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ADPT 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Karina Calzadilla, head of investor relations. Please go ahead. Karina Calzadilla: Thank you, Anton, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Corporation First Quarter 2026 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive Biotechnologies Corporation financial results for 2026. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing a slide presentation that has been posted to the Investors section on our corporate website. During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements depending on a number of factors which are set forth in our public filings with the SEC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad M. Robins, our CEO and Co-Founder, and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I will turn the call over to Chad. Chad? Chad M. Robins: Thanks, Karina. Good afternoon, and thank you for joining us on our first quarter earnings call. As shown on slide three, we are off to a strong start to the year, with accelerating momentum in MRD and disciplined execution across the company. MRD revenue grew 53% year over year, reflecting broad-based strength across both clinical and pharma. We also recognized our first primary endpoint milestone this quarter, a meaningful proof point for MRD's expanding role in drug development. clonoSEQ clinical volumes increased 41% year over year, demonstrating strong continued adoption. We also delivered meaningful margin expansion, with sequencing gross margin increasing eight percentage points year over year to 70%, driven by scale and operational efficiency. At the same time, we maintained strong financial discipline, reducing cash burn and ending the quarter with approximately $222 million in cash. Given the strength we are seeing in the MRD business, we are raising our full-year MRD revenue guidance to a range of $260 million to $270 million. Kyle is going to provide more detail shortly. Let us now turn to slide four for a deeper look at the MRD business. Our clinical business continues to deliver strong growth, with revenue up 54% year over year. clonoSEQ tests reached another quarterly record of almost 32,600 in Q1, up 9% sequentially. Growth was observed in all reimbursed indications, led by DLBCL at over 19% growth versus the prior quarter. Importantly, we are seeing mounting traction across the key drivers that support durable, long-term adoption. Blood-based testing reached 49% of MRD volume. In multiple myeloma, a traditionally bone marrow–driven indication, the contribution of blood-based MRD increased to 29%, up eight percentage points year over year. This shift is closely linked to expansion of the community setting, where a combination of favorable guideline updates and implementation of standardized testing protocols contributed to growth rates that outpaced the rest of the business. Community volumes grew 67% year over year and now represent 35% of total testing. Growth in the community business was further supported by our EMR-enabled workflows, which are driving repeat utilization. Serial monitoring orders available to Flatiron-integrated accounts are widely being utilized, and strong initial pull-through rates have further improved with 72% of repeat orders due being fulfilled. Physician engagement also continues to expand, with the number of ordering clinicians growing 43% year over year to nearly 5,000 in Q1, underscoring increasingly broad acceptance of MRD as part of routine clinical management. Finally, we continue to see increases in pricing, with U.S. ASP growth of 11% year over year to $1,360 per test. Importantly, I am excited to share that clonoSEQ is now listed in the Texas Medicaid policy manual. clonoSEQ is one of only two specific tests included in the newly developed genetic testing section, and patients may receive up to six tests per year. It is great to be pioneers in bringing advanced molecular testing to some of our most vulnerable patients. Our scale, adoption, and embedded workflows support clonoSEQ's sustained growth and continue to strengthen our leadership position as the market evolves. Let us now turn to slide five to discuss our biopharma business. We delivered one of the strongest quarters to date in MRD Pharma, with revenue growing 53% year over year, or 33% excluding milestones. As mentioned, we also recognized our first milestone in the U.S. tied to MRD as a primary endpoint, the CEPHIUS trial in multiple myeloma. New bookings were strong, driving backlog to approximately $254 million, up 24% year over year. Bookings came primarily from regulated studies, including several registrational trials where MRD will be used as a primary or co-primary endpoint in both multiple myeloma and CLL. We continue to see increasing use of MRD to guide treatment. Today, we have approximately 20 ongoing interventional studies where MRD is used for enrollment, stratification, or to guide therapy decisions. As these trials read out, they directly support our commercial business. For example, data from the PERSEUS trial helped establish sustained MRD negativity as a meaningful measure of deeper response in multiple myeloma, which supports broader adoption of clonoSEQ in clinical practice. The momentum we are seeing in the pharma business is likely to be further supported by evolving regulatory trends. The FDA recently introduced a new clinical trial model that incorporates real-time data submission, with early proof-of-concept studies underway, including the TRAVERSE trial in mantle cell lymphoma, where MRD-negative complete response measured by clonoSEQ is a key endpoint. While early, this emerging model for accelerating data review will reinforce the value of MRD endpoints that are objective, quantitative, and longitudinal. These dynamics are particularly relevant in regulated and registration settings where data quality, reproducibility, and regulatory credibility are critical, and where clonoSEQ is well positioned as a clinically validated MRD assay. Taken together, the trends we are observing support a reinforcing flywheel between biopharma and clinical testing, as adoption of clonoSEQ in drug development generates evidence, strengthens clinical utility, and drives demand in the clinic. To wrap up on MRD, as shown on slide six, we are well on track to deliver against our key priorities for the year. Starting with clinical volumes, we initially guided to over 30% growth for the year. Based on our first quarter performance and continued momentum, we now expect volumes to grow to at least 35% in 2026, with potential for upside. Importantly, the underlying drivers of growth are already nearing our full-year targets. Blood-based testing is rapidly approaching our goal of over 50% contribution, and community contribution is already at 35%, in line with our full-year expectations. EMR integrations continue to advance, with six new Epic accounts added year to date and five more expected to go live in the next month. In April, we went live with Epic at another of our top 10 accounts, bringing us to seven of our top 10 now being fully integrated. On pricing, we remain on track to achieve our target of approximately $1,400 per test in 2026, supported by recent policy expansions in CLL and DLBCL, Medicaid payment traction, and commercial payer negotiations, with 10 signed in the first quarter alone. Finally, strong top-line growth combined with continued operational efficiencies positions us to achieve over 70% sequencing gross margin and expand adjusted EBITDA. Overall, our progress across these MRD priorities is a testament to our continued momentum and strengthens our confidence in our ability to meet or exceed our full-year commitments. Turning now to slide seven, our immune medicine programs are progressing well against our 2026 key priorities. We continue to scale our TCR–antigen data sets and advance our AI/ML modeling work. We now have more than 6 million functional TCR–antigen pairs, with data that currently spans about 50,000 antigens and 50-plus HLA types. This proprietary data set enables us to understand TCR–antigen interactions and their role in cancer, virology, and autoimmunity. We recently confirmed that our digital AI model outperformed the accuracy of existing public benchmarks in predicting TCR–antigen binding. We published this work in Proceedings of Machine Learning Research and presented at the Machine Learning for Health Symposium. Our focus this year is to further improve these models in targeted applications that could be attractive to partners seeking to leverage our data and our digital capabilities. In parallel, we are applying our AI-enabled immune medicine platform to identify the likely disease-causing T-cell receptors and their antigens in select autoimmune conditions. This quarter, we kicked off our RA target discovery partnership with Pfizer. We received over 1,000 patient samples and are on track to deliver the RA data package in 2026. As we continue to make progress on these 2026 priorities, we are advancing discussions on additional data partnerships, maintaining a disciplined approach to capital allocation, and operating within our expected cash burn range of $15 million to $20 million for the year. I will now turn the call over to Kyle, who is going to walk through our financial results and updated full-year guidance. Kyle? Kyle Piskel: Thanks, Chad. Starting on slide eight with our first quarter results, total revenue was $70.9 million, representing 45% growth year over year, driven primarily by continued strength in MRD, which accounted for approximately 95% of total revenue. Of note, amortization from the Genentech payments is excluded from all prior period comparisons. MRD revenue grew 53% versus the prior year to $67.1 million, with clinical and pharma contributions of 65% and 35%, respectively. Immune medicine revenue was $3.8 million, down 26% from a year ago, primarily due to timing of sample receipts and processing. Turning to margins, sequencing gross margin, which excludes MRD milestones, was 70% for the quarter, up from 62% a year ago. This improvement reflects reduced assay costs due to efficiencies from our NovaSeq X launch in 2025, leverage in overhead as we support higher volumes, and favorable pricing trends across both clinical and pharma. Total operating expenses, inclusive of cost of revenue, were $90.1 million, up 10% year over year. This increase was mainly driven by continued investment in commercial and infrastructure, including EMR integrations and reimbursement, as well as higher personnel-related costs. At the segment level, MRD continues to demonstrate strong profitability, with adjusted EBITDA of $12.1 million compared to a loss of $4.1 million in the prior year, reflecting the impact of revenue growth, including milestone revenue, and continued operating leverage. Immune medicine adjusted EBITDA was a loss of $10.4 million. At the total company level, adjusted EBITDA was a loss of $2.5 million. Net loss for the quarter was $20 million, including approximately $2.9 million of interest expense related to our royalty financing agreement with Orbit. I will now turn to our updated full-year guidance on slide nine. We are raising our full-year MRD revenue guidance to a range of $260 million to $270 million, up from our prior range of $255 million to $265 million. This increase reflects stronger-than-expected clinical volume performance in the first quarter and continued momentum across key growth drivers. This range includes $9 million of MRD milestone revenue, which was recognized in the first quarter, and we do not anticipate additional milestone revenue for the remainder of 2026. At the midpoint of the guide, this implies approximately 25% year-over-year growth, or 33% growth excluding milestones. In terms of seasonality, we continue to expect MRD revenue to be weighted approximately 45% in the first half and 55% in the second half. We are reiterating our full-year total operating expense guidance, including cost of revenue, of $350 million to $360 million. This reflects continued investment in MRD growth, with approximately 75% of spend allocated to MRD, approximately 20% to immune medicine, and the remainder to corporate unallocated. Importantly, we remain on track to achieve positive adjusted EBITDA and positive free cash flow for the full company in 2026. Overall, the quarter reflects strong financial execution supported by continued revenue growth, expanding margins, and operating leverage. With that, I will turn the call back over to Chad. Chad M. Robins: Thanks, Kyle. We are executing well across the business, and the strength we are seeing, particularly in MRD, gives us confidence in both our plan and the opportunity ahead. As we move through the year, we expect to build on this performance and drive additional upside over time. With that, I will turn it over to the operator for questions. Operator: We will now open the call for questions. Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while I compile the Q&A roster. Our first question comes from Andrew Brackmann from William Blair. Please go ahead. Andrew Frederick Brackmann: Hey, guys. Good afternoon. Thanks for taking the questions here. Wanted to ask on community testing. You know, Chad, as you sort of outlined here, I think you are already at the full-year target for the mix that you want coming from the community. Can you maybe sort of compare and contrast for us just the nature of the conversations that you are having with those accounts in particular today versus a year or so ago? You have got so much sort of tailwinds from the blood mix increasing and then also the EMR integration. So how have those conversations sort of evolved over the last year or so? Susan Bobulsky: Thanks for the question, Andrew. I can help answer that. I think a year ago, if you had asked me this question, I would have said the conversations had shifted from “What is MRD? Why should I care? Why should I do this?” to “How should I do this? Which patients? Which indications? Which use cases? Help me understand more of the practical applications.” And now, a year later, the conversations are increasingly shifting toward practical implementation. We are increasingly getting traction with conversations around protocols and, in fact, have established testing protocols in a number of large community centers and networks. The goal is: let us standardize testing so that all our patients have access to the best care; let us ensure our clinicians are not forgetting about this for their heme patients, who in the community may not make up the lion’s share of the patients they see every day. That sort of practical, implementation-oriented conversation is more and more the norm, and I think it is a really positive sign for the degree to which MRD is now becoming entrenched as part of the standard of care in the community at large. Andrew Frederick Brackmann: That is perfect. I appreciate all that color. And then just wanted to ask on the reimbursement front. Obviously, there is a lot of noise out there with respect to CMS and the CRUSH initiative. Can you maybe just remind investors how clonoSEQ is positioned from a reimbursed profile? How you see your rate as durable even if there are changes to things like MolDX nationalization or implementation of prior authorizations? Thanks for taking the questions. Unknown Speaker: Yes. It is Dave. Thanks for the question, Andrew. We have looked extensively at this question, and after internal and external evaluation with outside counsel, we determined that we are currently not subject to panel reporting requirements for the cycle. There are very specific and defined requirements for PAMA reporting by statute, and your tests must not only fall under the CLFS, or Clinical Laboratory Fee Schedule, but also have to account for over 50% of your Medicare revenue. CMS publishes a list of CPT codes that fall under the CLFS, and the clonoSEQ episode billing structure is not on it. If we go one level deeper, CMS does not identify the MolDX code that we use for billing under the clonoSEQ episodic rate structure as being on the CLFS list. It is worth noting, as you all know, that the vast majority of our Medicare revenues are generated through the episode rate structure billing under the MolDX program. CMS does consider the PLA code that we use to bill Medicare for MCL recurrence monitoring as being on the CLFS, but our Medicare revenues under the PLA code for recurrence monitoring are well below the 50% revenue threshold set for PAMA for this initial data-reporting period. Separately, as it goes to your durability question, we are pursuing a multipronged strategy that not only includes recurrence monitoring—we are also in productive discussion with MolDX to increase the number of tests per bundle under our episode structure. There are other things that we are looking at. This is of super high importance, and we are all over it. Andrew Frederick Brackmann: Great. Appreciate all the color. Chad M. Robins: Thanks, guys. Susan Bobulsky: Sure. Operator: Thank you. Our next question comes from David Westenberg from Piper Sandler. Please go ahead. David Michael Westenberg: Hi. Thank you for taking the question. Congrats on the great job here. So I want to talk about MRD as a primary endpoint. Congratulations on that. Should we think about different things like CDx or on the label, and how should we think about pharma basically helping to push your product because of it beyond the label? And lastly, I imagine there is a lot of power in being able to find patients that are recurring. Is there any potential reimbursement or strategic monetization of maybe getting these clinical patients into clinical trials that were not able to prior to maybe, you know, clonoSEQ and its incredibly high sensitivity? Susan Bobulsky: Thanks, David. I appreciate those questions, and I think it is an interesting set of topics. First, with regard to primary endpoint, as you heard in Chad’s prepared remarks, we are seeing increasing use of the assay in the pharma setting in terms of regulated studies. And even more beyond that, we are seeing use in interventional studies where MRD is being used to stop or start therapy and to qualify patients that should be enrolled in the study to begin with. That particular trend is extremely favorable for our business because, of course, we are the only FDA-cleared assay in the space. We are extremely well positioned to capture these opportunities. We are also an assay that has extremely deep sensitivity and high specificity, which is really important in the context of interventions where you do not want to be giving patients therapies they do not need, right? So, the question then comes up: is this a companion diagnostic? Should it be incorporated into studies? There are now the beginnings of studies that are exploring that use case for MRD, although up to this point, the FDA has not taken the position that MRD needed to be positioned as a companion diagnostic within the regulatory context. I imagine that will come up as time goes on. There will be some studies for which that may be appropriate and others not. But regardless of whether MRD becomes a companion or remains a complementary diagnostic for these studies and therapies, it is quite clear that pharma companies are very interested in partnering to ensure that MRD uptake supports the adoption of their therapies. We are already having numerous conversations with our biopharma partners who want to better understand MRD adoption dynamics from our point of view and want to think about how we can work together to expand MRD adoption, especially in the community setting. And to your question about the concept of clinical trial matching, that is potentially an application of the data that we generate, and we have done some initial exploration. There is some level of interest in that, but more work needs to be done to determine whether and how we may proceed. David Michael Westenberg: Got it. And if I may, I am going to ask just one more sticking with the clonoSEQ business. DLBCL grew 19% quarter on quarter. That is great, particularly because there is a lot of noise with competition and a competitor having a lot of different presentations. Do you think that you maybe saw benefits from all of the different presentations at ASH and that would be a one-, two-, three-quarter benefit as all these physicians saw that at ASH? Or do you think there is sustainability for something beyond that? Thank you. Susan Bobulsky: I think that the strength we saw in the DLBCL business in Q1 is very pleasing to see, but also we have seen very strong growth quarter over quarter prior to and since the entry of competition in the space. I am quite confident that the growth we are seeing quarter over quarter is driven by the sustainable moats that we have built and the durable advantages that we have—the brand awareness specifically as a heme MRD test, the technology and its advantages relative to other approaches to assessing MRD, and the broad real-world clinical experience that we have built along with the coverage and the customer satisfaction that we have been able to deliver. All those things have contributed to clinician confidence in utilizing clonoSEQ. As the noise around MRD and DLBCL continues to mount, we are disproportionately benefiting from that as the market leader. And— Chad M. Robins: I was just going to say, David, just remember it is really early days for MRD and DLBCL in general. Susan mentioned all the reasons that we are well positioned, but we see durable growth over many quarters ahead. The general sentiment is getting doctors to incorporate MRD into clinical practice as a routine measure. We are benefiting not only from noise across the industry, but also, as Susan mentioned, from the fact that we have what we believe is the most sensitive and specific test out there. Susan Bobulsky: Yes. And, David, we do intend to continue to release additional data in this space, and I think particularly at ASH, we expect that you will have the opportunity to see another round of significant data advance. David Michael Westenberg: Alright. Chad M. Robins: Thank you. Operator: Our next question comes from Mark Massaro from BTIG. Please go ahead. Mark Anthony Massaro: Hey, guys. Thanks for taking the questions, and congrats on another beat and raise. I wanted to start on the pharma backlog, which increased 24% year over year. And like David said, it is great to see the first primary milestone come in. I think in prior quarters, you have broken out the secondary versus primary funnel. So I am just curious if you could speak to, with just one primary milestone in the bank, what does that look like for you guys over the next couple of years? Is this something that you think can continue? And then can you just remind investors of the economics of the primary endpoint compared to a secondary endpoint? Susan Bobulsky: Sure, Mark. To start out, I can give you an overview of how the backlog is broken out. We have about 190 active studies, and of those, 111 are either primary or secondary endpoint studies. Twenty-three are primary, and the remaining 88 are secondary. And, Kyle, maybe you want to speak to the economics. Kyle Piskel: Yes. On the economics front, deal by deal can have its own unique differences, and I will not go into specifics. Generally, primary endpoint milestones are higher than what we have seen historically in the past, which has been the vast majority of secondary endpoint milestones. They will not all be the same dollar amounts, etc., but they are typically a little bit higher. Mark Anthony Massaro: Fantastic. And then maybe at a high level, can you give us a sense—might be for you, Chad—what inning do you think you are in the EMR integration? I am just basically trying to determine what type of upside you have as we think about getting to full maturity across the EMR systems. Chad M. Robins: I think one of the most important things is prioritizing going after our largest accounts. Now we are seven out of 10 of our top largest academic accounts integrated. In the community setting in particular is where we are targeting large network practices on EMR integrations. Flatiron gives you certain advantages that Epic does not in that you can turn on a lot of accounts at one time. We have now roughly 150 in the community on EMR integrations. The real point is once you have your accounts integrated, we have a very defined strategy about targeting those accounts for pull-through and how you optimize the EMR. I would say we are early on those, but in the accounts where we have gone in and put that muscle into it, we are seeing really strong results. That is the focal point right now: once we are integrated, how do we go in and optimize those accounts? So, I would say early, but we have a very strong playbook in place. Mark Anthony Massaro: Fantastic. Thanks, guys. Kyle Piskel: Sure. Operator: Thank you. Our next question comes from Subhalaxmi Nambi from Guggenheim. Please go ahead. Subhalaxmi Nambi: Thank you, guys. Thank you for taking the questions. You have mentioned before having preliminary discussions on increasing the Medicare bundle of tests to over four. Can you give us the latest on the progress in those? Is this a late 2026 or a 2027 opportunity, and what are the steps left in that process? Chad M. Robins: Yes. It is really hard to predict timing of government contractors and agencies, so I am not going to go out on a limb and try to do that on this call. The only thing I can tell you is that we have a very strong relationship, we continue to develop very strong evidence, and we have had very productive discussions. Subhalaxmi Nambi: That is fair, Chad. Then can you talk about your progress so far this year related to the structure of milestone payments versus transitioning pharma to a more direct pay-for-service structure? How has that been received by partners, and is there a percentage of total customer numbers you are looking to have transitioned as we progress throughout the year? Susan Bobulsky: It is a long process. Many of our contracts are multiyear contracts, and the renegotiations come up as those expire. It is going to take some amount of time, some number of years, for us to even get the opportunity to revisit existing contract structures. What I will say is that in the situations where it has come up, it has been a topic of conversation every time, and many of those conversations are still ongoing. Subhalaxmi Nambi: That is fair. And last one for me, for Kyle—maybe for sequencing margin—what is the ceiling this year, and what will the gross margin progression look like this whole year? Should we expect sequential increases each quarter? Will the full benefit of the NovaSeq transition be realized this year, and what other levers do you have for gross margins? Kyle Piskel: I appreciate the question, Subbu. As it relates to ceiling, we have talked about 75% as the north star. I think it is a fair step up into that 75% gross margin throughout the year. The utility of the NovaSeq X, as we continue to drive volume, just compounds value for us, and as we continue to improve our price point, you will see more margin improvement throughout the year. It is probably fair to state that as a linear step up through to about that 75% range. Subhalaxmi Nambi: Perfect. Thank you so much, guys. And sorry to have nitpicky questions because, honestly, the volume numbers are pretty impressive. So thank you, guys. Susan Bobulsky: No worries. Operator: Our next question comes from Sebastian Sandler from JPMorgan. Please go ahead. Sebastian L. Sandler: Great. Thank you for taking the question. My first question is on pharma MRD bookings and conversion expectations. It looks like most of the guide change is on better volume, so I am just wondering if you expect any of the incremental bookings you saw in 1Q to convert to revenues in 2026. I think normally there is a 20% release rate for in-year bookings, so I am just wondering what is baked in there and if there could be any upside to the guidance in that. And then I have a quick follow-up. Kyle Piskel: Great to see the bookings in Q1 and the increased backlog exiting Q1. As it relates to the guide, pharma is lumpy quarter to quarter. It is a great start to the year. I think we just want to be prudent here in managing expectations, so we will keep it at that 11% to 12% year-over-year growth. That being said, as the trajectory continues and the pace of bookings and pull-through of the backlog increases, it could provide some opportunity to lift the guide in the back half of the year or even potentially next quarter. Sebastian L. Sandler: Okay. Thank you. And then just a follow-up. It looks like EBITDA for MRD stepped up around $2 million quarter over quarter despite a $9 million pharma milestone. Were there any one-offs we should be aware of? It seems like it might have just been personnel and EMR costs. And then I know you have the total company adjusted EBITDA guide positive by the end of the year, but can you give us any more color on incremental MRD EBITDA margins for the balance of the year and pacing there? Thank you. Kyle Piskel: Sure. As it relates to the sequential movement from Q4 to Q1, there is a bit of seasonality in our business in Q1 where we have some increased costs that will not recur, and Q4 was also a little bit higher on the pharma revenue versus Q1. That is the majority of the mix. As it relates to EBITDA improvement in the MRD business, if you focus on the base business, it is going to have a continued growth trajectory throughout the rest of the year. I do not want to put anything firm in terms of an EBIT margin at this point, but suffice it to say it is going to continue to grow sequentially each quarter. Sebastian L. Sandler: Great. Thank you. Susan Bobulsky: Thank you. Operator: Our next question comes from Daniel Brennan from TD Cowen. Please go ahead. Daniel Gregory Brennan: Great. Thank you. Thanks for the questions, guys. Congrats. Maybe just starting off with the 35% volume guide—what do you think the puts and takes would be if you come in above that over the back half of the year, given we have been accustomed to these really strong volume numbers and now you just raised the bar again? Susan Bobulsky: Thanks for the question, Dan. We are very pleased with the performance in Q1. It is a strong start to the year, and we feel very confident in the 35% year-over-year growth. Could it be higher? Yes, and there is potential for upside. We are just early in the year, so we want to see how our key growth drivers continue to play out. It is the same things we have been talking about: EMR integrations and whether we can drive increased adoption of serial testing and increased pull-through, particularly on the Flatiron system, which allows us to really standardize the ordering approach. We have seen really good results to date from that. The blood-based testing—you saw 29% of myeloma MRDs coming in this quarter in blood—that is a nice step up, and we will continue to look for that as a potential area for upside because we do see increased testing frequency where we see increased use of blood. Community use—we achieved our goal, as Chad’s prepared remarks indicated, for the full year in Q1; we need to maintain that and continue to see disproportionate growth in that segment. The guidelines we have been promoting and the favorable updates that came last year have been an important component of that. If we can continue to build and implement the pathways I talked about earlier—protocols that dictate how testing will be done in a standardized fashion in large community practices—that is another source of upside. The “takes” are simply that we believe we are in a very strong position, we have the right strategy, we have the right team, and we are the market leader, but we will remain attentive to existing and emerging competition. That is why it is important for us to maintain a rapid pace of growth, invest appropriately, and solidify all the moats we have been talking about. Daniel Gregory Brennan: Maybe just talking about the commercial organization, can you remind us of the plan this year—where you stand now, what the targets are by year-end in terms of commercial adds—and what is the balance you are trying to strike with driving profitability while ensuring you have enough feet on the street to stay ahead of competition and maximize the opportunity? Susan Bobulsky: The short answer is that we think the team we have is the right team to continue to prosecute the opportunity. We have 65 sales reps in the field, split half and half between account managers who focus on academic institutions and diagnostic hematology specialists who focus on community practices. Our reps have manageable index values; they are calling on a reasonable number of accounts and doctors; and they have acceptable amounts of travel time. We always look at individual territory performance and potential, and we may shift or add territories here and there to capitalize on opportunities in specific geographies. Over time, we will continue to look at new deployment strategies that could justify additional hiring, and we are watching the market dynamics carefully in that regard, but we are not expecting to invest in any significant expansions this calendar year. Chad M. Robins: I will add that some of the areas where we are continuing to deploy capital and invest are EMR integrations, reimbursement and revenue cycle management, and continued data generation to demonstrate clinical utility across all of our indications. Daniel Gregory Brennan: Great. Thank you. Operator: Thank you. As a reminder, to ask a question, you need to press 11 on your telephone and wait for your name to be announced. Our next question comes from John Wilkin from Craig Hallum. Please go ahead. John Wilkin: Hi, guys. Thanks for taking the questions. Just one quick one for me. I wanted to dig in a little bit deeper on the sequencing side of the pharma business. I know you have historically talked about that business being more like a high single-digit grower, and now we are in the second straight quarter where it has grown—I think in Q4 it was 24%, and this quarter over 30%. If you could give a little detail on what is driving that acceleration and if you think that acceleration could be sustainable through the balance of the year? Thanks. Kyle Piskel: Yes, John, appreciate the question. I think we are seeing a lot of traction in the pharma MRD space. The bookings and backlog are really the drivers of that, and the pull-through is also starting to happen. Additional pharma partners want to generate data and get readouts on their trials. I think it is an opportunity for us to continue to go after, and we are going to be beneficiaries of it. Again, we will hold the guide here right now; I anticipate it will grow throughout the year, but it can be lumpy quarter to quarter. John Wilkin: Okay. That is helpful. Thank you. Susan Bobulsky: Thank you. Operator: This concludes the question and answer session. Thank you for participating in today's conference. This does conclude the program. You may now disconnect.

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EVC 2026 Q1 财报电话会议

Operator: Investor Relations. Roy Nir: Joining me today to discuss our results are Michael Christenson, our Chief Executive Officer, and Mark A. Boelke, our Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to inform you that this call will contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to Entravision Communications Corporation’s SEC filings for a list of risks and uncertainties that could impact actual results. The press release is available on the company’s Investor Relations page and was filed with the SEC on Form 8-K. Additional information may also be found in our Quarterly Report on Form 10-Q, which was also filed today. If you would like to ask a question, please use the Q&A function on your screen, indicate your name and company, and submit your question. We will try to answer any questions that relate to the topics contained in today’s call during the Q&A session. I will now turn the call over to Michael Christenson. Michael Christenson: Thanks, Roy. And thank you to those of you joining this call today. We appreciate your interest in Entravision Communications Corporation and your support. As you saw in our press release, on a consolidated basis, Entravision Communications Corporation revenue increased 114% to $197 million in Q1 2026 compared to Q1 2025. We had operating income of $21 million in Q1 2026 compared to an operating loss in Q1 2025. We report our results for two segments, Media and Advertising Technology and Services, which we call ATS. This is the first quarter of our third year with this segment reporting. As you may know, we started in 2024. For our Media segment, revenue increased 4% in Q1 2026 compared to Q1 2025. This increase was primarily due to higher digital advertising revenue and retransmission fees. This was partially offset by lower broadcast advertising revenue and lower revenue from spectrum usage rights. Our Q1 2026 results included a 6% increase in local advertising revenue and an 18% decrease in national advertising revenue. These numbers exclude political revenue. Local advertising revenue is from our sellers working with local advertisers. They sell broadcast and digital marketing solutions. National advertising revenue is from our partners, primarily TelevisaUnivision, selling our broadcast to national advertisers and agencies. Our local advertising operations had 4% higher monthly active advertisers in Q1 2026 compared to Q1 2025, and a 2% increase in revenue per monthly active advertiser. Our operational priorities are to grow monthly active advertisers and revenue per monthly active advertiser. In terms of operating expenses and profitability, as we have discussed in the past, we made a number of important investments in our Media business in 2025 that we continued into Q1 2026. We added capacity to our local sales teams—more sellers—and we added digital sales specialists and digital sales operations capabilities. More digital. When we analyzed our local markets and our local advertiser base, we saw an opportunity to increase revenue by adding sales capacity. All of our local advertising customers are advertising in digital channels—search, social, streaming video, and streaming audio—and we believe we can serve their needs in those digital channels as well as our traditional broadcast video and audio channels. As we discussed in our fourth quarter report, we have two other important initiatives underway to generate incremental revenue. We are broadcasting a new network on our multicast capacity called Altavision across all of our markets. We produce the local news for Altavision, and we provide the sales and the broadcasting infrastructure. The balance of the programming is currently provided by Grupo Multimedios from Monterrey, Mexico, and we share the revenue. It is still early in the development of Altavision, so we have operating expenses but no significant incremental revenue. In addition, at the beginning of this year, we launched new programming on our full-power Orlando television station WOTF-TV, in partnership with Hemisphere Media. Hemisphere owns WAPA-TV, the number one television station in Puerto Rico. We launched WAPA Orlando channel 26 to serve the large and growing Puerto Rican, Caribbean, Central, and South American Spanish-speaking communities in Central Florida. More than 500 thousand Puerto Ricans live in the Orlando market, and we are very excited about this new revenue opportunity. Again, since it is early in the development of WAPA Orlando, we have operating expenses but no significant incremental revenue. Pulling this all together, in our Media segment, operating expenses increased $2 million in Q1 2026 compared to Q1 2025, so we had an operating loss of $5 million in Q1 2026 compared to an operating loss of $3 million in Q1 2025. As we discussed on prior calls, we are committed to growing our business and earning a profit. So we acknowledge that we have more work to do to improve our operating performance and profitability in our Media business. The new leadership team that we announced in March is evidence of this commitment: Maria Martinez Guzman, President of Entravision Media; Eduardo Meitorrena, President of Entravision Audio; and Winter Horton, our new Chief Revenue Officer. These new leaders are aligned on our core objectives: serve our audience as a trusted source of news, information, and entertainment, and serve our advertisers by connecting them with our audience. This team is committed to growing revenue and earning a profit. Now for our Advertising Technology and Services segment. ATS revenue was $155 million in Q1 2026 compared to $51 million in Q1 2025. We had more monthly active customers and more revenue per monthly active customer. We continued to invest in our ATS segment in Q1 2026 to grow revenue and operating profits. We invested in our engineering team to continue to improve our technology and build more powerful AI capabilities into our platform. And we invested to increase the capacity of our sales and customer service organizations. In addition, our infrastructure costs continue to grow as our revenue grows, but we are beginning to see operating leverage with infrastructure costs growing at a slower pace than revenue. The combination of these investments in ATS increased operating expenses by $10 million in Q1 2026 compared to Q1 2025, or $40 million on an annualized basis. Operating profit for ATS was $34 million in Q1 2026 compared to $7 million in Q1 2025. So to summarize, in Media, we are investing to increase our local sales capacity and to expand our digital sales and digital sales operations capabilities—more sellers and more digital. In ATS, we are investing to add more engineers to advance our technology and to increase our sales and customer service capacity—more technology, better technology, more selling. We believe these investments will help us build a stronger company. I will now turn the call over to Mark A. Boelke to share more details of our financial results for Q1 2026. Mark? Mark A. Boelke: Thank you, Mike. I will start by reviewing the performance of each of our two reporting segments—again, Media and Advertising Technology and Services. In our Media segment, first quarter revenue was $42.4 million, which was up 4% compared to first quarter 2025. This increase was primarily due to increases in digital advertising revenue and retransmission consent revenue, partially offset by decreases in broadcast advertising revenue and spectrum usage rights revenue. We have undertaken initiatives focused on increasing our Media advertising revenue, and we are seeing momentum and progress in the execution of these initiatives, particularly in local ad sales and digital ad sales. Let us look at total operating expense for the Media business—that is the sum of direct operating expenses plus selling, general, and administrative expenses as those two line items are reported in our segment results. Media segment total operating expense in the first quarter increased $2.1 million compared to first quarter 2025, an increase of 6%. One of our goals in the Media segment is to optimize organizational structure and expenses to be aligned with revenue and to generate profit, as Mike noted. We continue to work on achieving this goal, and we have taken steps under an ongoing organizational design plan begun in Q3 2025 intended to support revenue growth and reduce expenses in our Media segment. Key components of this plan have included a reduction in our Media business workforce, reduction in professional expenses, and the abandonment of several leased facilities. We recorded a charge during the first quarter totaling $1 million for the expenses associated with moves under this plan, and these charges were reported as restructuring costs on our income statement. The Media segment had an operating loss of $5.2 million in Q1 2026 compared to an operating loss of $2.6 million in Q1 2025. The decrease was mainly due to higher cost of revenue associated with the increase in digital advertising revenue in our Media segment. We remain focused on providing compelling content, growing revenue, streamlining our organization, and reducing operating expenses during 2026 and beyond. At this time, I will turn to our Ad Tech and Services segment, or ATS. First quarter revenue for the ATS business was $154.6 million, an increase of 204% compared to first quarter 2025, and a sequential increase of 74% from fourth quarter 2025. We had a higher number of monthly active accounts and higher revenue per monthly active account. As discussed on previous calls and as Mike noted earlier, we have had success executing our strategies in the ATS business, including strengthening the AI capabilities that are part of our technology platform and expanding the ATS sales team and geographic sales coverage. ATS total operating expenses increased 72% in the first quarter 2026 compared to first quarter 2025, an increase of $9.8 million. The ATS expense increase was primarily related to the increase in revenue. For example, the expense of cloud computing services has increased as a result of processing more transactions and using stronger AI capabilities in the ad tech platform. There was an increase in sales commissions and performance compensation as a result of the revenue increase and achievement of other performance metrics. And the ATS business has also hired additional sales, engineering, and ad operations staff in recent quarters in order to drive ATS growth and expand into new geographic territories. One of our goals for the ATS business is to continue to grow revenue and generate positive operating leverage, and the ATS revenue increase exceeded the expense increase in terms of percentage and absolute dollars. Operating profit for the ATS segment was $34.3 million in Q1 2026. This was an increase of 427% versus Q1 2025, and a sequential increase of 178% from the prior quarter, Q4 2025. Combining our two operating segments, on a consolidated basis, revenue for first quarter 2026 was $197 million, up 114% compared to first quarter 2025. The two segments together generated a consolidated segment operating profit of $29.1 million in Q1 2026 compared to $3.9 million in Q1 2025. The increase was a result of operating profit in the ATS segment partially offset by a decreased operating profit in the Media segment. We had consolidated operating income of $20.7 million in Q1 2026 compared to an operating loss of $52.8 million in Q1 2025. Corporate expenses in first quarter 2026 were $7.2 million, an 8% decrease compared to first quarter 2025, or about $600 thousand. The decrease was primarily due to expense reductions in professional services and rent. We have taken significant steps to reduce corporate expenses over the past few years, and for additional context, looking back one additional year to 2024, corporate expense in 2026 was 41% lower than corporate expense in 2024. Entravision Communications Corporation’s balance sheet remains strong, with over $71 million in cash and marketable securities at the end of first quarter 2026. We are proud of our strong balance sheet, which we believe sets us apart from others in the industry. Our strategy regarding allocation of cash is, first, reduce debt and maintain low leverage, and second, return capital to our shareholders, primarily through dividends. In first quarter 2026, we made a debt payment of $5 million, reducing our credit facility indebtedness to about $163 million at the end of first quarter 2026. We remain committed to reducing our debt and maintaining a strong balance sheet. In addition, we paid $4.6 million in dividends to stockholders in the first quarter, or $0.05 per share. For 2026, our Board of Directors has approved a $0.05 dividend per share, payable on June 30, 2026, to stockholders of record as of June 16, 2026, for a total payment of approximately $4.6 million. I would like to thank you all for joining our call today. At this time, Mike and I would like to open the call for questions from the investment community. Roy, I will turn it back over to you. Roy Nir: Thank you, Mark. We will now open the call for questions. As a reminder, if you have a question, please use the Q&A function and submit your question. Please hold as we review questions. Mike, the first question is regarding the outlook for political revenue in 2026. Any updates since the last call that you can provide? Michael Christenson: Yes. Thanks, Roy. I guess next quarter, we will put political comments in the prepared remarks. We are 182 days away from Election Day 2026. As everyone knows, primaries are underway across the country, and we are positioning ourselves for a strong political spending environment in 2026. For Entravision Communications Corporation, we have big races in our markets—governor races in Nevada and Texas. Those are the three biggest governor races for us, but we have some others. Then we have the Texas U.S. Senate race, and we have at least seven critical contested House races. So we will be busy this year focusing on political revenue. As everyone knows, this will be one of the most consequential congressional elections in our lifetime. We believe that the Latino vote will be critical to the outcome of all these elections. Studies we have shared with our clients and that studies have shown that Latinos are the most persuadable segment of the electorate, and we have a powerful channel for reaching that audience. So political will be an increasing focus for us as we go through the rest of this year. Roy Nir: Thank you, Mike. The next question we received was related to the status of the negotiations with TU and the affiliation agreement. Can you provide any update on that? Michael Christenson: No new news on the affiliation agreement for this call. This affiliation agreement runs through December 31, 2026, so we have time. We have been partners for three decades, and our plan is to renew this agreement, but there is no news on that at this time. Roy Nir: Thank you, Mike. Again, please hold as we review any potential questions. At this time, we do not have any additional questions. We would like to thank you all for joining our call today. We welcome our investors to connect with us through the Investor Relations page on our corporate website, entravision.com, where you will have access to a transcript of this call, the press release containing our first quarter financial results, and a copy of our Quarterly Report filed with the SEC on Form 10-Q. We look forward to speaking with you again when we report our second quarter results. Thank you very much. You may now disconnect.

