then when you look at the—do you still feel that you can get to that 80% CD beta through the cycle? And then, I guess, how are you looking at staying active in the deposit space given the competition versus sort of the loan-to-deposit ratio? And how are you thinking about that dynamic? Mark J. Ruggiero: Yeah. I think on the CD beta—all-in, I think cost of CDs is right around 3.30%. Let me just triple-check my math here. Yeah, so right about 3.30%. So I think in terms of repricing down, as I mentioned in one of my earlier answers, we have probably seen the vast majority of that. So even though Fed funds are sitting around 3.60%—you know, one-month money, brokered CDs in the one-month space—probably closer to 4% now. So I think of it as we have sort of achieved that beta based on where we are today in our CD ladder. I would expect, because of the pricing pressure that is out there and the competitive dynamics, we still have a four-month 3.60% offer out there. That is the primary driver of any new CD money. So I think it is going to keep, like I said, cost of CDs somewhat at bay at where they are right now, if not maybe a little bit of an uptick. In terms of the overall deposit strategy, I would just reiterate what I was suggesting earlier, which is continuing to stay as competitive as we think is appropriate on what we value as total relationship funding, and continuing to do what this bank has done for such a long time in attracting new money. That is the branches. That is the retail network involved in their communities. It is working with nonprofits. It is the C&I wins that we have been having typically coming over with more deposits. We still have good CRE relationships that hold money with us. So a lot of those pieces are still in place that have been able to drive deposit growth for us in the past. And then we will just couple that with being really smart about our pricing strategy. Jeffrey J. Tengel: Only other thing I would add to that, because I agree with everything Mark just said about our deposit gathering, is we are trying to get a little bit more focused and a little bit more specific around some of the market disruption that is happening here. And we think that that is an opportunity for us because I think we are viewed as sort of the stable—not a lot of change going on—and that is not true with some of our competitors. And so we have been very focused on developing marketing programs and having both our commercial and our retail bankers—arming them with data—to help them try and take advantage of some of the market disruption that we are seeing. So we are really focused on deposits. We know that is an important part of the overall company and funding the loan growth that we hope to achieve. So it is a lot of the things Mark talked about, it is being more strategic with some of the market disruption that we are seeing, and then we have a number of businesses that are not credit-oriented businesses—they are just deposit verticals—that we are doubling back on and seeing if there are ways that we can accelerate the growth in some of those areas. Analyst: Great. Thank you. Jeffrey J. Tengel: Thanks, Jared. Operator: There are no further questions at this time. I will now turn the call back to CEO, Jeffrey J. Tengel, for closing remarks. Jeffrey J. Tengel: Thanks, everybody. Appreciate your interest in INDB and Rockland Trust, and have a great day. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.