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FANG 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Diamondback Energy, Inc. first quarter 2026 conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam T. Lawlis, VP of Investor Relations. Please go ahead. Adam T. Lawlis: Thank you, Corey. Good morning, and welcome to Diamondback Energy, Inc.’s first quarter 2026 conference call. During our call today, we will reference an updated investor presentation and letter to stockholders that can be found on Diamondback Energy, Inc.’s website. Representing Diamondback Energy, Inc. today are Kaes Van’t Hof, Daniel N. Wesson, Jere W. Thompson, and Albert Barkmann. During this conference call, the participants may make certain forward-looking statements relating to the company’s financial condition, results of operations, plans, objectives, future performance, and businesses. We caution you that actual results could differ materially from those that are indicated in forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company’s filings with the SEC. In addition, we will make reference to certain non-GAAP measures. Reconciliations with the appropriate GAAP measures can be found in our earnings release issued yesterday afternoon. I will now turn the call over to Kaes Van’t Hof. Kaes Van’t Hof: Thanks, Adam, and welcome, everyone. As with the last few years, we are going to go straight into Q&A. Operator, please open the line for questions. Operator: Thank you very much. One moment. As a reminder, to ask a question, you can press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. We will now open the call for questions. Our first question comes from the line of Neil Singhvi Mehta of Goldman Sachs. Neil, your line is open. Neil Singhvi Mehta: Good morning, Kaes, and good morning, team. The big development you have been signaling is the move to a green-light framework from yellow-light, adding two to three rigs and moving to the fifth completion crew. Can you take a moment to talk about the thought process that went into this decision and how you are thinking about where and when to add activity? Kaes Van’t Hof: Yes, Neil. Good question. There are macro and micro elements. From a macro perspective, there is a clear market signal. We are two months into the world’s largest oil supply disruption in history, and while Diamondback Energy, Inc. is solely based in West Texas and somewhat of a tourist in this situation, it is a very serious event with a lot of oil supply off the market. If that is not a signal to grow production in an advantaged area like the Permian Basin, I do not know what is. We hope there is a resolution to the conflict, but even if there is, there is a lot of noise in the system and a lot of barrels have been taken off the market. Global inventories are starting to decline rapidly, and we are going to do our small part to add production. On the micro, Diamondback Energy, Inc. has the best inventory quality and depth in North America, executed at the best cost structure. If this is not the time to grow now, then when? We are able to do this in a very capital-efficient manner and get it done quickly. We have a backlog of DUCs and we prepare our business for up, down, or sideways. By adding a frac crew earlier in the year, we can get production up immediately. It is a testament to the team’s preparation and the whole organization working together to do this very quickly. In other organizations, the decision might take longer. Neil Singhvi Mehta: Thanks, Kaes. On the return of cash framework, you did not move away from the fixed framework, and while you bumped the dividend, you indicated you might slow the buyback a little bit. What did you intend to communicate with that? Also, there is a concentrated seller ownership base. If the family ultimately sells down their stake, do you still view Diamondback Energy, Inc. as a logical buyer to help offset that potential risk on the stock? Kaes Van’t Hof: Let us take it higher level. Allocating capital is our most important job. The return-of-capital programs were put in place after the COVID near-extinction event, when investors said, “I want my money back and I want it in a formulaic manner.” That has worked very well. We do not expect our ability to return capital to stockholders to change. We just want the flexibility to make more cyclical moves versus moves within a 90-day window. We have a very good track record buying back our stock: 42 million shares for $6 billion to date at $148 per share. With the stock where it is today, that is a very positive return for our stockholders, and I expect that to continue. We recognize we also have a large shareholder, and we have found ways to help monetize their stake efficiently. They are most focused on us creating long-term value. Allocating a ton of free cash to the balance sheet in times of extremely high oil prices creates long-term value with, in our mind, a higher floor for the stock. I would not expect anything to change. We have a great relationship with the family and the ability to help them monetize. If we use excess free cash flow over the next couple of quarters to pay down debt, we can help monetize their stake more efficiently coming out of this. They are long-term holders and they want the stock higher. Operator: Thank you very much. Our next question comes from the line of Scott Michael Hanold of RBC Capital Markets. Scott, your line is open. Scott Michael Hanold: Thanks. You all had pretty robust production performance in 1Q. Based on our chat last night, it sounds like your completions were as planned. Can you walk through why performance was so strong? It sounds like it was a lot more well performance versus any other dynamic. Is that something we should anticipate moving forward, and what is embedded in guidance? Kaes Van’t Hof: Yes, Scott. High level, our well performance year-to-date looks up relative to last year, which is probably even a surprise to us internally. We continue to try new things in completion design and efficiency that are starting to pay dividends. On the production side, there are a lot of good things happening in the field: less downtime, more automation—call it AI or automation—impacting that side of the business. Better wells and lower downtime is a good recipe for a production beat. Daniel N. Wesson: Post the Endeavor merger and getting the team together, we started trading a lot of ideas to optimize primary completions as well as the base. On the completion optimization side, with perforating strategies, rate design, and sand loadings, we think we are seeing uplift, and time will tell as we continue to implement that design. On the production side, workovers and treatments—acid jobs, chlorine dioxide jobs, surfactant jobs—are starting to pay dividends. Layering on machine learning as we continue to look at our data streams and processes, we are working toward implementing AI into field operations. We are seeing downtime come down, which was a big part of the beat in Q1. Little bits of optimization across the board are starting to show through to the top-line number. Scott Michael Hanold: When you guided oil, it looks like you could be greater than potentially 520 thousand barrels per day. If the macro environment continues, how much desire is there to continue to let oil production grow versus curtail it? Is there a scenario where you would step it up even higher if the macro remains heightened? Kaes Van’t Hof: It is fluid, and the board wants us to take this quarter by quarter. If there is outperformance and we still have triple-digit oil prices and the market is calling for oil, this could be a year where, instead of pulling back activity, you keep efficiencies going and let production continue to climb. We are only two months into this conflict, and it could be resolved quickly. We are ready to react. We still have levers to grow further, but for now, 520 thousand-plus barrels per day of oil is the new baseline. Operator: Thank you very much. Our next question comes from the line of Neal Dingmann of William Blair. Neal, your line is open. Neal Dingmann: Morning, Kaes and team. Thanks for fitting me in. My question is on activity. How much, if any, will negative Waha prices impact what you might or might not do? Same question with oilfield service prices—are you expecting OFS inflation given what is going on with prices? Kaes Van’t Hof: On Waha, pricing is deeply negative. We are well protected with financial and physical hedges. Our mix is moving more toward physical when the two new pipes come on, hopefully in the second half of the year. We are protected to get through this tight spot financially while we continue to add oily inventory—we are drilling some of the oiliest stuff in the basin. We will continue to work on physical protection on the gas side. We have worked on a power project for almost a year; we will see if we can get that done. We have talked at length about monetizing our gas, and we are on the cusp of that starting to happen when these pipes come on. Danny, on services? Daniel N. Wesson: We have not seen much pressure to date on service pricing. It is really a capacity question—what does service capacity look like? We have not seen industry activity ramp aggressively through these first couple of months of this conflict, so there is still quite a bit of capacity in rigs and completions. Calendars are not squeezed enough yet for providers to push pricing when we look for additional equipment. We have seen some inflation in consumables tied directly to commodity price, but those have been minimal thus far. We will see what activity does in the Permian and the Lower 48 to gauge service inflation through the rest of the year. Neal Dingmann: On capital allocation—given likely record free cash flow per share—how does capital for M&A stack up against buybacks or near-term debt repayment? Kaes Van’t Hof: The options for free cash flow are to grow—organically or inorganically—return cash, pay down debt, or hold cash. On organic growth, we pulled that lever in a small way by going to the top end of our CapEx guidance. On inorganic (M&A), we have been very good over the years, but this volatility makes deals difficult, private or otherwise. M&A is likely fairly quiet at Diamondback Energy, Inc. for the foreseeable future. We increased the base dividend. With oil prices where they are, we do not know if investors are capitalizing this price environment yet. For us, the bigger use of free cash is to pay down debt rapidly and convert that debt value to equity value in our NAV, and to keep some cash for a rainy day because this is a very volatile environment. Operator: Thank you very much. Our next question comes from the line of Arun Jayaram of JPMorgan Securities. Arun, your line is open. Arun Jayaram: Good morning. The 2026 and 2027 strips are around $90 and $75. How do you think about development in a much stronger oil price than 90 days ago? For the two to three incremental rigs, how are you thinking about capital allocation across the asset base? Are deeper benches now competing for capital as you drive down well costs in the Barnett? Kaes Van’t Hof: Even with higher commodity pricing, we are going to hold to the vast majority of our spacing assumptions throughout the basin. We look at each DSU-level project to maximize wells until the incremental last well generates a 40% rate of return at $60 oil. That provides prudent spacing and solid returns despite volatility. Drilling our best stuff first and sticking to that knitting continues. The Barnett, particularly given well sizes from a production perspective, generates more PV today, so it is getting more attention. Albert Barkmann: That is right, Arun. The acceleration coming in with these two rigs is really an acceleration of the Barnett plan. We are focused on that development and getting ahead of the Barnett obligations we discussed last quarter. Daniel N. Wesson: I will add that Barnett activity and obligation activity are almost entirely focused on the JV area with another partner. Those wells are not as high working interest—about half and half, a little heavier weighted to Diamondback Energy, Inc. The two to three rigs equate to about 1.5 net rigs at Diamondback Energy, Inc. The top line looks like we are adding a bunch of activity in the back half, but net to us it will be less impactful. Arun Jayaram: For Jere, you have taken pro forma net debt down to $12.7 billion. Given the intention to pay down more debt in a higher commodity price environment, what are your targets for the balance sheet from a gross or net debt perspective? Jere W. Thompson: Great question. We previously talked about hitting $10 billion net debt sometime in the next 12 to 18 months. With current commodity pricing and excess free cash flow generation, it looks like we can hit that much earlier—potentially in a couple of months. As we move into the back end of the year, we will have an opportunity to reduce both net and gross debt. We will build cash on the balance sheet through the fourth quarter and then look at calling our $750 million of 2026s outstanding. As we move into 2027, we may consider a larger liability management exercise with additional cash to take out as much as we can from near-term maturities, particularly anything maturing prior to 2030. We are in an advantaged position to move our balance sheet from a position of strength to a fortress in the near term. Operator: Thank you very much. Our next question comes from the line of John Christopher Freeman of Raymond James. John, your line is open. John Christopher Freeman: Thank you. Even after increasing activity, your reinvestment rate still fell sharply from what you planned last quarter—from 44% to 34% at the current strip. You have the ability to increase activity more and still have an industry-leading low reinvestment rate. Is there a reinvestment rate that you want to stay below regardless of the commodity environment? Kaes Van’t Hof: We have polled investors who own the stock. The general consensus: a little growth will differentiate Diamondback Energy, Inc. and makes sense, but do not do it in a capital-inefficient manner. We were going to run between four and five frac crews to hit our original guide. That fifth crew was going to go away for five or six months and then come back. It is a Halliburton e-fleet simul-frac, as efficient as it gets. We are just bringing that crew back to run five crews consistently. That maintains capital efficiency versus going too fast too soon, which has driven inefficiencies in E&Ps’ plans and, at times, ours. Staying capital efficient is the priority; the reinvestment rate is an output of that. John Christopher Freeman: Along those lines, the original 2026 plan did not forecast meaningful DUC draws or builds. How does that look now with the new plan? Kaes Van’t Hof: It evolves through the year. We will draw down DUCs in Q2 and backfill with two rigs worth of activity to build the DUC balance back up. We peaked a little over 200 DUCs in Q1. That number will come down in Q2, and the backfill rigs will rebuild it. We likely need to keep a slightly higher DUC balance than with four crews—around the high hundreds, about 200 DUCs—so we have two projects behind each crew ready to go. Daniel N. Wesson: We like to keep a quarter to a quarter-and-a-half worth of inventory ahead of each crew for flexibility if we run into a pad issue or takeaway constraint. Each crew will do about 100 wells per year, maybe a little more. A couple hundred wells ahead of five fleets is the right carry DUC balance. As crews get more efficient and complete more wells, it either means releasing crews to keep the same well count or building 20 to 30 more wells for the year in total—still within our original guidance window. We took the momentum from Q1’s beat and kept it going through the rest of the year. Operator: Thank you very much. Our next question comes from the line of Analyst of Barclays. Your line is open. Analyst: Good morning. On crude oil marketing, 1Q pricing was a bit stronger. Can you remind us of your exposure to premium price indices and the marketing strategy on oil? Kaes Van’t Hof: Strategy-wise, we learned from the Permian takeaway crisis of 2018 that we needed to use our balance sheet to get crude to the biggest markets—Corpus Christi and Houston. We invested in EPIC, Gray Oak, and Wink to Webster. Those made our investors money and protected Diamondback Energy, Inc. commercially. We have about 300 thousand barrels per day going to Corpus on EPIC and Gray Oak, and another 100 thousand barrels per day going down Wink to Webster into Houston refineries. We are exposed to water-based pricing and even have a small contract with dated Brent exposure. That has helped us. This is a good playbook for gas; we are a little behind there because oil is 90%+ of revenue, but the next trend is to improve gas marketing. Analyst: On the acquisition line item in 1Q, there were just a few hundred million. Are you doing any organic acquisitions or bolt-ons at good pricing? Jere W. Thompson: There were a couple of small acquisitions in our backyard in the Midland Basin. In that line item, we also have capitalized interest and capitalized G&A, which made up the vast majority. Add a couple of small acquisitions and about $50 million to $75 million in leasehold bonus as well. Operator: Thank you very much. Our next question comes from the line of Phillip J. Jungwirth of BMO. Phillip, your line is open. Phillip J. Jungwirth: Good morning. Can you talk about how you are viewing Viper ownership and what is optimal for Diamondback Energy, Inc.? You sold some in the quarter, still own 39%. With a stronger free cash flow outlook, there is less need for divestitures. Is there a minimum level of ownership you would maintain, and how does that play into capital allocation? Kaes Van’t Hof: We sold down a little Viper ownership as a follow-on from the drop-down where Diamondback Energy, Inc. took a lot of Viper stock. We could have taken more cash then, but instead waited and sold a little last quarter. We are done selling Viper shares at Diamondback Energy, Inc. The growth opportunity set for Viper is significant. Could Diamondback Energy, Inc.’s ownership be reduced through dilution? Possibly. But no desire today to monetize more shares. In a few months, both companies will be very well positioned from a balance sheet perspective to do anything from an M&A perspective, which is where we wanted to be. Phillip J. Jungwirth: In the 2022–2023 upcycle, private operators drove an outsized share of rig additions and oil growth. How would you characterize privates’ ability in the Permian to respond to higher oil prices now versus a couple of years ago, given implications for tightening OFS markets? Kaes Van’t Hof: Important question, and it has factored into our calculus. In 2022, Endeavor (now part of Diamondback Energy, Inc.) went from 2 rigs to 15; CrownRock (now part of Oxy) from 2 to 8; EnCap North (now part of Aventa) from 2 to 6; DoublePoint/Double Eagle (now part of a combination of us and Exxon) from 1 to 6. Big private-side moves back then. Much of that Midland private activity growth has been consolidated. There will be private growth—the model has shifted to smaller asset packages developed quickly, farm-ins to larger operators, and growth in Northern New Mexico—but by our math that is 20–30 rigs, not 100 like 2022. They will move quickly, but the volume impact will be much smaller than 2022. Operator: Thank you very much. One moment for our next question. Our next question comes from the line of Scott Andrew Gruber of Citigroup. Scott, your line is open. Scott Andrew Gruber: Good morning. In light of the impact of privates, how do you think about Diamondback Energy, Inc.’s volumes over the next five to ten years on an organic basis? Do you think about modest growth, stepping higher during periods of elevated prices and then maintaining that new level so net-net you are growing? Or, when prices are soft, do you pare back activity and let production fade? Kaes Van’t Hof: The operator with the best inventory quality, lowest cost structure, and longest inventory depth has the right to grow organically and create shareholder value. We have been looking to hit the organic growth accelerator for a while but did not have macro support. If mid-cycle pricing is a little higher—say $70–$75 WTI—I think a couple percentage points of organic growth adds to NAV and long-term free cash generation. Importantly, this new plan generates more free cash flow per share at any oil price above $60 than prior plans. In a $70+ world, that is advantageous to shareholders long term. Scott Andrew Gruber: On capital efficiency, it appears to improve on the margin with the updated plan, but it is hard to separate the DUC draw impact from adding rigs in the Barnett where you are still ramping learnings and efficiency. How would you describe the underlying trend in capital efficiency as you lap the DUC draw into 2027? Kaes Van’t Hof: DUC draws and Barnett timing are noise. Below that, the team is executing. We set records on drilling two-, three-, and four-mile laterals. Wolfcamp D development: we set a goal of $300 per foot for drilling, down from $360 per foot last year—we are already at $300 per foot. Barnett drilling needed to be below $400 per foot to target $800 per foot well costs to be competitive with the base program—we have already put a well in under $400 per foot. Efficiencies continue to improve above ground, and the big move is drilling and completing better wells subsurface. Those are the long-term drivers of capital efficiency. Operator: Thank you very much. Our next call comes from the line of Derrick Whitfield of Texas Capital. Derrick, your line is open. Derrick Whitfield: Good morning, and thanks for taking my questions. Regarding your share buyback and guiding principles, where do you view mid-cycle pricing now in light of the Middle East conflict and the risk premium? Also, what are you seeing in degradation of inventory quality across the Permian, clearly beyond Diamondback Energy, Inc.? Kaes Van’t Hof: We are long-term bullish. Within three months, we went from a projected largest oversupply (which was debatable) to the largest undersupply, and we are only two months in. It is hard for us to move off our mid-cycle framework—mid-$60s WTI, mid-teens NGLs, and $3 gas with Waha differentials. Energy security is becoming more important, meaning more landed storage and the U.S. barrel being more important than ever. We think the U.S. shale cost curve is moving up. Operators have done a good job with efficiencies, but geologic time catches up and there are signs of degradation in productive quality across the U.S. Our job is to keep Diamondback Energy, Inc. at the low end of the cost curve, with top-tier inventory depth and quality and low execution costs. We are very well positioned. It is too early to raise mid-cycle pricing. Derrick Whitfield: As a follow-up on the Barnett, referencing the play outline, how large could you reasonably grow this position beyond the 200 thousand you are highlighting? You have one of the most prolific buyers in Midland working with you. Kaes Van’t Hof: We announced the position after we felt we had a solid base of what we could get. We continue to add in Q1 on a small basis. Now we are doing a lot of trades. Big operators have Barnett positions, and we are all looking to block up to three- and four-mile laterals. There is a lot of Midland-based private equity building six- to eight-section positions that likely come to market. I think the position will grow, and we have the sizable base to continue growing it. Operator: Thank you very much. Our next question comes from the line of Analyst of Pickering Energy Partners. Kevin, your line is open. Analyst: Good morning. Can you provide color on the cadence of net lateral footage per quarter throughout the year and the lateral length per well? We assume the additional 200 thousand lateral feet is back-half weighted. Daniel N. Wesson: It will be pretty evenly weighted toward the back half. We went up to around 6.2 million lateral feet, so we are looking at probably 1.5 to 1.6 million per quarter for the back half of the year. Q1 was one of our lighter quarters on lateral length—about 11.5 thousand feet. For full-year 2026, we still expect to be at 12.9 thousand feet, ramping through the back half. Analyst: As a follow-up, any updates on the surfactant tests? Daniel N. Wesson: We had a big push toward the end of last year to get tests in the ground and try different surfactant combinations across rock types to understand drivers of well performance. Those tests are in, the team is studying results, and we are refining the process. We plan the next deployment early this quarter. Kaes Van’t Hof: One thing I would add: we tested about 50 wells last year. On average, we saw a 100-barrel-per-day uplift, but some wells were up 400–500 barrels per day and some were zero. We are figuring out what we did right in the 400–500 barrel-per-day wells and what we did wrong in the zeros. This is version 1.0. I think the basin and Diamondback Energy, Inc. are on the cusp of technological breakthroughs related to increasing recoveries past primary development. That will likely be a mega theme over the next four to six years. That is why we have held as much acreage as we have. We have some of the best oil in place in the basin and some of the smartest people working on this—potentially extending the basin’s life by a decade or two. Operator: Thank you very much. Our next question comes from the line of Analyst of Truist. Your line is open. Analyst: Morning. Thanks for the time. On the return-of-capital framework and pursuing growth this year—which makes sense—what is an upper bound of oil production growth for Diamondback Energy, Inc., assuming a green light on the macro? Is 5% a fair assumption, or could it be higher? Kaes Van’t Hof: I do not want to get into a specific number. We have already grown low single digits year-to-date. I do not think there is a lot of investor appetite for a large CapEx bump and more than mid-single-digit growth. It is early, there is a lot of noise, and no one is sure how the macro unfolds. We are keeping our cards close, coming out with a good Q1 forecast, and will see how the year unfolds. Investor appetite is not for the “go-go” days of 2017–2018 with multiple CapEx increases and mid-double-digit growth. We will keep it steady and capital efficient and take the macro quarter by quarter. Analyst: Any update around your surface position in light of a potential new market entry there—specifically the power project? Jere W. Thompson: As Kaes alluded to, we are making meaningful progress with our partners. We view the power and data center opportunity as a unique way to use our natural gas in-basin at advantaged pricing. Once we finalize a project, we will discuss more details, but it continues to move forward. Operator: Thank you very much. Our next call comes from the line of Charles Arthur Meade of Johnson Rice. Charles, your line is open. Charles Arthur Meade: Good morning, Kaes and team. On the acceleration of CapEx, can you give us an inside-baseball account of how you came to that decision—board latitude versus a quick telephonic/Zoom meeting? I am looking for insight into how you operate as a fast mover in a volatile tape. Kaes Van’t Hof: Our board is very nimble for its size—13 members who are responsive and move quickly when the decision is obvious. We also got advice from Jamie Dimon last year: communicate with your board often and tell them everything. We decided to overcommunicate through this crisis. The crisis kicked off a week after earnings; we had set the budget. We sent three or four notes to the board in March to update how we were thinking. Then it was a simple meeting ahead of earnings to make this decision. The board had resounding support for the plan. That is the inside baseball on how Diamondback Energy, Inc. works with its board. Operator: Thank you very much. Our next question comes from the line of Leo Paul Mariani of Roth. Leo, your line is open. Leo Paul Mariani: There has been discussion of weak Waha prices in 2Q. Could there be short-term negative volume impact for the company? Are there wells with a lower oil cut you might choke in for a period given how bad gas prices are? Kaes Van’t Hof: At these NGL prices, we think negative $3 Waha basically cuts out the value of your NGLs. Worse than that—negative $4 to negative $6—you start to eat into the value of oil production. Oil is $100 a barrel, not $60, so the math on shutting in oil barrels is different, but I do think shut-ins are happening in the basin. In areas like New Mexico, with tighter restrictions on midstream development and flaring, that is probably happening. For us, back in October when Waha blew out due to maintenance, we shut in 2 thousand–3 thousand barrels per day of production for a period and then brought it back. I would bet we are around that range today with Waha as weak as it is. It is not impeding new development, particularly with the amount of financial hedges we have. Leo Paul Mariani: That is helpful—it sounds like you still have flow assurance and this is more of an economic decision. Kaes Van’t Hof: That is right. Every molecule we have produced has moved; it is just moving at a negative price. Leo Paul Mariani: On growth, your oil guidance is a bit open-ended with 520 thousand-plus. You did around 520 thousand in 1Q. If the oil environment holds, should we think about that plus a little growth in the second half? Kaes Van’t Hof: That is fair. We will take it quarter by quarter. If we are outperforming the plan, we will hold activity and produce more oil into a market that needs it. Operator: Thank you very much. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our next question comes from the line of Analyst of Wolfe Research. Analyst: Thanks. Back to the balance sheet—Jere, with no variable dividend in the capital return structure, is it inconceivable that your net debt could go to zero over the next two or three years? Would you allow it to go to that level? Kaes Van’t Hof: That would be a good problem to have. We will be transferring a lot of value from the debt side of the NAV to the equity side over this quarter. We will take things quarter by quarter. If this oil price environment persists and the stock continues to go up, we will allocate less to buybacks and continue to put cash on the balance sheet. This is a cyclical business. We want the ability to pounce on opportunities when the cycle turns—M&A, buying back a lot of stock, or leaning on the balance sheet to buy back stock. The key is flexibility and long-term value creation. We want to get to zero debt and one share outstanding—it will be a race between those two with free cash generation over the coming decades. Analyst: Follow-up on non-operated positions: what are you seeing from your non-op and how could that influence consolidated growth? Perhaps a Viper question, but any color on private-side rigs and non-op activity? Kaes Van’t Hof: Diamondback Energy, Inc. carries very little non-op. Viper sees about half the wells in the basin. Early signs show nothing major on permitting, but field discussions suggest rigs are getting picked up on the private side. If we had to give a Permian rig count forecast for year-end, we are probably up 25–30 rigs from today. Operator: Thank you very much. Our next question comes from the line of Analyst of Melius Research. Your line is open. Analyst: I know things are fluid and you are taking it quarter by quarter, but the market has significantly changed in the last 60 days with structurally higher oil. You raised guidance for this year. How are you thinking about out-years and setting up the company to continue to grow at a mid-single-digit rate or not in 2027, 2028, 2029? Kaes Van’t Hof: We have to think long term. If we are in a higher-for-longer world, an advantaged company with advantaged inventory like Diamondback Energy, Inc. should answer the call for production growth—so long as it maintains capital efficiency. That would shift the business from a steady-state bond-like free cash generator to a free-cash-flow-per-share growth generator over the next few years, into the decade. It is early; we will see what the macro holds. It does feel like the world changed a lot since our last call. Analyst: As you think about your inventory depth versus peers, you are in a leading position. How would you characterize your position versus peers given the longevity you have? Kaes Van’t Hof: We are fortunate to have incredible inventory quality and duration. Within Diamondback Energy, Inc., we are always looking for the next stick—organically (Barnett generation, Upper Spraberry development) and inorganically. This machine is built to do significant transactions like Endeavor, but also the sub-$20 million deals. We do not want a unit in the Midland Basin to trade hands without Diamondback Energy, Inc. knowing it could be in our hands. We are set up for both small bolt-ons and larger transactions. Operator: Thank you very much. I am showing no more questions at this time. I would now like to turn it back to Kaes Van’t Hof for closing remarks. Kaes Van’t Hof: Thank you, everybody, for your interest. We are always available to answer any questions. Please reach out to the number or email on the notices. Operator: Thank you for your participation in today’s conference. This does conclude the program, and you may now disconnect.