32天前Insight Analytics约5分钟阅读

STT 2026 Q1 财报电话会议

Operator: Good morning, and welcome to State Street Corporation's First Quarter 2026 Earnings Conference Call and Webcast. Today's call will be hosted by Elizabeth Lynn, Head of Investor Relations at State Street Corporation. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street Corporation's conference call is copyrighted, and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street Corporation website. Now I would like to hand the call over to Elizabeth Lynn. Elizabeth Lynn: Good morning, and thank you all for joining us. On our call today are CEO, Ron O'Hanley, who will speak first, and then John Woods, our CFO, will take you through our first quarter 2026 earnings presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterward, we will be happy to take questions. Before we get started, I would like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the earnings release addendum. In addition, today's call will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those referenced in our discussion today and in our SEC filings, including the risk factor section in our Form 10-Ks. Our forward-looking statements speak only as of today; we disclaim any obligation to update them even if our views change. With that, let me turn it over to Ron. Ron O'Hanley: Thank you, Elizabeth. Good morning, everyone, and thank you for joining us. I will begin with a few broader observations before John walks you through our financial results in more detail. Reflecting on the first-quarter operating environment for a moment, several factors shaped investor sentiment in Q1, including the Iran war, divided views on the long-term impacts of artificial intelligence, and rising concerns on credit quality in certain parts of the financial system. Against this geopolitical and macroeconomic backdrop, we remain firmly focused on serving as an essential long-term partner to our clients and helping to deliver better outcomes for the world's investors and the people they serve. We continue to execute effectively on our strategy, supported by our distinctive capabilities, deep operational strengths, and a conservatively positioned balance sheet. That strategic positioning allowed us to deliver strong growth, underpinned by continued financial and strategic progress during the first quarter. Our results in the first quarter also underscore the inherent strength and diversification of our business model, which allows us to successfully navigate times of uncertainty and heightened market volatility, as we saw in Q1, with both FX trading and NII contributing meaningfully to our year-over-year financial performance. The scale, capabilities, and leading market positions of our core businesses, working together as one State Street Corporation, provide balance across varying market environments, reinforce the value of our platform for clients, and accrete value for our shareholders. Slide two of our investor presentation outlines our first-quarter highlights excluding notable items, which John will address shortly. We had a strong start to 2026, with broad-based positive year-over-year revenue performance across the franchise. Reported earnings per share increased 22%, while excluding notable items, EPS grew a very strong 39% year-over-year, supported by record quarterly fee revenue, NII, and total revenue. Importantly, substantial positive operating leverage in the first quarter drove another quarter of year-over-year pretax margin expansion. Quarter after quarter, the proof points continue to demonstrate that our strategy is delivering consistent, durable improvements in financial performance, with Q1 marking our ninth consecutive quarter of year-over-year positive operating leverage, excluding notable items. Stepping back from the quarter for a moment, I want to highlight some of the many growth opportunities we are realizing and see ahead at State Street Corporation. Through disciplined business investments and focused execution against a clear set of strategic priorities, we believe we are well positioned to continue to accelerate growth and deliver substantial and sustainable returns for our shareholders. We are drawing on deep, broad-based, technology-driven innovation and delivering digital platforms, compelling AI tools in AgenTx, and client solutions. Together, these capabilities help our clients succeed in a constantly evolving market while strategically pivoting State Street Corporation to faster-growing segments of the industry. In digital, we are focused on building the market infrastructure clients need to bridge seamlessly between traditional and digital finance. Following the recent launch of our digital asset platform, we are executing against a clear and comprehensive product roadmap that includes tokenization of assets, funds, and cash for institutional investors. These capabilities are designed to drive greater efficiency, enhance liquidity, and support new avenues of growth for markets, our clients, and for State Street Corporation. We are well advanced with clients to support their launch of tokenized fund strategies this year. Furthermore, State Street Corporation is deeply engaged in a number of digital asset-related industry initiatives, including DTCC's tokenization efforts, as well as Fnality's work to create an ecosystem of central-bank-connected, blockchain-based payment systems. These initiatives are key to the development of digital markets and consistent with our track record as a critical infrastructure provider and standard setter. Across alternatives, including private markets and hedge funds, we continue to see compelling long-term growth potential as the segment matures, with clients leveraging State Street Corporation to bring innovative solutions to markets. Our leadership positions across both investment servicing and investment management position us well to capture opportunities as we broaden access and simplify operations for clients, and our clients' clients. In wealth services, we are investing in leveraging Charles River's capabilities alongside our strategic partnership with Apex Financial Solutions to build a differentiated, fully digital, and globally scalable wealth custody and clearing solution. This positions us to serve wealth advisers and self-directed wealth platforms and unlock a new avenue for growth that leverages our strength across investment servicing and investment management. And finally, in State Street Investment Management, our strong track record of innovation, differentiated solutions, and scaled franchises in areas such as ETFs, cash, and retirement, to name just a few, create multiple avenues for growth. An illustration of our progress is the way we provide barbelled investment exposure at scale to serve distinct client needs. At one end, SPYM, our low-cost S&P 500 ETF, is gaining strong traction in retail and wealth channels. It ranked as the number one asset-gathering ETF globally in the first quarter, with $27 billion of inflows in that fund alone. At the other end, SPY continues to anchor institutional usage as the market's liquidity benchmark, with nearly $4 trillion of notional value traded in the quarter, representing roughly 17% of total U.S.-listed ETF volume. Together, this underscores the strength, breadth, and flexibility of our platform across client segments, and our abilities to successfully extend from our leading position in SPY to other high-growth ETF segments. Our scaled franchises within management also create a competitive advantage and will enable us to capitalize on several important global trends, including the shift from savings to investment, the move globally towards funded retirement systems, the expansion of digital assets, and the continued democratization of investing. For example, in digital, we are preparing to launch the State Street Galaxy Onchain Liquidity Sweep Fund, a tokenized private liquidity fund designed to support 24/7 on-chain liquidity for institutional investors. Together, these strategic initiatives underscore the broad range of opportunities ahead as we focus on driving near- and long-term growth, enhancing client capabilities, and strengthening our platform. At the same time, the next phase of our operating model transformation will strengthen our ability to deliver sustainable growth and long-term shareholder value. We are scaling AI-enabled capabilities, embedding more agile ways of working across the organization, and continuing to modernize our technology. With a continued emphasis on operational excellence, consistent execution of our strategy, and delivering for our clients, we are strengthening and improving our core end-to-end capabilities in technology, for the deployment of our AgenTeq platform and AI foundry to scale and accelerate AI in high-leverage areas, while also advancing capabilities in areas such as State Street Alpha and Charles River Development. These actions position us to operate more effectively, partner more deeply with clients, and help drive the next phase of industry evolution. To conclude, we are pleased with our strong start to 2026 while recognizing that our potential is even greater. We see broad-based strength across the franchise, and our first-quarter results reinforce that our strategy is translating into consistent and durable improvements in financial performance. At the same time, we continue to transform across the platform and accelerate the deployment of AI agents, which holds significant opportunity for State Street Corporation and our clients given the investment, operational, and technology intensity of what we do. In July, we will provide a detailed update on our strategic growth and transformation initiatives and how these position us to drive stronger performance over the medium term. We are encouraged by our progress, mindful of the environment, and confident in our ability to continue delivering as we move through the year. With that, I will turn it over to John to walk you through the first quarter in more detail. John Woods: Thank you, Ron, and good morning, everyone. We had an excellent start to 2026, with broad-based year-over-year growth across the franchise, driving record quarterly revenues and over 600 basis points of positive operating leverage in the quarter, excluding notable items. These results reflect disciplined execution alongside ongoing investment across our portfolio of strategic growth areas. Now let me dive into the details of the quarter, excluding notable items, starting on slide three. In the first quarter, total revenue increased 16% year-over-year to a record $3.8 billion. Fee revenue of $3 billion increased 15% year-over-year, driven by strong performance across investment management, investment services, and markets. Net interest income of $835 million increased 17% year-over-year, primarily reflecting continued net interest margin expansion. Expenses of $2.7 billion increased 9% year-over-year, driven by higher revenue, strategic investments, and the impact of currency translation, which was a headwind to expenses but a benefit to revenues. Taken together, this performance drove a significant improvement in profitability with 400 basis points of pretax margin expansion and a roughly four percentage point increase in ROTCE to 20%. Before moving on, let me briefly touch on notable items recognized in the quarter. Notable items totaled $130 million pretax in the first quarter, or $0.35 per share after tax, reflecting repositioning charges and the rescoping of a middle office client contract. Turning to slide four, servicing fees in the quarter increased 11% year-over-year to $1.4 billion, reflecting higher average market levels, the benefit of currency translation, and continued organic growth supported by net client asset activity, flows, and new business. AUCA ended the quarter at a record $54.5 trillion, up 17% year-over-year, primarily reflecting higher period-end market levels, positive client flows, and net new business. First-quarter servicing fee sales were $56 million. These were well distributed across regions and aligned with our strategic focus areas, particularly back office services and alternatives clients. Looking ahead, we continue to target $350 million to $400 million of sales in 2026. The pipeline remains healthy, with broad geographic and customer segment representation including APAC, EMEA, emerging markets, and alternatives. Additionally, we reported one new Alpha mandate win during the quarter, highlighting continued client engagement with our integrated front-to-back platform. Moving now to slide five. Management fees increased 23% year-over-year to $724 million in the first quarter, driven by higher average market levels and net inflows. Assets under management increased 20% year-over-year to $5.6 trillion, reflecting higher period-end market levels and continued client inflows. Net inflows totaled $49 billion for the quarter, led by strength across index strategies and solutions including ETFs and fixed income, as well as our cash franchise. Within ETFs, net inflows were $25 billion, driven by strong flows and market share gains in our U.S. low-cost suite. As Ron noted, SPYM, our low-cost S&P 500 ETF, was the largest asset-gathering ETF globally during the quarter. We also continued to advance product innovation and strategic partnerships, launching 57 new products and solutions during the quarter that are creating new avenues for growth. As a signpost of that progress, our State Street Bridgewater All Weather ETF surpassed $1 billion in assets under management during the quarter. We were also pleased to see our investment-grade public and private credit ETF, developed in partnership with Apollo Global Management, reach a new high watermark during January with AUM of over $800 million. Turning to slide six. Markets remains one of the key pillars of our One State Street strategy. It plays a key role in linking our investment services and investment management platforms, strengthening the connectivity across the firm and enabling more cohesive client-led solutions. FX trading revenue increased 29% year-over-year to $435 million in the first quarter, reflecting a strong 25% increase in client trading volumes, which reached a new record level as we supported clients amid a dynamic market environment. Securities finance revenue increased 2% year-over-year, supported by growth in client lending balances. Moving on to slide seven. Software services revenue increased 7% year-over-year in the first quarter, driven primarily by higher professional services and software and data revenues, reflecting continued SaaS go-lives and platform adoption across our client base. Software business momentum is also reflected in our annual recurring revenue, which increased 12% year-over-year, and our revenue backlog, which increased 11%. Turning now to slide eight. First-quarter net interest income of $835 million increased 17% year-over-year, primarily reflecting a 16 basis point expansion in net interest margin to 116 basis points, and average interest-earning asset growth of 1%. The year-over-year increase in NIM reflected improvements in funding mix, continued benefits from investment portfolio repricing, and runoff from terminated hedges, partially offset by lower average market rates. Growth in interest-earning assets was driven primarily by higher client deposits, partially offset by a reduction in short-term