6天前Insight Analytics约5分钟阅读

DUK 2026 Q1 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to the Duke Energy First Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mike Switzer, Vice President, Corporate Development and Investor Relations. Mike, please go ahead. Mike Switzer: Thank you, Jen, and good morning, everyone. Welcome to Duke Energy's First Quarter 2026 Earnings Review and Business Update. Leading our call today is Harry Sideris, President and CEO; along with Brian Savoy, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information, along with a reconciliation of non-GAAP financial measures. With that, let me turn the call over to Harry. Harry Sideris: Thank you, Mike, and good morning, everyone. We're pleased to be with you to share our results on the continued progress we're making on our strategic priorities. Today, we announced first quarter 2026 adjusted earnings per share of $1.93, which builds on our momentum from last year and marks a strong start to the year. These results are primarily driven by critical infrastructure investments to meet growing customer demand in our service territories. We are on track to achieve our 2026 guidance range of $6.55 to $6.80 and are reaffirming our 5% to 7% long-term EPS growth rate through 2030. And we are more confident than ever that we will deliver in the top half of the range beginning in 2028 when we expect to see accelerated growth from the economic development projects we have secured under ESAs. Our growth is strong. Economically attractive jurisdictions is underpinned by the industry's largest regulated capital plan, efficient recovery mechanisms and a long track record of constructive regulatory outcomes, and we continue to see strong fundamentals across our business. In the first quarter, we achieved key strategic milestones in support of the growing states we serve. With every investment, we're ensuring the dollars deliver long-term value for our customers and communities. We will continue to execute this strategy with discipline and look forward to updating you throughout the year. As we invest in our system, I want to underscore that our priority has been and always will be providing customers reliable power at the lowest possible cost. As a result of this unwavering focus, our rates are below the national average and have risen below the pace of inflation. We continue to find new ways to deliver affordable energy for our customers, including leveraging our scope and scale to achieve top-tier cost management. As shown on Slide 5, I'm pleased to announce 2 major accomplishments that will provide more than $5 billion of customer benefits, further demonstrating our sustained commitment to providing customer value. First, last week, we reached a multiyear agreement to monetize up to $3.1 billion of clean energy tax credits expected to be generated through 2028. The proceeds will flow back to customers to support keeping rates as low as possible. We also received all regulatory approvals, including from FERC, North Carolina and South Carolina regulators for the proposed combination of our 2 Carolina utilities. Combining these utilities will enable us to meet the Carolina's growing energy needs more efficiently with estimated customer savings of $2.3 billion through 2040. With these approvals, we're working towards an effective date of January 1, 2027. Our customers remain our top priority, and we will continue to utilize every tool available to keep rates as low as possible. We had several other significant accomplishments in the first few months of 2026, which are outlined on Slide 6. Starting with the 2 strategic transactions announced last year. We closed on the first tranche of Brookfield's minority investment in Duke Energy Florida in early March, receiving $2.8 billion in cash proceeds for a 9.2% interest in our Florida utility. Several weeks later, we completed the sale of our Piedmont Natural Gas Tennessee business to Spire for $2.5 billion. The more than $5 billion in proceeds strengthen our credit profile and help cost effectively fund our $103 billion capital plan as we invest for the benefit of our customers. Moving to economic development. We continue to seize the growth in our attractive regions driven by innovation in AI technologies and advanced manufacturing. Since the fourth quarter call, we've signed an additional 2.7 gigawatts of ESAs with data center customers, bringing our total executed agreements to approximately 7.6 gigawatts, nearly 2/3 of which are already under construction. We recognize that we're in a once in a generation build cycle and have been collaborating with state and local officials, policymakers and regulators to attract these investments to our communities while protecting our existing customers. We've taken a leading role in developing contract structures that establish greater certainty for planning and ensure that new large customers pay their fair share of the overall system costs. Contracts include minimum demand provisions, credit support, refundable capital advances and termination charges. Importantly, these incremental volumes will benefit all customers over the life of the contract as system costs are spread over a larger base. For decades, our teammates have had the privilege of living and working alongside the customers we serve, and that experience has made community engagement and core competency in our planning and delivery. When projects are built with communities and not around them, we are able to support growth in a way that both protects and benefits customers. And finally, I want to touch on several regulatory updates, beginning with North Carolina. The rate cases for both Duke Energy Carolinas and Duke Energy Progress are proceeding on schedule. The next step will be intervenor testimony, which is due for DEC at the end of May. We look forward to continuing constructive engagement with stakeholders as we advocate for the critical investments needed to reliably serve our growing communities and provide value for our customers. And in mid-March, we filed our initial electric rate stabilization adjustment in South Carolina under legislation that was signed into law last May. This efficient process allows for annual true-ups that reduce rate volatility for customers. The investments we're making in our systems support critical upgrades to improve reliability, harden the grid and support growth. Whether it's a blue sky day or responding to winter storms like we experienced earlier this year, we continue to provide value by keeping the lights on and restoring power safely and quickly. Moving to Slide 7. We continue to advance our all-of-the-above strategy, adding 14 gigawatts of generation over the next 5 years. We're also maximizing existing generation by extending the lives of our nuclear fleet. In April, the NRC approved the subsequent license renewal for Robinson Nuclear Plant, marking our second nuclear plant to reach this important milestone. As the operator of the largest regulated fleet in the nation, nuclear is foundational to our strategy, and we intend to seek similar extensions for all our remaining reactors. Our gas generation program, which is a critical component of our strategy is well underway with 5 gigawatts under construction and an additional 2.5 gigawatts in development. In March, the South Carolina Commission approved our application for a 1.4 gigawatt combined cycle plant in Anderson County. The plant is the first to be approved after the enactment of the Energy Security Act last May, and is our first new baseload generation asset in the Palmetto State in a decade. Construction is expected to begin in 2027. And last month, we implemented a CWIP rider in Indiana for our Cayuga combined cycle plant. This recovery mechanism supports the state's focus on affordability by reducing overall costs to customers while maintaining balance sheet strength. We have agreements in place to secure the long lead time equipment and workforce needed for this dispatchable generation, which reduce risk and leverage our size and scale to complete these projects efficiently, maximizing the value for our customers. The first turbine secured under our framework agreement with GE Vernova are being built, with the turbines for the first Person County combined cycle project expected to be delivered in the second half of this year. Our gas generation build will create thousands of construction jobs and we have a solid plan to ensure we have the skilled labor needed to meet our construction milestones on time and on budget. In the Carolinas, we have signed EPC contracts for the first 3 new gas generation facilities, a programmatic approach that gives our EPC provider Zachry line of sight to an order book of projects. We have deliberately laid out the construction timelines for Person County and Marshall plants to create a road map for Zachry to stage the regional workforce. This will support developing and retaining a local craft pool for years into the future. We're building on the success we've had supporting talent pipelines to address needed skills in our service territories, like we've done with lineworker training programs, and we're sharing these best practices with our EPC partners. To bring all this together, our project management and construction team has a robust construction monitoring process in place. We are working closely with our equipment suppliers and EPC providers, including conducting quality assurance checks of equipment and manufacturing and leveraging AI technologies to track milestones. This includes monitoring construction at a granular level down to the cubic yard of dirt excavated and concrete being poured. Overall, our scope and scale as well as our extensive experience and infrastructure development uniquely position us to lead this record generation build. And we've been actively preparing for this next build cycle for more than 3 years given us full confidence in our ability to execute the work ahead. With that, let me turn the call over to Brian. Brian Savoy: Thanks, Harry, and good morning, everyone. As shown on Slide 8, we delivered strong first quarter results with reported and adjusted earnings per share of $1.97 and $1.93, respectively. This compares to reported and adjusted earnings per share of $1.76 last year. Electric Utilities and Infrastructure was up $0.16, driven by infrastructure investments to reliably serve customers in our growing jurisdictions as well as favorable weather. Partially offsetting this was higher O&M and depreciation expense on a growing asset base. The colder temperatures we experienced in the quarter drove higher usage, but this was offset by higher O&M expenses incurred responding to winter storms. We budget for storms and have solid recovery mechanisms in place. So the impact in the first quarter is largely timing, and we continue to target flat O&M for the full year. Gas Utilities and Infrastructure was up $0.01 compared to last year, with contributions from riders and customer growth, partially offset by higher depreciation expense. The Other segment was essentially flat to the prior year. Our results for the quarter continued to build on the momentum from the past year, reflecting the strength of our utilities and consistent execution of our strategy, positioning us well to achieve our full year EPS targets. Turning to Slide 9. Our economic development success continues as we progress additional large load projects through the pipeline and signed contracts. We have now secured approximately 7.6 gigawatts of electric service agreements with data center customers, including an incremental 2.7 gigawatts since the fourth quarter call. As Harry touched on, these contracts include provisions that protect existing customers and deliver value to those customers over time by spreading fixed costs over a larger base. As we continue to convert economic development prospects into firm projects, we are locking in contracted ramp schedules that provide us with increasing confidence in our long-term load growth projections. On Slide 10, I want to highlight the work underway to sign additional contracts and bring new large loads onto the system. We continue to see robust interest from large load customers with our late-stage high confidence pipeline now at 15.4 gigawatts, inclusive of the ESAs we've signed. Our teams are working diligently to advance projects through the pipeline, and we expect to convert additional prospects to ESAs over the next 12 months. Construction is underway on the first 5 gigawatts of new data centers, and we are putting the necessary infrastructure in place to support speed to power, preparing the grid to deliver energy as soon as they are ready and executing our generation build to grow together over time. Consistent with our load forecast, we expect these customers to begin taking energy as early as the second half of 2027 and into 2028 and ramp into their full contracted load through the early 2030s. We expect the 2.7 gigawatts signed in the first quarter as well as any incremental projects signed to begin taking energy late in the 5-year planning window and ramp into the early to mid-2030s, strengthening the durability of our long-term growth potential well into the next decade. Turning to the balance sheet on Slide 11. We remain well positioned to meet our financial commitments for the year. In March, we received over $5 billion of proceeds from the sale of Piedmont's Tennessee and the first tranche of our -- of the Duke Energy Florida minority investment. Closing these transactions provides financial flexibility to execute our strategy and demonstrates our commitment to pursuing the lowest cost of capital to support our investment plans. Also in March, we issued $1.5 billion of convertible senior notes at a 3% coupon, providing interest savings as we pay down higher cost debt. We took advantage of the strong market conditions and priced $300 million of equity under our ATM program, which will settle in December 2027, consistent with the timing of our future equity needs. This balanced funding approach, along with improving cash flows from efficient recovery mechanisms keeps us on track to deliver 14.5% FFO to debt in 2026 and 15% over the long term, providing meaningful cushion to our downgrade thresholds. I also want to take a moment to acknowledge a major achievement we celebrated as a company this year, our 100th consecutive year of paying a quarterly cash dividend. This milestone marks a long-dated commitment to the dividend that's directly tied to the company's financial strength, regulatory execution and disciplined long-term investments. We have a diverse investor base, including many who live and work in the jurisdictions we serve, and we are proud to deliver this consistent cash flow they can count on. Let me close with Slide 12. We are off to a strong start in 2026, and I'm proud of our team's unwavering commitment to deliver value for our customers each and every day. We are on track to achieve our 2026 EPS guidance range of $6.55 to $6.80 and 5% to 7% EPS growth through 2030 with confidence to earn in the top half of the range beginning in 2028. Economic development success across our states generates an extensive runway of customer-focused capital investments that position us to deliver on our growth targets, which combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith. Julien Dumoulin-Smith: So just as it pertains to the Carolinas cases here, right? I mean, obviously, they're proceeding, as you say, on schedule. How do you think about any potential to settle them up here partially or otherwise here? Again, obviously, we're ticking through the milestones here. But just how would you set expectations against the wider backdrop here? A lot of noise in the system here, would love to hear how you set expectations. Harry Sideris: Yes, Julien. So we always pride ourselves in working closely with our regulators and stakeholders to make sure everybody understands the benefits of the case, the value that we're providing to our customers. Like I mentioned, the next big milestone is the intervenor testimony later this month. I think once we get that out, we will have more extensive discussions on settlement opportunities. We always are open to that, but we also feel like we have a strong case if we have to litigate it. We understand that affordability is front and center for everyone, it's front and center for us, and we're taking every action that we can. The announcement that we made yesterday with over $5 billion of savings over time for our customers is just one of the tools. And we have other tools in our tool bag to help as we have those stakeholder discussions. So we feel very confident that we will be able to continue our regulatory outcomes -- strength in regulatory outcomes that we've had for the last several years. Julien Dumoulin-Smith: Awesome. Excellent. And then just coming back to the load growth, I mean, kudos again on that here in the quarter. Can you give us a little bit of an update in South Carolina, where do we stand on the generic large load tariff docket? How do you think about that being a catalyst in its own right? And any differences in the framework that you're expecting between the 2 different Carolinas here? Harry Sideris: Yes. We're looking at several dockets and several tariff opportunities in all our states, but they're all grounded on the contracts that we have mentioned before, making sure that the data centers pay their fair share through minimum take provisions, deposits, refundable deposits, clawback provisions if they terminate. And also the benefits that they provide over time is a tremendous value to our customers. So making sure that people understand that. This is billions of dollars over the life of these contracts that are going to go to help offset the fixed system costs that we have with the larger loads. So we're in discussions in South Carolina, North Carolina, Florida and other states to make sure that these are memorialized and that we have the right provisions and tariffs in place to be able to do that. We feel our contracts do that now and then tariffs will just add to that. Operator: Your next question comes from the line of Carly Davenport with Goldman Sachs. Carly Davenport: Maybe just on the tax credit monetization that you announced this morning or mentioned in your prepared, any details you can provide in terms of counterparty or terms there? And just are there any other opportunities like that, that you could utilize to continue to provide customer benefits as the focus on affordability remains top of mind? Brian Savoy: Carly, this is Brian. I'll take that one. As we monetize tax credits over the past couple of years, we've tested the market and we found a couple of partners that we wanted to go longer with. And that's what was the catalyst to negotiate a multiyear contract with this counterparty. We can't disclose the counterparty, but they have a healthy tax appetite, obviously, because they're acquiring these credits and going to be applying them on their tax return. And we feel like that, that's the best approach to partnering with companies as this IRA monetization market has continued to mature because going through an auction each year does take a lot of churn and effort in the system and you don't necessarily get the best prices. Like we tested the prices. We got great value for our customers with this contract. And after we've proven out that the discounts on the tax credits are as good or better than any market we've seen. So I think you could expect us to continue doing this. And just to be clear, this is a forward contract. So we're going to earn the tax credits and sell them in those given years, but we predetermined the set value for our customers, which is a great, great opportunity. Carly Davenport: Great. Super helpful. And then maybe just on nuclear. I guess across the industry, there's been some discussion on perhaps a consortium of utilities, hyperscalers, government entities kind of coming together to try to address some of the cost overrun issues and move forward on new build AP1000s in particular. I guess, is that sort of a structure something that you might consider participating in? And maybe just refresh us on kind of what specifically you're looking for to feel confident to move forward on new nuclear development. Harry Sideris: Yes, Carly, obviously, nuclear is very important to us. We have 11 reactors that provide safe, reliable, dispatchable clean energy to our customers. And like Brian just mentioned, also helps us with customer value by providing almost $600 million of tax credits a year to our customers. So obviously, nuclear is important to Duke Energy. I think nuclear is important for the future of the country and the utility industry in general. We're going to need nuclear in the future to be able to deliver reliable power and clean power to handle the growth that our country is experiencing. But like we've said before, our main focus right now is to make sure that we get the most out of our current reactors. So we have about 300 megawatts of upgrades that we're executing and also getting the life extended. So we just announced Robinson's life extension, we'll be extending the lives of our other reactors as well. And we're working with the government, with hyperscalers and others to make sure that the things that we need to solve to be able to go forward with the new nuclear build are being managed. So those risks like we've talked about before, first-of-a-kind risks on the technology, what are we going to do with supply chain and workforce and making sure that that's available out there. And last but definitely not least is how we manage the financial risks that protects our customers from overruns as well as protects our investors from that. So we continue to have those discussions. We continue to maintain optionality in our IRPs and our planning to be able to do that if those answers come. But we will not make any moves till we get those 3 questions answered. Operator: [Operator Instructions] Your next question comes from the line of Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to maybe go into the backlog a little bit more for the ESAs. Just wondering if you could, I guess, share a bit more of the view of the larger pipeline, as you said, the 15 and change, and how you think the cadence of this could come together in the future as far as the potential to expand the plan and what that could mean over time? Harry Sideris: Yes, Jeremy, like we talked before, we're taking a very disciplined approach to this, really focused on those counterparties that are -- that can deliver those projects, and we're very conservative in what we're putting into that. So our pipeline is much bigger than that. But what we focus on is that late-developed stage, and we feel confident that the discussions that we're having are going to land a lot of these that are in our late development pipeline in the next 12 months. So we'll continue to update you on that. But we continue to have prospects further deeper in the pipeline that we're moving up into this more advanced stage as well. Brian Savoy: Jeremy, if I could just add, I can't help myself. I'm so proud of our focus on speed to power. We've really retooled how we approach these large load customers, pulling together our transmission and grid teams as well as our economic development teams, ensuring that we're looking at every solution to get these customers signed. And I think it's evident. We signed 2.7 gigawatts this quarter, which was more than half we signed last year is really a testament to that speed to power focus, and you should expect more of that in the future. Jeremy Tonet: Got it. That's helpful there. And just wanted to turn towards the current rate case. Are there any direct offsets here from the savings that you announced with the merger of the Carolinas and as well as the tax credits? Just wondering if you think about the potential to -- levers, I guess, to reframe the ask as a result of what was accomplished here just looking at forward prospects. Harry Sideris: Yes, Jeremy, we have a lot of levers, tax credits being one of them. The one utility, that's going to go into effect at the beginning of next year. So that will be more over time, but it does definitely provide a lot of value to the customers over that time, $2.3 billion. So our focus with the levers that we have now is how we can offer some of those up to mitigate some of the increase. So think about tax credits, then we have some other options as well. Again, we'll be talking to our stakeholders and our regulators after the intervenor testimony is filed at the end of this month. Jeremy Tonet: Got it. One quick one, if I could, just as it relates to the legislative session, if there's anything that you're watching there? I think there might be some bills talking on tax incentive for data centers, fuel cost sharing mechanisms. And just wondering if -- any thoughts on the legislative session you could share? Harry Sideris: Yes. We share the goals that our legislators and our regulators and our stakeholders have in the states. They want to make sure that customers are protected from the large load that's coming to our territory to make sure they pay their fair share. They want to make sure that the reliability is maintained. And they also want to make sure that we continue to have economic development in the states grow. Those are all things that we're in tune with, and we're working with them. I think a lot of the things that are being discussed are already in our contracts. It's just codifying some of that. So we'll continue to work with them, but we all have the same goal in mind to make sure that our customers are protected and our states can continue to grow and we can continue to have reliability. Operator: Your next question comes from the line of David Arcaro with Morgan Stanley. David Arcaro: I was just wondering -- just one question from me. Have you seen any -- just in terms of the data center activity in the broader pipeline, have you seen any acceleration in that activity in terms of top of the funnel interest in your service territory? Wondering if there are any areas, any regions that are showing indications that they could be bigger hubs and develop that way over time? Harry Sideris: Yes, Dave, we're seeing an acceleration in interest in our territories. Being a vertically integrated utility has a lot of advantages to these hyperscalers. We plan our transmission, our generation. It's a one-stop shop. We also have a very vast experience and skill around community engagement that can help these folks as they navigate zoning and other issues that crop up. So we're getting a lot more interest in our service territories. We're seeing in North Carolina around the Charlotte area kind of becoming another hub. We have a lot of interest in Florida as well as the southern part of Indiana. I know a lot of activity has happened in Northern Indiana originally, but we're getting a lot of incomings for the Southern Indiana region now as well. So we'll continue to work on those. Like Brian mentioned, we have a team in place that their goal 7 days a week, 24 hours a day is how do we get these things signed quicker, how do we service them quicker, maintaining the reliability and the value for all our customers. Operator: Your next question comes from the line of Richard Sunderland with Truist Securities. Richard Sunderland: Circling back to the customer savings outlined on Slide 5. The tax credit agreement, can you speak a little bit to the timing of flowback to rate payers there? I think you've discussed this a little bit in the past. Just trying to get a sense of if the latest monetization agreement is consistent with that or any changes in thinking there? Brian Savoy: Thanks, Richard, and congrats on the new role. I know you started covering Truist recently. So it's good to hear your voice. The tax credit agreement, I would think about it as we're locking in the value per customer. So we're not going to be negotiating discounts year in and year out. The flowback is different for North Carolina versus South Carolina for DEP and DEC currently. But you think of -- we've been signaling to a 4-year amortization generally, and that's what is in North Carolina. And as Harry said, as we work through the rate cases, this might be a tool to accelerate to keep the rates even lower during this time. But it's not additional tax credits, it's ones we expected to earn through our nuclear, solar and battery investments. It's monetizing them at these predetermined discounts and locking in that value for customers. Richard Sunderland: No, I appreciate that commentary as well. I guess on the ESA update too, just if I caught that in the script, I think it was 2/3 are under construction. Curious what you see as the timing for those remaining projects to begin construction. And I guess anything you're focused on locally around moratoriums, what have you in terms of the confidence of those projects advancing until they start turning dirt? Harry Sideris: Yes. So we're very confident in all our projects that are in the ESA bucket. Our ESAs require having zoning nailed down, having permits in place. So we feel confident, and that's why a lot of them have been able to start construction as soon after we sign those ESAs. We anticipate the same thing with all the new ones that are coming into us. They'll start construction very rapidly. And in fact, we're looking at ways of how we can accelerate some of the bridge power to them -- to get them online and have them start taking their service a little bit earlier as well. Operator: Your next question comes from the line of Steve D'Ambrisi from RBC Capital Markets. Stephen D’Ambrisi: I just had a quick one to follow up on kind of the load commentary in the 2.7 gigawatts. I was just looking at the North Carolina IRP that you guys had filed in October. And I think in that IRP, you had included the moderate development forecast, which included something like 6 gigawatts of advanced stage, but it was risked at like a 25% or 30% rate. And so I mean, it seems like signing this 2.7 gigawatts, even if it's in the tail end, looks like it would be upside to what was kind of laid out in the moderate development plan. So can you just talk about what that means and like what the avenue is to update load forecasts in North Carolina or elsewhere just as you continue to sign these large loads? Harry Sideris: Yes. It's a very dynamic environment that we're dealing with. That's why we put a high case in that IRP. So this 2.7 gigawatts that we just recently signed, that moves that load up to that level. So it's been contemplated in our plans there. It will be discussed in our rebuttal as well. So that just solidifies that other line in there. This is very dynamic. We're also talking to our stakeholders on how we can update that a little bit more frequently than what we have in the past because it's such a dynamic environment. But we're doing everything that we can to make sure that we're planning the generation, staying ahead of it so that we can sign these ESAs as fast as possible and not have any delays. Operator: We have reached the end of the Q&A session. I will now turn the call back to Harry Sideris for closing remarks. Harry Sideris: Thank you again, everybody, for joining us. And before I close, I just wanted to reemphasize how proud I am of the results that this team has delivered in the first quarter, and we're going to continue to build on that momentum as we move through the rest of the year. But I want you to know that we're executing our strategy effectively. We're reaching our new milestones in our generation build, and we're converting those economic development opportunities into real projects, and we're going to continue doing that in the future. So I'm very confident in our ability to earn in the top half of the range -- EPS growth range in 2028 as these loads materialize. And our plan is very durable well into the future. So again, thank you for joining us today, and thank you again for your investment in Duke Energy. Operator: This concludes today's call. Thank you for attending. You may now disconnect.

6天前Insight Analytics约5分钟阅读

SAB.MC 2026 Q1 财报电话会议

Lluc Sas: Welcome to Sabadell's results presentation for the first quarter of 2026. Joining us today are our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow the same structure as in previous quarters. Our CEO will begin by highlighting the key developments of the quarter and discussing the most relevant topics. Then our CFO will review financial results and the evolution of the balance sheet. The presentation will conclude with closing remarks from our CEO, after which we will open the floor for a live Q&A session. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc. Good morning, everyone. I will begin by outlining the 4 highlights of the quarter, which we will discuss in more detail during today's presentation. First, the sale of TSB is now complete. Therefore, we will pay the extraordinary cash dividend of EUR 0.50 per share at the end of May. Second, as we already anticipated, Q1 will mark the bottom of our core revenues. We expect these items to increase in each quarter over the course of the year. Third, we have launched an early retirement plan, which would improve efficiency in '26, but mainly in 2027. Fourth, we commit our full year guidance. Indeed, beyond the ups and downs of any given quarter, we have a sound, secure and proven growth strategy to deliver a 16% return on tangible equity in 2027. Slide 5 shows the key financial messages for the quarter. Just to remind everyone, all figures and results presented now exclude TSB. Supported by strong commercial momentum, performing loans and customer funds recorded year-on-year growth in the mid-single digits. In this context, core revenues are expected to have reached in this quarter their lowest point of the year. We see core revenues improving going forward as repricing pressures on NII ease and fee performance normalizes. Recurrent costs performed well in the quarter and reached EUR 569 million. We recorded one-off costs in the quarter of EUR 55 million related to the early retirement program underway. Our fundamentals remain solid. Our recurring return on tangible equity stood at 14.1%, and our capital position remains strong with a core Tier 1 at 13.2%. This performance is underpinned by strong asset quality that keeps on improving. Cost of risk and total NPAs both showed a reduction year-on-year. We continue to build up our Stage 3 coverage, which now stands above 70%. Finally, as I said before, we will distribute EUR 0.50 per share as an extraordinary dividend by the end of May. In parallel to this cash dividend, we keep executing our share buyback programs. We have already completed EUR 267 million out of the approved EUR 800 million. On Slide 6, financial implications of the now completed TSB transaction. Let me start with the sale proceeds. The initial agreed price was GBP 2.65 billion. This figure was agreed to be increased by the tangible net asset value generated since April 25. Taken together, this results in a final sale price of GBP 2.9 billion. Now let me emphasize the strategic and financial merits of the transaction. Firstly, the sale has generated significant value for shareholders. Transaction multiples are above both peer transactions and Sabadell's own trading multiples. In addition, the transaction is expected to generate more than 400 basis points of capital. This is driven by capital gains of more than EUR 300 million and the deconsolidation of risk-weighted assets. As approved at the Extraordinary General Meeting held last August, we will return this capital to shareholders. Accordingly, we will pay an extraordinary dividend of EUR 0.50 per share on the 29th of May. To conclude, following the sale of TSB, Sabadell now represents a more focused and simplified equity story with a clear strategic profile centered in Spain. In Slide 7, we see the details of the early retirement plan. We executed our last efficiency program as you remember, back in 2022, which included an early retirement plan. Since then, circumstances such as the demographics of our workforce prevented us from executing additional early retirement plans. Circumstances have changed and a structured early retirement plan is already being implemented in 2026. Importantly, this approach supports workforce optimization in line with the evolving business models and digital transformation. In terms of financial impact, we will incur in one-off costs in 2026 of approximately EUR 90 million. Meanwhile, we will generate gross annual savings of approximately EUR 40 million. Approximately 1/3 of these savings are expected to materialize in 2026 as the program is rolled out with a full run rate savings achieved in 2027. On Slide 8, we talk about new lending. Starting with mortgages, new lending decreased by 24% year-on-year. We remain focused on managing new lending through risk-adjusted return on capital, ensuring that growth is delivered in a profitable manner. As a result, we have continued to reduce our market share in new mortgage lending over the past months as front book yields have compressed. Origination of consumer loans decreased both year-on-year and quarter-on-quarter. We introduced changes to the application process this quarter, which temporarily impacted on conversion rates. We have already improved the process again and conversion rates and origination volumes are picking up again. Quarterly new loans and credit facilities granted to SMEs and corporates increased by 1% year-on-year and by 5% quarter-on-quarter, while working capital performance was more subdued. Overall, as we share on the next slide, these volumes of new lending allow us to continue growing our loan book. On slide 9, we see the loan book and starting with Spain on the left-hand side of the slide. Performing loans increased by 0.8% on the quarter with positive growth across all segments. Performing loans in Spain increased by 4.3% year-on-year. Our international operations are experiencing good momentum as well with performing loans rising by more than 7% quarter-on-quarter and by double-digit figures year-on-year. Overall, our total loan book showed a positive trend during the quarter, growing by 1.6%. Annual growth rate reached 5.6%. Moving on to customer funds on Slide 10. First, on balance sheet, customer funds ex-TSB remained broadly stable quarter-on-quarter and increased by 4.3% year-on-year. The Spanish perimeter showed an increase of 4.7%. Second, our balance sheet funds also remained broadly stable in the quarter, as market volatility has had a dampening effect on net subscriptions. We posted an increase over 10% on a year-on-year basis. All in all, total customer funds grew by 5.9% year-on-year. Looking at on-balance sheet funds breakdown on the right-hand side of the slide, non-remunerated deposits reached EUR 83.9 billion. Those non-remunerated deposits are almost completely located in Spain. This highlights the high proportion of low-cost funding within our deposit base. The cost of customer funds stood at 78 basis points in the quarter in the ex-TSB perimeter. Let me note that this includes higher yields in U.S. dollars and Mexican pesos. Therefore, the cost of customer funds in Spain was significantly lower and stood at 59 basis points. On Slide 11, we make a summary of our quarterly results. We recorded a net profit of EUR 284 million or EUR 347 million, including the contribution from TSB. Let me emphasize two points. Firstly, as I had previously explained, revenues have bottomed out with improvements expected in the coming quarters. Secondly, Quarterly results include EUR 70 million pretax in one-off charges, nonrecurring costs related to efficiency initiatives and FX hedge on the proceeds from the sale of TSB. Underlying profitability remains solid and recurring return on tangible equity stood at 14.1%. This keeps us on track to reach our full year guidance of 14.5%. And with that, let me turn it over to Sergio. Sergio Palavecino: Thank you, Cesar. And good morning, everyone. Let's move on to the financial results on Slide 13. Before going through the different lines of the P&L, I would like to explain the extraordinary items that Cesar has just mentioned. First, within the trading income line, we recorded an expense of EUR 14 million related to the foreign exchange rate hedging of the full proceeds from the sale of TSB. Once the sale has been completed, next quarter, we will record only EUR 5 million corresponding to the month of April. Second, we recognized EUR 55 million of nonrecurring costs related to the early retirement program in Spain. Overall, recurring ROTE stands at 14.1%, which is in line with our expectations and our year-end target of 14.5%. We will now review the main P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 14. NII bottom out this quarter as expected, decreasing by 2.5% quarter-on-quarter and by 3.5% year-on-year, which is mainly explained by the final headwind of lower interest rates repricing as well as the seasonality of Q1. On the top right-hand side of the page, you can see the drivers that explain the quarterly evolution. Moving from left to right, customer NII had a negative contribution of EUR 8 million due to lower customer margin. This was driven by loan book repricing at lower rates and a slightly higher cost of deposits following the success of the last digital current account campaign. Then the day count effect on customer NII resulted in a EUR 6 million negative impact. Regarding ALCO liquidity and wholesale funding, we have seen a net impact of also minus EUR 6 million, mainly attributed to liquidity, reflected increase in borrowing in dollars and Mexican pesos, which carry higher interest rates. Going forward, this will no longer be a headwind and we are expecting tailwinds from customer NII as explained in the next slide. Indeed, looking ahead on the left-hand side of the Page 15, the expected quality evolution throughout 2026 is shown. As anticipated, after reaching a low point this quarter, we now expect NII to grow at a low single-digit rate quarter-on-quarter. From there, NII should increase steadily over the year, ending the fourth quarter of 2026 with a mid-single-digit increase compared with the fourth quarter of last year. This outlook is based on the current macroeconomic environment where we are assuming interest rates will stay at higher levels than we had previously expected. The slightly higher rate environment, together with ongoing uncertainty and volatility may affect loan volumes. We now expect growth to be slightly below our initial plans, but still at mid-single digits. At the same time, on balance sheet customer funds are expected to grow between 3% to 4%. Higher interest rates should support loan yields with a steady quarter-on-quarter improvement starting from the beginning of the second quarter already. Regarding deposit costs, we now expect a lower pass-through compared with our existing book, which should support customer spread. Overall, customer spread is expected to improve quarter-by-quarter and reached levels above 290 basis points by year-end, slightly better than initially forecasted. Finally, noncustomer NII, which includes ALCO, wholesale funding costs and the liquidity contribution is expected to remain broadly stable around current levels. Taking all of this together, we are maintaining our NII guidance and continue to expect more than 1% year-on-year growth in 2026. Moving on to fees. posted a quarter-on-quarter decrease, mainly driven by the absence of success fees recorded in the previous quarter by seasonality and by a one-off cost in the payment service business. Looking ahead, we expect this line to improve, supported by increasing activity, particularly in the Payment Service business and in Corporate and Investment Banking, which has already been seen in March. In Asset Management, we also expect a continued positive trend in net inflows. To sum up, while we acknowledge a lower quarter than expected, we believe this marks a trough that will serve as an inflection point. Looking ahead, we expect fees to increase and land at the lower end of the mid-single-digit growth range. Moving on to cost. The key developments this quarter is the launch of the new efficiency initiatives in Spain. However, let me first focus on the underlying evolution of recurring costs. Total recurring costs decreased by 3% quarter-on-quarter when excluding EUR 55 million of nonrecurring costs and for comparability purposes, also excluding the reclassification related to the end of the agreement to sell the merchant acquiring business at the end of last year. On a year-on-year basis, total recurring cost increased by 3.4% mainly driven by inflationary pressures on personnel expenses as well as higher amortization and depreciation costs, which already reflect the current quarterly run rate. Looking ahead, as Cesar mentioned earlier, we expect that circa 1/3 of the total savings from the efficiency initiatives will fit through in 2026. Overall, this evolution is fully aligned with achieving our year-end targets. On the next slide, we covered the cost of risk, which remains at contained levels supported by solid underlying asset quality despite the increased uncertainty. Total cost of risk for the quarter was 38 basis points which includes all provisions and impairments across all categories. Looking specifically on loan provisions, the credit cost of risk was 27 basis points. Turning now to the bridge of the different components of total provisions for the quarter shown on the top right-hand side. We booked EUR 94 million of loan loss provisions after reviewing carefully the macroeconomic scenarios. Then we had EUR 4 million of provision reversals driven by the real estate asset disposals at a premium. In addition, we recorded EUR 23 million in NPA management costs and EUR 19 million in other provisions mainly related to litigation. Overall, the quarterly evolution of total cost of risk is fully aligned with our year-end target of around 40 basis points despite the increased uncertainty. Moving on in the next section, I will walk you through asset quality, liquidity and solvency. On Slide 20, we see a continued improvement in both the NPL ratio and coverage levels. The NPL ratio reached 2.55% representing a reduction of 10 basis points compared to the previous quarter. We can also see that Stage 2 exposure declined by more than EUR 1.2 billion year-on-year. Finally, the coverage ratio calculated as total provisions of Stage 3 exposures continued to improve and reached 71%, rising by more than 1 percentage point during the quarter. In terms of total NPAs in Slide 21, you can see the continued reduction of foreclosed assets. We have sold 24% of the stock of foreclosed assets in the last 12 months at an average premium of 8%. At the right-hand side of the slide, we can see that the ratio of NPAs as a percentage of total assets declined to just 0.7% which is a record low. Turning now to Slide 22. All liquidity ratios remain comfortably above requirements with a net stable funding ratio at 135% and the liquidity coverage ratio at a strong 186%. Credit ratings remained stable during the quarter. All rating agencies have assigned a stable outlook, except for S&P, which maintains a positive outlook, reflecting the possibility to achieve further uplift based on ALAC. I will also highlight that Moody's upgraded our deposit rating in April, and it has reconfirmed our Baa1 long-term rating following the application of the new EU depositor preference regulation. Finally, year-to-date, we have issued EUR 500 million in covered bonds. Given the sale of TSB, this 2026 will be a year with lower MREL funding needs. And therefore, less affected by potential market volatility. To conclude this part of the presentation, let me walk you through the evolution of our capital ratios during the quarter. This time around, this slide includes both the quarter-on-quarter variation and the expected impact of the TSB sale and the extraordinary dividend on the CET1 ratio. We will start by reviewing the quarterly evolution. This quarter, the CET1 ratio increased by 7 basis points, while generating 32 basis points before accounting for the dividend accrued. This includes 42 basis points from organic generation after deducting 81 coupons, minus 4 bps from fair value reserves adjustment in the fixed income portfolio due to higher interest rates at the end of the quarter and minus 6 basis points from higher risk-weighted assets, mainly driven by volume growth in our international businesses, where loans carry higher density. The accrual of a 60% dividend payout ratio had a negative impact of 26 basis points, bringing the CET1 ratio to 13.18%. Now looking at the capital effect of the sale of TSB. The transaction will unlock more than 400 basis points of capital for shareholders, as already anticipated when we announced the transaction. The sale generates a positive capital impact of 369 basis points this year driven by the release of risk-weighted assets, a net capital gain of more than EUR 300 million and the reduction of intangibles. This will be offset by the extraordinary cash dividend distributed to shareholders which represent a reduction of 378 basis points, bringing the pro forma CET1 ratio to 13.09%. Finally, the release of operational risk-weighted assets over the next 2 years will add a further 36 basis points, lifting the pro forma fully loaded CET1 ratio to 13.45%. With that, I will hand over to Cesar, who will conclude today's presentation and probably say goodbye after 5 very successful years leading Banco Sabadell. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. Continuing after that phenomenal waterfall is very interesting. So to conclude this presentation, I would like to briefly review the bank's transformation journey over the last few years. Our growth strategy has proven to be successful and has structurally transformed the bank. First, we are delivering lending growth while reducing the cost of risk. Performing loans have increased by more than EUR 11 billion since 2021, while the cost of risk has declined by more than half. This improvement reflects stronger underwriting standards and a higher quality loan portfolio. Second, the bank is showing a consistent increase in capital generation. Indeed, we are delivering high and sustainable profitability, along with strong capacity to remunerate shareholders. In this context, we have committed to distribute EUR 2.5 billion of ordinary remuneration over the next 2 years, representing an average yield of more than 9% when adjusted for the upcoming extraordinary dividend. In short, a solid performance supported by 2 key levers. We have gradually shifted the organization towards profitability-focused metrics, and we have significantly transformed our risk processes and models. The benefits of these 2 elements will continue to gradually improve the quality of our loan book over time. Finally, let me emphasize our full commitment to delivering the full value of this plan through 2027 as we enter a new phase under a new leadership. We are well positioned to create long-term shareholder value. To conclude my last quarterly results presentation at Sabadell, I would like to share some words on a more personal note. Looking back at the last 5 years, I am honestly proud of the results we have achieved. Sabadell was going through difficult times in late 2020. During this 5.5 years, we, as a team, have managed to deliver on our strategy. We have deployed the profound transformation of the bank, which has enabled our financial turnaround. And now I would like to thank you for the interactions we have had during this period. The team and I feel we have been treated with utmost fairness and respect and I honestly thank you for that. I will now hand it over to Lluc start the Q&A section. Lluc Sas: Thank you, Cesar, for your commitment and for everything you have accomplished this year. We will now open the Q&A session. I would kindly ask you to limit your participation to a maximum of two questions. So operator, could you open the line for the first question, please? Operator: First question is coming from Cecilia Romero from Barclays. Cecilia Romero Reyes: I have two, one on volume growth and the second one on cost. On the first one, on the asset side, loan growth in Spain has been modest quarter-on-quarter. While some peers point to raising competition in both corporate SME deposits. And how are you seeing competition evolve across SMEs and corporates? And how are you balancing pricing, funding costs and returns? And how do you think about your appetite to compete in mortgages where cross-selling helps the economics? And finally, how do you see growth evolving across segments to deliver mid-single-digit growth this year? And then on costs, following the restructuring announcement and the EUR 40 million expected annual savings, could you help us understand how this fits within your current cost targets? Are these savings incremental or already factored in your 2027 guide? Cesar Gonzalez-Bueno Wittgenstein: Thank you very much. So on -- let's go one by one. On Corporates and SMEs, I think if you look at it, we've increased by 5% quarter-on-quarter and 1% year-on-year. And looking ahead, loan demand from Corporates and SMEs remains solid. We keep a strong pipeline of medium- and long-term loans. Therefore, we are confident that growth will accelerate back to mid-single-digit levels and the front books and yields and spreads remain stable. You have to understand that the change in model is a long-term element. So the cost of risk going forward will be much lower. There has been a phenomenal transformation in the strategy of the bank. In terms of mortgages, to your question, the average front book yield on new Spanish mortgage lending is currently below swap rates, as you all know. And pricing conditions remain very competitive, even after taking potential cross-selling benefits into account. Therefore, we have intentionally reduced our market share of new mortgages lending from approximately 9% at the end of '24 when the yields were positive to below 6% this quarter when our natural market share is around 7%. And we will continue to adjust our appetite according to market pricing as we have done over the past year. On the consumer lending, I mentioned before that during the quarter, we introduced changes in the application process. And although the demand -- the upfront demand remained stable and strong, we had lower conversion rates. We have adjusted for these new changes and now conversion is back to where it was, and we expect healthy growth from now on. And in the cost of deposits and in the deposits, I think we've grown healthily in deposits, and that has been somewhat on the back of the growth of the digital account. We have been very successful in the growth of the digital account during the quarter. And as we have mentioned many times, this is not to increase the volume of deposits. This is to attract new customers that then become transactional and that allow for further growth. More than 60% of our acquisition is now through digital accounts when it was 0 a few years ago. And these clients behave well. They have strong transactionality, more than 50% have payrolls, 45% use payments every month and 40% use Bizum through Sabadell, which is a big sign of being engaged with us. And despite the fact that we have done this campaign at a high rate, it has been at the rate that we could obtain in the wholesale market. So it makes lots of sense. I will let Sergio to develop a little bit more on the cost side. But I think we are not -- just to make it very brief, I don't think we are adjusting our forecast now despite this one-off. Of course, that would imply that there is some room as the year progresses to review. But for the time being, we leave it untouched. Sergio Palavecino: Thank you, Cesar. A couple of comments to the first one, Cecilia. The first quarter is typically because of seasonality, probably one of the sort of slower in terms of volumes. In any case, we've been able to grow a little bit the loans and a little bit the deposits. And when you look at the year-on-year growth rate, it's at 5.6%. So it is actually absolutely in line with our expectations. And as Cesar mentioned, the pipeline is good. So regarding volumes. As of today, there isn't anything that makes us think that we're not going to grow in line with expectations. And then as per the cost to your question, this efficiency initiative, so the early retirement, the EUR 40 million in 2027 was not included in our guidance when we detailed the guidance of 2027 by the different lines. We think it's early to update guidance per lines in 2027 given the different changes that we're seeing in the market. Of course, this is a positive because then it allows us to have a buffer and then we see how inflation plays out in the different lines of the cost. But again, I think it's a buffer, and we feel optimistic about it. Lluc Sas: Okay. So operator, could you switch off the microphones when the analysts are asking the questions because we've been told that there's some feedback that analysts cannot hear the questions when they do the Q&A. So we can jump to the next question. Thank you. Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: Yes. So I just wanted to say goodbye to Cesar and congratulations for the last 5 years' performance. So my first question is on NII. You maintain your guidance of plus 1% in '26 but Euribor rates are now higher than expected, and you used to have a positive sensitivity. So I wonder if you can elaborate on NII dynamics in coming quarters? And what is the offset to the higher Euribor rates? And in the case, the margin uplift is delayed, if you can update on the risk to your '27 NII guidance as well? And my second question is capital distributions, the EUR 90 million of restructuring charges that you will book in '26, I wonder if that is compatible with your distribution targets? You did not specify how much of the EUR 2.5 billion will be paid out in '26 and '27. So I wonder if top-up share buybacks will be postponed to '27 after the winding of operational risk-weighted assets or not? Sergio Palavecino: Thank you, Paco, for your questions. Regarding NII, NII sensitivity, you're absolutely right, it's a positive one. So when interest rates go up, we expect NII to be higher. Actually, for 100 basis points immediate uplift in all rates, then we expect a 6% increase in the second year. And the first year is less. So the first year is somewhat more stable. So the first year is more stable as said. Looking at the evolution of NII, we initially expected NII to grow by more than 1% and keep on growing into next year. And that was basically based on volume growth, while rates were expected to be stable. This time around, what we are seeing and when we look at the yield curve to update our expectation, the yield curve was reflecting two hikes from the ECB. So now we have updated our model with two hikes. So the ECB at 2.5%, which is definitely a higher rate. For the first quarter and the second quarter, volumes are not changing in our view. They are absolutely in line to our expectations. And then I think the question mark is whether at some point at the end of the year may be somewhat less volume. And as particularly, we are growing a little bit less than expected in mortgages because we want to be really prudent with prices, particularly in this environment. So the movements that we are seeing are not going to affect 2026, cost of deposits, the market looks good. In the past, this rate have had a very gradual pass-through into the deposit cost and from everything that we're looking at, this seems to be the case this time around. So the pass-through at the beginning is less than the pass-through that we have in the book, which is close to 30%. And then for 2027, we feel positive, but it's a bit early to say. Definitely, the higher yields is going to be a tailwind and then remains the question mark on volumes that we had expectation for a continuous mid-single digit at so far, we maintain, but I think we need a bit more time to have visibility in 2027 and also cost of deposits, although we feel very comfortable for cost of deposits. So I think those are the moving pieces that taking all that into account, we feel that the outlook is solid for this year. And then for next year, as said, we feel somewhat optimistic, but it's early to be precise. And regarding capital distributions, EUR 90 million is the one-off cost. But already in the period, we are expecting the benefits -- part of the benefits, EUR 40 million in 2027, EUR 15 million, almost EUR 15 million in 2026 million. So that combined is EUR 55 million. The net is only EUR 35 million, which net of taxes, is less than EUR 25 million. So yes, it's going to have a bit of an effect, but we are talking about less than 1% of the distribution. So we think that at this point moment in time, there might be some organic capital generation that can offset that small deviation. So we maintain the target of the EUR 2.5 billion distributions, which we have always seen them being higher in 2027 than 2026. In 2026, we have the extraordinary of the TSB distribution, EUR 0.5. We're actually distributing a little bit more than what is generated in 2026. So it's -- I think the balance between timing of the distributions are also quite sensible. Lluc Sas: Perfect. So let's take the next question, please. Operator: Next question is coming from Maks Mishyn from JB Capital. Maksym Mishyn: All the best to Cesar in the new chapter. Two questions from my side. The first one is, maybe I've missed it, but on the digital campaign for the deposits, could you give us a bit more color on pricing and volumes you were able to achieve with the campaign in the first quarter? And the second question is on cost of risk. Have you updated your macro models in the quarter? And can you provide us with some comfort that macroeconomic turbines may not push your cost of risk higher? Cesar Gonzalez-Bueno Wittgenstein: Thank you very much. So I think we have never been too transparent on the numbers of the digital account. It's quite successful. And we have now more than 600,000 digital customers. And what I could say is that it has increased overall by around 2 basis points to cost of deposits in the quarter. And let me leave it at that. It has been quite successful. We are very happy, and it is fulfilling all its purposes. Lluc Sas: And then we also had the questions on cost of risk and macro models. Cesar Gonzalez-Bueno Wittgenstein: Yes. Thank you, Maks, for your question. Regarding cost of risk and the macroeconomic models, we have, of course, reviewed carefully the scenarios and taking into account what is going on, the conflict and the uncertainty. For the basic scenario, we have kept it unchanged. We are -- we built this scenario during the second half of last year, and we built it on a quite a prudent basis. In our base scenario, we're assuming GDP to grow, in Spain, 1.7%, unemployment to be a little bit above 10% and what consensus is delivering today is an expectation of growth above 2% in Spain and unemployment below 10% while the price of real estate will not be declining. That is the consensus. And we feel that we have seen that the assumptions in our macroeconomic base scenario are actually more prudent than what we're seeing in the market. Of course, this only affects Spain, which is our home market. So we have not changed the base scenario. What we have done is we have changed the probabilities of the upside and the downside scenarios. You know that under IFRS 9, you have the base at the downside and the upside, and we have a shift 5% probability from the upside to the downside. And with this, this has triggered a EUR 20 million provision that has been already incorporated in the EUR 94 million of credit loan provisions. So this actually 10% in the change of probabilities. And for the time being, we will monitor the situation and the development. But for the time being and as long as the GDP expectation in Spain is maintained at a growth of around 2%, we feel that the scenario is going to be good. Lluc Sas: Okay. So let's jump to the next question, please. Operator: Next question is coming from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: All the best of luck for you, Cesar, in your new adventures. I just have one question on fees and one questions on the deposit and one on interaction with lending. So on fee income, I mean how should we expect the improvement in coming quarters? Is it mainly driven by an acceleration of the asset management net inflows because you are launching a new product campaign or how should we think about fee progression basically coming in the coming quarters? And the second one on the loan to deposit. I mean do you have any target for loan-to-deposit ratio in the long run or in the medium term? Cesar Gonzalez-Bueno Wittgenstein: Yes. On the fee side, I think we are expecting an improvement in the recovery of CIB activity. There were quite a few things in the pipeline that are probably delayed. I think the payment business is also going to do better and certainly, the net inflows in asset under management. And we have already seen a recovery in the first two months -- I mean, in the first two weeks of March. Sergio Palavecino: Yes. So if I follow up on those, natural actually, we expect the credit services and assets under management, we expect the 3 of them to grow from this level. Services, the different business lines are working well. We had this one-off in the first quarter and seasonality. Seasonality affects very much our payment service business. And then we mentioned also the Corporate & Investment Banking, which simply was slow in January and February, and then is not picking up in March and therefore, the second quarter is expected to be good in terms of activity. So we also expect growth coming from that business line that is going to affect or is going to affect positively the credit, the services and then finally, the asset under management because of the growth in balances. And per the loan-to-deposit is 92%, very stable. It's been very stable already for many quarters where we've been able to grow mid-single digit in loans and sort of 4% in deposits with a higher base of deposits. So at the end of the day, quite stable. If we were in a situation where we had the opportunity to grow the loan portfolio, I think growing up to a loan-to-deposit in the range of 90% to 100%, it could be no problem. So we would also feel that, that's not an issue. However, our -- in our plan, we will try to grow as balanced as possible. Lluc Sas: Thank you much for your questions. Let's jump to the next caller, please. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: Thank you very much for taking my questions. I have two, please. Firstly, on the net interest income, I saw that your ALCO portfolio grew by roughly EUR 2 billion quarter-over-quarter. If you could kindly provide details on the yields at which you bought new bonds? And then also on NII, I would like to ask, I think it was mentioned in the previous results call that you had you're going to decrease the cost of digital accounts from 2% to 1%, and there was a EUR 30 million positive NII benefit on a -- basis from this. If you could kindly confirm this number? And then my second question would be, it is noted regarding the change in the scenarios of the IFRS 9 models. I would like to ask if you could kindly remind me the macro relay provision. Sergio Palavecino: Sure. May I start with the ALCO question? Thank you, Borja. Yes, we have increased a little bit our ALCO portfolio, in line with our plan. The ALCO, the size of the ALCO book is related to mainly the ALM, the hedging that we do, the size of our current accounts and deposits, which have been growing. And then on top of this year with the sale of TSB at the TSB level, we are selling the TSB MREL bonds at the ex-TSB and replacing them with cash from the transaction. So we wanted to put that money to work partially. So that's why we wanted to increase the portfolio this year. And we have invested in the typical investments that we do that mean Spain and other core European sovereigns with durations up to 10 years, some of them hedged. So at the end of the day, the duration of the portfolio that we buy is between 5 to 6 years and with yields above 3% and in the current environment, actually very close to 3.5%. And then as per the online current account, you are absolutely right. We have the intention to cut the remuneration on the previous campaigns from 2% to 1%. We did, and that took place in the month of March. So it was only one month in the first quarter and the benefits will keep on coming. The very good news is that -- the very good news is that after this cut, we're seeing a lot of stability in the balances. So I think it's working the strategy of buying customers and then keeping the balances. And finally, regarding your question on the macro provision, I think I mentioned that it was EUR 20 million, the provision that we took after changing the probabilities. And Cesar, I don't know if you'd like to add something? Cesar Gonzalez-Bueno Wittgenstein: I think you were spot on. I think on the digital account, what we said is exactly that there will be a EUR 30 million saving from the portion of that portfolio that we brought from 2% to 1%. And of that, we have seen 1 month and that EUR 30 million is over the course of the year. And as you mentioned also the very good news, as expected, is that the loss of volumes is low. And this proves again that this is a transactional account. It's not deposits. It's not to maximize returns. It's to have a full current account that, at the same time, has low costs and full services and at the same time, yields something that is above 0. And that is exactly what has happened. And now there are different tiers, and that is the strategy around this account, there are different tiers. Some for acquisition because to create the excitement to move the account, you need a slightly higher rate, but then everybody understands that the current account with a decent remuneration of 1% is attractive enough and they are becoming transactional. So as I mentioned before, we are very satisfied with the progress of this strategy. Lluc Sas: Operator, could we have the next question, please? Operator: Next question is coming from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: Two follow-ups on lending growth. The first one is on the SME and corporate book, the Spanish one. I mean you've got peers basically growing, I mean, significantly above that 2% so I just wanted to follow up a little bit actually on what do you think explains that gap right now? Is it risk profile, risk appetite by Sabadell? Is the fact that the incumbents in Spain have stepped up the pace. Is it related to the fact that your customers are requiring less credit than other type of corporates. So just a little bit of color basically on that. And then the second one is whether you're seeing actually the international book ex-TSB as a bit of an offsetting factor against and that we're seeing some degree of acceleration, especially in Miami and the foreign branches actually. So do you think there is a little bit of an offsetting actually coming from international book and the Spanish book or you treat those books completely separately? Cesar Gonzalez-Bueno Wittgenstein: I think reducing the probability of default by 50%, as we have done in new lending, of course, strengthens our asset quality. But for a period of time, makes the volumes slightly more subdued. And it makes a lot of sense to do that, but it's a transition in which we are still somewhat immersed. You have to take into account that, that probability of default improvement has a long tail it will take more than 4 years to see the full benefit in the SME portfolio, 7 years in mortgages and more than 2 years for consumer loans. And for sure, it's very difficult to separate off all the different factors that make that demand a little bit more subdued, but it is our impression that this is the main factor that reducing the probability of default of being more demanding on the quality, on the risk quality of the new loans is having certainly somewhat of a slowdown, which will fade over time. And regarding the growth abroad, not really. We have good business units abroad, Miami, Mexico in particular and we do what's right. And whenever we find the right project, so the right returns on capital with the right risk, then we're able to do it, and we are seeing an environment with a lot of activity and project finance, in structured finance and the corporate, our corporate customers that are doing business abroad. So we are taking advantage of that activity, but it's not really like that we see sort of offsetting. We don't look things that way, no. Lluc Sas: Let's go to the next question then. Operator: Next question is coming from Pablo de la Torre from RBC Capital Markets. Pablo de la Torre Cuevas: I have a couple of follow-ups on cost and distribution. So the first one was on cost. I just wanted to understand the phasing of any remaining one-off costs in 2026 and whether the plan as it stands now considers any further actions in 2027? And the second one was on distributions. I know you reiterated the EUR 2.5 billion in distributions for this year and next. But I just wanted to check that you also reconfirmed the previous dividend guidance of 2026 being above EUR 0.204. And then the last one on fees also, if you just can comment on the previous guidance of double-digit growth in asset management and insurance fee income growth from this year. I think that's growing only at 4% in Q1. Cesar Gonzalez-Bueno Wittgenstein: So you will complement to that. But on cost, we don't see further actions at this point in time in '27 and there will be a progressive deployment during '26, and we will accelerate it as much as possible. So we have incurred already in EUR 55 million of the EUR 90 million, and you should expect the greater start to happen relatively soon. And for '27 at this point in time, there's no expectation. That doesn't mean that there couldn't be later on. But at this point in time, there are no further expectations. And for the distribution, I think we have -- we are confirming everything, everything that we said in terms of distribution almost 6.5% of the total of the 3 years, the EUR 2.5 billion ordinary, the EUR 0.50, everything, I think, is being confirmed. Sergio Palavecino: Indeed. Yes. And finally, Pablo, I think you were asking for fees, which I think we've been discussing and the fee development -- I mean the expected performance of fee remains unchanged to what we said in the first -- at the beginning of the year, and for the year. So we expect fees connected with assets under management to grow linked to volume, but then we also expect a higher contribution from the different businesses that we run and in the presentation, we are acknowledging a slower start than expected. We were sort of expecting maybe a figure similar to the one that we have in the first quarter of last year. And the difference, which is some EUR 7 million is half that one-off and half a slow January and February in the import and export business and corporate and investment banking which has already get back on track from March. And with all this, what we are seeing is that we keep on targeting growth that might be close to the mid-single-digit range, probably the lower range -- the lower part of that range. So we are targeting close to 4% overall growth in the fee line for 2026. Lluc Sas: Let's go to the next question please. Operator: Next question is coming from Carlos Peixoto from Caixa Bank. Carlos Peixoto: Just a couple of questions from my side as well, basically focus on NII. I'd like to have a follow-up there. The first one is that your NII guidance is based -- or the above 1% growth is based on NII that was provided last year, excluding TSB or on the statutory NII that we now have? Just to understand the basis for the growth. And then delving into NII, just if you could remind us what type of savings you might be getting going forward from MREL instruments that you had to issue at the group level to finance the size of the group or when it includes the TSB and now with the sale you could have some savings on those instruments from maturing the instruments, basically, what -- how much could it be? And what will be the time line for those to kick in? Cesar Gonzalez-Bueno Wittgenstein: Thank you, Carlos, for your questions. Regarding the second one, MREL. We were done streaming an equivalent to EUR 1.4 billion of MREL to TSB, which is the MREL related to its risk-weighted assets. And that is the MREL that, therefore, we will be saving at the group level in the wholesale capital market, so EUR 1.4 billion. And that's why we're saying that we will not be active in the debt capital markets in 2026 as we don't need to get that. So if you apply the spread on the senior nonpreferred and senior preferred to that figure, it's something close to EUR 20 million per year that may take place already -- I mean, gradually from the second quarter of 2026, as we will not be issuing and we will have maturities. And then I think the first question, not sure if I got it fully right. I think you are asking about the perimeter for the NII, and we are trying to be comparable. So it's going to be the ex-TSB perimeter is the one that is going to remain. So that's the one we're being guiding on to try to make it -- [ PLs with PLs ]. Hopefully, that was your question, and I hope I answered otherwise, we can follow up on it. Lluc Sas: Thank you, Carlos. And then we have got one final question. So operator, please. Operator: Last question is coming from Britta Schmidt from Autonomous Research. Lluc Sas: Britta we cannot hear you. No? Well, so probably he's jumped to another call because we know that it's a busy day for you, so thank you for your understanding. And that concludes our presentation for today. Thank you, Cesar and Sergio, and thank you all for participating. If you have any further questions, the Investor Relations team remains available for any follow-up or additional information. Have a great day. Thank you. Cesar Gonzalez-Bueno Wittgenstein: Thank you.