wholesale funding. Turning to slide nine. Expenses were up 9% year-over-year in the first quarter, excluding notable items. Currency translation accounted for approximately two percentage points of the increase. Of the remaining seven percentage points, approximately five percentage points reflected higher revenue-related costs, with the remaining balance of two percentage points driven by continued strategic investments and run-the-bank expenses, net of productivity savings. Moving now to capital and liquidity on slide 10. Our capital levels remain strong, enabling disciplined capital deployment aligned with our strategic priorities. At quarter end, our standardized CET1 ratio was 10.6%, down approximately 100 basis points from the prior quarter. The decrease primarily reflects higher risk-weighted assets associated with a normalization of RWA in our Markets business from episodically low levels in the prior quarter, along with the impact of U.S. dollar appreciation in March and, to a lesser extent, equity market appreciation on the final day of the quarter. Turning to capital return, in the first quarter, we repurchased $400 million in common shares and declared $233 million in common stock dividends, resulting in total capital return of $633 million, equivalent to a payout ratio of 90%. Before moving on, I would call your attention to a new slide 13 in the appendix on our NDFI loan portfolio. This lending remains disciplined and client-focused, primarily supporting investment services clients. In addition, this is a highly collateralized and diversified portfolio that has performed resiliently across cycles and continues to support durable client relationships. Turning to our full-year outlook, which, as a reminder, excludes notable items. We continue to assume that global equity markets are flat this year on a point-to-point basis from 2025, while remaining mindful of the potential for variability in the operating environment. Against this backdrop, we now expect fee revenue growth in the 7% to 9% range, an increase from our previous outlook of 4% to 6%, reflecting a stronger-than-expected Q1 along with continued organic growth and solid momentum across the franchise. Turning to net interest income, following our strong first-quarter performance, we now expect NII growth in the 8% to 10% range, representing an improvement from our previous outlook for low single-digit growth. We currently expect expenses to increase by 5% to 6%, up from our prior 3% to 4% outlook, primarily reflecting higher revenue-related costs. Finally, we continue to expect an effective tax rate of approximately 22% for the full year and a total payout ratio of roughly 80%, subject to board approval and other factors. We will now open the call for questions. Operator: At this time, we will open the floor for questions. You may remove yourself at any time by pressing star 5 again. Please note, you will be allowed one question and one related follow-up question. Again, that is star 5 to ask a question. We will pause for just a moment. Our first question will come from Glenn Schorr with Evercore. Your line is open. Please go ahead. Glenn Schorr: Hi. Thanks very much. I am happy about the pickup in NII, and I think the NIM expansion during the quarter was great. I find it interesting that average interest-earning assets were only up 1%, so I am interested if you could talk to the tug-of-war dynamic of better NIM but not a ton of earning asset growth. And does any of that change within your updated guidance? Thank you. John Woods: Thanks for the question, Glenn. I would say that we are very pleased to see our net interest margin progress, and as mentioned, much of that is coming on the funding mix side of the balance sheet. As we see growth in deposit levels, which surged in the first quarter, we are continuing the plans from the last couple of quarters of reducing our short-term wholesale funding. That is higher-cost, and we find that to be an appropriate rotation to higher-quality funding on the funding mix side. Interest-earning assets will be less of the story. Q1 was driven almost entirely by net interest margin. I think that is a similar story for our guide for 2026. The range that we talked about earlier is almost entirely driven by net interest margin as well. Interest-earning assets are really going to be something we keep an eye on, but not what is going to drive net interest income in 2026. Elizabeth Lynn: Operator, we can take the next question. Operator: My apologies. Our next question will come from Alexander Blostein from Goldman Sachs. Your line is now open. Please go ahead. Alexander Blostein: Hi. Good morning. Thank you for the question. I was hoping we could spend a minute on the goals you are trying to achieve from the next chapter of State Street Corporation's transformation. I know you alluded to the fact that you will provide a lot more detail in July, but since you opened that door, can you give us the overarching goals you are trying to achieve? Is that faster revenue growth, better profitability, or both? I believe your last official medium-term pretax margin target is somewhere in the low 30s. Is the goal to get that into a higher range over time? Any high-level framework would be helpful. John Woods: I will start off here. As you may have heard me comment on this in prior sessions, we had a goal to get to 30% pretax margin, which we delivered on in 2025 and again here in early 2026. You are seeing us meet that threshold, and the guide that we delivered today, if you play that through, implies in the neighborhood of 31% pretax margin. We think we are moving the platform forward from a profitability standpoint. The second big driver will be growth. In July, you will hear from us an updated view about what we think this platform can deliver over the medium term from a profitability standpoint. We feel there are extremely attractive opportunities to grow profitability metrics—pretax margin and other metrics—and we also believe we have very unique opportunities to grow this platform overall from a revenue standpoint. The building blocks of all of that will be the increasing business execution discipline that is emblematic of what you are seeing in organic growth across our fee line items. We will talk about what that can deliver for us. The other two big categories I would highlight: first, a distinctive portfolio of strategic initiatives that can drive unique, outsized benefits into the platform over the medium term; and second, transformation. Within transformation, there are several pillars. We will talk through our ongoing operating model transformation, embedding agile ways of working across the entire enterprise, and really solidifying a product-platform approach to delivering our services to clients. A second pillar will be the ongoing modernization of our technology and infrastructure, which we are excited about. And lastly, all things AI, where we have continued to make investments and make progress. We will wrap all of those building blocks together and what we believe they will contribute over the medium term in our commentary you will hear from us in July. Alexander Blostein: That sounds great. Looking forward to that. My follow-up: a question around ETFs, both in terms of growth and expense perspective. There has been increased focus on distribution platform fees that may come online towards the end of the year—Schwab is discussing that. Any early thoughts on the implications that might have on both ETF growth for State Street Corporation and incremental expenses that you might be willing to incur if you were to stay on the Schwab platform? Ron O'Hanley: Alex, it is Ron. We are very familiar with what some of the platforms are doing. Most of these platforms are close partners. In terms of our long-term strategy and performance, we are not concerned about this. If you have been following what we have done in ETFs, we have continued to broaden that platform, moving from where we started as an institutional provider to not only maintaining that institutional leadership but growing both in client segments in the low-cost wealth channel and in channels outside the U.S. You will see pockets of the kinds of things you are talking about, but we do not see it as any kind of substantial risk or headwind to our overall ETF business. Operator: Thank you. Our next question will come from Kenneth Usdin with Autonomous Research. Your line is now open. Please go ahead. Kenneth Usdin: Hi. Thanks. Good morning. This quarter, you showed the ability to put up meaningful operating leverage and also have a higher cost growth rate to even deliver that. Were you able to pull forward some spending, or was it mostly revenue-related costs? And as you look forward to the new 5% to 6% cost guidance, how are you balancing expected efficiencies, and how much FX translation are you including in the full-year guide after the hurt that it was in the first quarter? John Woods: A couple of comments. In the first quarter, there was about a 2% impact from currency. When you take that 9% expense growth, you are really starting with 7% ex-currency. That 7% is predominantly revenue-related; five percentage points of that would be revenue-related, which leaves a net 2%. Within that 2%, we have run-the-bank costs and our strategic investments. Those are in the neighborhood of, if you break that out, call it 6% of spend in running the bank and investing in exciting initiatives. We fund a lot of that through productivity, which is the net 4% of productivity that we delivered in the first quarter. We will continue to monitor our productivity trajectory, and the same storyline holds with the 5% to 6% full-year guide: the incremental growth you are seeing is majority revenue-related, and then there will be other costs as we continue to fund strategic investments, partially offset by productivity. The storyline for Q1 holds for the full year as well. Kenneth Usdin: Thanks, John. As a follow-up, with strong NII and strong FX trading, do you expect that to run-rate, or do you expect a natural come-off given the types of volatility and environment that we saw in the first quarter? John Woods: On FX, we had a strong quarter. Two things have to come together: first, you need the franchise in place to take advantage of opportunities and be there for clients. The investments in client acquisition, product extensions, and geographic expansion in Markets have served us well in Q1. Second, we had elevated but healthy volatility where liquidity was still good but there was a lot of turnover. Those combined to deliver Q1. For the rest of the year, when you think about our fee guide of 7% to 9%, we assume those FX conditions moderate gradually throughout the year. We are not depending on Q1’s highly favorable conditions being maintained to deliver 7% to 9%. For NII, our original guide was up low single digits; now it is 8% to 10%. We originally viewed NIM at 100 to 110 basis points; for 2026 you could see 110 to 115 basis points, slightly off from Q1’s 116. NIM is the main driver, with funding mix a larger tailwind. Overall deposits will be up, helping that funding mix. We previously said maybe $250 billion of deposits; probably in the range of $250 billion to $260 billion for the rest of the year. We will look to pay down some higher-cost debt and continue to optimize the funding mix to drive NIM. All of those building blocks are incorporated into the 8% to 10% NII guide. Ron O'Hanley: Ken, I want to underscore a point John made on FX. We have invested for years in expanding client volumes and ensuring we serve as much of our investment servicing clients as possible. We expanded geographic capabilities and, importantly, expanded the ways in which we can meet our clients technologically and how they can trade with us. We did that when there was not a lot of volatility, preparing for when normal volatility returned. We are seeing the benefits of those past and ongoing investments. Operator: Thank you. Our next question will come from James Mitchell with Seaport Global Securities. Your line is now open. Please go ahead. James Mitchell: Maybe just a follow-up on deposits. Up nicely with a big mix shift to noninterest-bearing deposits, which I think was a particular benefit quarter over quarter. How can any further optimization around pricing affect deposit growth from here, and how are you thinking about the mix in your guide? Thanks. John Woods: I mentioned the level of deposits; I would anchor to that $250 billion to $260 billion range. On mix, we originally talked about around 10% noninterest-bearing. That is still a good anchor over time, but in 2026 it appears we have a slightly higher noninterest-bearing opportunity than that 10%. For deposit drivers, there are external and internal drivers. Internally, we control continuing to grow our platform, serving clients, and growing AUCA—another record this quarter—which is where we source those deposits. Second, client segment growth: alternatives is growing faster than non-alternatives and, pound for pound, brings more deposits with a more attractive mix. Externally, deposits tend to rise when money supply and GDP are growing, when rates are stable or falling, and given our business, if volatility and risk-off rise, we tend to grow deposits. Broadly, our NII line is a bit of an offset to other line items, similar to what happens in Markets during higher volatility like in Q1. James Mitchell: Any thoughts on April from here—what you have seen so far? John Woods: I would say moderating from here. We had extremely positive conditions in Q1. Still very solid trends. I would stick with the $250 billion to $260 billion deposits and maybe slightly better than our 10% noninterest-bearing guide, as mentioned earlier. April trends are good in NII and deposits. James Mitchell: Great. As a follow-up on the wealth management business—across regions, EMEA was the largest contributor to net flows in the first quarter, I think $29 billion. What vehicles and asset classes drove that? Was it lumpy, and can that momentum in Europe continue? John Woods: On net asset flows, fixed income was very strong and led the way, followed by multi-asset. And you heard how well our low-cost suite did this quarter, and ETFs in general. Those were the bigger drivers, with fixed income one of the biggest. Operator: Our next question will come from Michael Mayo with Wells Fargo. Your line is open. Please go ahead. Michael Mayo: One short-term question and one long-term question. Short term, I think you said revenue backlogs are up 11%. If that is correct, can you size that a bit more in terms of the level of backlog versus history and where that is coming from? Long term, Ron, back to AI: some say they will remodel their entire business around AI; one bank has specified expected AI benefits; some say business models will be destroyed due to the AI scare trade; others say it is overrated. Where do you stand? John Woods: Thanks for the question, Mike. That 11% was with respect to the Software Services line alone, and that is correct. Uninstalled revenue is up 11%. Multi-year revenue growth in this space has been around that level, so that continues our expectation of around 10%—low double-digit growth—over the medium term, and as we continue investing, we may do better. ARR grew 12% as well. I will turn it over on AI. Ron O'Hanley: Mike, we are very positive on AI, and a lot of