6天前Insight Analytics约5分钟阅读

STIM 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Neuronetics First Quarter 2026 Financial and Operating Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Mark Klausner: Good morning, and thank you for joining us for the Neuronetics First Quarter 2026 Conference Call. Joining me on today's call is Neuronetics' President and Chief Executive Officer, Dan Reuvers. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our business, strategy, financial and revenue guidance and other operational issues and metrics. Actual results can differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. For a discussion of risks and uncertainties associated with Neuronetics' business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K, which was filed in March and the company's quarterly report on Form 10-Q for the quarter ended March 31, 2026. The company disclaims any obligation to update any forward-looking statements made during the course of this call, except as required by law. During the call, we'll also discuss certain information on a non-GAAP basis, including EBITDA and adjusted EBITDA. Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provides useful information for both management and investors by excluding certain noncash and other expenses that are not indicative of trends in our operating results. Reconciliations between U.S. GAAP and non-GAAP results are presented in the tables accompanying our press release, which can be viewed on our website. With that, it's my pleasure to turn the call over to Neuronetics' President and Chief Executive Officer, Dan Reuvers. Daniel Reuvers: Thanks, Mark, and welcome, everyone, to our first quarter 2026 earnings call. I'll begin by sharing some perspectives on my background and why I joined the company, discuss some early observations, and then I'll walk through the key drivers of our performance in the quarter. Then I'll walk through our quarterly financial results in greater detail, and I'll conclude with my perspective on the rest of 2026 before opening the line for questions. This is my first earnings call as CEO of Neuronetics, and I'm pleased to be here. I've spent about 35 years in the med tech industry, and most of my career has been in businesses where patient impact, execution and operational rigor drive the outcome. Most recently, I served as CEO of Tactile Medical, where we grew revenue from $187 million to approximately $300 million. During that time, we expanded patient reach, grew gross margins, delivered record earnings and cash flow generation. Before that, I spent 12 years with Integra LifeScience, where I led the $1 billion Codman Neurosurgery division. And earlier in my career, I held leadership roles at several other med tech companies. There were a couple of things that drew me to this role. First, our mission to renew lives by restoring hope for patients and their families is one that I'm passionate about. It's amazing how many people have reached out to me since taking the role, sharing their stories of how they or someone they knew have either suffered from depression or better yet benefited from one of our therapies. Second, I think my background gives me a great perspective on how to move this business forward. My experience in the device space will allow me to come up to speed on the NeuroStar business quickly. And it's notable that Tactile was vertically integrated, meaning we designed, manufactured and sold our therapy solutions, but also directly build third-party payers, an experience I expect to draw on as we continue to improve efficiency within our Greenbrook clinics. Since stepping into the role, I've spent the bulk of the last month on a listening tour. I've been on the road with our field team, inside our clinics and meeting with customers. I've also engaged with shareholders, analysts and others, helping me shape my understanding of the business. My approach has been deliberate and comprehensive, intended to allow me to fully understand this business before making decisions about where to lean in, where to adjust and how we maximize the value of what we have. With that said, what I've seen in my first few weeks has reinforced my conviction in the underlying opportunity that exists for us. First, on the NeuroStar side, I see a clear opportunity to broaden how we go to market and reach customer segments where we've not historically been positioned to compete. I'll talk more about that in a moment. Second, with the Greenbrook clinics, workflows are key to optimizing profitability in our clinics, not only ensuring that patients have an efficient path to initiate their treatment and gain relief, but also to minimize operational handoffs. Revenue cycle management is also an area where I've spent time in my previous role. And what I've seen inside our clinic operations tells me there is more opportunity ahead. Lastly, we have a talented team that's focused and executing. And I've been genuinely impressed with the quality of the people and the conviction toward our mission across the organization. Now before I walk through the quarter, I'd like to briefly address 2 items. First, on our recently announced CFO transition. Steve Fansteel departed earlier this month to pursue an opportunity outside Neuronetics. We've initiated a comprehensive search to identify his successor. We appreciate Steve's contributions during his time at Neuronetics, and we'll provide updates as the search progresses. Ultimately, this allows me to select a partner that I'm confident, can help me lead our next chapter. Second, I want to share some perspective on the comments made by certain shareholders about our business. While we believe that the integrated NeuroStar and Greenbrook businesses provide us with a strong foundation to grow from, we respect some shareholders' views that the separation of the business could potentially unlock shareholder value. The Board and I are aligned on operating this business with discipline and on making decisions that create long-term value for our shareholders. I assure you that I'm evaluating this business with an open mind, and I appreciate everyone's patience as I work through my process. With that context, let me share a bit more about our performance in the quarter. Our Q1 results were largely in line with expectations, and we're making progress on the commercial and operational priorities already in motion. Starting with the NeuroStar business. During the quarter, we shipped 34 systems, up 10% year-over-year. We continue to support our installed base with the most comprehensive training and clinical resources in the category. We're also modernizing how we deliver that support with more virtual, on-demand and real-time engagement tools that provide customers with choices on how they want to be supported. We're piloting an expanded set of commercial models for NeuroStar. Customers exist with a range of needs. And while we have a history of providing unparalleled ongoing support to our customers, we also know that not all customer's needs are the same. So expanding our go-to-market menu is a priority. I'm convinced that we can compete on a broader horizon by listening to customers and responding in kind. Early feedback has been positive, and I'll have more to share in August. Now a few comments on Greenbrook. Clinic revenue grew 15% in the quarter. Growth in the quarter was driven by continued strength in SPRAVATO with treatment growth year-over-year and expansion of buy-and-bill. On the TMS side, within our clinics, volumes were modestly below prior year levels in the quarter, which we attribute in part to weather disruption across portions of our footprint during the first 2 months of the quarter. We saw patient flow normalize as the quarter progressed, and we expect to return to more typical volume trends as we move into the second quarter. Within our clinic operations more broadly, the focus remains on workflow and revenue cycle management. The team has made real progress on collections and operational efficiency, and we see continued runway. We've also leveled our marketing investment across the year rather than front-loading it, which we believe is the right cadence for the business. We acted during the quarter to better align our cost structure. These steps are expected to deliver annualized savings of approximately $2.5 million to $3 million with net savings beginning in the third quarter. Profitability and cash are top priorities and will be a focus of mine going forward. Taken together, the quarter reflects a business that's executing on the priorities already in motion while we lay the groundwork for our next phase of growth. With that, I'll walk through the financial results in greater detail. Unless otherwise noted, all performance comparisons are being made to the first quarter of 2026 versus the first quarter of 2025. Total revenue in the first quarter was $34.5 million, an increase of 8% compared to revenue of $32 million in the first quarter of 2025. The increase in revenue was primarily driven by higher U.S. clinic revenue. Total revenue from our NeuroStar business, inclusive of our system revenue as well as treatment session revenue was $12.9 million in the first quarter of 2026. This represents a decrease of 3% versus the prior year. U.S. NeuroStar system revenue was $3.2 million, an increase of 13% on a year-over-year basis, and we shipped 34 systems in the quarter, an increase of approximately 10% versus the prior year. U.S. treatment session revenue was $9.1 million, a decrease of 5%, while system treatment utilization increased 3.5%. This was offset primarily by a reduction in customer inventory levels. U.S. clinic revenue was $21.5 million, a 15% increase year-over-year. The results were driven by continued strong SPRAVATO growth and overall pricing improvement. Gross margin was 46.9% in the first quarter of 2026 compared to 49.2% in the prior year quarter. The decrease in gross margin is a result of revenue mix with clinic revenues representing a higher portion of our overall revenues. We also saw some negative impact from the increase in SPRAVATO buy-and-bill from Q1 of last year when we were still launching that offering. Operating expenses during the quarter were $25.1 million, a decrease of $1.6 million or approximately 6% compared to $26.8 million in the first quarter of 2025. The decrease is primarily attributable to savings in SG&A expenses, where we have driven and will continue to drive efficiencies. Net loss for the quarter was $10.8 million or $0.16 per share as compared to a net loss of $12.7 million or $0.21 per share in the prior year. First quarter 2026 adjusted EBITDA was negative $6.6 million as compared to negative $8.6 million in the prior year, an improvement of $2 million. Moving to the balance sheet and cash flow. As of March 31, total cash was $19 million, consisting of cash and cash equivalents and restricted cash as compared to $34.1 million as of December 31. Cash used by operations in the first quarter was $9.4 million. This compares to an operating cash use of $17 million in Q1 of 2025, an improvement of $7.6 million versus the prior Q1. As previously disclosed, in March 2026, we amended our debt agreement with Perceptive Advisors, which reduces our outstanding debt obligation and interest expense. Under the amendment, we made a one-time principal payment of $5 million to Perceptive Advisors, along with adjustments to the existing debt covenants. Now turning to guidance, which remains unchanged. We continue to expect total revenue between $160 million and $166 million, gross margins to be between 47% and 49%, operating expenses in the range of $100 million to $105 million, inclusive of approximately $8.5 million of noncash stock-based compensation. Cash flow from operations between negative $13 million and negative $17 million. As a reminder, our operating cash flow is projected to improve beginning in the second quarter and then sequentially through the remainder of the year, with operating cash flow being flat to positive during the second half of the year. And in the second quarter, we expect to see mid-single-digit growth. As we look ahead to the remainder of 2026, our priorities are clear. We're focused on disciplined execution, sharpening how we go to market and continuing to drive the business towards being cash flow positive. The pilots we have underway in the NeuroStar side of the business are designed to expand our reach and within our clinic operations, we'll continue to focus on workflow, collections and operational efficiency. We expect these benefits to continue building throughout the year. Looking further out, I want to briefly touch on COMPASS Pathways pending psilocybin therapy. The regulatory process is Compasses to navigate, but the Trump administration's recent executive order prioritizing such submissions is certainly encouraging. If approved, we believe Greenbrook is among a very small number of providers genuinely equipped to deliver it. The protocol requires certified settings, trained clinical staff and a proven back-office infrastructure for benefits investigation and prior authorization, all of which we already have in place through our SPRAVATO operations. While we will be prepared to execute if the product is approved, similar to SPRAVATO, we'd expect the revenue ramp to be measured in the first year of launch, but the narrow pool of providers capable of delivering this therapy represents a durable advantage for our business. As I mentioned earlier, my approach in these first few weeks has been deliberate. I'm committed to making decisions that balance the interest of our patients, physicians, colleagues and shareholders. And I expect to be able to share an even more grounded view of where we're headed when we report next quarter. I want to thank the Neuronetics team for the work they've put in this quarter and for the welcome they've given me. I look forward to updating you all on our progress in August. And with that, I'll open the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Bill Plovanic from Canaccord Genuity. William Plovanic: So 3 questions for you, Dan, if I could. One is just clarity on the performance in the Greenbrook sites. I just want to make sure I heard that the -- was it the treatment revenue and number of treatments was down year-over-year, backing out the SPRAVATO. I just want to get -- to make sure I heard that correctly. Daniel Reuvers: Yes. Overall, we were pleased with the Greenbrook performance. We were up double digits, as we said, about 15%. The TMS volumes were off a little bit, Bill. And we think that, that was related to a couple of things. One, weather, which we -- pretty concentration up here in the Northeast. And then we were a little lumpy in our ad spend as we exited last year. So smoothing that this year, I think, is going to bring that more in line with consistency. But we also saw better performance in March than we did in January and February. So it was -- we don't think that, that was a trend as much as an event. On the SPRAVATO side, we saw growth in both the buy-and-bill and the A&O segments, double digit in both segments. And yes, buy-and-bill was up as a mix compared to Q1 of last year. But I think it's worth noting that we've also seen that kind of equilibrate over the last couple of quarters as far as mix between that and A&O. William Plovanic: Okay. Great. And then just secondly, one of the biggest challenges new executives face when they come into a company is just making sure to keep the team intact and turnover. And I just wanted to see if you could provide any color on what you've seen thus far. I know it's only been 45 days, but just kind of what you're seeing across the organization thus far. Daniel Reuvers: Yes. It's -- first of all, I've been really impressed with how much the mission permeates through the company. People are really connected with the impact that we're making on patient's lives. I mentioned in my opening comments that I was on -- I've been on a listening tour for the first month for the most part. And that gave me an opportunity to go out and spend time with folks in the field as well as having spent a good amount of time in the office. So I've met with a lot of people, have been trying to connect as best I can with things like podcasts and town halls. And so far, I've been pleased with, as I said, kind of where people's attitudes are. I think there's an anxious enthusiasm to think about how we might do things different, how we might continue to find ways to get better. So overall, I would say, quite good. And I don't -- I haven't seen anything as far as turnover spikes or anything that would have, I would say, raised an eyebrow for me. William Plovanic: Okay. I think just the last question is really elephant in the room. I mean you addressed it, but I just wanted to hit home on it. Just you ended the quarter with $19 million of cash, $13 million unrestricted. It sounds like given the guidance that would tell us you'll use $4 million to $8 million of that during the full year. I would expect most of that would be in the second quarter given the guidance that the back half would be positive. I just -- any thoughts, comments? Is that enough to get you through with working capital? And just how are you thinking about that today? Daniel Reuvers: Yes. I mean we're always evaluating the balance sheet. But I think as we shared at the midpoint of $15 million of burn for the full year, the math would lead you to $14 million at year end. So -- and you're also right in that our assumptions are that we would be flat to positive in the second half of the year. So based on the current plan, we feel like we've got sufficient headroom in the balance sheet to get us -- to take us through the year. Operator: Our next question comes from Adam Maeder of Piper Sandler. Adam Maeder: Congrats on the new role and look forward to working with you again. Two for me, one kind of housekeeping question and one bigger picture question. Just on the housekeeping item, weather. It sounded like there was an impact to TMS volumes at Greenbrook clinics. I was hoping you could kind of quantify that for us. Is it also reasonable to assume that your stand-alone NeuroStar business also saw some headwind from weather? And how do we think about how quickly these patients can potentially kind of be -- their sessions can be recaptured? And then I had a follow-up. Daniel Reuvers: Yes. I'm not going to quantify on the Greenbrook side, Adam, but we did see -- we do think that there was some of the impact there, particularly because we saw more of the weakness in January and February than we did in March. It's also worth noting on the NeuroStar side that TMS patients are coming in every single day. So trying to manage a schedule around weather is more difficult than SPRAVATO patients that are coming in more episodically and have a lot more latitude in scheduling. So I think that was one of the reasons that we saw the impact within Greenbrook. On the NeuroStar side, we think that we saw some of the same kind of impact from weather. But that said, from a total utilization standpoint, we were actually up low single digits on absolute utilization within our NeuroStar business as far as treatment sessions were concerned. We saw a little softness in the revenue [ rec ] just because we had a little bit of customer inventory on hand that folks are working through. But overall, I would say the business held up quite well in spite of the weather. Adam Maeder: Okay. Fantastic. And then for my follow-up, Dan, in the press release, you talked about significant value in the business that's yet to be fully realized. You also have a large shareholder who issued a letter last month for -- asking for a strategic review and potentially a sale of the TMS business. And you touched on it in the prepared remarks. I think I heard you're evaluating the business with an open mind. I guess I was hoping you could share a little bit more color here on your early learnings and thoughts as you think about kind of the broader makeup of Neuronetics. And one question that I sometimes get from investors is the NeuroStar business, the stand-alone business, why can't that business grow faster given the size of the total addressable market? And what are the plans to kind of catalyze that business? And sorry for the multipart question. Daniel Reuvers: Yes. Yes, no problem. So first, as it relates to the shareholder letter that we saw. As I said in my opening remarks, I mean, I really have been on a listening tour, and I've had outreach to that shareholder along with others just to make sure that I'm hearing some of their thoughts and concerns. I think there's some frustration there. And quite frankly, I appreciate it. I think that what I'm still trying to do is really look at the business through a variety of different lenses, and I'm pretty pragmatic about it. I mean I'm not wed to a predetermined conclusion, but I'm also not inclined to be impetuous and make sure that I look at the business overall. I think as it relates to what can we do to continue to demonstrate strength and growth, which under any outcome scenario adds long-term value for shareholders, it's looking at the NeuroStar business, I do think that we probably under punched our weight here lately. The opportunity to expand our go-to-market menu is one of the things that I believe is going to be a helpful catalyst for us. And we're still in pilot phases on that, Adam. But ultimately, we have taken an approach that has conveyed what I would call unparalleled support to our TMS customers. I don't think any other competitor out there comes even close to the kind of support we provide to our customers. But that said, not all customer's needs are the same. So I think it's important for us to expand our menu and allow customers to kind of establish which parts of value they want and make sure that we've got kind of a broader girth of go-to-market menus that they can select from. So we're in the midst of doing some pilots right now. I think we'll have a lot more clarity over the next couple of months, but it includes making sure that we're looking at incentive comp that it's aligned with our direction, that we have an opportunity to revisit our funnel and make sure that we've slotted those in the right spaces. So more work to do, but I think that as we continue to really reevaluate our go-to-market and with an open mind look at how we can make sure that we're matching the right level of support to that, which the customer wants to pay for. I think that's a ratio that I expect will bear some fruit. Operator: Our final question comes from the line of Danny Stauder of Citizens JMP. Daniel Stauder: Just my first one, following up on kind of the TMS question. But Dan, I wanted to ask about the commercial strategy for TMS. We know there was a realignment of the capital sales team and system sales have been strong the last 2 quarters. But as you sit here in the early days of your tenure, just broadly, how do you think about the balance between focusing on driving utilization per site versus expanding the installed base? Are there any potential strategic changes here? Or how do you think about that balance? Daniel Reuvers: I think continuing to drive utilization is an important one because whether we're on a sessions model or otherwise, it's what's the underlying creation of demand and the more utilization our customers continue to find more patients they can help. One way or another, that's going to lead to an expansion of our business. So I think we're going to continue to look to how we can expand our socket placement or placement of new capital units. I think that's one of the places where we've probably slipped a bit and focusing on new placements and expansion of capital and making sure that it's our unit that resides in those clinics. Whether regardless, I guess, of what economic model is in place, we just want to make sure that we're demonstrating the most value across the competitive landscape. And I think that between the support we provide with our account managers in the field with benefits investigation, our co-marketing, training, service, the cloud-based TrakStar utility that we've got, I just don't think anybody can compare there. And we're going to, as I said, continue to work through a couple of pilots. But the things that got us there, I think, will continue to be durable areas of value and how we structure that, I think, is some of the things that we're still titrating a bit. Daniel Stauder: Great. Appreciate that. And then just one on the Compass collaboration. Obviously, the recent update from the administration is good news. But I just want to get a sense of how meaningful this could be? Obviously, Compass is already pretty far along in terms of the approval process, but do you feel this recent update could be more important on the reimbursement pathways? I know that's been a focal point for eventual contribution. So just any thoughts you have there would be appreciated. Daniel Reuvers: Yes. Well, first of all, I think that the whole Compass opportunity and psychedelics at large represent a big opportunity for us given our footprint and our infrastructure. I was really excited in my first month to see the Trump executive order leaning into the FDA process on some of these. So I think that it probably adds or it shortens the fuse. How much? I don't know, but it probably shortens the fuse on the path to approval, which I think is encouraging for all of us that are in this space. I'm not sure how much it impacts reimbursement. I think that's probably a separate track, but certainly, the pursuit of that in tandem on Compass' behalf, all of those things sort of point to faster than slower. And as we get into 2027, we'll certainly look forward to being able to try and better quantify what we think that means to us. I think if you look at the SPRAVATO rollout from the early days, as much enthusiasm as there was, it's a bit measured in its early adoption. But I think that the momentum is certainly moving in the right direction on this one. Daniel Stauder: Great. I appreciate that. And just one last one for me. I just wanted to ask on some of the TMS coverage expansion to include nurse practitioners. I was just curious, high level, if there have been any incremental conversations with accounts on this topic? Have you seen that customers are waiting for this, maybe somewhat higher demand? Just anything more on how this could impact utilization and how you think it will play out in '26 and beyond, would be great. Daniel Reuvers: Yes. So that's the reference to the UHC and the Optum coverage policy change where nurse practice can now be eligible to deliver TMS versus licensed psychiatrists. I think it's a good move. We've got a lot of really quality nurse caregivers out there. I don't know that they were waiting for it as much because maybe they didn't -- sometimes you never know if it's ever coming, but there are 35 million covered lives in the 26 states that will be affected. And I think what it will allow us to do or has allowed us to do is go revisit some of those clinics that are managed by nurse practs where TMS just wasn't a viable option because of the reimbursement limitations. So I think it probably added a number of accounts to our target list, but still early days since we're, I think, a month in. Operator: This concludes the question-and-answer session. I would now like to turn it back to Dan Reuvers for closing remarks. Daniel Reuvers: Yes. I just wanted to thank all of our employees for a hard-fought quarter as they all are as we continue to try and restore hope to patients and their families. And I wanted to thank our shareholders for their support, and I look forward to sharing an update on our progress when we have an opportunity to share the results of our second quarter. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