that has to do with the nature of our business, which is investment, operational, and technology intensive. Where are we? First, it is comprehensively embedded across the enterprise. We have broad access and accelerating adoption—virtually every employee where it makes sense has access to the tools, and usage is scaling rapidly, with repeat behavior indicating the tools are becoming part of daily workflows. Second, on development and technology systems, we are fully enabled there, and we are already realizing productivity gains. It is giving us the ability to do more, faster, and get to projects that previously would not have made the cut. All of our developers have access to AI development tools, and we are seeing acceleration in new technology development and modernization. Third, it is what you do with it after that. We have built a centralized AI hub with a deep use-case pipeline that is beginning to scale and will scale over the back half of 2026. This platform supports over 200 AI use cases now, with 70 already live. As they mature, we expect tangible business impact to begin emerging in the back half of 2026 and then accelerating. Fourth, agentic service delivery: given the operational intensity of what we do, the opportunities are significant. We have agent-enabled service delivery coming online in July, and our AI Foundry to repeat and scale this. Do we think AI destroys the business model? We do not. These are widely available tools; the advantage is in how you deploy them. The real power is not just operational improvement, but creating real agility in how the organization operates—how we face off with clients and organize work internally. We see more opportunity than risk. Michael Mayo: The three words “annual business impact”—can you dimension this in any way, starting late this year or next year? John Woods: It will start scaling in 2026, and we are going to dimension what the impact will be over the medium term. It will be very meaningful and a very important pillar of how we drive value and bottom-line impact, while also expanding resources to invest in our strategic roadmap. As we get later in the year and start looking at run-rate benefits exiting 2026 into 2027, we will come back and articulate the near-term benefit. Michael Mayo: So we will get this on the second quarter earnings call? John Woods: Earnings call. Operator: Our next question will come from Ebrahim Poonawala with Bank of America. Your line is now open. Please go ahead. Ebrahim Poonawala: You spent some time in your prepared remarks around tokenization and your digital asset platform. Should we think about all of this as mostly retaining the customer activity that you already have, just moving from analog to digital, or are there new revenue opportunities from tokenization and moving on-chain? Ron O'Hanley: It is both. Given our client base and market share with sophisticated clients, they expect the best the market has to offer. Some use cases are already very real. Tokenization of assets is a net new opportunity for us. Tokenized money market funds are a real use case—beneficial to the market and liquidity, and will result in core revenues for us. The on-ramp/off-ramp bridge from traditional finance to digital finance is also a real opportunity. Think of new railroads being laid; the interchanges are underdeveloped. Volumes are growing fast off a small base, and part of the reason is underdeveloped on- and off-ramps. Being part of that infrastructure is a second source of new revenues. We see both retention and new revenue. Ebrahim Poonawala: Are these capabilities built in-house, or are there targeted platforms where M&A or partnerships make sense? Ron O'Hanley: We always think about make versus buy. Even on make, partnerships are another lever. Our Galaxy product is a partnership with Galaxy. We are tied into emerging fintech platforms in the U.S. and hotspots in Europe and India. We will continue to explore M&A, but we also have confidence in our organic capabilities. It will be all of the above. Operator: Our next question will come from Brennan Hawken with BMO Capital Markets. Your line is open. Please go ahead. Brennan Hawken: Good morning. John, you gave clear color on deposit trends and how those feed into NII. I was curious about expectations around the euro and GBP deposits. The forward curve there has gotten hawkish with two hikes in the outlook. Are those hikes included in your updated outlook? And betas on those currencies were low during the recent rate cuts. Should we expect low betas when those rates move up? John Woods: In the guide, we assume one hike, with the Bank of England and the Fed on hold, and the ECB in for one hike. We acknowledge there could be more than one. From a sensitivity standpoint, it is not a huge quarterly driver—around $5 million per quarter. On betas, for U.S. dollar, betas were relatively symmetric in the tightening and easing cycles, around 75% to 80%. For the euro, a similar expectation but lower than the U.S., maybe in the 50% range, and relatively symmetric up and down. Brennan Hawken: Follow-up for Ron: you do not expect much impact to your ETF business from changes wealth firms are working on. Active ETFs are not big for you, but could you share your perspective on active ETF platform fees and why the impact would be manageable for SPDRs? Ron O'Hanley: Active ETFs are absolutely growing, and we are a beneficiary on the servicing side. One reason for growth is the vehicle often being better aligned with distribution trends—control over portfolios in wirehouses and the rise of independents. The buyer’s fee comparison is less about active ETF versus passive ETF and more around active mutual fund versus active ETF, which helps the value proposition. We can realize opportunity in ETF growth around the world. We were early in Europe as a sponsor and servicer; growth was slow at the beginning, but take-up is accelerating, and we think real growth is yet to come as distribution shifts from banks toward platforms that will deploy ETFs. Even in places like the Middle East, funds businesses are skipping over old mutual funds and going right to ETFs, building modern platforms. It is a vibrant, growing sector, and we are well positioned as both sponsor and servicer. Operator: Our next question will come from David Smith with Truist Securities. Your line is now open. Please go ahead. David Smith: Thanks. On the capital front, you have been running more at the high end of the 10% to 11% CET1 range for most of the last year, but you were in the middle this quarter. Are you now more comfortable running mid-range, or is this just a transitory move down given elevated balance sheet at March-end? Then any early impressions on potential impact of the new RWA and GSIB surcharge rules proposed last month? And is the 80% payout ratio target on a GAAP or adjusted basis? Thank you. John Woods: Our operating range is 10% to 11%, and we have articulated recently that we have been operating at the upper end. That has not changed. You can see some variability on quarter-ends based on the specific day’s activity. March 31 was an exceptionally active day, with larger movements that drove the 10.6%. If you look at the averages for Q4 and Q1, average CET1 was at the upper end of 10% to 11%, and that is how we continue to operate. On Basel III, we are constructive on the proposed approach. It delivers a more targeted view of credit risk RWA, and we expect a benefit on credit risk RWA that exceeds the additional RWA on operational risk. We will frame magnitudes as we continue to study and await final rules, but generally we see a net benefit. Lastly, the 80% payout is on a GAAP basis. Operator: Our next question will come from Analyst with Morgan Stanley. Your line is open. Please go ahead. Analyst: Hi. Good afternoon. On the private credit side, appreciate the incremental disclosure on the NDFI loans. It looks like the majority of those loans are non-BDC loans, and you also mentioned some of the safeguards on the BDC loans themselves. How are you thinking about growth in that NDFI portfolio going forward, and how do you assess safety around that portfolio? John Woods: These are our clients—non-depository financial institutions broadly are an important part of how we support the customer segment, primarily investment services clients. As part of the broad suite of services, we support them from a balance sheet standpoint. This is highly strategic lending for us. The categories are extremely well positioned from a risk-return standpoint. We have never had losses in subscription finance or in the triple-A CLO book, which comprise the large part of the NDFI book. On BDC lending, we are down to $1.6 billion, senior secured with substantial subordination—about 80%—behind our positions. It is diversified with ongoing structural protections. This will be a growth area for us; you could see low- to mid-single-digit growth, commensurate with continued penetration of this attractive segment. On private markets servicing, elevated redemption requests can have a marginal impact, but it is limited. The round trip is a net positive for us: redemptions may have a small impact on servicing fees but result in higher deposits. Net-net, very stable in terms of revenues and fees. We see this as a temporary flow-related issue rather than systemic. Ron O'Hanley: It is important to remember the attention is on a very small piece of private credit—those in semi-liquid fund structures. The vast majority of private credit is not in those structures, and there is no reason to believe private credit will not continue to grow. In regions like Europe or Asia, significant expansion of bank balance sheets is unlikely, yet credit appetite will continue to grow. In the GCC, for example, banks are highly profitable but do not have many places for balance sheets to grow; capital needs are significant and will be fulfilled by private credit. You will see careful examination of semi-liquid vehicles and expectations for retail and affluent investors, but that is a relatively small segment. John Woods: To tie back to the $1.6 billion on the slide, less than half of that is in the non-public, semi-liquid space that is getting attention. Overall BDCs are 4% of loans; less than half of that—around 2% or less—is in the space getting headlines, and well less than 1% of total assets. Operator: Our next question will come from Vivek Juneja with JPMorgan. Your line is now open. Please go ahead. Vivek Juneja: Thanks. First, you had a scoping charge of $41 million. This was the second one in the last 12 months. Can you give some color? Is it the same client? Same type of issue? What is driving these, and why have we seen two in the last 12 months? Second, on Schwab charging a fee for their distribution platform—will you absorb it, or pass it on? Lastly, on the charge-off jump this quarter—what type of loan was that? Ron O'Hanley: These are idiosyncratic. It is not the same client and not for the same reason. In this case, it was an existing Alpha client that will remain an Alpha client. It was one part of their insource-to-outsource journey within our middle office business. They intended to outsource more; we mutually agreed this was not the time to continue that outsourcing journey. It is within the middle office and is an insource versus outsource decision by the client. On Schwab, we do not have a concrete plan yet because we have not seen the final. We will decide once we see it and come back to you. John Woods: On the charge-off, this was a COVID-era commercial loan. Coming out of high-margin contracts from around 2021, when those rolled off, the name had pressure and went into nonaccrual. We took the opportunity to exit. It was substantially reserved, so not a big P&L impact; we crystallized it and moved on in Q1. It does not extend into other portfolios and has nothing to do with NDFI. Operator: Our next question comes from Analyst with Wolfe Research. Your line is now open. Please go ahead. Analyst: Hi. Good morning. This is actually calling in for Steven today. We appreciate the color on the drivers of expense growth, including the 4% from net productivity savings. Given headcount was down 2% year-on-year, how much did that contribute to overall efficiency savings? Looking ahead, do you see potential for further headcount optimization? John Woods: Headcount will be something we consider, but there are puts and takes. We are growing and investing in businesses, so we may add in some places. Gross productivity levers—automation, reengineering, zero-basing processes—reduce reliance on headcount where possible, and we use that capacity to hire in other areas. Round trip, we expect continuing contributions from headcount, but with puts and takes as we invest elsewhere. It is a meaningful portion of the 4% productivity. Operator: Our final question will come from Gerard Cassidy with RBC. Your line is now open. Please go ahead. Gerard Cassidy: John, you have had strong positive operating leverage—ninth consecutive quarter excluding notable items. How much of it is structural—your scalable platform and mix shift—versus cyclical tailwinds like FX volatility or rising market levels? And Ron, with investing in AI today, does scale become an even greater challenge for smaller players to compete against companies like yours and the large money center banks? How important is scale to successfully compete in this business? John Woods: Across the board, we have had organic growth in the quarter—durable, reflecting multi-year investments, business execution, and a sales culture that is paying dividends. We are seeing organic growth across all fee line items. In Markets, from a distance one might say environmental factors, but it is not only environmental. Long-term client relationships and platforms we have built are very attractive, and connectivity between Markets and our Investment Services and Investment Management clients is very strong. We believe we have a durable opportunity to drive attractive positive operating leverage that will reflect in pretax margin improvements over time. Environmental factors can help, but even without them, we believe we have a very attractive opportunity to grow pretax margin through positive operating leverage given the organic drivers. Ron O'Hanley: The importance of scale has not gone down. The investments required around technology and cyber just to stay where you are—forget about growth—are significant, imposed by regulators and increasingly by clients. Layer on the revolution we are seeing with AI—not just bringing in the technology but profiting from it—the scale around people and know-how is hard for smaller players. If we are moving toward true digitization of finance, that will take time; it is not just showing up with a new platform, but recognizing the long-term transition and building on- and off-ramps, which is where you make money, and which require scale. We do not dismiss innovators; we follow them, partner with them, and in some cases buy them. But we are not seeing one of them developing into a true scaled player to compete in our pocket of the market. Operator: There are no further questions. I will now turn the call back over to Elizabeth Lynn for closing remarks. Elizabeth Lynn: Thank you all for joining us today. Please feel free to reach out to Investor Relations with any follow-up questions. Thank you again, and have a nice day.