6天前Insight Analytics约5分钟阅读

UNJCF 2026 Q1 财报电话会议

Jaime Marcos: Good morning, everyone, and thank you for joining us for our first quarter 2026 results presentation. First of all, I would like to confirm that earlier this morning, before the market opened, we published this presentation and the related financial information on the CNMV and our corporate website. Today, our Chief Financial Officer, Pablo, will be the one presenting the first quarter trends. The presentation will last approximately 20 minutes, and it will be followed by our usual Q&A session. Without further ado, I would now like to hand over to Pablo. Pablo Gonzalez Martin: Thank you very much, Jaime. I will start on Page 3, where we show the main highlights of the quarter. Starting with our business activity, I would like to highlight that business volumes have accelerated their growth rate to over 3% year-on-year. This progress has been supported by an almost 4% growth in customer funds and supported by an increase of almost 11% in off-balance sheet funds, mainly mutual funds, where we are showing a 17% year-on-year growth, maintaining a 9% market share in net inflows. This improvement is also supported by a 2.4% growth in total performing loans, which for the second consecutive quarter continued to accelerate their growth. Turning to profitability. Net income for the quarter amounted to EUR 161 million. Both net interest income and fees showed year-on-year growth, something that combined with lower provisions more than offset the mid-single-digit increase in total cost. The adjusted return on tangible equity remained at 12%, while the cost-to-income ratio stood at 46%. Asset quality remained strong. The net NPA ratio stood at just 0.7%. The NPL ratio continued its downward trend, reaching 2% and its coverage further improved to 80%, significantly above the 70% reached a year ago. The cost of risk also showed a positive trend, declining to 20 basis points, marking one of the lowest levels in recent years and below our initial guidance. Lastly, we remain focused on value creation. Our CET1 ratio stayed stable at 16% during the quarter as we are allocating capital for shareholder remuneration and lending growth. Two weeks ago, we paid the 2025 final dividend which, together with the interim dividend paid in September reached EUR 443 million. This represents a payout of 70%, resulting in 9% dividend yield. Looking ahead to 2026, we expect to further enhance shareholder remuneration up to 95% of net income, thanks to our relatively higher capital position and also to our robust organic capital generation. Overall, our tangible book value per share adjusted for dividends was 9% higher than the previous year. In summary, all trends remained solid throughout the first quarter of 2026, confirming the recent positive momentum. We recognize that uncertainty has increased in the past couple of months, and it may be too early to provide more specific effects. Nevertheless, based on the information available so far and despite market volatility and the possible direct and indirect effects of the current geopolitical risks, we reaffirm all targets and commitments outlined in our strategic plan. The beginning of 2026 has been better than initially expected, which is obviously great news given the uncertain environment we are facing. All in all, we confirm our initial guidelines for the year. I will continue with the commercial activity on Page 5. As you can see, total customer funds increased by 3.9% year-on-year. On-balance sheet funds grew by 1.6% or 2.4% when excluding the public sector. Off balance sheet funds rose by 10.6%, driven by a remarkable 16% growth in mutual funds. It is worth mentioning that mutual fund balances have grown from EUR 14 billion to nearly EUR 17 billion over the past 12 months. On the next page, you can see the details regarding our assets under management and insurance business. As highlighted in the previous slide, assets under management increased by 11% year-on-year with mutual funds showing particularly strong growth of 17% despite challenging environment this quarter. Net inflows reached EUR 468 million, representing a strong 9% market share. On the right hand side, we show the revenues from these 2 business segments, which have risen by 4% compared to the last year and now account for 19% of total revenues. Now on Page 7. As you can see, loan volumes continue to grow. Total performing loans increased by 0.8% quarter-on-quarter and 2.4% year-on-year, reflecting a positive performance across all segments. Private sector loans rose by 1% compared to the previous quarter while corporate loans posted an increase of over 3%. Lending to individuals maintained its gradual growth trajectory. Mortgage volumes remained stable during the quarter and on a year-on-year basis, whereas consumer loans continued to expand at high single-digit rates like in the previous quarters. Overall, first quarter evolution demonstrates slightly better trends than previous quarters, driven mainly by improvement in the mortgage and SME segments, both of which showed some growth this quarter, while maintaining positive dynamics in corporates and consumer. On Page 8, you will find details regarding the new loan production. During the first quarter of 2026, new lending to private sector increased by 10% compared to the previous year, reaching EUR 2.5 billion. As we have just seen, we are delivering growth in the loan book in all main segments. You can see consumer lending maintains very good momentum Mortgages are close to our natural market share level. And in business lending, lower volumes are explained by some large tickets last year, but we are delivering a strong portfolio growth here on much better portfolio and customer management. Turning to Slide 9. We would like to briefly present some evolution of digital sales and customer acquisition. In the top left, 65% of consumer loans were granted digitally, significantly higher than the 49% in the previous year. It is also worth noting that digital consumer loans amounted to EUR 160 million, representing an 82% increase compared to the first quarter of 2025. In mutual funds, the weight of digital sales grew from 25% to 36%, reaching EUR 230 million, which is nearly 50% higher than last year. Also, as shown in the bottom right of the slide, I would like to highlight that more than 1 million clients use their Bizum with us, which is the instant payment tool most used in Spain, something that is quite relevant for the transactional business as you can only have one Bizum account per fund number. Also, it is worth noting that in the first quarter of 2026, the acquisition of new salary accounts has doubled, explaining the quarterly increase in the cost of deposit as we will see later. The commercial campaigns include an upfront compensation for the client in exchange for their formal commitment to maintain their salary with us in the future. As you can see, a strategy that is working very well to further improve the transactional business with our clients, which is one of the main commercial focus of the bank. Moving now to Slide 10. We highlight our continued progress in our sustainability strategy. We keep financing the transition and actively pushing green bond issuance. During 2025, our green bonds enabled the avoidance of 142,000 tons of CO2. Our pool of eligible projects continue to grow together with our ESG business, both green and social. We are well on track on the decarbonization targets over the lending portfolio. Overall, the evolution we are seeing is very positive, and this is clearly reflected in our sustainability ratings that show a consistent positive trend. We now continue with the review of the P&L in the next section in Slide 12. Net interest income increased by 1.3% compared to the first quarter of 2025. On the quarter, it fell by 1.2%, primarily due to the lower day count. Total fees were 1% higher than in the previous quarter and 3% higher than last year. Overall, revenues reached EUR 520 million, 1% higher than the first quarter of 2025. Total costs grew by 1% on a quarterly basis and 4.5% compared to last year, in line with our mid-single-digit growth guidance. Loan loss charges decreased by over 20%, both quarter-on-quarter and year-on-year, confirming the positive asset quality trends. Other provisions were 9% lower than last year and also significantly lower than last quarter when we booked some restructuring charges. Profit before tax stood at EUR 232 million. After accounting for EUR 71 million in taxes, which includes EUR 6 million of the banking tax, net income reached EUR 161 million, representing a 1.4% increase over last year. Now let's review the income statement in more detail. Starting with the net interest margin on Page 13. As you can see, the customer spread remained stable compared to the previous quarter, reversing a negative trend that began in the first quarter of 2024. Loan yield increased by 2 basis points, the same as the cost of deposits, which, as I mentioned earlier, grew due to the impact of our successful salary account campaigns. Net interest margin fell to 1.69% due to the volume effect, driven by higher balances in repo market activity. However, if we exclude this effect, net interest margin stayed stable during the quarter. On the following page, we show the details of the quarterly evolution of net interest income, which decreased by 1% during the quarter but was 1% higher than the previous year. The lower day count of the quarter amounted to EUR 6 million, while NII decreased by almost EUR 5 million. So, without this effect, NII would have actually increased during the quarter. As you can see in the bridge, the increase in deposit cost, mainly driven by customer acquisition campaigns and the lower lending income, which is fully explained by the lower day count, were partially offset by liquidity, ALCO, and wholesale funding. Turning to fee income, the trend observed in recent quarters was confirmed, with a slight decrease in banking fees, which is more than offset by non-banking fees growth, mainly from mutual funds and insurance. Despite the negative mark-to-market at the end of the quarter, fees from mutual funds continued to improve, increasing 19% year-on-year and nearly 4% quarter-on-quarter. Fees related to assets under management and insurance further strengthened their contribution this quarter, accounting for 53% of total fees, up from 48% last year and 43% in the first quarter of 2024. In Slide 16, we show you the details of the rest of revenues, which also show a relatively stable trend in recent quarters, with a slightly lower trading income this quarter owing to market conditions, but nothing material. Regarding total costs, personnel expenses continue to grow due to salary increases agreed with unions and new hirings. Other administrative expenses also reflect some of the initiatives needed to implement our business plan, leaving total costs 5% above the previous year, in line with mid-single-digit growth guidance. On the right-hand side, you can see our cost-to-income ratio, which grew to 46%, mainly owing to these initiatives that we expect will positively impact the future revenues. Something that going forward will help reverse this trend. All in all, the ratio remains below our 50% target. On the next page, we continue with the cost of risk and other provisions, which, in my view, are one of the most positive news of the quarter. As you can see on the left-hand side the cost of risk was 20 basis points, which is the lowest since the merger with Liberbank and below our initial guidance of less than 30 basis points for the year. The remaining provisions, including legal ones, were also lower, leaving total provisions at EUR 43 million in the quarter, which is 19% below 2025. Provisions showed a very positive evolution at the start of the year, which is obviously great news and leaves us in a comfortable position for the rest of the year. Moving now to Page 19, the bank's return on tangible equity continues its upward trajectory, reaching 10% as of March 2026, or 12% when adjusted for excess capital. As we frequently highlight, we consider the return on CET1 to be a reliable benchmark for us, as it effectively isolates the relatively larger accounting equity required due to solvency deductions, mainly from deferred tax assets. In the first quarter of 2026, the return on CET1 adjusted for excess capital stood at 17%. Lastly, on the right-hand side, you'll find the tangible book value per share plus dividends which has grown by 9% over the past 12 months. Let's move now to the credit quality section on Page 21. As you can see on the slide, positive trends remain in place. NPLs are down 20% year-on-year, with a coverage growing to 80%. Overall NPAs are also down 26% year-on-year, with coverage also improving to 79%, a very positive evolution that leaves total net problematic exposure at only 0.7%. If we now move to solvency on Page 23, you have the quarterly bridge. CET1 was very stable in the first 3 months of the year. Quarterly capital generation, including a positive contribution from the stake in EDP, was mainly allocated to shareholder remuneration and lending growth, which are the 2 main users where we plan to go toward our comfortable solvency position, leaving the CET1 stable at 16% in March 2026. On the next page, you will find our MREL position. As shown, our MREL ratio stood at nearly 27% at the end of March, providing a substantial buffer above the key requirements listed on the right, including an MDA buffer that was higher than 680 basis points. In terms of liquidity, all ratios remain among the highest in the sector with the NSFR at 159% and the LCR at 292%. Finally, our loan-to-deposit was 69% in March, summarizing the excess of retail funding of the bank that, among others, explains the size of our structural ALCO portfolio that we show on the following page. The yield of the portfolio grew from 2.6% to 2.7%, a small improvement owing to the reinvestment and active management. Duration and size also represented a modest increase in the quarter. It is also worth noting that 81% is public debt and that 83% is included in the amortized cost portfolio. Finally, as shown on Page 27, despite geopolitical uncertainties, we reaffirm our guidance for the year. We expect net interest income to exceed 2025 figure, net fees to grow at low-single digit and total cost to increase by mid-single digit. Regarding cost of risk, our initial forecast was to finish the year below 30 basis points, which we also maintained despite the strong first quarter of 20 basis points. It is obviously better than expected at the start of the year, but given the current situation, we prefer to be prudent. In terms of business volumes, we remain well on track to achieve the target of 3% growth. Finally, we confirm our expectation that net income for 2026 will surpass the EUR 632 million from last year. This concludes my quarterly update that as demonstrated, shows a continued improvement in the bank's overall financial position with a stronger commercial performance, enhanced results, consistently high solvency and very positive outlooks for shareholder remuneration. Thank you very much. And I will now hand over to Jaime for the Q&A session. Jaime Marcos: Thank you very much, Pablo. We will now begin with the Q&A session. [Operator Instructions] Operator, please open the line for the first question. Good morning, everyone, and thank you for joining us for our first quarter 2026 results presentation. First of all, I would like to confirm that earlier this morning, before the market opened, we published this presentation and the related financial information on the CNMV and our corporate website. Pablo Gonzalez Martin: Thank you. Maks. Regarding the cost of risk, as you can imagine, we are in an uncertain environment and geopolitical risks are part of our analysis, and we have considered with our post-model adjustment some impact in the quarter. So, we are quite aware that the potential cost of risk for the quarter was quite good and even below our guidelines for the year, but we want to be prudent for the year and maintain the guidelines for the time being. Jaime Marcos: The other one, the second one was related to a potential exit scheme because another competitor has announced one. Just as a reminder, in the fourth quarter 2025, we booked some restructuring charges to implement a similar exit scheme, a voluntary exit scheme. In our case, that exit scheme, it is more focused on renewal of part of the staff rather than specific cost cutting. So that was announced in the fourth quarter. It was booked in the fourth quarter, and it will be implemented throughout 2025. Pablo Gonzalez Martin: Yes. And was within our guidelines for total cost was considered this scheme. Jaime Marcos: Thank you, Pablo. Please, operator, can we go to the next one? Operator: Next question from the line of Miruna Chirea from Jefferies. Miruna Chirea: I just had 2, please, on NII and then one on the salary account campaigns. So firstly, on NII, you are maintaining your full year '26 guidance of NII greater than '25. But if I'm just analyzing your Q1 NII point, I'm already getting to a number that is more than 1% above '25. And presumably, you're also looking at some volume growth and potential further margin expansion for '26. So, it seems that there is some upside to your guidance. If you could just walk us through your expectations for quarterly NII provision? And then on the salary account campaigns, we showed the increase in your cost of deposits for the quarter. Could you give us some color on how successful the campaigns were and then some details on the pricing? I hear your comments about the upfront cost, but is there also a promotional rate? And if so, for how long does it last? And what does the rate reset afterwards? And if you could share any thoughts on the outlook for the cost of deposits for the rest of this year? Thank you very much. Pablo Gonzalez Martin: I'll try to give you some information on the NII. We maintain the guidance. If you consider the improvement compared to one year, it's only 1.3%. So, this is quite in line with what we were expecting. So, we maintain the NII. I think for the coming quarters and the expectation on a quarterly basis of what we expect, I think the first thing to mention is interest rate volatility is paramount and will have an impact mainly on 2027 and 2028. In the short term, in the quarterly, the impact of any interest rate shock is always smaller. So, our expectation remains that the first quarter was going to be slightly below last year. But if we consider the day count, it could consider the fourth quarter the bottom of NII. From this onward, our expectation is a gradual improvement, slower in the second quarter and then taking and picking up and having some momentum from the second half of the year and especially in 2027. So, we maintain that expectation, and we will see how this evolves. And regarding the salary account. I think this has been quite successful, and this is one of the reasons that we have some pickup in cost of deposits, but it's with our strategy to improve the transactional business with our customers and improve the transactional business down the line. And the overall cost of risk this quarter has been quite stable regardless of this impact. And going forward, obviously, we have higher rates on market prices, we will have some impact down the line, but within the expected beta that we have at the moment, and consider that we have only 25% of remunerated deposits in our book. Jaime Marcos: Thank you, Pablo. Please, operator, can we move to the following question. Operator: Next question from the line of Cecilia Romero from Barclays. Cecilia Romero Reyes: I have two. The first one on NII sensitivity and 1 year have moved higher again. Over a 24-month repricing horizon, how much incremental support can NII realistically receive from higher rates, including out of reinvestment at higher yield relative to the assumptions you had at the end of last year? And in a scenario where sector loan growth is affected by the macro backdrop and lending slows, will a stronger deposit growth support NII? And the second one on provisions, if the macro environment were to become more uncertain, how would that typically feed through into your provisioning models and cost of risk? I think you have a high weight in your base case. Are you thinking of changing your weight for each scenario? And do you have any overlays? Pablo Gonzalez Martin: Thank you, Cecilia. Regarding the NII sensitivity, I think as I mentioned, for the first year, any interest rate shock has very little impact since we started at the end of 2023 to lock in the level of rates for the next 2 years -- 2, 3 years. So, for this first 12 months, the impact will be very small. From a more second year impact, we think we have an impact for 100 basis points parallel movement of around mid- to high-single digit impact in NII. And this obviously, as you can imagine, will depend a lot on how customer deposits cost evolve. So, it's always with the assumptions that everything, the beta is maintained as it is now, which is -- has been quite stable. So, there's no reason to think in a different way. But obviously, we consider in this analysis that we have some renewed ALCO portfolio reinvestment, and we have also some new lending at higher rates after the shock. So, this gives us with a positive evolution in the second half of this year, a small one and then picking up some momentum from '27 onwards. Overall, I think it's important to remember that we have quite a significant NII sensitivity in the medium term due to our liability and the deposit -- the transactional deposit base that we have. And regarding the volumes in the impact of NII, we have given a more stable and constant balance sheet impact rather than dynamic impact. So, we haven't considered in this sensitivity the impact on volumes. I think in the short-term the impact of reducing expected volumes, we were expecting to have around 3% growth in volumes more or less for the year. So, if maybe anything of this geopolitical risk has an impact of some reduction in lending. Maybe we have an increase in the saving rate that support the deposit side. So, I'm not convinced this is negative or neither positive. We have some NII coming from the lending. The good news is the front book is ahead of the back book, and the deposits are behaving as expected. So, we're comfortable with the guidance that we give for the year and expect to improve next year. And regarding provisioning and how we consider -- we have a prudent approach in our model. And just to give you some color, the model of our IFRS 9 macroeconomic variables that consider our base scenario, we were expecting only 1.9% GDP growth for the year. And the last number that we have for the first quarter is we have an annualized 2.7%. So, still room for some reduction in the year in the GDP numbers. We consider the situation to have some impact, but not a very significant impact and still maintain positive momentum in the Spanish economy. And regarding the post-model adjustment and the 1-year cost of risk, I think we already have some buffer on top of this provisioning within our IFRS model, which is we already considered last year, and we mentioned that we consider geopolitical risk as one of the potential impact that our model didn't consider. So, we already have some provision last year, and we slightly increased this quarter, again, our post-model adjustment. So, we are comfortable with our guidance of below 30 basis points for the year, even in some stress scenarios as we are witnessing today. Jaime Marcos: Thank you, Pablo. Please can we move to the following question please, operator. Operator: Next question from the line of Borja Ramirez from Citi. Borja Ramirez Segura: I have 2 questions, please. The first is on the payroll accounts, if you could kindly provide more details on the volume outstanding and the average cost? And also, if you could provide details on the ongoing system competition in Spain? And then my second question would be, I understand that you have some ALCO maturities that I think it was between 80 and 90 basis points, around EUR 2 billion maturing this year. If you could kindly reconfirm this number. And I think you also have NII benefit from the maturity of an expensive bond at the end of this year, if I remember well. So, there could be some NII uplift on that. If you can this as well, please? Pablo Gonzalez Martin: Thank you, Borja. Regarding the customer acquisition campaigns, I think just to give you some color, we have spent around EUR 6 million in this quarter on these campaigns, which represent the successful of the campaigns, which is more than EUR 4 million more than the previous quarter. So, this strategy is picking up, and we pay slightly less than EUR 500 upfront with compromise from the customer to be with us at least for 2 years. And so, the impact on the cost is within those EUR 500 that I mentioned. And the amount, we gathered more than 12,000 new salary accounts for the quarter. Regarding the ALCO portfolio maturity, as I mentioned last presentation, we have for this year, slightly above EUR 2 billion. We still have remaining EUR 1.7 billion for the year, and the average cost is very similar to the number for the whole year. So, it's around 0.8%. And this has been considered when we say that we expect to have a slightly higher NII for the year than compared to last year. So, we already took this in consideration. And as you can imagine, we are reinvesting this at a higher level. Jaime Marcos: Thank you very much, Pablo. Operator, please, we can move to the following question. Operator: Next question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So, my first question would be on cost growth. Some of the wage negotiations are coming due next year, if I'm not mistaken. So how should we think about cost growth beyond 2026, more in '27, '28? And what cost pressures do you see kind of on the horizon? And then my second question would be, could you just remind us how much DTA benefits we should be expecting every year going forward? Pablo Gonzalez Martin: I think regarding cost growth, I think as you can imagine, it's a combination of different things. As we mentioned within our strategic plan, we have a strategy to diversify our revenue sources. So in order to grow in corporate lending and in consumer lending and import/export lending and private banking and so on, this requires some deployment of IT developments process and people and talent. And we have been hiring some talent. So, you have to consider this on top of the actual salary increase that we mentioned. So, we maintain and we are comfortable with the 5%. I think to talk down the line for '27, '28 is too premature, and we will give more details on the future position for the bank. And on top of this, we have this, as I said, on top of these new hirings, we have some schemes, as we mentioned, to reduce some of our workforce. So, what we are doing is not a cost-cutting measure, but to renew and to uplift the capabilities of our workforce. And regarding your second question, Jaime, can you comment? Jaime Marcos: Yes. On the DTAs, very straightforward. I think that you can expect a run rate between 20 to 25 basis points per year of solvency generated by lower deductions from DTA at current profitability levels. That will be probably the summary. So, we can move please operator to the next question. Operator: Next question from the line of Carlos Peixoto from CaixaBank BPI. Carlos Peixoto: The first one would just be a little bit of a follow-up on fee income. Basically, you're maintaining the low-single digit growth for the year. Do you see any tailwinds here or headwinds, sorry, actually from the market -- the recent market volatility or potential hampering of your assets under management business because of this? And then the second one would be on capital distribution plans. So, you have already upgraded payout to very high levels. But I was just wondering whether there are any additional plans to distribute or to accelerate the distribution of the existing excess capital? Pablo Gonzalez Martin: Thank you, Carlos. I think on fee income, as we said, we have managed quite well the headwind coming from market volatility. I think that the market is performing quite well considering the geopolitical risk environment. And I think there's still some momentum in the Spanish and our customer base to increase their investment compared to their saving. And so, we haven't changed our expectations on off-balance sheet growth and mutual funds. This obviously will depend on how market evolves. But so far, I think the drawdown that we saw in March is almost recovered now. So, we don't think the customer and the investor base will change their attitude unless we have a more significant impact on the market that we don't foresee in the short-term. And regarding capital distribution plans, I think we have a quite generous level of 95% shareholder remuneration of net income. And just to recall, we will have a presentation in the second quarter. We will have the update of our interim dividend of 70% in the first half of the year. Then in the third quarter result presentation, we will announce how is going to be delivered, the 25% additional remuneration that we plan. And in the final year presentation, we will have the final dividend. So, we don't think we need to accelerate anything regarding shareholder remuneration, and we stick to our strategic plan. Jaime Marcos: Thank you very much, Pablo. Can we please move to the following question, operator. Operator: Next question from the line of Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: About corporate lending, if you could elaborate a bit more on what has been the plan delivered in the quarter? And how should we expect growth in the future? Do you think that the strong quarter-on-quarter growth that you have delivered could be maintained or there was any specific one-off transaction that distorted the growth? And the second question is on capital linked to the previous question of Carlos. I wanted to understand whether you could use part of that capital for any inorganic growth and what will be the priorities and the capital hierarchy that you will be looking for in terms of businesses, whether you will prioritize fee-based business or whether you would like to, as the guy has been suggesting looking for diversification. Pablo Gonzalez Martin: I think I have got both of the questions, but thank you, Ignacio, for your question. I think regarding the corporate lending, although the quarter has been significantly good we think the year-on-year numbers are sustainable, and we will probably maintain this 6% growth for the coming quarters. I think you have to think that we have to catch up in terms of customer activity. We are deploying more resources for this business. And although the level is higher than the market growth, we have to do some catch-up in terms of market share in this business. And so, we still have plenty of opportunities to maintain the growth. Maybe not the growth on a quarterly basis, but the growth on an annual basis could be some guidance for how much we expect to grow in the high-single digit number, between mid- and high-single digit number for the coming quarters as well. And regarding the capital, on top of what I mentioned of shareholder remuneration, we also mentioned in our strategic plan that we will consider any bolt-on operation in M&A. And this will have a clear view on improving and accelerating our diversification of revenues that we were thinking. And as you can imagine, this diversification spans from fee business, but also in areas where we have a lower market share like consumer lending or other type of specialized lending that we have a smaller market share. So, we maintain that possibility. But I think to be clear, the whole idea of this bolt-on is not something that we need to do to deliver in our strategic plan targets. It's something that will help us to accelerate the process of diversification. But we will maintain hiring people and improving capabilities to do this diversification. Jaime Marcos: Thank you again, Pablo. Let's move to the following question, please. Operator: Next question comes from the line of Fernando Gil de Santivañes from Intesa Sanpaolo. Fernando Gil de Santivañes d´Ornellas: I hope you can hear me? Pablo Gonzalez Martin: Yes. Go ahead Fernando. Fernando Gil de Santivañes d´Ornellas: So I see headcount substantially up by 100 persons in the quarter. I just want to get a sense of how should we be thinking about headcount going into the year-end of 2026 and given that you [indiscernible] to be in Q4. Pablo Gonzalez Martin: I'm not sure I got your question properly, but I think you were looking at the headcount of employees and how this has evolved in the quarter, increasing slightly. You have to consider that we have 2 different forces. One is we are growing our capabilities in certain areas. In IT, in artificial intelligence deployment and some specialized areas like specialized lending and things like that. And on the other side, we have the redundancy, the voluntary redundancy plan. And in this quarter, we have the first impact, but we have not any impact from this plan. So, net-net, I think the headcount will be very similar, slightly up, but not very significant. So, we maintain our cost guidance of mid-single digit for the year, and this consider the employee and workforce. Jaime Marcos: Thank you very much, Pablo. Just to double check, I think that we don't have any more questions. But please, operator, can you confirm it? Operator: Yes. There are no other questions at this time. Jaime Marcos: All right. So, thank you very much, everyone. The IR team remains at your disposal. If you need further info, please do not hesitate to contact us. Thank you very much for your interest and your time. Pablo Gonzalez Martin: Thank you very much. Have a good day.

6天前Insight Analytics约5分钟阅读

LCID 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Lucid Group First Quarter 2026 Earnings Conference Call. Please be advised that today's conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Nick Twork, Vice President of Communications. Please go ahead. Nick Twork: Thank you, and welcome to Lucid Group's First Quarter 2026 Earnings Call. Joining me today are Silvio Napoli, incoming CEO; Marc Winterhoff, our Interim CEO; and Taoufiq Boussaid, our CFO. Before handing the call over to Silvio, let me remind you that some of the statements on this call include forward-looking statements under the federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, vehicles and products, studios and service networks, financial and operating outlook and guidance, macroeconomic, geopolitical, policy and industry trends, tariffs and trade policy, company initiatives, leadership changes and other future events. These statements are based on various assumptions, whether or not identified in this communication and on the predictions and expectations of our management as of today. Actual events or results are difficult or impossible to predict and may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our annual report on Form 10-K for the year ended December 31, 2025, subsequent quarterly reports on Form 10-Q, current reports on our Form 8-K and other SEC filings and the forward-looking statements on Page 2 of our quarterly earnings presentation available on the Investor Relations section of our website at ir.lucidmotors.com. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as required by law. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this afternoon as well as in the earnings presentation. With that, I'd like to turn the call over to Lucid's incoming CEO, Silvio Napoli. Silvio, please go ahead. Silvio Napoli: Thank you, Nick. Good morning, everyone, and thank you for joining. This is my first earnings call with Lucid and as already had the opportunity to share with many of you, I'm extremely pleased to be here and part of the Lucid team. With not even a month with the company, I'm still at a very early stage, so I'll keep my remarks brief. Let me start by reiterating why I'm here. Lucid brings together state-of-the-art technology, a premium product platform and a unique opportunity to build a strong, enduring position in a transforming industry. And that combination is compelling. That is the reason that brought me here. Today, 3 weeks into the journey, I'm even more convinced that this is the case. In my first days, I've had the opportunity to meet with our teams in Newark, our headquarters and in some of our key markets. In fact, on the very first day, I traveled to visit a factory in Arizona, the heart of Lucid. Last week, I traveled to Saudi Arabia to witness a strong brand recognition in this fast-growing market and to see firsthand the progress of our new factory under construction. As you know, this manufacturing center is an essential part of our commitment to drive scale, profitability and to position Lucid on the world stage. While there, I've also been meeting with employees, shareholders and with local stakeholders. And everywhere I go, I'm focused on listening and beginning to understand where we are strongest and where we need to improve. And what stands out immediately is the incredible domain competence and outstanding motivation of the Lucid team and the strength of our product. At the same time, it's clear that realizing Lucid's full potential will require sharper focus and consistent execution, particularly around simplification, prioritization and speed. My near-term priorities are straightforward: recenter all our activities around our customers, ensure the organization operates with clarity and accountability, focus resources on the highest impact areas and embed a stronger culture of cost and capital discipline across the business. A central objective over time is to build a more self-sufficient company, one that progresses towards funding its own growth. And that means being rigorous in delivering on our commitments and how we allocate capital to few vital priorities. In simple words, this means making clear choices on where to invest and just as important, where not to. At the risk of stating the obvious, I'm not in the position to comment on results reached prior to my joining. Accordingly, I trust you will understand that today I will not comment on any specifics, including the outlook. My goal over the coming weeks is to deepen my understanding of the business so I can engage more fully with you in the future discussions. With that, I'll turn the call over to the team to walk you through the Q1 results. Thank you. Marc Winterhoff: Thank you, Silvio, and good afternoon, everyone. Let me start with the key takeaways. We expanded our Uber partnership to at least 35,000 vehicles, raised over $1 billion in new capital and ended the quarter with a clear cost reduction program underway. The foundation is solid, and we are building on it. We have made meaningful progress on each of these fronts. Among the highlights. First, we expanded our partnership with Uber to provide a minimum of 35,000 robotaxis, up from 20,000 previously announced and increased their investment to $500 million, up from $300 million, improving our visibility into long-term demand and revenue in a new and growing market. Further reflecting the strengthening relationship between our companies, Sachin Kansal, Chief Product Officer at Uber, has been nominated for election to Lucid's Board of Directors. Second, we significantly strengthened our financial position, raising approximately $1.05 billion, including $550 million investment from the Public Investment Fund through a private placement, reaffirming their continued support and long-term commitment to Lucid. We maintained approximately $2 billion of undrawn commitment under the DDTL after drawing $500 million of cash in April, further enhancing our financial flexibility. Pro forma for the capital raise and the DDTL increase, liquidity at quarter end would have been $4.7 billion, providing ample flexibility to continue to support development of our Midsize platform and the continued build-out of M2. Third, we continue to execute to deliver scale and profitability, delivering $282 million in revenue. Despite the unforeseen geopolitical tensions and logistical obstacles in the region during Q1, our M2 construction never stopped, and we continue to install capital equipment and work towards start of production. The plan remains to ramp up Midsize vehicle production in 2027, and we launched an aggressive cost reduction program targeting cost savings across all areas of the organization in all geographies. Let me walk you through the key updates of the execution of our strategy in detail. Following the framework we laid out at our recent Investor Day, the Lucid Air and Gravity continue to anchor our near-term growth. And our focus here remains execution, quality, delivery and customer experience. Operationally, we produced 5,500 vehicles in Q1, up 149% year-over-year. Despite a temporary disruption, which elevated costs, we exited the quarter trending back toward our cost targets. We delivered 3,093 vehicles, which was flat compared to Q1 2025. When Gravity deliveries were temporarily impacted by a supplier issue, we acted quickly, resolved it and resumed deliveries with additional quality controls. As deliveries resumed, we saw improving momentum through the quarter, including the highest March deliveries in Lucid history, up 14% year-over-year. We also experienced a strong rebound in order intake, up 144% in North America in March from February, with Gravity driving the majority of demand. In March, we regained our position among the best-selling EVs in our segments. We also continue to make progress on our partnerships for our international distribution, including the official launch of our first retail partnership in Europe, which allows us to scale more quickly in a capital-efficient way. We expect the delivery trajectory to improve through the year. Near-term demand signals are mixed, but we see tailwinds building into the second half. Apart from seasonality, which historically drives greater deliveries in second half, there are numerous other factors which may deliver a lift, including high gas prices, which tilt demand towards vehicles with more attractive operating costs, competitive dynamics, including exits from the Air and Gravity segments, lease cycles, Lucid software updates, potential tariffs on European imports and potential improvements in macroeconomic and geopolitical conditions. As a result, we continue to expect a back-end weighted delivery profile for 2026, but are confident in the long-term trajectory of demand. Our priority now is consistent and predictable conversion of production into deliveries. Central to our framework to scale and drive profitable growth is the Midsize platform. The Midsize platform brings Lucid's signature range, efficiency and driving experience to a much larger TAM and broader set of customers and is key to unlocking scale, affordability and improved unit economics. At our recent Investor Day, we provided a clearer view of the future product portfolio with the expected pricing starting below $50,000, reinforcing Lucid's entry into a more accessible segment of the market. I'm pleased to be able to share that our BOM cost position remains favorable, still tracking below our initial cost estimates. During the quarter, construction on M2 and installation of capital equipment continued, and we remain on track for production ramp-up of the Midsize in 2027. Turning to our third priority, autonomy. In mid-April, we announced the expansion of our partnerships with Uber, increasing their total investment to $500 million and expanding the planned deployment to at least 35,000 robotaxi vehicles. This represents a meaningful increase in both scale and long-term visibility for the program, which generates a new revenue stream through a partnership approach that enables rapid speed to market in a new and rapidly growing market with minimal CapEx. I'm excited to share that we have met all milestones so far in our joint project with Nuro to provide autonomous Lucid Gravities to Uber for commercial launch by the end of the year, and remaining milestones are on track. We delivered 75 engineering vehicles and testing and mileage accumulation is ongoing in several cities throughout the U.S. Starting in mid-April, Uber and Nuro employees are now able to test the end-to-end customer experience, including ordering a robotaxi within the Uber app and choosing from select destinations for drop-off. Our partners at Nuro have also received approval from the California DMV for driverless testing of the Lucid Gravity in the state, making it one of the only a handful of vehicles that have received such approval. This is a key step in paving the way for launching commercial autonomous operations later this year. Looking forward, we are targeting the following milestones as we track toward commercial robotaxi operations in late 2026. This quarter, Lucid will start our production validation builds, which are intended to reflect our production intent design and some of the key robotaxi features like exterior beaconing for customers, interior cameras and consumer interfaces. This build is expected to be completed in Q3 and allows us to begin more comprehensive end-to-end testing with our partners as well as homologation testing and validation. And following the completion of testing in Q3, we anticipate starting regular production of robotaxi vehicles for commercial sale in early Q4 at M1. As you can see, we are well on our way to achieving our goals with our robotaxi program and commercial launch is on track for late 2026. In parallel, we continue to expand advanced driver assistance features across our consumer vehicles. Over time, we expect these features to become an increasingly important source of recurring revenue with subscription-based offerings being launched starting in 2027. In closing, Q1 highlighted areas where we still need to improve execution, and we are taking clear actions to address them. I'd like to close with a few personal words. It has been a privilege to serve as Interim CEO. We delivered 2 years of consecutive record quarters when it comes to deliveries until the end of 2025. We ramped the Gravity throughout 2025, resulting in a production increase of about 100% last year. We've navigated real headwinds and the team's ability to keep moving through them is something I'm proud of. We sharpened and expanded our strategy with a clear and capital-efficient approach to provide leading autonomy solutions, both for robotaxis and personally owned vehicles. We made meaningful progress across our partnerships, including expanded commitments from both PIF and Uber. I'm confident in this team and Silvio's leadership and in where Lucid is headed. And I'm looking forward to continue to contribute as Chief Operating Officer. With that, let me hand over to Taoufiq. Taoufiq Boussaid: Thank you, Marc. I will walk you through the financial results for the quarter, the structural drivers behind them and how recent actions position us to execute against the framework we laid out at the Investor Day. Q1 was disrupted by a temporary stop sale, but the underlying business held and in March, orders and deliveries rebounded. With roughly similar units delivered and lower regulatory credit sales, revenue grew by approximately 20% year-over-year to $282 million in Q1, driven primarily by mix and pricing effects from Gravity. Let me give you the context that makes this number more useful for thinking about Q2 and the rest of the year. We produced 5,500 vehicles in the quarter but delivered 3,093. This gap reflects a combination of the impact of the temporary Gravity stop sale during which finished vehicles sat in inventory pending validation rather than converting to revenue and segment contraction. A key highlight of the quarter was Uber's expanded vehicle commitment and increased investment in Lucid. It matters for 3 reasons. It improves long-term revenue visibility. It derisks the volume ramp into the Midsize era, and it validates our vehicle platform as the reference point for commercial autonomy deployment. This is a durable addition to the capital structure and to the revenue outlook, not a onetime transaction. Gross margin for the quarter was negative 110.4% versus negative 80.7% in Q4 and negative 97.2% in Q1 a year ago. I want to be precise about the walk because the composition matters more than the headline. Three factors drove the sequential decline, lower delivery volume against a largely fixed manufacturing cost base, underabsorption of fixed cost and large regulatory credit revenue in Q4 that didn't repeat in Q1. Partially offsetting these were IEEPA tariff refunds and the lower inventory write-down versus the prior quarter. These costs were tied directly to the stop sale. With that resolved, they don't carry forward. What remains and what we are focused on is the structural trajectory, which includes, as shared at Investor Day, an average of 50% to 60% reduction in unit cost over the coming years. While we saw unit cost spike during the quarter driven by temporary disruption, it trended back towards the targeted trajectory in March. As volume scale into the second half and with the launch of the Midsize vehicle platform, we expect continued structural improvement in unit economics. I want to be clear, the underlying midterm trajectory of unit cost improvement that we described at Investor Day remains intact, and Q1 does not alter it. Turning to operating expenses. This totaled approximately $678 million for the quarter. R&D was $336 million, down sequentially from $361 million, reflecting program level sequencing even as we continue to fund the Midsize platform and our autonomy stack. SG&A increased $22 million sequentially to $304 million, primarily driven by discrete items, including a prior quarter provision reversal. Excluding these items, underlying SG&A was broadly stable. Year-over-year, SG&A increased $92 million with the comparison impacted by a $35 million noncash benefit in the prior year related to the reversal of stock-based compensation. These numbers also don't yet capture the $500 million in savings expected from our recently announced headcount actions over the next 3 years with the near-term impact most significant. Taken together, our posture on operating expenses is straightforward: protect the investments that build long-term competitive advantage, Midsize, autonomy, software and drive discipline everywhere else. Net loss for the quarter was approximately $1 billion compared to $366 million in the first quarter of 2025. The increase reflects the gross margin dynamics we discussed, continued investment in the business, particularly the Midsize platform and higher SG&A with the year-over-year comparison impacted by a discrete benefit in the prior year. Importantly, a significant portion of the year-over-year change is driven by noncash and nonoperating items, including a $274 million unfavorable change in the fair value of derivative liabilities related to movements in our stock price as well as lower interest income and higher interest expense. And as mentioned, it does not reflect the benefits of our recent headcount actions no more recently launched cost takeout initiatives. Net loss in any quarter reflects noncash and nonoperating items that move significantly with our stock price. The operating loss and cash consumption metrics give a cleaner read on trajectory. Our focus remains on improving operating leverage as we scale volumes and continue to drive cost discipline across the business. Turning to liquidity and capital structure. We ended the quarter with approximately $700 million in cash and cash equivalents and total liquidity of approximately $3.2 billion. Subsequent to quarter end, we executed a series of transactions that strengthened our balance sheet, $200 million of equity investment of common stock from Uber, $300 million from a registered common stock offering and $550 million in convertible preferred stock from PIF. In addition, PIF and Lucid announced an amendment to our delayed draw term loan, providing greater flexibility and approximately $2 billion of available liquidity following a $500 million draw on April 1. Giving effect to the capital raise and DDTL increase, total liquidity would have been approximately $4.7 billion at quarter end. This extends our operating runway into the second half of 2027 and gives us the flexibility to fund Gravity ramp, M2 construction and launch preparation and continued investment in the Midsize program and autonomy stack. On the question of dilution, which I know is on investor minds, the recent financing was structured deliberately to balance liquidity needs against dilution considerations. The convertible preferred structure with PIF reflects that balance as does the sizing of the common equity component. We will continue to evaluate all financing options, including the public markets when the appropriate conditions materialize. And our bias is toward disciplined capital deployment and with opportunistic raises. The strategic stockholder base around this company, anchored by PIF and now meaningfully reinforced by Uber gives us a structural advantage in how we think about capital over the medium term. Now on working capital and inventory. We also expect to see benefits to cash flow driven by improvements to working capital. Inventory stood at approximately $1.47 billion at quarter end, up from approximately $1.1 billion at the prior quarter and elevated by the stop sale buildup. As deliveries normalize through the year and we draw down that inventory, you should expect a higher conversion into cash. Beyond the stop sell normalization, we are tightening production to delivery alignment as an ongoing operating discipline. The new production reporting methodology, which I will cover in a moment, supports that by improving transparency on the conversion step. We took over $200 million in inventory impairments in Q1. Going forward, we expect those to decline. And as inventory reduces through the year, we expect to benefit from impairment releases. Now I mentioned our new production reporting methodology. I want to take a moment on this change to how we report production. Starting this quarter, we are moving our production metric to a process complete definition, meaning we count a vehicle once it has completed the factory gating process, regardless of whether it ships as a complete unit or in a semi-knockdown form. This change better reflects true quarterly production and reduces the volatility that the prior methodology introduced due to shipment logistics. It has no impact on inventory or days on hand reporting, both of which remain based on finished deliverable vehicles. The effect for investors is greater comparability with peers and a cleaner signal on underlying operational cadence. Under the new methodology, the normal auto industry seasonality, Q2 strongest based on working days, Q1 and Q4 softer due to holidays and planned shutdowns will appear more visibly in our reported numbers. Now let me address our outlook and guidance. With Silvio now on board and conducting his review of the business, we are suspending our prior guidance and we provide a full updated outlook at our Q2 earnings call. I want to be clear, this is a governance decision. Near-term demand conditions remain uneven, and we are managing our production cadence accordingly. Our 2026 objective is unchanged. We continue to work to closely align production with demand to avoid excess inventory. We are not constrained on capacity. We are constrained by our own discipline not to build inventory ahead of demand. As market conditions develop, we will scale production accordingly. We have launched a company-wide program to sharpen operational efficiency, reduce costs and concentrate capital on the highest-return opportunities. Q1 cash performance was affected by the stop sell action and the associated inventory reset, which we expect to normalize as we move forward. We are focused on restoring consistent cash generation and building a more durable operating foundation. Production of our first Midsize vehicle is expected to ramp throughout 2027. And our Lucid Gravity robotaxi program in partnership with Uber and Nuro remains on schedule for launch in late 2026. In closing, to put the quarter in perspective, we strengthened our balance sheet, expanded the strategic partnership that improves long-term visibility and are implementing reporting changes that improve transparency. A temporary stop sale in February was resolved, and we have taken action to address the root cause. The Investor Day framework holds. The path to profitability runs through scale from Midsize cost reduction through M2 and improved mix and operating leverage. Q1 does not change that trajectory. It reinforces the importance of disciplined execution, and that is where our focus is. The fundamentals of this business, the technology, the product and the strategic position we have built are intact. We are managing this period with discipline, and we intend to emerge from it in a stronger competitive position. With that, let me turn it over to the operator for your questions. Operator: We will now begin the question-and-answer session by taking questions submitted through the Say Technologies platform. Nick Twork: Our first question comes from [indiscernible]. How does management plan to restore shareholder confidence and address concerns about bankruptcy or potential take-private scenario? Marc Winterhoff: First, I want you to know that we hear your frustration and restoring your confidence is of our utmost importance to us. We are focused on rebuilding your confidence through disciplined execution, transparency and measurable progress against key operational and financial milestones. The business is moving from a period of heavy investment toward a phase where we can begin to leverage those assets at greater scale. We ended 2025 having scaled production, improved unit economics and maintained liquidity. And yes, we've been hit with an unforeseen operational disruption in Q1, which we solved and deliveries and orders have rebounded towards the end of the quarter. We are focused on translating operational progress into more predictable financial profile. To your specific concerns, we do not speculate on market rumors or hypothetical strategic alternatives. Our focus is on executing the plan we laid out, strengthening the company and creating long-term value for our shareholders. Nick Twork: All right. Our next question comes from Robbie S. When is Lucid going to turn a profit? What is the plan? Taoufiq Boussaid: At our Investor Day, we laid out a clear path to profitability. The target is gross margin breakeven in the midterm, building towards the mid-teens by late decade. And on cash flow, we expect to reach positive free cash flow on a similar horizon. The levers to get there are straightforward. It starts with improving fixed cost absorption as volume grow, continuing to bring down bill of material and manufacturing costs, scaling Gravity, launching the Midsize platform and developing higher-margin recurring revenue from software, ADAS and autonomy. On the Midsize platform specifically, this is a meaningful expansion of our addressable market. And importantly, it has been designed from day 1 with cost, scale and manufacturability at its core. Nick Twork: All right. The next question comes from Crystal M. Based on your current cash burn rate, how many quarters of runway does Lucid have without raising additional capital? And what specific milestones must be met before then to avoid dilution? Taoufiq Boussaid: Based on our current cash burn and the recent financing activities we have taken, including the capital raise and the extension of the DDTL, we have funding runway into the second half of 2027. That gives us adequate flexibility to support the Gravity ramp, progress M2 construction and continued targeted investments in both the Midsize platform and our autonomy software. During this period, our focus is on executing the operational milestones that moves us towards breakeven and reduce our reliance on dilutive capital. That means disciplined execution of the Gravity launch, continued manufacturing efficiency gains, measured advancement of M2 aligned with demand and sustained momentum on the Midsize program. At the same time, we are actively pursuing top line diversification through higher-margin software and services particularly around ADAS. On dilution, we are deliberate in how we approach capital raising. We have consistently favored structures that limit near-term dilution and preserve optionality. The use of preferred convertibles being a good example of managing both timing and impact. But ultimately, the strongest answer to dilution is accelerating our path to breakeven because this is what opens up a much broader range of financing alternatives. Nick Twork: That concludes the questions from the Say Technologies platform. Now I'll turn it over to the operator for live questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Ward with Citigroup. Michael Ward: Can you share any volume targets for M2 for 2027? It sounds like it's going to be a gradual type launch throughout the year. And I'm just wondering if the launch is better than expected, does that liquidity take you into 2028? Marc Winterhoff: The targets on the volume, we actually revealed at the Investor Day, and they have not changed. They have not changed. No, no. We are really laser-focused on that ramp. Michael Ward: Okay. And then the second thing I would ask is, as it relates to the robotaxis, are the volume deliveries to Uber depending on them getting certified? Or is there some sort of a schedule for those volume numbers to start to accelerate? Marc Winterhoff: Well, it's basically actually Nuro getting the certification. As we just mentioned, we make very good... Michael Ward: Nuro? Marc Winterhoff: Yes, very good progress on that. So we are on track with this. I mean still we have to have final certification to be able to do this, for instance, when we start in the Bay Area here in California. But so far, even all the development and the certifications are moving as we expected. Operator: Our next question comes from the line of Andrew Percoco with Morgan Stanley. Andrew Percoco: Maybe if I can start out on the free cash flow expectations and just your general commentary around having sufficient liquidity through or at least until the second half of 2027. Can you just maybe help provide a little bit more context around what some of the underlying assumptions are within that? I understand that you guys are pulling the delivery guidance for the year for some governance reasons, but there's anything you can kind of provide in terms of what your underlying assumptions are around demand, that would be super helpful. Taoufiq Boussaid: Andrew, I think that the first answer to your question is that you need to recall that there is a typical seasonality in the company and that we see a significantly improved cash flows during or on the back end of the year. So we shouldn't do any read-through of the cash performance as of Q1 because of 2 specific events. The first one is the stop sales, so which has led to higher cash burn, and we are saying that we will be recovering that. And the second element that you need to take into account is the typical seasonality with a step-up in the sales towards Q3 and Q4, which is helping us to manage the cash burn. So we haven't guided specifically for the cash burn. We have guided for the runway. The statement still remains unchanged. So we will be providing more visibility on that when we reaffirm the guidance in Q2. Andrew Percoco: Okay. Understood. And maybe just my follow-up is just around the commodity cost environment. A lot of your OEM peers are continuing to highlight some pressures there this year and into next year. Can you just maybe provide an update in terms of what you're seeing? I think you guys in the past have said that you've at least hedged or contracted out some of that commodity exposure. But to what extent are you seeing any kind of incremental pressure there? And might that impact that path to profitability? Marc Winterhoff: Actually, right now, that is very limited. I mean yes, there have been increases over the last couple of months on certain raw materials like aluminum. But very recently, for instance, we haven't actually seen an increase. And the other topic is the DRAM, which hits the whole industry. But even that, I mean, is compared to the rest of the BOM cost of the vehicle, a small amount. So we don't see a major impact compared to where we ended end of last year right now. Operator: Our next question comes from the line of Ben Kallo with Baird. Ben Kallo: Just maybe the first one, could you maybe talk more about the sales partnerships, which I guess will be very important, especially as you introduce the Midsize vehicle. You mentioned one in Europe. Marc Winterhoff: Yes. I mean what we're doing there is we're basically extending our approach there from a pure direct-to-consumer model into also partnering either with dealerships in an agency model, for instance, within Germany, so in areas where we already have a D2C network or with importers in new markets that we are entering right now. And we are in the midst of all this process and recently launched the first agent in addition to our D2C outlets in Germany, which gives one day to the other 2 additional cities to cover. And we have numerous LOIs. I think the recent number is like 12 LOIs that are -- we're pushing forward and hopefully get to a contract situation and launch very soon. But it allows us to much faster grow within the areas and the countries we are already in, for instance, in Germany or in the Netherlands or expand into new countries through an importership where you then use existing infrastructure and existing business relationships of those importers to scale much faster. Ben Kallo: Great. And then just on the review, Silvio's review, could you maybe talk, if possible, just about the timing or when we should expect another update? Or is there not a lot of certainty in that for now? Silvio Napoli: Thank you, Ben. I think at the moment, I'm getting to the position. I would say, as of Q2, we should start somehow getting a sense of where we are. Now in terms of by when I'll be ready to give a plan, et cetera, this, I think, is something I'll discuss with the Board at the earliest opportunity. Operator: Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Andres Sheppard-Slinger: Congratulations on the quarter and just wanted to maybe take a brief moment to thank Marc and congratulate him on all his great efforts over the past 2 years. First question, I just wanted to clarify on the guidance. So just to be clear, you'll give us an update in Q2 regarding the production guidance as well as the CapEx guidance. But just to be clear as well, the Midsize timing, robotaxi timing and also the medium-term goals, those are all on track and unchanged. Just wanted to clarify. Marc Winterhoff: On the Midsize, this is also what we guided before. So that is also subject to the suspension right now. But I think what is important to understand is that what really counts is the ramp-up in 2027, and that's what remains unchanged. As I said in the beginning, the volumes that we're looking at is unchanged. On the start of production, that's something that we will guide after review with Silvio and the team then by the end of Q2. I also want to point out that when we talk about the start of production, that is less impactful actually than the ramp. I mean we've seen this, you probably remember with the Gravity where we had an SOP, but then we weren't able to ramp as we intended to. And that is something that we definitely absolutely want to avoid, and that's why we want to review everything and make the right decision for the business. Andres Sheppard-Slinger: Wonderful. Okay. That's super helpful. And maybe just as a quick follow-up. I wanted to touch again on the second production facility, the one in Saudi. Just given the geopolitical conflict still going on, do you foresee any bottlenecks or any issues to the time line for the construction there? Or is that on track? Just any update there would be helpful. Marc Winterhoff: Well, so far, I mean, it is going and we have never stopped doing it. I mean we had a few delays when it comes to arrival of equipment to be installed, but our team was able to mitigate that. And so yes, on that as well, we will update at the end of Q2. But so far, we haven't seen any impact. Operator: [Operator Instructions] Our next question comes from the line of James Picariello with BNP Paribas. Thomas Scholl: This is Jake on for James. First, could you give us some idea of the split between the Gravity and Air deliveries in the first quarter? And approximately how many units were pushed from the first quarter into the second by the stop sale? Marc Winterhoff: I mean as we said in the past, so the majority of our deliveries are now the Gravity. We don't give a direct projection on that. I mean on the average selling price, you maybe can reverse engineer the math somehow. When it comes to how many sales are being pushed into the second quarter, that's actually a number that I don't have handy right now. I mean the numbers of deliveries and orders rebounded in March significantly. But that exact number, I don't have handy. Thomas Scholl: All right. And then thinking a little bit longer term, you guys are targeting breakeven free cash by the end of the decade. Right now, your $4.7 billion in liquidity gets you into the second half of 2027. Is there any way to think about your total liquidity need to get from the second half of 2027 until 2029 or 2030? Taoufiq Boussaid: James, you asked us the same question during the Investor Day. I understand that it's a very important point for you. So again, the key data points that we have. So we have a trajectory of how we will be rebuilding the gross margin and how we'll be progressing over the years. So it's a very important data point for you to assess. We have also communicated the details around the different levers for us to reach the breakeven and the rough timing to get there. I think that our historical and future delivery of the key milestones will allow you to do a calibration of what it would mean, and it will help you estimate the additional capital requirement, which is required. Having said that, I would like to reemphasize 2 very important points. So what we have said is that the important component of the cash burn is related to the CapEx in M2. So we have also shared our trajectory in terms of CapEx reduction. We will have a steep decline after 2027. And as a consequence of that, we will see a significant reduction of the cash requirements that will be needed for the plan. So over time, the cash burn profile in itself will have to change and evolve. So again, I'm sharing some of the important data points. We have not historically been in a position to provide the exact quantification. We obviously have a plan. What is really important is the milestones and how we're executing against some of these important targets, milestones, be it in gross margin, be it in terms of reducing the CapEx and accelerating the trajectory to the breakeven. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

6天前Insight Analytics约5分钟阅读

IPCO.TO 2026 Q1 财报电话会议

William Lundin: Okay. So welcome, everybody, to IPC's 2026 First Quarter Results Update Presentation. I'm William Lundin, the President and CEO. I'm joined today by Christophe Nerguararian, our CFO; as well as Rebecca Gordon, our SVP of Corporate Planning and Investor Relations. So I'll start with the highlights and give an operational update, then Christophe will touch on the financial highlights for the quarter. Following the presentation, we'll take questions, which can be submitted through conference call or via the web online. Jumping into the highlights. We're very pleased to report another solid quarter of operational performance. Production for Q1 was at the top end of the quarterly forecast at 43,000 barrels of oil equivalent per day, and we're retaining our full year production guidance range of 44,000 to 47,000 boes per day. We had good cost discipline with Q1 operating expenditure coming in at sub USD 18 per barrel of oil equivalent, and we are maintaining guidance for OpEx at USD 18 to USD 20 per barrel. Entering 2026, we set a lean work program and budget as we were assuming a base case price estimate of $65 per barrel Brent. And in response to the improved pricing environment, we're taking advantage of our operatorship and increasing our capital program from USD 122 million to USD 163 million, predominantly to accommodate short-cycle investments across some of our producing assets. The Q1 capital spend was USD 71 million. Operating cash flow generation for Q1 was $68 million, and we revised our full year OCF guidance to USD 220 million to USD 340 million assuming $70 to $90 per barrel Brent for the remainder of 2026. Free cash flow was minus USD 17 million. And we are entering really an inflection point here for the company and there shouldn't be too many more quarters of negative free cash flow going forward with Blackrod first oil expected in the near horizon. Full year free cash flow is expected to be between 0 to USD 120 million positive between $70 to $90 Brent for the rest of 2026. Net debt stands at $513 million, and we expanded our Canadian credit facility during the quarter to USD 250 million. We also extended the maturity of that to 2028. So that gives us an increased headroom and overall flexibility. Our benchmark hedges for WTI and Brent for approximately 40% of our production exposure rolls off in June, leaving us fully exposed to benchmark oil prices from July onwards. We have some WTI/WCS differential hedges and transport/quality-related hedges tied to our Canadian heavy oil exposure as well at attractive levels and some natural gas hedges in place that are currently in the money as well. No material incidents took place during the quarter, we're very pleased to report on. So on to the following slide. As shown on the production graph on Slide 3 here, IPC delivered flat production, really at the high end of our guidance in the first quarter, with overall strong performance across all the assets in the portfolio. So I'll touch on more detail on each of the assets' performance later on in the presentation. Moving on, we're very strongly positioned to deliver within our CMD production forecast range of 44,000 to 47,000 barrels of oil equivalent per day. Drawing your eyes to the bottom of the production chart on this slide. 2026 is really a story of two tales here with forecast production volumes expected to rise materially at the back end of the year with Blackrod Phase 1 oil production set to come online. In addition to some of the incremental capital adds, fast payback projects we've also added in, this will be contributing more so at the back end of this year for production rates. Our production mix is weighted 60% towards Canadian crude, which is tied to WCS pricing, 10% to Brent-linked production coming from Malaysia and France and the remaining balance of 30% being natural gas from Southern Alberta. And I'd also like to reiterate here that the 44,000 to 47,000 barrels of oil equivalent per day guidance is an annual average, very much an annual average rather than a quarterly average as can be seen on the high and low guidance bands on that bottom left-hand chart. OpEx, so we are maintaining that original Capital Markets Day forecast as we set out in February of $18 to $20 a barrel. First quarter operating cash flow was USD 68 million. The differentials from Brent to WTI, can be seen in the brackets there, was $9 and from WTI to WCS was $14 a barrel. So the Brent to WTI differential was notably high on the back end of the geopolitical conflict in the Middle East, which our Brent-linked production benefits from, of course. Our operating cash flow full year forecast for 2026 is updated to USD 220 million to USD 340 million based on $70 to $90 Brent, and that assumes a $5 differential between Brent and WTI and a $14 differential between WTI and WCS. So a material improvement compared to our CMD forecast and notably more than funding our incremental capital spend program this year with the revised updated operating cash flow generation outlook. Moving on to our CapEx program inclusive of decommissioning, which now stands at a forecast of $163 million. So that's roughly $40 million higher than the original CMD CapEx guidance. The increase is mainly due to accelerated fast payback drilling activity at our Southern Suffield assets in Alberta and in the Paris Basin in France, which I will expand on following asset-specific slides. So we continue to see great progress at Blackrod, and we've updated our 2026 budget outlook for the forecast spend at that asset. Big picture, the multiyear budget for Blackrod Phase 1 growth capital, the first oil is USD 850 million. There has been some minor cost pressure with total costs expected to be approximately USD 857 million, which is less than 1% overall of that original sanction CapEx guidance for the growth capital to first oil. And we're still expecting the project to be delivered in terms of first oil in Q3 of 2026, which is ahead of the original timeline given at the time of sanction back in 2023. Because of this continued acceleration and positive progress, there are some sustaining completion costs as well being pulled forward, which is a positive outcome overall. The free cash flow outlook, we're projecting to generate between 0 to $120 million of positive free cash flow between $70 and $90 Brent for the remainder of 2026. Very exciting to be returning into a positive free cash flow generating position this year with a major boost in free cash flow levels anticipated in 2027 and beyond as Blackrod Phase 1 ramps up and comes onstream. Moving to the share repurchases slide. IPC, of course, has a very strong track record of share repurchases in our brief history as a company. So 77 million shares have been bought back at an average price of SEK 79 or CAD 11 per share, respectively. And that represents around $1.4 billion of value created from the share repurchases when comparing the average share price that those shares were bought back at to our current share price. Notably on the antidilution waterfall, the only time shares were issued in a transaction was for the BlackPearl acquisition back in 2018. All of those shares have been bought back. And our current shares outstanding is just shy of 113 million shares, which is less than the original starting amount of 113.5 million shares. And we've transformed the company to where we are today compared to at inception in 2017. Now we see a 4.5x increase in production levels, 18x increase on our 2P reserves in excess of 20 years, added to our 2P reserve life index in excess of 1 billion barrels of contingent resources, added an overall 4x increase to our NAV compared to that of when the company was formed at the beginning of 2017. So Blackrod. This is a 20-year journey in the making to bring this vision into reality by unlocking a Phase 1 commercial development. I had the privilege of being at site at the end of April. This is a world-class SAGD plant with a best-in-class operational staff. It's a compact site with a small footprint for the CPF and nearby well pad facility tie-ins. This asset is going to propel the company to new levels, and it's been a fantastic journey going from sanction through to development and on to startup now with rotating equipment well in service at this point in time. Original guidance for this project, again, back in 2023 when it was sanctioned, called for first oil in late 2026 and growth capital up into that point of USD 850 million. We achieved first steam ahead of our original forecast, resulting in a schedule improvement which was announced at the beginning of this year, with first oil expected in Q3 2026. So operations continue to progress well, and we're strongly positioned to deliver within this accelerated timeline. Cumulative spend as at the end of Q1 from the beginning of 2023 on the growth capital is USD 842 million with some minor works remaining on the final boiler tie-in as well as well pad facilities as we expect to deliver this project overall in line with the original growth capital guidance to first oil. I really couldn't be more proud of our multidisciplinary IPC teams as well as the vendors utilized in this major undertaking, and we're especially pleased that there has been no material safety incidents under IPC's supervision as prime contractor of the site. Excellent delivery overall and stewardship of this project to date. So Blackrod valuation. Again, this is a true game-changing asset for IPC. We have regulatory approval up to 80,000 barrels of oil per day with over 1.45 billion barrels of recoverable resource. Phase 1 targets 30,000 barrels per day and 311 million barrels of 2P reserves. And the economics as at the beginning of this year, based on our conservative reserve auditor price deck, is USD 1.4 billion of net present value using a 10% discount rate and approximately a $47 WTI breakeven. As you can see on the figure on the right-hand side of the slide, this is a massive uniform sandstone reservoir. It's contiguous and homogeneous, lending to a very much predictable and scalable product potential that's validated through the 15 years that it's been under pilot operation testing. In the lower graph here, the dark wedge on the bar chart reflects what is booked in 2P reserves and carried within our valuation. The light blue component of that bar chart is the contingent resources and represents upside to our business. Moving on to our producing assets. Our current flagship oil-producing asset at Onion Lake Thermal delivered stable production through Q1. We also did some 4D seismic work at the beginning of the year and are reviewing that data to hone in on some additional potential infill targets on existing producing drainage patterns. And also to note on that schematic on the right, H Pad is the next main drainage pattern to be developed in the sequence. Moving on to the Suffield area assets. So very much predictable and low decline production, the Suffield area assets, which delivered around 23,000 barrels of oil equivalent per day through Q1. We're very excited to be redeploying some capital into these assets, where we've sanctioned a 4-well production drilling campaign within the Basal Quartz area, just west of the Suffield block. Production from France and Malaysia for Q1 was in excess of 5,000 barrels of oil per day. We had some incremental activity that's also been sanctioned now in France. We look to drill 3 sidetracks in the FAB field and 1 sidetrack in the Villeperdue field. So very exciting to be drilling again in France. And in Malaysia, we also plan to do an operational activity of workover using a hydraulic workover unit later this year on our A13 well. So with that, I will hand it over to Christophe to go through the financial highlights. Thank you. Christophe Nerguararian: Thank you very much, Will. Good morning, everyone. So indeed, a good quarter with production at the high end of our Q1 guidance at 43,000 barrels of oil equivalent per day. And of course, during this first quarter, when the situation happened between Iran, the U.S. and Israel, the oil prices increased massively from the beginning of March. And so you really have a relatively high average Dated Brent oil price for the whole quarter, in excess of $81 per barrel, but that was really two sides of the story with lower oil prices in January and February and much higher in March. So overall, that really helped generate on that basis strong operating cash flows and EBITDA for the quarter at USD 68 million and USD 64 million. As we guided before and as most of our investors know, the capital expenditure in 2026 was always expected to be much front-loaded, and so you can see a disproportionate portion of the CapEx spent during this quarter translating into a free cash flow of negative USD 17 million. And it depends where oil prices will be on average for Q2, but it's fair to assume that the free cash flow may be negative again in Q2. But from that point onwards, we're expecting to turn the corner and to be again back into free cash flow territory for the second half, depending on where first oil kicks in at Blackrod. So USD 13 million of net profit for this quarter. The net debt increased during this first quarter by USD 30 million. Again, it's fair to assume that this net debt would increase again in the second quarter and from that point on progressively. Depending on where oil prices stand, we should see some deleverage from Q3 or from Q4. But certainly this year, we should start to see some accelerated deleveraging as the Blackrod production ramps up over time. Realized prices, so I mentioned, were strong. And I think it's interesting, a bit sad at the same time, but interesting to see that the physical market is quite dislocated. And so the Dated Brent has been trading at between $5 up to $30 premium on top of the future or the financial Brent, if you wish. And when we lifted our cargo in Malaysia, the last one in March, we had a good premium. And for the future June cargo, which we're going to lift in Malaysia, we can see that the physical market is very tight because the premium we can realize there are very, very high. So you can see we sold in March a cargo in Malaysia at USD 110 per barrel, while on average for the quarter, Dated Brent was USD 81. The Brent-WTI differential widened a bit at $9 and the WTI/WCS differential stood at negative $14 for the quarter. We're continuing in Canada to sell our heavy oil on parity or very close to the WCS. Gas prices were actually okay during this first quarter. But overall, the market again is quite disconnected between the U.S., and the Canadian market has been a new reality for the Canadian gas prices over the last 18 months now for the lack of infrastructure and communicating infrastructure between the Canadian gas pipeline network and the U.S. market. So you can see that we realized CAD 2.5 per Mcf during this first quarter. But the forecast is showing for the summer months lower gas prices, which is still a negative to IPC given that we are producing more gas than we're consuming at Onion Lake or that we will consume in the following quarters at Blackrod. Now the positive in the long run is that because we are consuming gas at Blackrod, it will be a relatively cheap feedstock gas going forward. In terms of financial results, it's interesting to compare '25 and '26. We had during this first quarter '26 similar production and overall revenues between the first quarter '26 and '25. Some of the difference between the 2 quarters in '26 and '25 was coming from the fact that we lost $10 million of hedges -- hedged losses in this first quarter because we had hedged around 40% of our WTI and Brent exposure at between $62 and $68 per barrel. And of course, we've been losing in the month of March mainly. And given that we are still hedged until the end of June at those around 40% level at current prices, we can expect to make a hedging loss of around USD 30 million during the second quarter. But I think it's important to flag as well that beyond the end of June, we no longer have any benchmark hedged. So we are totally exposed to the Brent and the WTI prices going forward into the second half of 2026. Looking at the operating costs. So we were below during this first quarter as a result of strong production level and relatively low electricity and gas prices. We can expect higher operating cost per barrel going into the second quarter with a bit of a slightly lower production in the second quarter. In the third quarter, when we're going to move progressively into commercial production at Blackrod, we're going to register some OpEx which will be a bit higher in the first months of operation. But you can see that as soon as the Blackrod production ramps up in the fourth quarter, the OpEx per barrel will progressively reduce, and we would expect that trend to continue into 2027. You can see the netback on the following graph with gross margin of close to $18 per barrel and operating cash flow at $17.5 and EBITDA at $16.5 per barrel of oil equivalent of netback. Looking at the evolution of our net debt. So we increased our net debt this quarter by USD 30 million given the reasonably high CapEx of $71 million we spent during the year. So we spent more CapEx than the level of operating cash flow. This is going to reverse in Q2 and even more so in the second half of this year. In terms of financial items, it's sort of a steady state now in the second half. Last year when we refinanced our bonds, we had some exceptional and one-off fees that we paid as part of that bond refinancing. From now on, it's going to be much more stable. And just to mention that the foreign exchange loss you can see here of $6.5 million during this quarter is a noncash item. Otherwise, the G&A remains reasonably stable and flat at around USD 4 million per quarter. So looking at the financial results. We generated net revenues of $173 million, netting a cash margin of $68 million and gross profit of USD 37 million, which net of the financial items, tax and tax elements yielded a net profit of USD 13 million for the quarter. The balance sheet has continued to evolve since we sanctioned the Blackrod project. As you expect, our level of cash has reduced and our level of net debt increased over the last 3 years. But again, we are almost touching distance from reversing this trend certainly going into 2027 but as well going into the second half of this year. And I will let Will conclude this presentation. William Lundin: Thank you very much, Christophe. So in summary, very exciting to be ramping up activity really across all regions of operations. Q1 capital came in at USD 71 million and the full year outlook is $163 million now, really leveraging our operatorship and increasing our production exposure to the high commodity pricing environment that we're seeing. We're well positioned to deliver within our production guidance, and our operating costs remain under control. Operating cash flow generation was robust for Q1 at USD 68 million. And the outlook for the full year is $220 million to $340 million. We have in excess of USD 150 million of undrawn liquidity headroom. There are no material environmental or safety incidents that took place in the first quarter. And with that, I'm happy to pass it over to the operator to begin questions, and you can also submit your questions online via the web. Thank you. Operator: [Operator Instructions] We'll now take our first question from Teodor Nilsen of SB1 Markets. Teodor Nilsen: Will and Christophe, first question there is around the small CapEx increase you announced. I just wanted to know what is driven by cost increases and what is driven by higher activity. And second part of that question is related to the activity increase. By how much should we assume that the exit rate production this year increases as a result of the accelerated investments? So that's the first two questions. And third question, that is on share repurchases. You've, of course, been very successful doing that for the past 2 years as you discussed. But you haven't been doing any repurchase. You have not done any material repurchases the past few months. So I just wanted a background for that. Do you think the share price approached a reasonable level? Or are there other reasons for why you have reduced the buybacks? William Lundin: Thanks very much, Teodor, for the questions. I'll head those off. First one being the small CapEx increase. So we had an adjustment of $122 million to $163 million for capital expenditure for 2026. So that $40 million some-odd increase, the lion's share of that is for capital activity in France and Canada. So we're going to be doing 4 sidetracks drilling program in France for approximately $15 million and also in Southern Alberta at our Suffield area assets, more on the more recently acquired in 2023 Core 4 property. We're also going to be drilling 4 wells there. So the total combined amount is around $23 million when you add the France plus the Brooks-related activity that we're undertaking. I also touched on the slight cost increase at Blackrod there as well, which was expanded on throughout the presentation. But really the vast majority of the cost increases are deliberate cost increases here to increase the activity for production contributing projects. And so that production increase for those 2 projects that I had noted, which will be more back-end weighted this year in terms of the production contribution, we expect to see in excess of 1,000 barrels per day on average delivered for 2027 from those 2 programs. So very attractive cost per flowing barrel metrics to undertake those capital activities and really a part of our whole strategy as well over the past couple of years while we've been accommodating the growth capital for Blackrod as well as buying back our shares at very cheap levels. Some of the capital activity that's been ripe and ready to go across our existing producing assets, we've elected to wait until more constructive oil prices present themselves. And here we are now. And that is the reason for why we've kind of prioritized the incremental capital going towards production contributing activity right now as opposed to share buybacks. We do have the flexibility to restart share buybacks, where we have the NCIB activated up until December of this year. We are steadfast on focusing on getting Blackrod on to production here. We continue to monitor market conditions and overall liquidity headroom. Safe to say we are very strongly positioned, and it's something that we're going to continue to monitor as the year progresses here in terms of restarting shareholder returns. Operator: [Operator Instructions] We will now move on to our next question from Mark Wilson of Jefferies. Mark Wilson: Excellent progress as ever and good look with the final steps in Blackrod, obviously. I thought the most interesting area now is the gas side of things in Canada. You mentioned that your hedges are rolling off for WTI. Just remind us where that stands for the gas, particularly as that is looking weaker in terms of infrastructure. And whether you think there's any longer-term impact from the M&A we've seen into Canadian gas, Shell coming in for ARC and further phases of Canada LNG. Just be interested to hear that. Christophe Nerguararian: Yes. Thank you, Mark, and very good questions. So I skipped the table on hedging as Will touched on it already in the opening slide. But you're absolutely right. It was very interesting to see Shell going after ARC, which is a large gas producer, and so this is just speculation at this stage, but probably paves the way or at least increases the chances and the odds that Shell would go and try to expand the LNG facility on the West Coast of Canada, North of Vancouver. And that's a fairly obvious move when you look at the massive arbitrage you can see between local domestic gas prices and international gas prices. So I think the projection in the very short term is to probably still have reasonably low gas prices onshore Western Canada, but the prospects of having more demand from that LNG Canada plant going forward has probably increased over the last few weeks. In terms of hedging, we have 50,000 GJ a day of gas hedged at CAD 2.7 per GJ or CAD 2.8 per McF. So unfortunately, that's probably going to be in the money. And so you know us. We remain very opportunistic. If we see any gas prices hike in the forward curve, you should fairly expect us to seize that kind of opportunities. And so that was your main question, around gas prices. No, you're absolutely right, that in terms of WTI or Brent exposure, the hedges are rolling off at the end of this quarter, at the end of June. And so we'll be fully exposed going forward to what looks to be reasonably constructive oil prices going forward. William Lundin: Sorry, just to add to that in terms of being a great signal in terms of Shell increasing its exposure in Canada just for the upstream overall Canadian landscape there. And now with that acquisition, Shell has secured roughly 3/4 of its feed gas requirements for both Phase 1 and Phase 2 of LNG Canada. So it certainly bodes well and signaling for an FID of Phase 2, but we're still yet to see that for that LNG project on the West Coast of B.C. there. Mark Wilson: Got it. Okay. And is it worth mentioning on the broader Canada side of things, what was it I heard recently, is it a sovereign wealth fund? Or is it an infrastructure fund? And any implications? William Lundin: Yes. That was Mark Carney, and he said a sovereign wealth fund. The extent of the details are yet to be understood in terms of where the funding is going to come from to be able to do that. But that is the headline that Mark Carney announced, was a sovereign wealth fund. Mark Wilson: Okay, okay. And then just one last point. I might have missed it in Teodor's question. But the short cycle in Suffield, that's obviously targeting liquids, I imagine. William Lundin: Yes, oil. Mark Wilson: Okay. Very good. Congratulations again. Looking forward to reading the rest of the news in the year as it ramps up. Christophe Nerguararian: Exactly, thank you. William Lundin: Much appreciate it. Thanks, Mark. Operator: Thank you. We have no further questions in the queue. I'll now hand it over to the company for online questions. Rebecca Gordon: Okay. Thanks, operator. So we've got a couple of questions here. Maybe we can just start with a bit of information on the short cycle, Will. Just a couple of questions on Ferguson and whether we have opportunity there to put some rigs in or maybe look at additional drilling there. William Lundin: Yes, for sure. So Ferguson, there's quite a few opportunities in terms of drilling as well as recompletion, refracking-related activity as well that we are looking into. Some of the activity is likely to be an operating expenditure-related item. So that is something that we do plan to do in terms of a few wells and recompletions on a few wellbores there. So look to see some minor production boost coming from the asset towards the tail end of the year. Rebecca Gordon: Okay. Very good. And then another question here. I mean, obviously, there's a lot of interest on Phase 2. Is there any intention to bring that forward now? Or how are we feeling about the timing given the oil price? William Lundin: Yes. I think the liquidity position as we've stated for quite some time now is going to change quite rapidly as Blackrod Phase 1 sets to come onstream in the back half of this year, and we look to generate significant free cash flow in the year of 2027 even at more modest oil prices. And if these pricing levels are to hold through 2027, it's going to put us in a very, very good place to look to continue pursuing our key capital allocation strategic pillars in terms of organic growth, shareholder returns and also staying opportunistic towards M&A. But for Phase 2 specifically, our future expansion potential at Blackrod behind the scenes is definitely something that's being worked up. But of course, we remain very, very much focused on successfully completing and bringing Phase 1 online from an oil-producing standpoint. Rebecca Gordon: Great. Thanks. And then just a quick question on capital structure, Christophe. Could you explain the increase in the RCF, why you went for that? Christophe Nerguararian: Yes. Well, if you look back at what IPC has been doing as a corporate, we try to raise and improve liquidity when we don't need it. So it's been a constant discussion with our banking partners and banking friends. We enjoy very good support from Canadian banks these days. There was the opportunity to increase the Canadian revolving credit facility from CAD 250 million to USD 250 million, which we just did and extended the maturity up to May 2028 as we do every year. So it's all positive for no other specific purpose than having ample liquidity. Rebecca Gordon: Fantastic. Thanks. Will, just a question on regulatory framework, so in Canada, the U.S. and our other operating jurisdictions. Have we seen any changes post the Iran war in those sort of regulatory frameworks or anticipate anything to come? William Lundin: No, there hasn't been any changes regulatory-wise in the stable jurisdictions where we operate and we have production operations taking place. And specifically in Canada also, they have a sliding framework based on oil prices for the royalties. So no changes expected there or elsewhere within the portfolio at this time. Rebecca Gordon: Okay. Fantastic. And then maybe one final question here. What would be your priority post Blackrod complete in terms of organic growth or shareholder returns or buybacks? William Lundin: Yes. The infamous question, I think. The punch line here is that we have the ability to do it all, and we look to strike the right cadence in terms of pulling forward organic growth and continuing to screen opportunities in the M&A landscape and balancing shareholder returns as well. And so I think we're going to be really strongly positioned to deliver on all three of those fronts. And the main lens, of course, will be to maximize shareholder value in our pursuit of that capital allocation strategy. Rebecca Gordon: Okay. Fantastic. That's what we have time for today. That's all our questions. So I leave it to you to close, Will. William Lundin: Excellent. Thanks very much, Rebecca, and thanks, everyone, for tuning in to our first quarter results update presentation. We're very, very strongly positioned, and It's a super exciting time for the company with the next major catalyst being Blackrod first oil. So that will come in due course very soon here. So thanks, everyone, and take care. Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.