32天前Insight Analytics约5分钟阅读

ERIC-B.ST 2026 Q1 财报电话会议

Daniel Morris: Hello, everyone, and welcome to the presentation of Ericsson's First Quarter 2026 Results. Joining us by video today is Borje Ekholm, our President and CEO and in the studio, I'm joined by Lars Sandstrom, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A. [Operator Instructions] Details can be found in today's earnings release and on the Investor Relations website as well. Please be advised that today's call is being recorded, and today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call. We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll now hand the call over to Borje and Lars for their introductory comments. Borje Ekholm: Thanks, Daniel, and good morning, everyone, and thanks for joining us today. Q1 was a solid start of the year and with the results that reflects our continued execution against our operational and strategic priorities. We saw a very large currency headwind during the quarter, probably one of the toughest quarters from a comp ratio as the Swedish krona strengthened towards almost all currencies compared to last year. So this, of course, materially impacted every line of our financial statements with reporting sales falling 10%. At the same time, we performed well operationally realizing strong organic growth of 6%, with all segments contributing. Our results are a testament to our leading portfolio and the investments we've been making in furthering our technology leadership. Over the last few years, we've actively managed to reduce dependence on geographic mix. Of course, we realize that North America often receive a disproportionate interest from, I guess, the community -- analyst community, but also around the world. And that's, of course, natural because it is a front-runner market. And this quarter, we saw sales reduced by mid-single digits in North America. But we could still deliver a gross margin of 48.1% for the group and 50.4% for segment networks, indicating that the work we've done to balance out the geographic mix is coming through in the results and giving us less sensitivity to geographic mix. Cloud Software and Services continue to execute well. We reached a gross margin of 43.2%. That's up more than 300 basis points year-over-year. Revenue seasonality was in line with the guidance we had for the quarter and we saw some deals being pushed into Q2. And we expect to see that, therefore, stronger seasonality than normal next quarter. EBITA came in at SEK 5.6 billion with a margin of 11.3%, and the strengthening of the Swedish krona affected EBITA by SEK 2.2 billion. And you've also seen we have the revaluation of the long-term stock-based programs. And all of those are, of course, included in the results. Cash flow during the first quarter is seasonably lower typically. Despite this, cash flow came in at a healthy SEK 5.9 billion with a net cash position of SEK 68.1 billion. And as you've seen just a couple of weeks ago, the AGM approved the Board's proposal on increased dividend and our first share buyback program. We will start to execute on the share buyback program next week with a target to buy back SEK 15 billion. In the next phase of AI, we see that high-performance mobile connectivity will become increasingly important. Even so, our planning assumptions for the RAN market remains flat over the longer term. With disciplined execution, we create room to make selective investments in growth to broaden the mobile platform to new use cases and new sectors. We believe the growth will come in areas outside of our traditional CSP markets. And then we're talking about areas like enterprise and mission critical networks. In our Enterprise segment, which includes our wireless WWAN business, private networks, network APIs or as we now call it, actually network-powered solutions and mobile money, organic growth was stronger, which is encouraging. There are new markets that we see as key opportunities going forward. Of course, new markets take time to develop but we're now seeing these efforts start to scale. I would also comment on the loss in Enterprise of SEK 1.4 billion. It's clearly unacceptable, but it also includes a number of onetime costs and have an improvement plan in place that we're executing on and we will expect to see that coming through shrinking losses during the rest of the year, comes from growth, operational discipline and of course, at the onetime cost base. We're also driving several other growth initiatives. And there, we see good progress in mission-critical networks which tend to be a bit lumpy and vary by quarter. We're experiencing strong interest in several verticals, particularly within Defense Solutions. In modern defense applications, high performance, and then I'm talking about large capacity connectivity is required. And this will make 5G stand-alone a cost-effective alternative. And we've seen a trial with the Italian Navy -- or actually deployment with the Italian Navy this quarter. Another very exciting area is 5G-based sensing where one of many use cases is about detecting unconnected drones. And a few weeks ago, we showcased our solution, which is seeing significant customer interest, of course, given a difficult current market environment geopolitically. We see that our technology here has a great market potential, and we're now starting to invest to capture these opportunities. I would say this is just one example that you don't have to wait for 6G to get part of new exciting use cases with the technology we have. So we're seeing good momentum on our strategy execution, and we've strengthened Ericsson operationally. And I would say this is showing now in our Q1 results. With that, let me give the word over to you, Lars, to go through the numbers in some more detail. Lars Sandstrom: All right. Thank you, Borje. I will begin with some additional comments on the group before moving over to the segments. So net sales in Q1 totaled SEK 49.3 billion with organic sales growing 6% year-on-year. The growth was broad-based and sales grew in all segments and 3 market areas delivered double-digit organic growth, driven by continued 5G rollouts and increased uptake of 5G core. Americas declined 2%, with strong growth in Latin America, more than offset by a mid-single-digit decline in North America following a strong quarter last year. Reported sales decreased by 10%, impacted by a negative currency effect of SEK 7.8 billion then. So organic growth again grew 6%. IPR revenues were SEK 3.1 billion, and this run rate coming out of the quarter is approximately then SEK 13 billion. Adjusted gross income was SEK 23.7 billion with a negative currency impact of SEK 3.8 billion. Adjusted gross margin was 48.1%, in line with last year, excluding iconectiv. On the cost side, operating expenses, excluding restructuring charges, dropped to SEK 18.4 billion, around SEK 2 billion lower year-over-year, driven mainly by currency as well as the divestment of iconectiv. Underlying inflationary pressures were more than offset by cost reduction driven by headcount as well as efficiency measures. And as Borje mentioned, adjusted EBITA, which excludes restructuring, but includes the other one-offs was SEK 5.6 billion. This is down by SEK 1.4 billion, including a negative impact of SEK 2.2 billion, the divestment of iconectiv and SEK 0.5 billion of additional share-based compensation costs coming from the increased share price here during the quarter. The EBITA margin was 11.3%. Cash flow before M&A was SEK 5.9 billion, driven by earnings and reduced net operating assets. So let's move to the segments. In Networks, sales decreased by 8% year-on-year to SEK 32.9 billion with a negative currency impact of SEK 5.2 billion. Organic sales increased by 7%. Organic revenues grew in 3 of our 4 market areas. 2 strategic markets, India and Japan grew strongly. North America declined, impacted by customer spend reallocation in Q1 this year following recent market consolidation. Customer investments were also elevated last year due to tariff uncertainty impacting the comparison. Networks' adjusted gross margin decreased slightly to 50.4%, mainly reflecting actions to enhance resilience in the supply chain. Adjusted EBITA was SEK 6.4 billion, impacted by a negative currency impact of SEK 2 billion and benefiting from lower operating expenses, which were also supported by continued efficiency improvements. Adjusted EBITA margin was 13.3%. Looking at the right-hand graph, the rolling 4 quarter gross margin stabilized around 50% and adjusted EBITA margin at around 20%. Moving to the segment Cloud Software and Services. Sales here decreased 9% to SEK 11.8 billion, including a negative currency impact of SEK 1.6 billion. So organically, sales grew by 4%, with growth primarily in core. Adjusted gross margin came in at 43.2%, an improvement from 39.9% last year, supported by improved delivery efficiency and a favorable product mix. Adjusted EBITA increased to SEK 0.6 billion with a margin of 5.3% despite a negative currency impact of SEK 0.3 billion. Lower gross income was offset by lower operating expenses here. And looking at the right-hand graph, the rolling 4 quarters adjusted gross margin was around 44% and adjusted EBITA margin around 12%. And these are both new high levels. So reported sales on the Enterprise side decreased 30%, impacted by the sale of iconectiv and currency. On an organic basis, Enterprise grew by 4%, and this marks the second quarter of organic growth. Adjusted gross margin declined to 49.0%, reflecting the impact of the divestment of iconectiv and change in business mix in Global Communications platform. Adjusted EBITA landed at minus SEK 1.4 billion, reflecting the divestment of iconectiv and nonrecurring cost of SEK 0.3 billion in the current quarter. Turning then to free cash flow, which was SEK 5.9 billion before M&A in the quarter. We delivered a cash to net sales of 13% for the rolling 4 quarters, above our 9% to 12% target. And cash flow generation was strong, supported by earnings and a stronger-than-normal seasonal reduction in operating net assets. Net cash increased sequentially by SEK 6.9 billion to SEK 68.1 billion here in the quarter. The buyback program of up to SEK 15 billion was approved by the AGM and share repurchases will start now soon. Next, I will cover the outlook. Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment, including the global semiconductor situation, and Borje will come back to this. The Q2 outlook assumes no tariff changes and the exchange rates specified in the report. For Networks, we expect sales growth to be broadly similar to the 3-year average quarter-on-quarter seasonality. And for Cloud Software and Services, we expect sales growth to be above the 3-year average quarter-on-quarter seasonality. We expect Networks' adjusted gross margin to be in the range of 49% to 51% and restructuring charges for 2026 are expected to be at an elevated level with a fairly large part already seen in Q1. So with that, I hand back to you, Borje. Borje Ekholm: Thanks a lot, Lars. So our Q1 results demonstrate the strong execution on our strategic priorities and the actions we've taken over the last several years to strengthen the company operationally. This includes how we made Ericsson less reliant on any specific geographical mix, enabling us to sustain healthy margins in varying market conditions as you have seen in today's report. Our actions also include how we diversified our supply chain to mitigate as much of the geopolitical disturbances as possible. This continues to be a clear competitive advantage, enabling us to meet customer commitments amid the current backdrop. Of course, the global semiconductor situation remains challenging as the AI boom is increasing input costs. We continue to take actions, and Lars mentioned this as well, to mitigate this impact by working closely with both our customers and suppliers, of course, including our pricing. While we believe we're in a good position, we are not immune to these disturbances. So they will have consequences on price and availability. As of course, AI may be the key driver for our industry longer term, we see AI as a net positive for us. The next phase of AI will see AI being industrialized, shifting focus from current focus on data centers, large language models rather to applications, devices, use cases. This will require advanced mobile connectivity with capabilities such as ultra-low latency and high uplink. This puts us in the middle of the next phase of the AI era. With our strategy, we are well positioned to capitalize on this opportunity. We're doing this by providing the industry's best networks for AI and by expanding the mobile platform to new use cases and sectors. This includes exposing network capabilities through network-powered solutions, allowing developers to use the network capabilities to create new use cases. It also includes opening up new addressable markets such as enterprise solutions based on cellular technology and mission-critical networks. And this will allow us to capture a greater share of the value from connectivity and drive mid-single-digit growth for Ericsson while achieving our long-term margin targets of 15% to 18%. So with that, I think it's time for some Q&A. Daniel Morris: Thanks Borje. [Operator Instructions] Thanks, operator. Time for the first question. The first question this morning is going to come from Simon Granath at ABG. Simon Granath: I have a question on Lars on the memory and cost inflation. And the Q1 margin performance for Networks was, in my view, strong. But given the rising memory prices and as inventory runs down through the year, how confident are you that memory prices won't be a significant headwind for the rest of the year? And all else equal and on this topic, should we see Q1 marking the highest level for the year? Lars Sandstrom: All right. Thanks, Simon. When it comes to outlook, we give, as you know, outlook for the first -- for the next quarter here. So -- but when it comes to memory cost and other semiconductor costs, there is, as we say here, a headwind coming. And -- but we should also remember that it is a smaller part of our total cost base, of course. But there is a headwind coming, and we are working hard to mitigate together with our suppliers, but also together with our customers to share the burden here. And then it comes to what can we do when it comes to product substitution, et cetera. And it is a bit too early, I think, already now to say how the impact will be. But you will -- if there is -- and when there is things happening, you will see that more coming into the second half of the year. Daniel Morris: The next question will come from the line of Andrew Gardiner at Citi. Andrew Gardiner: So just on the North American revenue trends that you saw in the quarter, you've highlighted the pressure there, Borje, sort of mid-single digit down year-on-year. I'm just wondering what your view for 2026 as a whole is for that region. The comps, as you suggested, were particularly tough in the first quarter given the tariff impact last year and some buy forward. Does that -- does the decline that you've seen in the first quarter, should that lessen as we come through 2026? Or are there other factors we should be aware of? Borje Ekholm: You see a lot of forecasts in the market on the North American market. And I would say the development you've seen during the first quarter is probably similar to what we should expect for the year. I think that's fair to say given our customers' guidance. At the same time, we have a little bit different mix compared to the market where, as Lars noted, we were maybe hit a bit harder than the general market, the first quarter because of the consolidation we've seen among the operators in the U.S. that was closed. So if you net-net, I don't see a changing market condition, but I see a bit better mix for us vis-a-vis the market. And as you noted, we had a tough comp in Q1. But don't assume the U.S. all of a sudden is going to change direction. That's why I want to come back to what I think is more important today is we're less exposed to North America from a geographic mix perspective and the investments and commitment we have been talking about to diversify our mix. So if we are a bit weaker in North America, but stronger in another market for a quarter, we can actually compensate that and keep a very healthy gross margin. And that, I think, lends for a better predictability of the total company and actually for a healthier way of operating the company. So -- well, I think North America always will be important. From a mix point of view, it will be less important going forward. We work with the customers as front-runner customers, but it's always going to swing a bit up and down in a quarter. So we're -- on the one hand, yes, I would always prefer them to grow, but the reality is it will swing. So the question is more how we can provide a healthy gross margin, a much more stable gross margin. And I think Q1 is a good indication of the work we've done. Andrew Gardiner: I mean I suppose related to that, I mean you mentioned the other strategic markets. I mean India and Japan have been the 2 you've highlighted away from North America. You did see good growth there. I mean is that something that is not just a 1Q impact, but we should expect steady growth from those 2 key markets through the year? Borje Ekholm: I would -- there, we have actually strengthened our market position. So we should see healthy growth as we continue to deliver on those opportunities. So I'm actually very comfortable about that. Daniel Morris: The next question is going to come from the line of Erik Lindholm-Rojestal from SEB. Erik Lindholm-Rojestal: Just one question here. I wanted to ask on OpEx and the impact of cost savings. I mean it looks like underlying OpEx is down around SEK 0.5 billion, as you mentioned, despite the one-off impact that you flagged here. So what sort of inflationary pressures do you see in OpEx for the rest of the year? And when should we start to see the impact from the cost savings that you've launched in Sweden here at the start of the year, for example? Lars Sandstrom: Yes. When it comes to OpEx, I think in the quarter here, it's down organically. I think it's currency and iconectiv that is impacting and then there is somewhat also underlying cost reduction coming through here. And we are continuously working with that. The inflation we talk about since a big portion of the cost base in OpEx is related to people. Of course, there is an underlying continuous salary increase that is coming that we need to work with. And our working assumption is that we live in the flat RAN market and that we need to accommodate too by continuously working and finding efficiencies and reductions where it is possible. And then we do that continuously. So that is what we are working with here every quarter continuously. And you saw there was quite a bit of restructuring here coming in the first quarter now, primarily to the Sweden area, but also the rest of Europe. We have activities in North America, in Asia, et cetera. So that is a continuous work that we are doing, and we will continue that also in the coming quarters. Erik Lindholm-Rojestal: All right. But I guess it's fair to say that these measures will more so show in the second half then? Lars Sandstrom: The ones that we announced today or in this quarter, of course, they come more in the second half of the year and into next year. And then we have the previous ones that is coming, you can see now. So that is a continuous work that we do. Borje Ekholm: I would just add there, by experience, it takes a bit longer than you hope to see it in the numbers. So theoretically, it should come in Q3, of course, or Q2, Q3, but it will be a bit of a delay there. That's why you see the cost kind of not exactly following the number of employees because it's simply associated with costs around when we take costs out. So -- but you will see it after the second half and into next year. Daniel Morris: The next question is going to come from the line of Andreas Joelsson, DNB. Andreas Joelsson: A follow-up on the COGS question that we had. Of course, there's a headwind coming from the component prices, but you have been able to increase the gross margin in Networks for some time and now it has stabilized. What other areas within costs have you sort of from experience the last few years, learned that there is maybe that you can use to compensate for component price increases. So it's not just negotiations with vendors and customers that could keep the gross margin resilient, as you say, if you understand that blurry question. Borje Ekholm: Thanks for the question, Andreas. I can try to give you a notion. Of course, the most important one is to work on the prices. It's undoubtedly the case, and that we continue to do. The other levers we have, which actually have proven to be very sizable is product substitution, i.e., we can -- through technology development, we deliver a product that performs the same, but at a lower price or a lower cost point, I should say. So that actually is maybe the most important one that we've been able to do for quite some time. And I feel quite comfortable we'll get that with the next-generation ASICs coming within not-too-distant future. Then we have also been able to take a lot of costs out on service delivery. And there, I think there are more costs to be taken out. So I think we have -- it's not -- it doesn't come easy. It doesn't come in that sense for free. But I do think there is a number of areas we can kind of leverage to protect a healthy gross margin longer term. And that's why I feel we have kind of reached a different level of performance and control on the cost side. And you know component prices have varied already now. So we've been able to handle that in many different ways. And our ambition is clear. That's what we intend to do going forward as well. And we have a number of degrees of freedom in what we actually do to manage the margins. Daniel Morris: The next question is going to come from the line of Richard Kramer at Arete. Richard Kramer: Borje, you mentioned the early stages of physical AI, which would involve greater mobile connectivity. But can you point to anything within your portfolio which could provide a material uplift to group sales growth, especially addressing the sort of data center AI spending boom given that enterprise remains fairly small in the mix? Borje Ekholm: Yes. Richard, it's a good question. We're not going to see any sales directly from data center expansions right now. Our, call it, exposure to AI is more going to come from the applications when you start to see inference play a very different role. So we may not be the frontrunner on the AI wave, but we are rather the longer term, I would say it's one of our key drivers of traffic in the networks and the connectivity will does look different. That's why I believe the exposure we have is going to come more from that traffic development from AI moving into implementations, but it's also going to come from AI in enterprises. And here, we start to see some front-runner industrial companies, still small, but actually picking up demand in 2 areas: enterprise connectivity, i.e., wireless solutions or as a matter of fact, in interest for network APIs and embedding that into enterprise use cases. So I would like -- I don't want to promote that we have any exposure to data center. So that wave is going to go. We're more a little bit behind that, I guess, in the -- I don't know what to call it, but kind of benefiting from the overall migration of applications towards AI. Daniel Morris: Next question is going to come from the line of Felix Henriksson, Nordea. Felix Henriksson: Good to see the Cloud Software and Services EBITA margin expanding to around 12% on a 12-month rolling basis. I wanted to ask, is there any reason why the margin expansion in this segment should not continue given that growth seems to be led by very margin accretive 5G core demand? Lars Sandstrom: It's a good question. I think what we have said is that the first aim here is to reach a stable double-digit margin and then we work from there. And I think we need to remember that the cloud software is also connected to the flat RAN market. So there is -- but still, there is an underlying growth that we are able to capture with in the core area, which is good, I think. And we have managed to show that we are having a good market position there. So we continue to work on that. So we don't promise. We guide quarter-by-quarter, as you know, but we feel we have reached a stable level now in a good way in the company. Daniel Morris: The next question will come from the line of Ulrich Rathe at Bernstein. Ulrich Rathe: This is more a question for Lars, please. You talked about how you have immunized margin to the foreign exchange moves by matching cost and revenue better. Can you sort of talk about that a little bit more? And I'm wondering, in particular, 2 areas here. One is to what extent are you still benefiting from hedging that could roll off and produce an incremental headwind if the FX rates stay at where they are? And also, with the current level of FX matching in cost and revenue, what would be the effect of a strengthening -- sorry, of a weakening Swedish krona? Would that actually correspond to a material margin driver for you or not? Lars Sandstrom: I think we need to separate between gross margin and EBITA margin here. On the gross margin, we are fairly balanced in the currency baskets, whereas in the OpEx side, we are much more exposed with the Swedish SEK ratio there. So it's higher as we get more of an impact from that end. So I think from -- so that's what's impacting, so to say, the FX mix that we have. So I think that -- and if there is a significant change, you would see that more impacting EBITA rather than gross margins in that sense. And then when it comes to hedging, we have some hedging, but rather low levels and they are coming out. So it should not be a big impact going forward. Daniel Morris: Next question will come from the line of Sandeep Deshpande at JPMorgan. Sandeep Deshpande: Could I ask -- I mean, you've seen this weakness in North America. In terms of your exposure to 5G and 5G core outside North America, do you see there is a potential for significant upgrades? I mean that is the market hasn't shifted as much to 5G or 5G core over the last few years as it has in North America and thus, the growth outside North America could compensate if North American growth over the next few -- couple of years is not going to be as strong. And the question I'm asking here is that historically, outside North America, they have not been as keen to quickly upgrade to next-generation technologies like 5G or 4G even before that. So I mean, how do you see that progress, I mean, at this point? Daniel Morris: Borje, maybe we ask you to take that one. Borje Ekholm: Yes. That's a very good question. North America have been a front-runner market. It's still not fully migrated to 5G SA even there. The only market which is fully 5G SA actually is China. So we see that that's where the market will go. We see a number of operators today increasingly focused on migrating to -- from 5G non-standalone into 5G SA and then 5G advanced. It's still largely a work in progress. So if you try to give some sort of statistics, maybe 1/4 of the operators have some sort of 5G SA and 5G SA of scale is fewer than that. So I would say that's actually one of the major opportunities for our industry. And it's 2 things. Of course, it's an upgrade cycle for us. But I think more importantly, it will allow the operators to start offering differentiated services. So you can have network slicing, dynamic network slicing, for example, can happen when you have 5G stand-alone. So the way we think about this is it's actually one of our more positive opportunities from a medium-term perspective as companies or operators upgrade. And the way to think about this is in order to prepare your network for 6G that eventually will come, you need to actually migrate through 5G standalone into 5G advanced and then have built the architecture that's prepared for 6G. So I see while not everyone have transitioned today, they will need to go that way. And so it will provide an interesting opportunity for us as operators upgrade. So that's why we've invested in positioning us well on 5G core, and we are now starting to see growth coming through on 5G core. So it's actually, I think, a net-net positive for us as we move forward. Daniel Morris: Next question is coming from the line of Daniel Djurberg at Handelsbanken. Daniel Djurberg: A question. I was quite impressed by the network gross margin given the geographical mix with large deployment in India and also growth in LatAm. It could indicate that it was capacity heavy. And if that is correct, should we expect more coverage and hardware deployment in second half in India, for example, and Japan, i.e. supportive on gross margins and then also we have the cost inflation that you mentioned. Daniel Morris: Maybe, Borje, we can start with your thoughts on those 2 markets more broadly and Lars on the margin. Borje Ekholm: Yes. I know we were often talking about coverage and capacity before. I would say what we have tried to do is actually to reduce the dependence on that as well. So when you look at this, there is always an element of higher-margin software sales versus hardware, but it's less important going forward. So the comment here is probably to say that there is a tad more capacity, but it's not meaningfully impacting the profile here. Lars Sandstrom: Yes. No, I think you covers it well. So I think the outlook you see in -- for the Q2 here for Networks is 49% to 51%, and that is what we see now based on the product portfolio and product deliveries and market mix we foresee now. So I think signals rather stability as well. Daniel Morris: The next question is coming from the line of Sebastien Sztabowicz at Kepler Cheuvreux. Sébastien Sztabowicz: On the defense market opportunity, you've been talking about a $10 billion opportunity in that market. Now you are talking about some trials happening currently in Italy. When do you expect those opportunity to materialize and generate first significant revenue? Is it an opportunity over 3, 5 or beyond 5 years? Just to understand a little bit the phasing and the ramp of this technology. Daniel Morris: Sure. Borje, your thoughts on the overall opportunity. Borje Ekholm: I actually think the opportunity is more near term. It's very hard to judge. But I think it's a very good question. And your perspective may be as good as ours. What we see though is a very near-term, very strong need in the market for modern, call it, modern warfare involves a lot of AI and actually heavy need of communication and connectivity, therefore. So we see that this is much more of a near-term opportunity. I wouldn't say 5 years plus. It's more kind of a mid, call it, use 3 years, for lack of a better word, before this opportunity. But if you start to think about -- take a critical site, it could be a sports arena or a nuclear power station or an energy generation station or something like that. The threat from drones are pretty much today. So when you start to think about when is the technology needed from a risk perspective and protection perspective, it's actually a near-term risk. So as I know it or as I see it, I think we need to tackle that need when the market is there. So had I wished we would have started a few years earlier, yes. But I think we're in pretty good shape to start to see these opportunities materialize over the next even maybe 9, 12, 18 months opportunity, and then they start to scale at 2, 3 years. So I'm quite excited about these opportunities because the communication network and the scale we have makes our solutions rather competitive. So I'm actually -- I'm thinking this is -- our ambition is that this is a nearer-term opportunity than 5-plus years. But then putting an exact number on it, I can't, to be honest. But I'm -- but the reception we get from customers is very positive. Daniel Morris: The next question is coming from the line of Sami Sarkamies at Danske. Sami Sarkamies: I still wanted to go back to the rising input costs that were discussed earlier in the call. I have a 2-part question. Firstly, can you elaborate on your current operator agreements allow you to raise prices if needed? Do they, for example, cater for above normal cost inflation? And then secondly, when you look at your operator customers, are you seeing rising energy costs to have an impact on their behavior and potentially investment plans for the year? Daniel Morris: Lars, we start with you on the first and Borje... Lars Sandstrom: We start on the customer side. There are -- it depends on the renewal cycle of contracts that we have with customers, and that can vary a bit in different markets and different customers. So there are -- but there are still an opportunity, I think, to take this discussion because we are -- these are a bit exceptional times. So there is -- we need to take this in a good commercial discussion with our customers. And when it comes on the energy impact on operators, I think that is an important part, the TCO where our products with the right investments they do, they can drive down their TCO. So I think in that sense, it helps our competitive advantage in the market. But we have not seen any big impacts yet. But of course, if there is a prolonged situation with high energy costs, that could have an impact, but we have not seen that. And I think you should also remember the revenue base of our customers is very stable. So they have quite -- we have seen this historically. And normally, our industry or our customers are quite resilient over time. I don't know if you want to add more on that, Borje. Borje Ekholm: You've captured it. What we see and we see an increasing focus on energy efficiency in discussions with customers. So I think this will be a topic -- and as Lars said, it kind of goes both ways, right? It's an opportunity because they need to actually upgrade some of the old equipment, and they actually need to move towards modern. And at the same time, they get a bit tougher on their own cost position. So it kind of sits in that cost a bit [indiscernible] as we say in Swedish, I don't know what that translates to. But that's kind of the situation, right? The interesting thing is that when we now are around, we start to see customers talking about how you actually phase out old technology. And we're even starting to see customers in some markets talk about how do we phase out 4G and actually migrate to 5G and in a way, then have only 5G and 6G. Of course, 3G being phased out in most regions, except Europe possibly. That will also support energy efficiency. So we're actually -- this energy squeeze leads to a bit of a -- when you asked about change in behavior, yes, it is a change in behavior, but much more focused on how do I get on the latest technology curve that helps me with lower process cost. And that will include phasing out 2G, 3G and soon 4G in some markets. Daniel Morris: Moving on to the next question, please, which is coming from the line of Oliver Wong at Bank of America. Oliver Wong: I wanted to focus on perhaps the cost from things like logistics and transportation since given ongoing global geopolitical events, it seems like there could be some impact on that. And also perhaps on the instability of the supply chain, could that be a risk to you? So yes, it would be great to kind of discuss about the logistics and transportation costs. How is that relative to perhaps the impact from rising memory in terms of potential headwinds going into the year? Lars Sandstrom: And I think when it comes to logistics and transportation, we have seen some impact now. But in the total scheme of our cost base, it's limited. So we should remember that. I think it's important. And especially now in Q1, we had some additional costs with the Middle East conflict there where we had to do some rerouting, changing transportation lines, et cetera, utilizing then our flexible production system and supply chain. So I think, yes, it has given some, but we have been able to make sure that we deliver to our customers, which is, at the end of the day, most important for us. So I think -- and that ties a little bit into your supply chain question there. We have a rather well-distributed supply chain today to manage disturbances. We have proven that, I think, during the pandemic. We have proven that now during last year on the tariff side, et cetera. So we continuously work with this and try to mitigate when the things are happening. And of course, as we have said on the tariff side, we cannot guarantee that we are immune, of course, but we are, I think, managing it pretty well. Borje Ekholm: The fair comment is also that we have a distribution hub in the Middle East. So we've been impacted for sure already and been able to mitigate that fully by leveraging the flexible supply chain. So I think this -- we'll have to focus on managing it, monitoring and managing it as well as we can. Daniel Morris: We have time for one final question this morning. We can move to the next. So a follow-up question from Daniel Djurberg at Handelsbanken. Daniel Djurberg: I know I should ask your customer this and I will, but still Latin America saw good growth in Networks, and this is a geography with really tough competition. To me, your radio access network portfolio is more competitive to [ Pearson ] for many years, you showcased at Mobile World Congress. Can you give -- or obviously, can you give any examples of this, if it's correct? And how we should think about markets like Latin America, Sub-Sahara, Eastern Europe, where you have tough Chinese competition? Borje Ekholm: It's a good question. And the reason why I'm hesitating is more that we get into specific customer situations. And I don't want to talk about that for the simple reason that if I would be our customers, I wouldn't like us to talk about it because it may be my competitive positioning in the market that I'm revealing. That's why I think it's inappropriate for us to talk about customers. But what I can say is that we've -- we think our -- the competitor we have to always beat is one of the Chinese. They're, of course, very strong. I have no doubt about that. But we can see that we can actually go head on with our product portfolio, thanks to the strong performance, the strong infield performance we see on quality benchmarking when we compete with them, where we come out well. You can see that in all the -- whether it's Umlaut test or OpenSignal or whatever, we come out well in that comparison. We perform also very well on energy once you're in the field. And it's because the way we have focused on developing the products, it's actually dedicated not to lab trials, but more to infield performance. So operators that looks at that total perspective there we can compete, right? And we've seen that in Latin America. We see it some -- in Africa, it's maybe the hardest market to compete. And you've seen us fight there. But at the end of the day, we remain competitive, and it depends on operator preferences as well. We certainly, in Southeast Asia, win market share when we compete also with the Chinese competitors. Daniel Morris: Thank you. So that comes to the end of the Q&A session. Thank you for joining us. Thanks, Borje and Lars as well. Borje Ekholm: Thank you.