6天前Insight Analytics约5分钟阅读

XRAY 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 DENTSPLY SIRONA Inc. Earnings Conference Call. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Wade Moody. Please go ahead. Wade Moody: Thank you, operator, and good afternoon, everyone. Welcome to the DENTSPLY SIRONA Inc. First Quarter 2026 Earnings Call. Joining me for today's call are Daniel T. Scavilla and chief executive officer and Michael Pomeroy, interim chief financial officer. I would like to remind you that an earnings press release and slide presentation related to the call are available on the Investors section of our website at www.dentsplysirona.com. Before we begin, please take a moment to read the forward-looking statements in our earnings press release. During today's call, we may make certain forward-looking statements that reflect our current views about future performance and financial results. We base these statements on certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recently filed Form 10-K and any updated information in subsequent Form 10-Q or other SEC filings list some of the most important risk factors that could cause actual results to differ from our predictions. On today's call, our remarks will be based on non-GAAP financial results. We believe that non-GAAP financial measures offer investors valuable additional insights into our business' financial performance, enable the comparison of financial results between periods where certain items may vary independently of business performance, and enhance transparency regarding key metrics utilized by management in operating our business. Please refer to our press release for the reconciliation between GAAP and non-GAAP results. Comparisons provided are to the prior year quarter unless otherwise noted. A webcast replay of today's call will be available on the Investors section of the company's website following the call. And with that, I will now turn the call over to Dan. Daniel T. Scavilla: Thanks, Wade, and good afternoon, everyone. Q1 marked the start of executing the DENTSPLY SIRONA Inc. return to growth action plan. Our results reflect a business in transition, and do not yet capture the actions underway intended to drive sustained profitable growth. We are strengthening execution, investing in key growth areas, positioning the company for improved long-term performance. From my perspective, we are where we expected to be at this early stage. We are executing the plan as intended and remain focused on improving speed and accountability. As I said last quarter, we are going deeper, moving faster, and being bolder to improve our business while placing the customer at the center of all we do. That mindset is taking hold across the organization. Near-term performance is still being affected by external pressures and the timing of our investments, while the underlying market remains stable. We are monitoring geopolitical and macro factors closely while making strong progress on the areas within our control. Regardless of market conditions, we will remain focused on executing our plan and improving our performance over time. We are engaging with our customers more, accelerating innovation, and optimizing our cost structure. These actions are already gaining momentum and are expected to contribute more meaningfully as the year progresses. During the quarter, we advanced our commercial restructuring in the U.S., expanded clinical education and sales force training, and continued to drive innovation across the portfolio while implementing a restructuring to redirect funds to fuel commercial and innovation growth. We are also seeing early encouraging traction with our distribution partners and I will share more detail on that shortly. We remain confident in our strategy, and are maintaining our full-year 2026 outlook. On today's call, Michael will review our first quarter 2026 financial performance and key drivers. I will then provide an update on our strategic progress, including the actions we are taking to support the five pillars of our return to growth action plan. With that, I will turn the call over to Michael. Michael Pomeroy: Thanks a lot, Dan, and good afternoon, and thank you all for joining us. As Dan noted, first quarter results are in line with what we anticipated at this stage as we execute on our plan to continuously lean down our OpEx structure and drive sustained profitable growth. Before we begin, we announced today a change to external reporting for our regions from U.S., Europe, and Rest of World to Americas, EMEA, and APAC. This update creates a more efficient reporting structure and better reflects how we manage and evaluate the business internally. The results being reported today reflect this change. A recast of prior comparative regional information has been provided along with today's press release. Let's move to Q1 results on Slide 4. Our first quarter revenue was $880 million, representing an as-reported sales increase of 0.1% over the prior quarter. On a constant currency basis, sales declined 6.7%, based in part on the impact from Byte and a strong Q1 2025 treatment center sales comparison not repeated in 2026. Adjusting for these one-time headwinds, Q1 2026 sales on a constant currency basis were down 4.5%. On a constant currency basis, sales highlights in the quarter included double-digit growth for EDS and APAC, favorable SureSmile performance in EMEA, and growth in Wellspect Healthcare. These improvements were offset by declines in EDS outside of APAC, CTS, and OIS. Adjusted EBITDA margins declined 430 basis points, resulting from a 560 basis points decline in gross profit, driven by lower volumes, sales mix, and tariff impacts. While OpEx experienced a headwind on an as-reported basis, from a constant currency perspective, OpEx was down $20 million, reflecting benefits from our return to growth OpEx restructuring and overall cost control management. In line with what we communicated in our last earnings call, we increased our spend in R&D year over year as we support the return to growth action plan and invest in bringing innovation to market. Adjusted EPS in the quarter was $0.27. In the first quarter, operating cash flow was $40 million compared to $7 million in the prior year quarter. The year-over-year increase is primarily attributable to improvements in working capital with lower accounts receivable. This is an early sign of progress as we focus on improving working capital over the balance of the year. We finished the quarter with cash and cash equivalents of $190 million. Our Q1 net debt to EBITDA ratio was 3.3x. During the quarter, we retired $79 million of debt. We continue to prioritize debt reduction over time and remain committed to maintaining investment grade credit metrics. Let's now turn to the first quarter segment performance on Slide 5. Starting with CTS, constant currency sales declined 2.9%. We saw a high single-digit decline in E&I, as declines in imaging equipment and treatment centers were driven by a tougher comparison versus the prior year quarter. When adjusting out the one-time institutional installation, CTS was flat in constant currency. Our global CAD/CAM business was flat year over year, with growth in APAC offset by a decline in EMEA, which was driven by softness in the Middle East and Central Europe, partially offset by double-digit growth in the UK, Spain, Turkey, and Denmark. We saw increased demand for mills in the U.S., along with bright spots in APAC. Overall, U.S. distributor levels for CAD/CAM and imaging products remain below historical averages. They are a trend we expect to continue. Turning to [inaudible], sales declined 7.2%, driven by lower volumes in Americas and EMEA, partially offset by growth across all three product categories in APAC. Moving to OIS, sales in constant currency declined 13.5%. Adjusting for the year-over-year impact from Byte, OIS declined 7.6%. IPS declined high single digits in the quarter, driven by lower implant volume across all three regions. SureSmile, our clear aligner offering, declined low single digits in the quarter, with a high single-digit decline in the U.S., partially offset by 11% growth in EMEA. Wrapping up with Wellspect Healthcare, constant currency sales increased 3.4%, led by 4% growth in EMEA and the continued strength of new product and execution of the business. Now let's move to Slide 6 to discuss our outlook for 2026. As Dan shared earlier, we are maintaining our 2026 outlook for net sales of $3.5 billion to $3.6 billion and an adjusted EPS in the range of $1.40 to $1.50. With the uncertainty and fluidity of the current macro and geopolitical environment, we are applying a thoughtful, risk-aware approach to our guidance while remaining focused on executing initiatives to drive sustainable growth. With that, I will turn the call back to Dan. Daniel T. Scavilla: Thanks, Michael. As I mentioned in my opening comments, our focus remains on disciplined execution, and we are making progress against our plan. The management team and board are closely aligned. Priorities are clear, and the organization is engaged and motivated. I also want to recognize the strength of our leadership team, particularly our U.S. commercial leaders. Several competitive hires joined recently who bring deep dental experience and are already making meaningful impact. While it is still early, what we are seeing gives me continued confidence that we are on the right path. My leadership team and I have been spending more time in the field and at local customer events, gaining valuable firsthand perspectives. Customers are noticing a shift in how we show up. Most importantly, we are consistently putting the customer at the center of our decisions and actions with a clear focus on improving both the experience and outcome for the dental practitioners we serve. We are in the early stages of expanding our clinical education and sales force training programs with increasing structure and scalability. Early feedback is encouraging, and the teams are responding well to greater clarity, investments in their development, and increased accountability. This work is strengthening our foundation as we prepare for more consistent execution in the second half of the year. At the same time, we are strengthening our processes to ensure solutions are grounded in real-world customer needs. As part of this effort, we are establishing a CEO advisory board comprised of dentists to provide direct and ongoing customer insights. Returning the U.S. to growth remains our top priority. The actions we are taking to strengthen talent, execution, expand distribution, and improve customer engagement are beginning to show early traction. At the same time, we are reinforcing the key drivers of our long-term growth. A central priority is sharpening our focus on the implant business. While recent performance in this segment has been challenging, we continue to benefit from strong underlying assets and a deep heritage in the space. To build on this foundation, we initiated a disciplined set of actions to improve performance and position the business for sustainable growth. I will provide more detailed updates in future earnings calls. Innovation also remains central, supported by increased R&D investment with a clear focus on our highest value opportunities. Let me share a few of our recent launches as seen on Slide 7 in the earnings presentation. We just announced the launch of SmartView Detect, the first FDA-cleared and CE-marked AI-enabled diagnostic aid that automatically identifies potential inflammation at the root tip in 3D scans. Integrated into the DS Core platform, the solution works with both new and existing systems, enabling seamless adoption. In clinical evaluation, SmartView Detect increased detection sensitivity by approximately 46% relative to unaided review, helping reduce the risk of overlooked findings while improving workflow efficiency. This innovation not only enhances diagnostic confidence, but also supports clearer patient communication, reinforcing our commitment to advancing connected, high-quality dental care. In endodontics, we introduced the Reciproc Minima File System and the X-Smart Go cordless endomotor, both designed to simplify workflows and improve efficiency. Reciproc Minima enables treatment of narrow and complex canals with a one-file approach, while X-Smart Go enhances mobility and performance through cordless operation and integrated intelligence. Together, these solutions reflect our focus on practical, evidence-based innovation. In imaging, we announced FDA clearance of our dental-dedicated MRI, representing an important step forward in expanding our capabilities in soft tissue diagnostics. The system has been validated in clinical settings, and is expected to support broader collaboration with leading academic and research institutions, consistent with our strategy to build clinical evidence and drive adoption. It also complements our existing imaging portfolio. Beyond dental, Wellspect continues to show solid momentum. Adoption of Sureti for females is expanding, supported by ease of use, discretion, patient comfort, and encouraging feedback from both patients and clinicians. Building on this, the recent launch of the male version extends the portfolio to a broader patient population. Finally, we are making progress in expanding and strengthening our U.S. distribution network. As announced yesterday, we signed an expanded agreement with Atlanta Dental Supply, adding our connected technology solutions portfolio effective August 1. This marks our fourth new distributor agreement this year and enhances our regional coverage, improving access and service levels in an important market. The other distribution agreements announced in the first quarter are beginning to build traction and expand our commercial reach. Early traction includes Benco installing its first CEREC system under the new agreement, an important milestone achieved ahead of schedule. To lead DENTSPLY SIRONA Inc. into its next phase, we are strengthening our foundation with better tools, more integrated systems, and increased automation. This builds on the strength of our existing teams, while enhancing capabilities in transformation, operations, and financial performance. Our transformation office continues to drive execution of the return to growth action plan, with a focus on embedding lean operating principles, simplifying processes, and improving how work gets done across the organization through the customer's lens. In parallel, we are advancing our enterprise AI strategy to drive efficiency and support innovation across both commercial and operational areas. In Q1, we began deploying AI-enabled tools in select workflows to improve productivity, with a broader rollout planned throughout the year. Within finance, we are strengthening capabilities while maintaining continuity as we actively progress on our search for a permanent CFO. Michael continues to be a strong partner in his interim role, ensuring stability and focus on execution. We are simplifying and optimizing the operating model to improve efficiency and scalability. The restructuring program remains on track to deliver $120 million in annual savings, with benefits building through 2026 and becoming more meaningful in the second half of the year. Key actions include cost optimization, organizational simplification, and supply chain efficiencies, along with reducing complexity across legal entities and IT systems. Through these actions and by driving lean principles further into the organization, we will improve our speed, competitiveness, and the customer experience. Early proof points are visible, including a reduction of approximately $20 million in operating expenses during the first quarter. These savings are being reinvested into growth areas such as R&D, clinical, and commercial capabilities, while we continue to manage external headwinds. A disciplined approach to capital allocation and balance sheet management remains a priority. During the quarter, we reduced debt by approximately $80 million, reflecting our commitment to deleveraging. Capital allocation priorities remain focused on debt reduction and share repurchases, supported by improving working capital and free cash flow. With the dividend eliminated during the first quarter, we have increased flexibility in how we deploy capital, and as performance improves, we expect to be in a position to evaluate the timing of share repurchases later this year. In closing, progress is encouraging, execution is improving, cost discipline is in place, and we are building the capabilities needed to drive sustainable growth. Early proof points are emerging across the business, and visibility should continue to improve as the year progresses, particularly in the second half. We remain confident in the strategy and focused on delivering long-term value for shareholders. I believe the potential for DENTSPLY SIRONA Inc. has never been greater, and we have at our fingertips everything we need to achieve this. Thank you. Now let us turn to Q&A. Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We kindly ask that all attendees limit their questions to one primary question and one follow-up question. Our first question comes from the line of Allen Charles Lutz of Bank of America. Please go ahead. Allen Charles Lutz: Thanks for all the details, Dan. On the return to growth action plan, there is a lot of good steps there. You talked about new distribution relationships and expanding ones you have already had, investing in clinical education, and then new product investments. So there is a lot of things on the plate. How do you think about the timing of these benefits? I think at the top of the call, you alluded to maybe some benefits happening toward the second half of the year. As we think about all those things that you are spending time on or that you have done so far, is this something where we should start to expect more material benefits in the back half of this year? Or is this effectively more of a two- or three-year roadmap? We would love if you could just give us a sense of how you are thinking strategically about the timing of some of these investments you are making in that return to growth plan. Thanks. Daniel T. Scavilla: Thanks, Allen. I appreciate the question. And I think you kind of answered it, right? When we first rolled out the return to growth plan, we called it a 24-month plan, recognizing that you cannot move fast enough, but at the same time, cannot change this in the speed that all of us would wish. Q1 was the beginning where we established the plan, built the teams, and did all the reorganization. This is really us out of the gate in the first quarter. As we begin some of the restructuring that is occurring in the first and second quarter, you will see some of those cost benefits come through more in the fourth quarter than you would in the first half of the year. As you look at the commercial cadence and what we plan to drive, again, I would think we will begin to see some things in the fourth quarter, but I really do believe that more of the improvements will be seen as we get into 2027 and certainly into 2028. Allen Charles Lutz: Appreciate all the color there. And then we would love to hear an update on some of your early conversations with DSOs. Where within your portfolio is the most interest, and how can X-ray benefit help you at those? Daniel T. Scavilla: Thanks. Again, great question. There is a lot of great activity currently occurring with DSOs. It is something we had begun into the last quarter of last year. If you look at who we are and what we offer, you have this incredible strength of a broad portfolio. Whether you want to actually build out new dental suites—we can provide all of that—or you want to get into longer plans for consumables and pull-throughs, we can do that as well. We are really talking with several concurrently, and we are looking to have a more active plan again toward the second half of this year and into next year. I think the strength is in the broad offering we can give them as a one-stop shop, and therefore bring all of the leverage bundling together for the best impact for them and ease of doing business with us. Operator: Our next question comes from the line of Jonathan David Block at Stifel. Please go ahead. Jonathan David Block: Maybe just the first one. I would say the trends with the consumer are certainly a watch with the geopolitical backdrop, and you guys are so global in nature that I figured I would take the opportunity. When you look across your book of business, anything to call out between Americas and EMEA and APAC when we think about March or April trends, whether that would be weakening or maybe even something to call out in terms of more resilience than maybe you expected considering what is going on in the world? Daniel T. Scavilla: Great question, Jonathan. There are certainly a lot of moving parts here. We did not really call out the Middle East. We will keep our eyes on that. It is a low single-digit impact for us right now. The continued struggle in Central Europe with Russia certainly has its weight, something that we have built into our forecast. As of now, we stay with what we planned in our initial business plan, and should we see some of these risks changing or shifting, we will take more action after we get through the second quarter. Jonathan David Block: Fair enough. And maybe the second question—and maybe a half question here—can you talk to us on where you are with the drop-ship model with the distributors? You talked to more distributors coming on board, but what more needs to be done there? Maybe if you want to talk to the receptivity. I mean, I think for them, it is not tying up their cash. And if you feel like it is giving you a greater voice with the distributors. And then admittedly, a completely unrelated question would just be the cadence throughout the year—do we think about the exit EBITDA margin in 4Q, which might help us bridge from 1Q to 4Q? Thanks. Daniel T. Scavilla: No problem. A couple of things. The transition into the new capital model really applies to some of the existing dealers, not necessarily new ones. We will provide this for everybody, but when we talk about the inventory build or the change in inventory that you were referring to, that is a little more of a Patterson and Shine dynamic than all of the new players who would start at zero anyway. The first quarter did not include any of that burn-through of the inventory. We expect to see that from Q2 through Q4. It is well received. It is built into all of our agreements. It is honestly not a negotiating point with us because the benefits are for both sides and pretty easily accepted that way. I will refrain right now from giving you what we think Q4 guidance is. It is not something we do. We want to get a couple of quarters under our belt with all of the moving parts we have, and it will really help you determine what is the best way to set up your 2027 model. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeffrey D. Johnson with R.W. Baird. Please go ahead. Jeffrey D. Johnson: Yes, thank you. Good evening, guys. Dan, I wanted to start with Wellspect. That business showed through very consistently and nicely this quarter. OIS and CTS, we know there is a lot of moving parts there. On the EDS side, I think that was probably the biggest surprise to me from a segment performance, just the down 7%. The comp got a little bit tougher, but the switch from plus to minus this quarter—what was driving that shift? The markets seem like they have held in fairly consistently. What was the underlying driver of that fall off? Thanks. Daniel T. Scavilla: I would tell you we looked at a little bit of softness in the fourth quarter, and we saw that carry into the first quarter. I trace that down to specific markets. I will not call them out right now. While we believe some of it is destocking of dealers, especially those that may have gone into a little more PE-based approaches, we are working through the program for a better understanding of where that is. Right now, it really looks like there was a bigger shift in Europe than we would have anticipated. The U.S. is kind of in line where we thought. Even within Europe, there are probably about five different markets that we are taking a look at to understand what is being driven there. Our current estimates and assumptions are there is some continued destocking that we felt in the fourth quarter and in the first quarter. As you noticed, we have not called off of our number. We think that this is a timing issue as we stand today, but we will look to see how we can prove that true. Jeffrey D. Johnson: Understood. And then as my follow-up question, you mentioned again tonight returning the U.S. to growth by maybe later this year. Europe is actually a bigger segment for you guys geographically. Maybe the consumables thing you were just referencing there drove that European number down to down 5.6% this quarter. But as you focus on the U.S., I would assume you also plan or hope or are working towards getting that European number more consistently to growth as well. Help me understand how you are thinking about Europe over the next few quarters and eventually getting that return to growth as well. Daniel T. Scavilla: Of course we want Europe to get back into growth. It is foundational. The U.S. stays on track; we are happy with that. In Europe, you talked about EDS, which I would agree with. Keep in mind that treatment centers were fairly large last year as well. As Michael called out, that is an academic-type thing where they come in blips, not really something you can easily forecast and see. We want to make sure we do not overstate the change because of that one-time headwind. A strong Europe and APAC are needed as well as continued growth in the Americas, and we are focusing on it. The vast majority of what we are doing to return the U.S. to growth is applicable throughout the world. Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Anthony Sarcone of Jefferies. Please go ahead. Michael Anthony Sarcone: Just wanted to start on gross margin. You talked about 550 basis points of contraction. Maybe you can give us a little more color on what is driving those in 1Q and then how we should think about the cadence of gross margin through the year? Michael Pomeroy: A big piece of the headwind in gross margin is tariffs. When you are looking year on year, tariffs did not exist to the extent they do now, so that is a pretty big piece. We talked about EDS 2025, which comes off the balance sheet. It is inventoriable, therefore capitalized, and that was a negative hit as well. As far as going forward, everybody knows what is happening with tariffs. We will start seeing the adjustments from the SCOTUS decision and then down to the Trump 10% in Q2. So that piece is going to look a lot better. Dan talked about what we are working on as far as Europe—getting the destocking behind us, which we believe it is. And the third piece is tariffs down the road. But just pure apples to apples, I would think we should be gaining 300 basis points at a minimum back in the Q2–Q3 timeframe. Michael Anthony Sarcone: Okay. That is helpful. And on macro and geopolitics from an input cost standpoint, what are you seeing in terms of higher oil and freight prices? Daniel T. Scavilla: You were breaking up a bit, but I think I got it. Yes, we are seeing some headwinds with freight and oil. We will continue to monitor that and understand if it is something we can offset, absorb, change, or have to adjust. I want more than one quarter under the belt before we make that decision. Operator: Thank you. One moment for our next question. Our next question comes from the line of Analyst from Piper Sandler. Please go ahead. Analyst: Hey, guys. This is Joe Donahue on for Jason Bednar. Thanks for taking the questions. Starting on consumables more broadly, we are seeing a continued mix shift toward private label. Strategically, how are you thinking about navigating this shift? And do you read the private label trend as still having runway, or is it starting to plateau in the current environment at all? Daniel T. Scavilla: It is a fair question. Private label is something that has been around and will continue to be around. It is something that we will obviously look at and, where it makes sense, compete against. We have several programs in development to make this a meaningful and worthwhile approach with customers. I am not going to lay those out just yet for competitive reasons. I want to get them launched before we discuss them. But it certainly has our attention and the need for us to penetrate the market with more creative ways to get our products into the hands of dentists. Analyst: Thanks. And then to push a little more on pricing with input costs here—do you feel you have incremental ability to pass through price to offset these pressures? What is your appetite throughout the year and what might be included in the guide for pricing versus how much more you could possibly take? Daniel T. Scavilla: We took some minor pricing last year, more on capital than anything. Our intent is not to change that right now, and I do not see anywhere where we would benefit from price increases of any significance. Right now, it is really about us staying focused on return to growth and executing in a way that is beneficial to the customer. I do not think there is a significant price play that would get us where we need to get to. Operator: Thank you. One moment for our next question. Our next question comes from the line of Elizabeth Hammell Anderson with Evercore ISI. Please go ahead. Elizabeth Hammell Anderson: Hi, guys. Good afternoon. Given the R&D spending in the quarter and your focus on new products, and at some recent dental shows, can you talk about the new product contribution in the quarter and how you are seeing that progress over the course of the rest of the year and maybe 2027? Daniel T. Scavilla: Thanks, Elizabeth. We do not disclose that level of detail. We do monitor it, and it is something that we have our eye on. I will hint that we need to see those metrics improve for our investment in R&D, and I think there is an execution plan that should allow us to do that. It is not something I would put out publicly in terms of contributions for this year or next. Elizabeth Hammell Anderson: But would you agree that it is a ramping contribution as we go into next year, really starting to step up maybe in 2027–2028? Daniel T. Scavilla: I would agree with that. Operator: One moment for our next question. Our next question comes from the line of Michael Aaron Cherny with Leerink Partners. Please go ahead. Michael Aaron Cherny: Afternoon. Thanks for taking the questions. I know we have touched on a lot of the different segments. I just want to dive in a bit on implants. As you think about the next couple of years of go-to-market, where do you think you are in your combination of product reboot, sales reboot, and how to factor that into that component contributing to the return to growth opportunity? Daniel T. Scavilla: It is a fantastic question. While we talk about geographically focusing on the U.S. as a return to health—which it is—implants are one of the top priorities. I have commissioned a team of dental KOLs to work with us and get the voice of the customer. We are working on several approaches with the team to come back with more holistic programs. I want to get them formed and launched before I speak about them. Implants are an area of focus. We are not happy with our performance to date. We recognize we have some of the best offerings in the market, and we simply need to execute in a better way and utilize those assets more strongly. Michael Aaron Cherny: And relative to your comments about the buyback, as you think about the evaluation to the end of the year, what are the moving pieces that are going to impact your decision on a go/no-go evaluation? Daniel T. Scavilla: Not many, to be honest. There was an opportunity by removing the dividend and redeploying it. We had some near-term debt coming due that made sense to retire. I wanted to put the funds there first because it will help us deleverage, especially as EBITDA gets stronger. It did not make sense to carry that forward. In the second half of the year, we will look at the option to remove stock. At this price, I am anxious to do it. I think it is going to be a great one to remove. I am going to get the debt in line first. I want to preserve our credit ratings the way they are, then move into removing shares in a way that makes sense not only in the second half of the year but ongoing thereafter. Operator: One moment for our next question. Our next question comes from the line of Lilia-Celine Lozada at JPMorgan. Please go ahead. Lilia-Celine Lozada: Maybe I will start with guidance. You beat by quite a bit on the top line on a reported basis, but reiterated the guide. I appreciate it is still early, but what is the thinking behind that? Why not flow through the beat? And are there any offsetting dynamics in Q2 through Q4 that we should be keeping in mind? Daniel T. Scavilla: It is a great question. It is my style that I am bringing into DENTSPLY SIRONA Inc. I did the same thing back at Globus. I am not going to make a call after one quarter. I like to see at least two before we do. Regardless of it, I would not have brought it up or down. It is not a concern. It is just more of a style. I would rather be appropriately conservative than anything else right now. That is all it reflects. Lilia-Celine Lozada: Got it. Makes sense. Then I was hoping you could dig into CTS a little bit more. That came in nicely higher than what we were thinking. Can you talk a bit more about what drove that strength and what you are seeing in terms of appetite for capital in this environment? Daniel T. Scavilla: There are a lot of moving parts. Having expanded the dealers and working on programs with them—we called out through Michael’s script—we are seeing some strength in the U.S. Again, one quarter does not make a trend. We will continue to execute and, after a couple of quarters, see how that is shaping up. I would attribute the CTS strength more to activity occurring in the U.S. through our partners. Operator: Thank you. One moment for our next question. Next question comes from the line of Analyst at UBS. Please go ahead. Analyst: Thanks for taking my question. Dan, I appreciate the lift that you have here operationally and all the things that you have initiated internally. When you think about the growth initiatives, which segments or geographies do you think catch up or get to growing faster than the market? What products do you think you can get to quickest? Can DENTSPLY SIRONA Inc. grow faster than the market, in line with the market, or better than market in implants or something to that effect? What are you most excited about, or where do you think you can return to market growth or better, and what segment is fastest? Daniel T. Scavilla: I will refrain from giving segment-by-segment growth expectations. We have been working on that, and there will be an investor day probably toward the end of this year or beginning of next, and we will do that along with the strategic plan. I believe that this organization, with the right structure and focus, can grow at or above market over time. We need to work our way through that in 2026 and into 2027, but that is the target. The U.S. has to return because of its size. Within that, through the actions we have taken with dealers, it has to be about the right placement of capital. It has to be, in my mind, implant-focused, EDS-focused, and with our enhanced R&D, we need deeper penetration into the ortho market. All of those are in play. I want to get them functioning first before I commit anything in particular. Among those, we should be at or above market as we get into a healthy cadence. Analyst: And a quick follow-up. You are talking about capital deployment and share buybacks. Presumably there is not likely a focus on M&A, but if there was, in Wellspect or in dental, is there an area where a tuck-in or something more material might enhance the product portfolio or be more synergistic or needed? Daniel T. Scavilla: I do not think there is anything needed. I am looking at M&A because even if we decide not to do it over the next few quarters, we are going to go back to that and sustain. We have a plan in place already. We have established an independent board with Wellspect and will announce that as we finalize. It is going to focus on hypergrowth within Wellspect so that we drive way above market and penetrate deeper. Should we find adjacencies there that are bolt-on or can be fast in closing out a gap, that would be one area of interest. In the non-dental area, we have several conversations currently with longer-term potential. Within dental, I want to refrain from specifics right now. I am looking for an accelerated way to differentiate ourselves in certain areas. Some of it would be CTS to help penetration. As far as implantable products themselves, there is nothing we are chasing down at this time or have interest in. Operator: Thank you. One moment for our next question. Our next question comes from the line of Steven James Valiquette at Mizuho Securities. Please go ahead. Steven James Valiquette: Great. Thanks. Good afternoon. We heard one of the global dental distributors today talk about some lower industry pricing trends on scanners or other digital equipment, primarily from newer market entrants. I am curious what you are seeing on the competitive landscape front in IOS, and what this might mean for PrimeScan or your other offerings. Daniel T. Scavilla: I think your data is correct. There are new entrants at low cost. We have to look at our current model versus what could be market appropriate in this changing dynamic, and that is where our size and breadth of portfolio come into play. We are doing a few things. One is looking to become more competitive in that area, probably through more structured programs that not only have a scanner but the pull-through effect of it—things some of the lower-cost entrants will not be able to compete with without bundling up. We are going to use our portfolio in a bundle strategy that will allow us to accelerate some of the penetration we are seeing and be more market appropriate today. Operator: Our next question comes from the line of Erin Wilson Wright at Morgan Stanley. Please go ahead. Erin Wilson Wright: Great, thanks. You highlighted in the deck as well as your prepared remarks a lot on innovation in terms of specific products and areas of focus. What could really move the needle? Would you call out a couple that could be significant that we should pay attention to going forward from an innovation perspective? Daniel T. Scavilla: Only among the ones discussed on the call, I like the AI detection as a way to further enhance the DS Core offering to our current and future customers. That one excites me. I have been a fan of Wellspect, and I see the potential of this business. The Sureti launches into an entirely new area for them and into new geographic markets. Both of those are exciting. I think the MRI is a much longer, more clinical long-term play. I do not see that as a large revenue generator over time, but rather something that will lead to future products or approaches that can be very interesting. Reciproc Minima using one file is a great approach that can reduce cost and speed up time, with what appears to be great outcomes for patients. I like them all. I think they all have potential to move us forward. Erin Wilson Wright: And on macro and input costs, you did say you are seeing an impact now. Can you quantify that? Is it material right now? And just remind us—do you have anything embedded in your guidance, or do you think you can mitigate it? Why not make any changes on that front just to be conservative? Daniel T. Scavilla: I will make it simple. We are not going to disclose specifics. I am creating freedom to move if we see escalation or unforeseen things. If something material occurs, we would have to react and share adjustments, whether we can absorb them or not. There is nothing material today; otherwise we would have disclosed it. In a changing world, should that change, we will come back and update your assumptions. Operator: One moment for our next question. Our next question comes from the line of Analyst at Citi. Please go ahead. Analyst: I want to go back to implant volume. You mentioned that across all regions, implant volumes were a little bit lower than expected. Curious if you can bifurcate between premium and value demand, realizing that the significant majority of your portfolio is premium. Is there any significant differentiation by region? And you kind of alluded to this in your prepared remarks, but can you provide a little more detail on the strategy to stem some of that lower demand and the timing of those benefits? Daniel T. Scavilla: We are down in both value and premium for the quarter. For value—MIS in particular—it is simply underutilized. To stem that, we need to position it differently as a brand that can really drive, which I feel has not been fully implemented by the company. We are working on that. Astra is still one of the best products out there. Clinical education and rep education are all parts of that to drive improvements. I feel implants are more of an execution issue than a product issue. We have the right portfolio. We have to improve education to execute better. We will have market-appropriate or competitive programs forming in the second quarter, but I will refrain from details until we get them implemented. Analyst: As a follow-up, last quarter you guided to a $30 million headwind in the first half of this year due to the inventory sell-through underneath the new drop-ship model. Was much of that realized this quarter? And can you quantify on a basis point basis how it impacted gross margins? Michael Pomeroy: None of it was realized this quarter. It still is in our line of sight to happen, consistent with our previous guidance, but it is going to be more of a late Q2 and then second-half impact. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brandon Vazquez at William Blair. Please go ahead. Brandon Vazquez: Great, thanks for the question. Maybe I can ask a portfolio question from the opposite side. As you are in the seat another quarter here, as you are looking at the portfolio, is there anything you think that maybe DENTSPLY SIRONA Inc. is not the right home for? Anything on the rationalization side that might help improve the P&L? Daniel T. Scavilla: Great question, Brandon. My answer is no, not yet. I want to see how the market responds to our return to growth plan. I want to look at these from a different light. I do not like the position we are currently in, and I want to stabilize and get them growing. Then we say what makes sense or not. We announced the creation of the Growth and Value Committee. With that, I have the board working with me to look at potential M&A and whether it makes sense for something to be set up as a divestiture. My ask of them—and right now everybody is aligned—is to get through the execution phase before we evaluate where that makes sense. I am not afraid to do it. I just do not have the right facts or positioning to do that in what I think is the best interest of all of us. Brandon Vazquez: Makes sense. And as a follow-up, within CTS and EDS, APAC was highlighted as an area of strength while there are some other pockets of weakness. Could you spend a minute on APAC and why things are doing relatively well there for this portfolio compared to the other regions? Daniel T. Scavilla: I would point to the leadership and structure. They are strong and well educated, and they spend well on clinical education. Everything I am saying I am bringing into the U.S. was started there, and I think that is one of the drivers. With APAC as well, we are looking at doing a similar thing. It is more of a long-term investment growth. Again, I would point out the strength really based on the execution of a team with a good plan, and one that we can learn from and spread throughout the world. Operator: This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