32天前Insight Analytics约5分钟阅读

ZRSEF 2026 Q1 财报电话会议

Walter Hess: Good morning, everyone, and welcome to our Q1 '26 trading update. I'm Walter Hess, the CEO, and I'm joined today by our CFO, Daniel Wuest. In line with what we announced at the full year conference, we will provide transparent quarterly insights into our path to EBITDA breakeven, which is why we are hosting today's call. Just a few weeks ago, during our full year '25 results, we outlined our strategic evolution from an online pharmacy player to the leading digital and AI health platform, the engine for our profitable expansion at scale. Today, we will show you the facts that validate our successful development. Let's move straight to the Q1 highlights on the next slide to demonstrate how well this engine is now accelerating. Overall, we achieved a strong revenue growth of 10.7% year-over-year. Our Rx business showed outstanding momentum with a 30.4% growth year-over-year alongside a strong 7.6% sequential growth compared to the previous quarter. The growth was fueled by accelerating month-over-month with a remarkable uptick in March, which also continues in April. Our high-margin Digital Services business continues to scale rapidly, achieving an impressive 63.1% growth rate while consistently increasing margins. In Q1 '26, we successfully expanded our ecosystem platform, growing our active customer base by 1 million year-over-year, whereas 0.4 million in Q1 '26, to a total of 12.6 million, which is a great achievement. And most importantly, and as you know, our main priority, we improved our adjusted EBITDA by CHF 10 million year-over-year to minus CHF 6 million, proving we are on track to achieve our breakeven target in the course of 2026. Let's move to Slide #5 now. The 30.4% year-over-year Rx growth clearly proves that our strategy to capture the potential of the Rx market is highly effective. It shows that the patients are more and more familiar with our Digital Services and increasingly value the comfort of home delivery. We saw a growth in Rx orders from month-to-month with a significant uptick in March, rounding off a very successful first quarter and also continuing into April. And this acceleration comes together with a more and further optimized channel mix, which pleasingly increased RAS, return on advertising spend, and decreased our customer acquisition costs even further. Ultimately, this is a strong start into the year, and it demonstrates the growing stickiness of our health platform. Our non-Rx business remains a reliable driver of value, delivering continuous and profitable growth of 6.5% year-over-year to fuel our broader ecosystem. We managed our OTC and BPC business according to plan to a growth rate of 4.4%. Our Digital Services, including TeleClinic, Retail Media and our Marketplace grew further by an outstanding 63.1%. These digital business lines are not just growing top line, they are delivering increasing margins and therefore, a significant EBITDA contribution. And on top of it, the strong platform performance and expansion also forms an excellent basis for our Retail Media business. And now I would like to hand over to Daniel. Daniel Wüest: Thank you, Walter. And also from my side, a very warm welcome to all the participants. Let's move to Slide #7, where you see the EBITDA bridge, which we also provided to you during the full year figures in March. And I want to start this with the following comments. We closed Q1 with an adjusted EBITDA, as Walter already said, with minus CHF 6.3 million, representing a substantial improvement of almost CHF 10 million, exactly CHF 9.8 million compared to the quarter of last year. That's proving our continuous path to profitability. The adjusted EBITDA margin improved by over 360 basis points from minus 5.7% to minus 2.1% in Q1 compared to the previous year's quarter. If you look at the chart and you see since Q1 '25, we have seen an ongoing quarterly EBITDA improvement driven by basically 3 factors: Better operational performance, focus on marketing efficiency and also very important to mention, disciplined cost management. Amongst other, you remember, we have closed the Heerlen Logistics operations last year. And this year, we have announced the closing of Ludwigshafen, the warehouse and their respective logistics operations, which have already contributed substantially on the cost side, but will further contribute during '26. And I can also confirm that with the closure of Ludwigshafen, we are very well on track. We will see first positive operational effects there in the second half of '26. We continue to be very transparent, and you see with this minus CHF 6.3 million in Q1 '26 in the chart on Page 7 that we expect the quarter result almost on the same level for Q2. And then as already mentioned in March, we aim for getting close to EBITDA breakeven in Q3 and there will be definitely EBITDA breakeven in Q4. And I think that's what the management team is kind of aiming to achieve. All in all, our Q1 results demonstrate that our measures are working and will further work because it's not yet done, and bet DocMorris is very well on track to achieve EBITDA breakeven in the course of the year. We are relentlessly executing our plan with precision, knowing that our strategy, the evolution from a leading online pharmacy to a leading digital and AI health platform will pay off. With that, I would like to go to Slide #8. There, nothing new. Backed by our strong Q1 performance and our current trading, where we see an ongoing positive trend from March, we are fully confirming our short and midterm guidance as laid out on the full year presentation in March. That means we confirm our '26 adjusted EBITDA target in the range of minus CHF 10 million to minus CHF 25 million, strongly supported by the improvements we have already seen and delivered in Q1. We are confident to achieve EBITDA breakeven even if we would be at the higher end of the guided external revenue growth guidance. And just for your memory, we guided mid-single-digit to low teens percentage range. And as you have seen in Q1, we can deliver on the EBITDA target even if we are at the upper end of the overall revenue guidance. All in all, we firmly reiterate our commitment to reaching EBITDA breakeven during '26 and achieving positive free cash flow in the course of '27. And with that, I hand over to Walter. Walter Hess: Yes. Thank you, Daniel. So before we move to Q&A, I want to briefly address the upcoming Annual General Meeting and the future Board composition proposals. Our Board proposes 3 independent nominees, Thomas Bucher, Nicole Formica-Schiller and Dr. Thomas Reutter. Together with our existing Board members, this composition brings targeted expertise across the areas most critical to further execute on our strategy. Management's clear preference is for continuity and stability. We are at a pivotal point in our development. Consistent, focused execution requires a Board that is aligned, experienced and ready to act, not one in transition. All proposed new nominees are fully independent and stand for the interest of all shareholders. We believe this is the right team to take DocMorris forward, and we encourage shareholders to support these nominations at the AGM. Let me conclude the call with a clear message. Our vision of health in one click is not just a concept. It is fully operationalized through our integrated digital and AI health platform. However, a strategy is ultimately defined by its execution. Our Q1 results deliver strong proof that our measures are working and DocMorris is firmly on track. We are not just making promises for the future, we are delivering today. This is clearly demonstrated by our strong Rx growth and the 63% expansion in Digital Services and our continuous EBITDA improvements. My clear statement to you is that the transition to a profitable digital health ecosystem is fully underway and is yielding tangible financial results. We have the right strategy. We have the right management team and the operational proof is in place. We are executing with absolute focus, and we are pairing the necessary sense of urgency with a clear commitment to long-term value creation. And with that, we would like to move over to the Q&A part of this call. Operator: [Operator Instructions] And we have already some questions. The first question comes from Mr. Koch from Deutsche Bank. Jan Koch: My first one is on Rx. Encouraging to see that the growth rate has accelerated again in Q1. If I analyze your Q1 number, I'm already quite close to your full year guidance. So is there anything we should consider here? Or is your full year guidance just a bit more conservative than in recent years? Then secondly, on profitability, could you confirm that the loss in Q2 is not expected to be higher than in Q1? And if so, the upper end of the EBITDA loss range looks quite unlikely as well. Any comments here? And then lastly, are there any upcoming regulatory changes that we should keep in mind? There have been some headlines on the potential changes to the cold chain requirements. So any color here would be helpful. Walter Hess: Yes. Thank you, Jan, for your questions. Let me take the first and third question. And then the second one, I would like to hand over to Daniel. On the Rx, what I just can confirm that we continuously improve the marketing mix, the performance of the marketing. And with that, we just see a really good development. And yes, so let's meet again in August, and then I can further -- or we can further give you more details about the growth and what you can expect also in the second half year and for the full year. About profitability, maybe Daniel? Daniel Wüest: Yes. I think that's always the backside of being very transparent and you did the right math or measuring up on the scale. I think it would be -- if you already would know how Q2 would come in, especially on the bottom line, then my life would be much easier, and we would now go out and [indiscernible] join with the fun. No, but on a more serious note, definitely, we aim for EBITDA -- quarterly EBITDA in the area of Q1 and knowing that Q1 and Q2 are usually the weakest quarters and with acceleration in Q3 and Q4. However, having said this, as Walter already mentioned, we see very good traction coming from March and also has been transferred into April, even that basically, we had 2 slower weeks due to the Easter time and related vacation. And therefore, I would kind of confirm your view that you could assume that it will be roughly on the level of Q2. But of course, we have -- the management has a higher ambition to maybe improve it to the upper end of the midpoint of the shaded bar, which you see in the chart. Walter Hess: Okay. And then coming to your third question about the regulatory development, and you mentioned the cold chain. So as you all know, there is a draft of regulation, which has been issued by the Ministry of Health. And now the EU Commission intervened and basically said that it's a violation of EU law again, we have to say. For us, it's a positive signal because we see it equally. So now the ministry has to adjust this draft. And it's really just a draft, and it's only on the regulation level. So we see it as a really positive sign as I think also the market has seen. Operator: The next question is from Mr. Kunz from Research Partners. Urs Kunz: I have just one question regarding Digital Services. If I calculated correctly, you had a growth rate of 110% in Q3 and then 95% in Q4. Now you have 63% in Q1. And this is a rather steep deceleration. Is that something we have to think about that it's going further down in the coming quarters? Or is it going to stabilize? Because you have your guidance or your inofficial guidance of mid-double-digit percentage range for the whole year, which would translate to, I guess, 40% to 60%. Daniel Wüest: Thank you, Mr. Kunz, for the question. I think your calculations of the last year and the quarterly development are, let's say, more or less right. And as mentioned, we indicated when we guided for Digital Services that we are aiming for mid-double-digit growth, which we would also translate into 40% to 60%. And with the -- we are now actually at the upper end. And I think in relation to TeleClinic, there, the TeleClinic was slightly below the average, but we have kind of disclosed for Q1. But as mentioned, you have to remember that last year, TeleClinic has won the TK tender, which is by far the biggest insurer in Germany. And there you have seen a huge increase in volume starting in December, but mainly in Q1. And you can expect and assume that there will be kind of a leveling out, i.e., that the base effect will then, from Q2 onwards, play in favor of TeleClinic. And having said this, TeleClinic has several tenders outstanding where we expect to get feedback rather sooner than later and which could then also basically, if they would go into the right direction, give some additional top line growth, which was not reflected in the initial guidance, which we had put out in March. I think just to add there, I think top line growth is one, and we also explained in March that in -- with TeleClinic, we always have years where with high growth, but let's say, stable profitability, margin development, which was last year because the growth was 3 digit, but the margins more or less were stable. And this year, and that deliberately, we see already in the Q1 that the growth is a little bit lower, but the margins have substantially improved, and we expect that this will continue during the year, meaning that we are not talking kind of a 3, but rather kind of a 4 as the first number in the margin profile. Urs Kunz: Okay. But all in all, you're quite confident that the growth rate in Digital Services in the next few quarters stabilize somewhere in this double-digit percentage range, mid-double-digit percentage range and then not kind of constantly going backwards? Daniel Wüest: No, no. I think we hope it will be the other way around, but let's see. But we are very confident that this 40% to 60% is for the time being that the wide range and not any -- adjustments to the downside are definitely not a topic for this year. Operator: [Operator Instructions] And the next question comes from Guillaume Galland, I hope I pronounced your name correctly, from Barclays. Guillaume Galland: See, I have one question maybe on the non-Rx and OTC side. So yes, could you give us a bit more color on what you're currently seeing in German OTC? And -- so your peers have flagged some softness in the market, which was seen in Q4. [indiscernible] in Q1. It seemed that OTC has slowed in Q1 for DocMorris. So keen to hear a bit more on the consumer demand and if you've seen any changes on the competitive intensity. Walter Hess: Thank you, Guillaume. Happy to answer that one. So obviously, the market is going on more or less the same level and pace as also the Q4. For us, it's important. We have a plan to grow mid-single digit with OTC and BPC, and this is the level where we manage growth in that part. And yes, so as you might remember, generating OTC growth would not be really difficult. So we could grow further, but it comes with a price. And our priority is very clearly on profitability. And this is why we decided also to soft guide OTC on mid-single digit, what works well in Q1 and also in Q2, the start in April. Guillaume Galland: And then regarding -- sorry, Rossmann and dm, any change here in terms of competition? Walter Hess: Sorry, I didn't understand your question. Guillaume Galland: Have you seen any switch in competition from Rossmann and dm in the market on the OTC side? Walter Hess: No, we don't feel additional competition at all. Daniel Wüest: Guillaume, so to make it very clear, I think on the OTC, we have compared from Q1 -- Q4 to Q1 this year, we have not changed anything. We have exactly the same amount of marketing spend, marketing ratio and everything. And that's the reason -- you do not have to ask us why in Q4, we all of a sudden got to a double-digit OTC growth. But I think that was somehow exceptional. But Q1 is really according to plan and budget and to guidance, which we provided this mid-single digit and this 4.6%, we are perfectly on track to -- in this respect. Walter Hess: Okay. So as there are no further questions... Operator: Yes, one more question. It just came in. I'd like to interrupt you. So the next question is from Gian-Marco Werro. The floor is yours. Yes, we can't hear you, Mr. Werro. I'm sorry. Walter Hess: But we can answer your question off the call at any time. So we are, of course, achievable -- available. Okay. So let's end this call. Thank you very much for taking part, for spending the time. I just can confirm we are really well on track. The management, the company needs stability and consistency, and we are strongly executing and fully focused on delivering the guidance that we have promised to you and to the market. I wish you a wonderful day and looking forward to seeing you and meeting you in August latest. Thanks a lot. Daniel Wüest: Thank you.

32天前Insight Analytics约5分钟阅读

DOCM.SW 2026 Q1 财报电话会议

Walter Hess: Good morning, everyone, and welcome to our Q1 '26 trading update. I'm Walter Hess, the CEO, and I'm joined today by our CFO, Daniel Wuest. In line with what we announced at the full year conference, we will provide transparent quarterly insights into our path to EBITDA breakeven, which is why we are hosting today's call. Just a few weeks ago, during our full year '25 results, we outlined our strategic evolution from an online pharmacy player to the leading digital and AI health platform, the engine for our profitable expansion at scale. Today, we will show you the facts that validate our successful development. Let's move straight to the Q1 highlights on the next slide to demonstrate how well this engine is now accelerating. Overall, we achieved a strong revenue growth of 10.7% year-over-year. Our Rx business showed outstanding momentum with a 30.4% growth year-over-year alongside a strong 7.6% sequential growth compared to the previous quarter. The growth was fueled by accelerating month-over-month with a remarkable uptick in March, which also continues in April. Our high-margin Digital Services business continues to scale rapidly, achieving an impressive 63.1% growth rate while consistently increasing margins. In Q1 '26, we successfully expanded our ecosystem platform, growing our active customer base by 1 million year-over-year, whereas 0.4 million in Q1 '26, to a total of 12.6 million, which is a great achievement. And most importantly, and as you know, our main priority, we improved our adjusted EBITDA by CHF 10 million year-over-year to minus CHF 6 million, proving we are on track to achieve our breakeven target in the course of 2026. Let's move to Slide #5 now. The 30.4% year-over-year Rx growth clearly proves that our strategy to capture the potential of the Rx market is highly effective. It shows that the patients are more and more familiar with our Digital Services and increasingly value the comfort of home delivery. We saw a growth in Rx orders from month-to-month with a significant uptick in March, rounding off a very successful first quarter and also continuing into April. And this acceleration comes together with a more and further optimized channel mix, which pleasingly increased RAS, return on advertising spend, and decreased our customer acquisition costs even further. Ultimately, this is a strong start into the year, and it demonstrates the growing stickiness of our health platform. Our non-Rx business remains a reliable driver of value, delivering continuous and profitable growth of 6.5% year-over-year to fuel our broader ecosystem. We managed our OTC and BPC business according to plan to a growth rate of 4.4%. Our Digital Services, including TeleClinic, Retail Media and our Marketplace grew further by an outstanding 63.1%. These digital business lines are not just growing top line, they are delivering increasing margins and therefore, a significant EBITDA contribution. And on top of it, the strong platform performance and expansion also forms an excellent basis for our Retail Media business. And now I would like to hand over to Daniel. Daniel Wüest: Thank you, Walter. And also from my side, a very warm welcome to all the participants. Let's move to Slide #7, where you see the EBITDA bridge, which we also provided to you during the full year figures in March. And I want to start this with the following comments. We closed Q1 with an adjusted EBITDA, as Walter already said, with minus CHF 6.3 million, representing a substantial improvement of almost CHF 10 million, exactly CHF 9.8 million compared to the quarter of last year. That's proving our continuous path to profitability. The adjusted EBITDA margin improved by over 360 basis points from minus 5.7% to minus 2.1% in Q1 compared to the previous year's quarter. If you look at the chart and you see since Q1 '25, we have seen an ongoing quarterly EBITDA improvement driven by basically 3 factors: Better operational performance, focus on marketing efficiency and also very important to mention, disciplined cost management. Amongst other, you remember, we have closed the Heerlen Logistics operations last year. And this year, we have announced the closing of Ludwigshafen, the warehouse and their respective logistics operations, which have already contributed substantially on the cost side, but will further contribute during '26. And I can also confirm that with the closure of Ludwigshafen, we are very well on track. We will see first positive operational effects there in the second half of '26. We continue to be very transparent, and you see with this minus CHF 6.3 million in Q1 '26 in the chart on Page 7 that we expect the quarter result almost on the same level for Q2. And then as already mentioned in March, we aim for getting close to EBITDA breakeven in Q3 and there will be definitely EBITDA breakeven in Q4. And I think that's what the management team is kind of aiming to achieve. All in all, our Q1 results demonstrate that our measures are working and will further work because it's not yet done, and bet DocMorris is very well on track to achieve EBITDA breakeven in the course of the year. We are relentlessly executing our plan with precision, knowing that our strategy, the evolution from a leading online pharmacy to a leading digital and AI health platform will pay off. With that, I would like to go to Slide #8. There, nothing new. Backed by our strong Q1 performance and our current trading, where we see an ongoing positive trend from March, we are fully confirming our short and midterm guidance as laid out on the full year presentation in March. That means we confirm our '26 adjusted EBITDA target in the range of minus CHF 10 million to minus CHF 25 million, strongly supported by the improvements we have already seen and delivered in Q1. We are confident to achieve EBITDA breakeven even if we would be at the higher end of the guided external revenue growth guidance. And just for your memory, we guided mid-single-digit to low teens percentage range. And as you have seen in Q1, we can deliver on the EBITDA target even if we are at the upper end of the overall revenue guidance. All in all, we firmly reiterate our commitment to reaching EBITDA breakeven during '26 and achieving positive free cash flow in the course of '27. And with that, I hand over to Walter. Walter Hess: Yes. Thank you, Daniel. So before we move to Q&A, I want to briefly address the upcoming Annual General Meeting and the future Board composition proposals. Our Board proposes 3 independent nominees, Thomas Bucher, Nicole Formica-Schiller and Dr. Thomas Reutter. Together with our existing Board members, this composition brings targeted expertise across the areas most critical to further execute on our strategy. Management's clear preference is for continuity and stability. We are at a pivotal point in our development. Consistent, focused execution requires a Board that is aligned, experienced and ready to act, not one in transition. All proposed new nominees are fully independent and stand for the interest of all shareholders. We believe this is the right team to take DocMorris forward, and we encourage shareholders to support these nominations at the AGM. Let me conclude the call with a clear message. Our vision of health in one click is not just a concept. It is fully operationalized through our integrated digital and AI health platform. However, a strategy is ultimately defined by its execution. Our Q1 results deliver strong proof that our measures are working and DocMorris is firmly on track. We are not just making promises for the future, we are delivering today. This is clearly demonstrated by our strong Rx growth and the 63% expansion in Digital Services and our continuous EBITDA improvements. My clear statement to you is that the transition to a profitable digital health ecosystem is fully underway and is yielding tangible financial results. We have the right strategy. We have the right management team and the operational proof is in place. We are executing with absolute focus, and we are pairing the necessary sense of urgency with a clear commitment to long-term value creation. And with that, we would like to move over to the Q&A part of this call. Operator: [Operator Instructions] And we have already some questions. The first question comes from Mr. Koch from Deutsche Bank. Jan Koch: My first one is on Rx. Encouraging to see that the growth rate has accelerated again in Q1. If I analyze your Q1 number, I'm already quite close to your full year guidance. So is there anything we should consider here? Or is your full year guidance just a bit more conservative than in recent years? Then secondly, on profitability, could you confirm that the loss in Q2 is not expected to be higher than in Q1? And if so, the upper end of the EBITDA loss range looks quite unlikely as well. Any comments here? And then lastly, are there any upcoming regulatory changes that we should keep in mind? There have been some headlines on the potential changes to the cold chain requirements. So any color here would be helpful. Walter Hess: Yes. Thank you, Jan, for your questions. Let me take the first and third question. And then the second one, I would like to hand over to Daniel. On the Rx, what I just can confirm that we continuously improve the marketing mix, the performance of the marketing. And with that, we just see a really good development. And yes, so let's meet again in August, and then I can further -- or we can further give you more details about the growth and what you can expect also in the second half year and for the full year. About profitability, maybe Daniel? Daniel Wüest: Yes. I think that's always the backside of being very transparent and you did the right math or measuring up on the scale. I think it would be -- if you already would know how Q2 would come in, especially on the bottom line, then my life would be much easier, and we would now go out and [indiscernible] join with the fun. No, but on a more serious note, definitely, we aim for EBITDA -- quarterly EBITDA in the area of Q1 and knowing that Q1 and Q2 are usually the weakest quarters and with acceleration in Q3 and Q4. However, having said this, as Walter already mentioned, we see very good traction coming from March and also has been transferred into April, even that basically, we had 2 slower weeks due to the Easter time and related vacation. And therefore, I would kind of confirm your view that you could assume that it will be roughly on the level of Q2. But of course, we have -- the management has a higher ambition to maybe improve it to the upper end of the midpoint of the shaded bar, which you see in the chart. Walter Hess: Okay. And then coming to your third question about the regulatory development, and you mentioned the cold chain. So as you all know, there is a draft of regulation, which has been issued by the Ministry of Health. And now the EU Commission intervened and basically said that it's a violation of EU law again, we have to say. For us, it's a positive signal because we see it equally. So now the ministry has to adjust this draft. And it's really just a draft, and it's only on the regulation level. So we see it as a really positive sign as I think also the market has seen. Operator: The next question is from Mr. Kunz from Research Partners. Urs Kunz: I have just one question regarding Digital Services. If I calculated correctly, you had a growth rate of 110% in Q3 and then 95% in Q4. Now you have 63% in Q1. And this is a rather steep deceleration. Is that something we have to think about that it's going further down in the coming quarters? Or is it going to stabilize? Because you have your guidance or your inofficial guidance of mid-double-digit percentage range for the whole year, which would translate to, I guess, 40% to 60%. Daniel Wüest: Thank you, Mr. Kunz, for the question. I think your calculations of the last year and the quarterly development are, let's say, more or less right. And as mentioned, we indicated when we guided for Digital Services that we are aiming for mid-double-digit growth, which we would also translate into 40% to 60%. And with the -- we are now actually at the upper end. And I think in relation to TeleClinic, there, the TeleClinic was slightly below the average, but we have kind of disclosed for Q1. But as mentioned, you have to remember that last year, TeleClinic has won the TK tender, which is by far the biggest insurer in Germany. And there you have seen a huge increase in volume starting in December, but mainly in Q1. And you can expect and assume that there will be kind of a leveling out, i.e., that the base effect will then, from Q2 onwards, play in favor of TeleClinic. And having said this, TeleClinic has several tenders outstanding where we expect to get feedback rather sooner than later and which could then also basically, if they would go into the right direction, give some additional top line growth, which was not reflected in the initial guidance, which we had put out in March. I think just to add there, I think top line growth is one, and we also explained in March that in -- with TeleClinic, we always have years where with high growth, but let's say, stable profitability, margin development, which was last year because the growth was 3 digit, but the margins more or less were stable. And this year, and that deliberately, we see already in the Q1 that the growth is a little bit lower, but the margins have substantially improved, and we expect that this will continue during the year, meaning that we are not talking kind of a 3, but rather kind of a 4 as the first number in the margin profile. Urs Kunz: Okay. But all in all, you're quite confident that the growth rate in Digital Services in the next few quarters stabilize somewhere in this double-digit percentage range, mid-double-digit percentage range and then not kind of constantly going backwards? Daniel Wüest: No, no. I think we hope it will be the other way around, but let's see. But we are very confident that this 40% to 60% is for the time being that the wide range and not any -- adjustments to the downside are definitely not a topic for this year. Operator: [Operator Instructions] And the next question comes from Guillaume Galland, I hope I pronounced your name correctly, from Barclays. Guillaume Galland: See, I have one question maybe on the non-Rx and OTC side. So yes, could you give us a bit more color on what you're currently seeing in German OTC? And -- so your peers have flagged some softness in the market, which was seen in Q4. [indiscernible] in Q1. It seemed that OTC has slowed in Q1 for DocMorris. So keen to hear a bit more on the consumer demand and if you've seen any changes on the competitive intensity. Walter Hess: Thank you, Guillaume. Happy to answer that one. So obviously, the market is going on more or less the same level and pace as also the Q4. For us, it's important. We have a plan to grow mid-single digit with OTC and BPC, and this is the level where we manage growth in that part. And yes, so as you might remember, generating OTC growth would not be really difficult. So we could grow further, but it comes with a price. And our priority is very clearly on profitability. And this is why we decided also to soft guide OTC on mid-single digit, what works well in Q1 and also in Q2, the start in April. Guillaume Galland: And then regarding -- sorry, Rossmann and dm, any change here in terms of competition? Walter Hess: Sorry, I didn't understand your question. Guillaume Galland: Have you seen any switch in competition from Rossmann and dm in the market on the OTC side? Walter Hess: No, we don't feel additional competition at all. Daniel Wüest: Guillaume, so to make it very clear, I think on the OTC, we have compared from Q1 -- Q4 to Q1 this year, we have not changed anything. We have exactly the same amount of marketing spend, marketing ratio and everything. And that's the reason -- you do not have to ask us why in Q4, we all of a sudden got to a double-digit OTC growth. But I think that was somehow exceptional. But Q1 is really according to plan and budget and to guidance, which we provided this mid-single digit and this 4.6%, we are perfectly on track to -- in this respect. Walter Hess: Okay. So as there are no further questions... Operator: Yes, one more question. It just came in. I'd like to interrupt you. So the next question is from Gian-Marco Werro. The floor is yours. Yes, we can't hear you, Mr. Werro. I'm sorry. Walter Hess: But we can answer your question off the call at any time. So we are, of course, achievable -- available. Okay. So let's end this call. Thank you very much for taking part, for spending the time. I just can confirm we are really well on track. The management, the company needs stability and consistency, and we are strongly executing and fully focused on delivering the guidance that we have promised to you and to the market. I wish you a wonderful day and looking forward to seeing you and meeting you in August latest. Thanks a lot. Daniel Wüest: Thank you.

32天前Insight Analytics约5分钟阅读

The Iran War Went Pretty Much As History Predicted For Stock Market. What's Next?

The Iran war's timeline followed the typical market reaction to major geopolitical events in history.

32天前Insight Analytics约5分钟阅读

Investors Weigh Impact of Iran War, Expectations For Credit Market Economy | Real Yield 4/17/2026

"Bloomberg Real Yield" highlights the market-moving news you need to know. Today's guests: BoFA Securities Senior US Rates Strategist Meghan Swiber, Neuberger CIO & Global Head of Fixed Income Ashok Bhatia, Goldman Sachs Asset Management Head of Multi Sector Fixed Income Investing Lindsay Rosner, and Corbin Capital Partners Deputy CIO, Credit John Cocke.

32天前Insight Analytics约5分钟阅读

Nasdaq heads toward its longest winning streak since 1992 as historic stock-market comeback continues

A rally that has already catapulted stocks higher with a velocity rarely seen before continued to pick up speed on Friday.

32天前Insight Analytics约5分钟阅读

Stocks Are Surging. Here Are 14 to Sell Short.

The list includes Tesla, Ford Motor, Carvana, DraftKings, Norwegian Cruise Line, GameStop, and Starbucks.

32天前Insight Analytics约5分钟阅读

U.S. Stocks Surge on Hope Iran War Nearing End. Foreign Leaders Have a More Sober View.

Saudi Arabia's finance minister warned that normalizing energy and commodity flows will take time because of the logistics involved.

32天前Insight Analytics约5分钟阅读

Peace, Earnings, and AI Lead Stocks to New Records

The “end” of the Iran war spurred a market celebration this week, even if the conflict is nowhere near officially over.

32天前Insight Analytics约5分钟阅读

Stocks Hit Records on Iran Truce Hopes. Why the Rally May Have Further to Run.

U.S. stocks rallied to fresh highs as hopes for a U.S.-Iran truce pushed oil prices lower and boosted investor sentiment.

32天前Insight Analytics约5分钟阅读

Concurrent Technologies Plc (COTGF) Q4 2025 Earnings Call Transcript

32天前Insight Analytics约5分钟阅读

Fed Governor Waller says Iran war and labor market risks are keeping central bank on hold

"High inflation and a weak labor market would be very complicated for a policymaker," the central banker said for a speech in Alabama. "If I face this situation, I'll have to balance the risks to the two sides of the Fed's dual mandate to determine the appropriate path of policy, and that may mean maintaining the policy rate at the current target range if the risks to inflation outweigh those to the labor market," Waller added.

32天前Insight Analytics约5分钟阅读

Retail Traders Retreat Amid Iran Conflict

At the end of last year, Nasdaq retail data suggests retail trading reached $70 billion a day as markets rotated out of crypto and software stocks and into value stocks. But in the past few weeks, as the conflict in Iran started, data shows retail trading has fallen significantly.

32天前Insight Analytics约5分钟阅读