6天前Insight Analytics约5分钟阅读

REMEDY.HE 2026 Q1 财报电话会议

Aapo Kilpinen: Ladies and gentlemen, dear Remedy investors, welcome to the webcast for Remedy's Q1 Business Review of 2026. My name is Aapo Kilpinen from Remedy's Investor Relations. Joining with me today are Remedy's new CEO, Jean-Charles Gaudechon, also known as JC; and then our CFO, Santtu Kallionpaa. JC will briefly introduce himself and then guide us to the quarter. Santtu will then do a deeper dive on the financials of the quarter. We'll then look at the outlook for the year, and then we'll end with a Q&A session at the end of the webcast. [Operator Instructions] But without further ado, JC, please, the stage is yours. Jean-Charles Gaudechon: All right. Thank you, Aapo, and hello, everyone. Welcome to Remedy Q1 2026 Business Review. I guess I need to start by saying a few words about myself. So let me start with, I think, something that really defines me is my past as a software engineer. I think that's really what shapes how I think about games, how I think about running studios, companies like Remedy, and how we approach game development in general. Over the past 25 years, I've had a chance to work on games across many roles on all platforms really and across North America, Asia and Europe, so quite global. That has given me a good overview of our craft and now I have the immense privilege of bringing that experience to Remedy. One of the boldest, most original studios in gaming with some of the best talents in the industry, which is excellent. You know what Remedy has achieved is rare. Over more than 3 decades, this studio has built a voice unlike any other, supported by a strong and engaged community, which is extremely rare, as I said, and a great asset now and for the future. More broadly, in our industry today, I think the creative craft is under real pressure. Games with a genuine soul, games that take risks, that have a point of view are getting harder to find. And those are exactly the games that Remedy makes. My mission is not to change what Remedy is. My mission is to protect and grow that soul and to help this studio grow without losing what makes it Remedy. All right. Enough of me, let's go through our business performance together. Q1 2026 was a good start to what I believe is going to be a very exciting and pivotal year for Remedy. Revenue increased, driven by game sales and royalties that nearly doubled for the comparison period. EBITDA came in ahead of the same comp period at EUR 2.9 million and EBIT was positive at EUR 1 million. Operating cash flow was on a healthy level. So good signals as we start that year. And a good share of that performance is being driven by our back catalog, which continues to find its audience. That is very encouraging, especially as we are building the self-publishing muscle at Remedy. We have a number of exciting projects in development, but the most immediate focus for Remedy, the one closest to our players' hands with the 2026 launch is CONTROL Resonant, obviously. So let's cover that. Our goal with CONTROL Resonant is to deliver a great melee action in RPG. Again, that honors the Control universe but also expands it, and that players will truly appreciate because in the end, that is what really only matters. So we're doing that for players in our fan base. A lot of interest was captured with our December 2025 announcement, and the leading indicators are on track. Looking ahead, we will ramp up the marketing campaign leading up to release, and we expect the momentum to significantly intensify. We have an ambitious global campaign and a sizable marketing budget for execution. The reception has been incredible so far. We're extremely happy about traction. During Q1, we released 2 new trailers. The first was our gameplay reveal trailer featured in the PlayStation State of Play. As you know, one of the highest profile venues in the industry for a reveal like this one. And putting our gameplay in front of that audience -- in front of you all for the first time was a very important moment for us and for the game at Remedy. The second was produced with our long-term partner, NVIDIA. This partnership shines a spotlight on the technical ambition behind CONTROL Resonant. And of course, on our very own Northlight, our proprietary engine, which is what allows us to push the game's performance and cutting-edge graphics, extremely important for Remedy games, as you know. Beyond the trailers, sorry, we released a developer diary for our community called Beyond the Oldest House. This is the kind of content that really matters, we believe, to our most dedicated fans, direct access to the people making the game, our dev team speaking in their own voices, speaking honestly about what they are building. Remedy's community has always liked authenticity. And I think that's really what we've been doing here and what we want to keep doing. We also hosted an exclusive showcase for media and creators. We had over 70 outlets that attended, generating more than 140 articles and around 2 billion impressions across global media, which we believe are good numbers at this stage of the campaign and more importantly, the coverage was not just broad and just volume, it was also quality and it was positive, which obviously, for us, is very encouraging and kind of how we want to land the product. Outlets like Edge, Polygon, GAMINGbible, IGN, just to name a few, I don't want to hurt anyone in the process, but have all come away from their previews with a clear message, to be clear, this was a hands-off preview, but still very encouraging. And people really said, this is a Remedy game that takes risks and has its own identity. And that's always what we want to make at Remedy. And you'll see that more and more as I talk strategy moving forward, it's very, very important that these games feel Remedy and are more Remedy than ever. There are, of course, fair questions being raised. Action RPG is a new genre for Remedy, and the press, the fans are right to scrutinize how the gameplay holds up. We welcome that scrutiny, but we are also confident that as players and press get their hands on the game, they will see kind of how serious we are about earning our place in the action RPG space. I have the chance to play the game daily, and I can tell you that it's coming very well together. I'm very happy. All right. So beyond the press, the broader signals heading into launch are healthy, sentiment among fans and content creators has held up globally, which is great to see. That audience is sizable. The Control universe has been played by close to 20 million people over its lifetime. We are also making a deliberate push beyond our traditional strongholds, the U.S. and Europe. This time around, Asia and Latin America are real priorities for this launch. And we have invested in localization at a level we have never done before. Our thinking here is simple, Remedy's voice deserves to reach further, and we are giving it the means to do so. All right. So turning over to our games currently in market. Alan Wake 2 became available on Amazon's Luna service during Q1, alongside Alan Wake Remastered, generating a platform deal royalty. The game also continued to perform across other platforms throughout the quarter, and Santtu will explain a bit more how that impacted Q1 positively. Happy to -- I'm very happy to announce that the game has passed a 6 million benchmark in lifetime copies sold. Control retained its solid sales momentum in Q1. In fact, Control actually sold better than the comparison period driven by promotions and added visibility from CONTROL Resonant, obviously. This is a dynamic we plan for at attractive price points. Control is a great vehicle for new players to enter the world of Control ahead of the sequel. All right. FBC: Firebreak. The last major update, Open House was released in March, and the game has moved to maintenance mode after that. The game will remain online and a Friend's Pass feature was introduced to support the player base. It is very important for us at Remedy to let players enjoy the game for as long as they can and as long as they want. The game remains available on PlayStation Plus and Xbox Game Pass, sorry, and can be purchased on PC and console platforms. All right. Our development pipeline has 3 active projects. CONTROL Resonant, obviously, in full production. We already discussed about this one at length. Max Payne 1 and 2 remake is also in full production in partnership with our partner, Rockstar Games. And you know how close to our heart is Max Payne. So something that we're putting a lot of effort on also. And we have a new project currently in proof of concept, which unfortunately, I cannot tell much more about today. So building on what I shared earlier, 3 areas where we are sharpening our focus. One, focus on core strength. Remedy is exceptional at building single player narrative experiences on core platforms. This is what we do best, and we need to double down on that expertise. We cannot take it for granted, not our craft and certainly not our players. This does not mean we stand still. We will innovate and we will explore new ways of reaching players when the case is right. But every step beyond our core has to build on what we already do best. Franchise expansion as the second pillar. Today, we tend to think about our games one after another. I want us to evolve that mindset, managing more franchises. I think our IPs today can really give a lot more than what they already do. We need to think as long-term strategies that let us be bolder to connect the dots further within and between our world. That is something very important to me for the future of Remedy. And three, self-publishing. I think this is a unique opportunity to hone the whole chain. No one can really speak about Remedy games better than Remedy. I want our publishing voice to be as unique and distinctive as our games themselves. It's a chance to be heard like never before. And we are not going to play safe, you will see that with the CONTROL Resonant campaign. With that, I will hand over to Santtu to walk you through the Q1 financial results. Santtu Kallionpaa: All right. Thank you, JC, and good afternoon also on my behalf. Let's start reviewing the financials from the revenue. So in Q1 2026, our revenue was EUR 13.1 million, which is 2 percentage lower than in the comparison period. Game sales and royalties almost doubled from the comparison period being EUR 5 million for the first quarter. This was driven by the royalties from Alan Wake 2, which include also the onetime royalty accrual from the game becoming available in Amazon Luna. Also, Control games has performed well in Q1 and partly drove the game sales and royalties above previous year. Q1 2026 also includes revenue accruals from FBC: Firebreak's subscription service deals, which we didn't have last year Q1. Development fees, they decreased from the comparison period and still made over half of the total revenue for Q1 2026. Development fees were for the projects, Max Payne 1 and 2 remake and CONTROL Resonant. Revenue was impacted negatively by weak USD rate. With the FX-neutral revenue, we would have had a growth of 0.2 percentage. Then looking at the longer perspective, the share of game sales and royalties of the total revenue has started to increase during 2025. Alan Wake 2 started accruing royalties in the end of 2024. And as said, during the first quarter 2026, Control games and sales related to our older game titles were on a higher level than in Q1 2025, and FBC: Firebreak started accruing revenue from Q2 2025 onwards. Development fees have remained roughly on a similar range for the last 4 quarters, but there has been also a variation between the quarters due to the development milestones of CONTROL Resonant and Max Payne 1 and 2 remake. Then moving on to profitability. So the operating profit in Q1 2026 was EUR 1.0 million positive, being EUR 0.3 million less than in the comparison period. This decrease is mainly due to higher depreciation and investments to self-publishing in Q1 2026. EBITDA improved from the comparison period and was EUR 2.9 million positive. Growth from the comparison period is largely due to the decrease of external development expenses. Then let's look at the costs in more detail for transparency. So unnetted external development and personnel expenses in total decreased by 11 percentage from EUR 11.5 million in Q1 2025 to EUR 10.3 million in Q1 2026. External work expenses were EUR 1.9 million in Q1 2026, being 44 percentage lower than in the comparison period. This was driven by lower external development needs in the game projects. The unnetted personnel expenses were EUR 8.4 million in Q1 of 2026, increasing by 3 percentage from the comparison period. This growth matches the growth of average number of personnel during the reporting period, which also increased by 3 percentage. The amount of capitalized development expenses at EUR 3 million was on a similar level than in the previous year. The amount of capitalization is higher than in the previous quarters, mainly due to increased efforts on CONTROL Resonant. In Q1 2026, depreciation expenses in total were EUR 1.9 million, of which EUR 1.2 million were related to game projects. These included Alan Wake 2 and FBC: Firebreak depreciations. Q1 depreciations are on a lower level than in the previous quarter, and this is due to the depreciations following the level of game sales of the games, which we are depreciating. Currently, a major part of Remedy's intangible assets is from capitalized development costs of CONTROL Resonant. Also, the remaining capitalization of Control's publishing and distribution rights has been mainly allocated to CONTROL Resonant. Once the game is launched later this year, the depreciations related to CONTROL Resonant will start, which will impact the quarterly depreciation levels. So at the end of Q1 2026, our total cash level was EUR 34 million, including EUR 14.4 million in cash and EUR 19.6 million in short-term cash management investments. During Q1 2026, the cash flow from operations was EUR 8.3 million positive. Besides the cash flow from operations, our cash position was affected by a EUR 3.2 million negative cash flow related to investments and EUR 0.3 million negative cash flow from financing. Cash flow from investments, that includes payments related to capitalized development costs and machine acquisitions. Cash flow from financing includes IFRS lease liability payments. The cash position improved in relation to both the comparison period, Q1 2025 as well as to what the situation was at the end of year 2025. Then if you look at the cash flow from operations closure, there has been variation in timing of payments from quarter-to-quarter. Q1 2026 cash flow from operations was EUR 14.9 million higher than in the comparison period. Our outflowing operative payments were 23 percentage higher than in the comparison period. Due to timing of sales payments, we, at the same time, received significantly more inflowing sales payments than a year ago. Timing of development fees -- fee payments are agreement based, and there is difference compared to revenue accruals. Royalty and game sales-related payments follow the revenue accruals with delay. So in overall, year 2026 started with a profitable quarter for us with both EBIT and EBITDA being positive. This is, of course, ahead of marketing ramp-up and related spend to support the launch of CONTROL Resonant during 2026. And now, JC will continue with outlook. Jean-Charles Gaudechon: Thank you, Santtu. All right. Our outlook for 2026 is unchanged. We expect our full year revenue and EBITDA to increase from the previous year. And then handing it to Aapo for Q&A. Aapo Kilpinen: Thank you, JC. Thank you, Santtu. Let's move on now to the Q&A. [Operator Instructions] We already have a couple of good questions in the pipeline, so let's begin with those. JC, the first question is related to you. What are the short-term goals from the new CEO? And will those goals affect how Remedy operates? Jean-Charles Gaudechon: Yes. Good question. I mean, so I've been here for a few months, and I spent a lot of that time listening and getting to understand people, the studio where we're at. And honestly, the priorities are very clear. Today, it's to execute on CONTROL Resonant. We can have all the strategies in the world, if we don't make an incredible game, what's the point? So I think to me today, it's really to give the studio the support, the direction, the inspiration to really kind of get CONTROL Resonant across the finish line in the best possible way now. It now is, of course, the biggest one, but we have other great games in the pipeline, which also needs and deserves attention and support. So this is very much the focus right now. The strategy pillars I talked about, we'll surely get into it, get into that vision, but today, let's focus on product execution. Aapo Kilpinen: Excellent. Thank you, JC. The next question is on CONTROL Resonant. Can you give more color on the leading indicators that you're tracking on the game? Jean-Charles Gaudechon: So unfortunately, right now, we cannot yet. Of course, we're still being -- a lot of that is happening behind closed doors, and we apologize. I know both present players are antsy to hear and learn more about the game and trust us, it's going to come. But today, I can't say a lot more. What I can say, as I said in the presentation, we're happy about how it's tracking. We're getting the momentum we want to gain. We're getting the traction. The game is landing the right way. The message, what we're hearing back is very much in line with what was planned. So happy about that. Apologies that I can't go much deeper into details, into numbers, but that's what I can say today. Aapo Kilpinen: Very good. Next question is on China and broader Asia. Is there a local partner model with a distribution arrangement? And how does the economic split compare to core markets? Jean-Charles Gaudechon: So good question. And you know I spend quite a bit of time in Asia myself. So that allows me also to hopefully get a bit better understanding of that region, even though you can't make any generalities and it's a daunting market, but also a very attractive one. We're going to have a local strategy. We're going to have a local partner. I can't announce any of that just yet or have any more details, but there is a strategy around how to approach China specifically. I think for me, what's most important today is how do we position the product to be a success with Chinese gamers. I think action RPG is something that resonates well in China. And I believe Chinese gamers will, I hope, Chinese gamers will appreciate CONTROL Resonant, and we're going to do everything on the way to get there. It's tough to say how much this is going to play in economics of the game. But what I can tell you is we're going to push really harder. Also on the localization front, I touched on it earlier. It's pretty much the biggest localization investment Remedy has ever made. And we're very happy to tell our Chinese gamers that the game and in China, but across the world, Chinese speakers that the game will be both kind of text and audio localized, which I think will be great. Aapo Kilpinen: Super. Next question is to Santtu. With CONTROL Resonant nearing completion, how should we think about the development fee trajectory through the rest of 2026? Santtu Kallionpaa: Yes. So the general rule regarding the development fees is that they follow the agreed milestones of the game development and the contracts. And good assumption regarding, for example, CONTROL Resonant is that the development fees will continue to accrue as long as the development of the game takes. Aapo Kilpinen: Excellent. Continuing with the finance question, Santtu. Are there still some B2B payments accrued for the coming quarters in relation to FBC: Firebreak? Santtu Kallionpaa: Yes. I think we have said earlier that the B2B deal accruals continue as long as the B2B deals regarding the game being in the subscription services continue. So it's based on that. We have also said that the major part of the cash flow impact from these agreed deals for FBC: Firebreak, that's already in our balance sheet. Aapo Kilpinen: Excellent. Then back to JC. I would like to hear more about the social media marketing efforts in China and how big of a share of the CONTROL Resonant sales do you see coming from Asia? Jean-Charles Gaudechon: I think I've kind of already answered this one and the last one. Not much more to say that we're going to be present. We are present and we're going to intensify our presence on the Chinese social media, and in general, kind of try to create our voice, getting a share of voice in China. Aapo Kilpinen: Very good. Next question on CONTROL Resonant's budget, ahead of CONTROL Resonant's launch, does the estimated development budget of approximately EUR 50 million still hold? Jean-Charles Gaudechon: So I'm not going to -- this is Santtu already looking at me and saying, don't say it. It's -- what I can tell on the budget is the team has done and the studio has done excellent work to stay on track, has done excellent work to build a AAA game on a relatively short or small budget. And that's something we've seen from Remedy before. That's something we'll see again from Remedy because honestly, there's something pretty incredible about the way being -- the games are being built at Remedy the way they've been thought through and managed. So it's been -- it's not has always been the case. I know that. We've had some hiccups in the past, but I can tell you that the team has done incredible work on control resonance. Aapo Kilpinen: Very good. Next question then is in relation to Remedy's headcount. Remedy's head count is increasing. This seems to be counter to what is happening in many other game studios. What is the thinking behind the increase? Jean-Charles Gaudechon: I mean good segue from what we just -- the previous question. And let me answer it by telling you again that the studio has made incredible games on relatively small actually team size, a relatively small budget size. And I think that happened because, well, it's a studio that has its own engine that has its own kind of tools and ways of building it, which I've seen for the past 2 months, and I understand why they were able to pull it off that way. I think also one thing you can see about Remedy is Remedy has always been smart of not going too fast, too quickly, which you've seen in other parts of the industry, unfortunately. And when you get to that, then that's when you take the risk of potentially having to downsize. What I can say today from the size of the team, the size of Remedy and the games we're making, I think we're pretty much rightsized for it. Aapo Kilpinen: Excellent. Next question, again, on organizational topics. As you've gotten to know the company, do you see areas in Remedy's operating model or organizational structure where changes may be needed? Jean-Charles Gaudechon: I think you can always make improvements, and we will make improvements. Yes, I've seen parts of Remedy, which I think can be improved at many different levels. Today, what's really important is to keep a balance on what you can improve and when you do some of these improvements. And as I said right now, the studio is in full execution mode. You need to be cautious with that. We need to give the right support. And a lot of this is gradual anyway. So today, it's more about protecting, supporting, making sure that we stay on the right tracks, but not necessarily disrupt any of that. But yes, there will be changes here or there, kind of internal cuisine type of thing, which will help, I think, the studio even perform better in the future. Aapo Kilpinen: Perfect. Next question is about the new projects. Is there any information you can share about it? Will it be under the Remedy connected universe? Or will it be a completely new title, spin-off? Anything that you can communicate at this point? Jean-Charles Gaudechon: It's tough. I keep having to say that I can't say much. But unfortunately, no, I can't reveal anything about this new project, except that it's going to be yet again an incredible Remedy game. Aapo Kilpinen: Very good. The next, Remedy has always been a contender for the Game of the Year in TGA. So is winning Game of the Year with CONTROL Resonant in your playbook? Jean-Charles Gaudechon: It always is. This team, and I've seen it now, we know it from before, right? This team is always going for the highest possible quality. And I think CONTROL Resonant is not different on that front. So we're going to push hard. I heard that this is going to be a pretty hard year, but I'm not sure exactly what's coming out this year, but there's going to be competition. But I think we'll be up there fighting for it. Aapo Kilpinen: Excellent. Then would you consider adding a preorder option for the games you publish? Jean-Charles Gaudechon: So I can't say much once again on CONTROL Resonant specifically. Me personally, I think preorder is a good way to judge traction, to judge success of the game ahead of launch. So I think it's a good thing. Aapo Kilpinen: Yes. Super. Then I think the final question, might there be any collaboration with Epic Games to bring Jesse or Dylan Faden or maybe even Ahti the janitor to Fortnite to promote CONTROL Resonant like what was done with Alan Wake 2? Jean-Charles Gaudechon: I mean we're big fans of crossover. I think we've showed it in the past. I think it helps us expand our universe, our worlds, and that's something that I mentioned in some of the pillars in the presentation just now. And this is something we're going to keep doing because I believe strongly in RPs in our worlds, and they should even get deeper and connect the dots more, as I said before. So I can't, of course, say anything about whether we do something with Epic or Epic is a strong and close partner. So we're always talking to our partners about potential opportunities. And these are, again, a great opportunity to look into. Again, as I said, one filter we will, I think, use more and more is, is it building on our core strength? As I said, as the first filter -- first pillar, sorry, this is going to be something we do a lot. And I think you define the vision of a studio not by just saying yes, but also saying no, which is what we don't go after, what may not really help compound that culture and build on the core strength of Remedy. So this is the filter we'll be using moving forward on the crossover, et cetera. But so far, we've been really happy with it. Aapo Kilpinen: Very good. One final question came through. In what way do you think the rapid development of AI will impact Remedy's operations, perhaps regarding product price or game development costs? Jean-Charles Gaudechon: So you're casually dropping an AI question at the end, excellent. Of course, it's a big topic these days. We've had a clear stance as Remedy with AI. Today, we're not using generative AI to create any user-facing content or in general. I would also say, good luck trying to make Alan Wake with AI. I would love to see that happen, but I think that it's going to be very, very hard. So today, I would say it's a bit of a non-topic. Of course, we need to make sure this is framed. There is adoption here or there happening like in gaming in general, you can never really stop someone to tinker with it. But it's really important that we have a clear frame, and it's very important that this does not replace any parts of the creativity coming up in our games. And that's something that, to me, I'm going to be fearless about. Aapo Kilpinen: Thank you, JC, very clear. Excellent. Thank you so much for the questions. Excellent questions once again. If there are any additional questions you didn't have the chance to present, feel free to send those over to the e-mail address now visible on the screen. We'll be back next time with our half year financial report that will be on August 11. But until then, bye-bye from us.

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CARL 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Carlsmed, Inc. first quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to turn the conference over to your first speaker today, Stephanie Vadkovich. Stephanie Vadkovich: Thank you, operator. Welcome to Carlsmed, Inc.'s first quarter 2026 earnings call. Joining me on today's call are Michael Cordonnier, chairman and chief executive officer, and Leonard Greenstein, chief financial officer. Before we begin, I would like to caution that comments made during this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the market in which Carlsmed, Inc. operates, trends, expectations and demand for Carlsmed, Inc. products, expectations with respect to reimbursement, statements about the company's clinical data, surgeon adoption and utilization, and Carlsmed, Inc.'s expected financial performance and position in the market. Any forward-looking statements made during this call, including projections for future performance, are based on management's expectations as of today. Carlsmed, Inc. undertakes no obligation to update these statements except as required by applicable law. These statements are neither promises nor guarantees and are subject to known and unknown risks and uncertainties that could cause actual results, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements. For more detailed information, please review the cautionary notes on the earnings materials accompanying today's presentation as well as Carlsmed, Inc.'s filings with the SEC, particularly the risk factors described in Carlsmed, Inc.'s Annual Report on Form 10-K for the year ended 12/31/2025. I encourage you to review all Carlsmed, Inc.'s filings with the SEC concerning these and other matters. Additionally, during today's call, management will discuss certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in today's earnings press release. These filings, along with Carlsmed, Inc.'s press release for the first quarter 2026 results, are available on carlsmed.com under the investor section, and include additional information about Carlsmed, Inc.'s financial results. A recording of today's call will also be available on Carlsmed, Inc.'s website by 5:00 p.m. Pacific time today. Now I would like to turn the call over to Michael to go over Carlsmed, Inc.'s business highlights. Michael Cordonnier: Thank you, Stephanie, and welcome to the team. I would like to welcome everyone on our call today. At Carlsmed, Inc., our mission is to improve outcomes and decrease the cost of health care for spine surgery and beyond. To achieve this mission, we have pioneered patient-specific digital surgery for lumbar and cervical spine fusion procedures. Our vision is to make personalized surgery at scale the standard of care for spine surgery. Our AI-enabled digital surgery empowers surgeons to partner closely with patients to seamlessly create three-dimensional surgical plans and 3D-printed spine fusion devices designed to achieve predictable patient outcomes while supporting the surgeon's preferred surgical approach. We then provide postoperative outcome analytics to our surgeon users for each procedure through our Aprivile Insights as part of the MyAprivile ecosystem. We believe this personalized, outcome-driven, AI-enabled ecosystem approach represents the future standard in medical technology, one that is better for patients, surgeons, hospitals, and payers. Importantly, our model is built to scale efficiently. By manufacturing only what is needed for each specific procedure, we avoid the traditional prebuilt inventory trays of implants and instruments that have long burdened the legacy spine and orthopedics businesses. Instead, we are able to provide patient-specific, sterile-packed implants and instruments specific to each patient just in time for their surgery. This capital-light, demand-driven approach enables us to scale rapidly while maintaining a relentless focus on patient outcomes. With this vision as our guide, 2026 is off to a great start with solid execution across our business. In the first quarter, we saw strong adoption of our lumbar and cervical personalized surgery procedures, reinforcing our view that Aprivo as a platform technology is positioned to transform spine surgery. Our clinical outcome data continues to be robust, and our investments in technology continue to drive the scale and productivity needed to make personalized surgery the standard of care for spine fusion procedures. With the peer-reviewed data published on reduced reoperations with the Prevost personalized surgery procedures, we continue to execute on our mission to improve outcomes and decrease the cost of health care for spine surgery. Turning to the first quarter, we delivered strong revenue of $16.1 million, representing growth of 58% over the prior year. Our growth was driven by the continued focus on medical education and compelling clinical outcome data, driving expansion of our surgeon base and increasing procedure volumes. Operationally, we continue to leverage our investments in technology to further drive production efficiencies, reducing lead time by more than 30% to six business days in the quarter and delivering more than 200 basis points of margin expansion year over year. Our fully integrated digital system allows us to partner with hospitals, surgeons, and patients to seamlessly integrate into clinic and operating room workflows preoperatively, intraoperatively, and postoperatively for nearly all indicated patients. Our commercial growth continues to be driven by a surgeon-led adoption model and expanding utilization. I am proud to report that we grew our total surgeon user base by more than 60% year over year, reflective of the rapid clinical adoption of personalized surgery procedures. We continue to drive particularly strong engagement from early career and post-fellowship surgeons who are eager to adopt new technology to differentiate their practices and improve outcomes. With our rapidly growing base of surgeon users, we are still in the early innings of market penetration and have a long runway ahead of us. The Opdivo lumbar procedure represents the majority of our business today, where we continue to gain traction within the estimated 445 thousand lumbar spine fusion procedures performed annually in the U.S. Clinical evidence generation continues to support the early adoption of Aprivo by consistently demonstrating improved outcomes for patients compared to stock implants. In January, data published in the Global Spine Journal further validated our personalized spine surgery approach, including evidence demonstrating a 74% reduction in surgery revision rates at two years compared to stock devices. This peer-reviewed study compared two-year revision rates among complex adult spinal deformity patients receiving Carlsmed, Inc.'s Aprivo personalized interbody implants with previously published revision data from a similar patient cohort receiving conventional stock implants. Patients treated with Aprivo experienced significantly fewer revisions due to mechanical complications, showing a revision rate of 4.3% in patients treated with Aprivo compared to a revision rate of 16.6% in patients who had stock devices. To put this into perspective, over the past 25 years, lumbar fusion technologies have not published data to demonstrate significant reduction in reoperation rates at the standard two-year benchmark. In contrast, Aprivo’s patient-specific lumbar procedures have demonstrated clinically meaningful reduction in reoperations driven by significant decreases in key complications like rod fractures and proximal junction kyphosis. Importantly, this improvement is measured against procedures with traditional stock fusion devices used by the most experienced and skilled surgeons. As a further expansion of our Prevel lumbar procedure, we have announced successful completion of the first Aprivo bilateral lumbar fusion procedure in February. We are seeing great data in our limited market evaluation and are on track for our full commercial launch in the fourth quarter of this year. Carlsmed, Inc.'s Suprivo Lumbar Fusion has strong hospital reimbursement from CMS with all Aprivile lumbar fusion procedures covered by one of 11 different MS-DRG codes. The majority of Aprivo lumbar procedures are reassigned to the three elevated major complication or comorbidity MS-DRG codes. This provides hospitals with superior economic and clinical value to provide access to the Aprivile procedure for patients. On 04/10/2026, CMS published the FY 2027 proposed rule for the inpatient prospective payment system. Under this proposed rule, all Aprivile lumbar spine fusion procedures would be reimbursed by one of three new MS-DRG codes—523, 524, or 525—at a premium to traditional spine fusion procedures. If finalized as proposed, we see this development as very positive for patients, surgeons, and hospitals to establish and maintain long-term access to the Prevost lumbar spine fusion procedure. This published rule is preliminary. We anticipate the final rule to be published prior to becoming effective on 10/01/2026. Shifting to cervical, the first quarter 2026 represented our first full quarter in market commercially with the Aprivo cervical fusion procedure, which we launched in December 2025. With an estimated 370 thousand cervical fusion procedures performed annually in the U.S., we believe that this additional growth lever can provide additional momentum in our business as a further extension of the Aprivo platform. Cervical and lumbar spine fusion procedures are performed by spine surgery trained neurosurgeons and orthopedic surgeons alike. Many of the spine surgeons perform both lumbar spine fusion and cervical spine fusion procedures, demonstrating a substantial procedural overlap across spine surgeons. We believe that we can leverage our team to train and onboard many of the surgeons already familiar with the lumbar Privo technology platform on the Privo cervical platform. In the early days of launch, we have already trained more than 20% of our surgeon users on the cervical platform. The Aprivo cervical procedure is designed to address common causes of variable outcomes associated with anterior cervical discectomy and fusion (ACDF) failure, including subsidence, malalignment, and reoperations. The procedure is designed to optimize bone contact surface area to improve load distribution, bone graft loading, preserve end plate strength, reduce subsidence risk, and restore or maintain alignment. To complement Aprivo cervical and achieve progress against some of these challenges in cervical fusions, our newly announced Cora cervical plating system marks the debut of Carlsmed, Inc.'s patient-specific fixation portfolio and represents a fully personalized solution for ACDF procedures. The first procedure was performed in February 2026 at the University of California, San Francisco. We are progressing well with the limited market evaluation and are on track for the launch of Cora cervical personalized plating system in Q4. Much like the lumbar Aprivo procedure, the cervical Aprivo procedure has a strong inpatient reimbursement profile. In October 2025, the Aprivo cervical procedure received a new technology add-on payment up to an incremental $21 thousand 125 hospital reimbursement. This reimbursement program is for a three-year period, and CMS renewed the NTAP payment for FY 2027 as anticipated in the publication of the preliminary rule. Looking ahead, our strategic focus remains consistent and positions us to continue the durable, high-quality growth we have demonstrated to date. Within our first area of focus, patient-centric innovation, we continue to advance our proprietary personalized surgery platform, including AI-enabled 3D surgical planning, workflow automation, patient- and surgeon-specific devices, and single-use sterile-packed surgical instruments, and further procedural integration in the clinic and operating room. As discussed previously, we have demonstrated great early traction with the recent launch of Aprivo cervical, and we are collecting early clinical experience with the bilateral posterior Prevo procedure and personalized Cora cervical plate fixation. Our product innovation portfolio includes further advancement to drive ease of integration in the surgical workflow and further personalization of spine surgery. Our second area of strategic focus is surgeon education and includes further investments in our medical education team and programs to meet accelerating demand for Aprivo personalized surgery. We continue training new surgeons every month by leveraging success in academic centers to drive peer-to-peer surgeon education with the thought leaders in personalized spine surgery. We also continue to support education initiatives with upcoming resident and fellow courses in partnership with leading academic institutions. As previously mentioned, we have seen strong uptake with early and mid-career surgeons who are adopting digital surgical planning into their practice in their efforts to streamline workflow and improve patient outcomes. These surgeon users will continue to shape the future of spine surgery, and this is an ongoing growth driver for Carlsmed, Inc. that we believe will continue to drive adoption and utilization. Our third area of strategic focus, commercial execution, continues to center on surgeon onboarding, increasing surgeon utilization, and expanding within hospital systems. As we continue to scale, we have expanded our strategic and national accounts efforts to enable local and national access across large hospital systems. Across both lumbar and cervical platforms, hospitals are recognizing the clinical workflow benefits enabled by the Aprivoo ecosystem. By providing deeper integration within a surgeon's preoperative and postoperative clinical workflow, we believe that our platform solution can simplify the surgeon's pre-op planning, reduce time and complexity of the spine fusion procedure in the OR, and enhance surgeons' ability to provide predictable outcomes to spine fusion patients. Lastly, we will continue to generate clinical data to support medical education and market adoption of our transformative personalized surgery technology platform. We believe that personalized surgery at scale is a new standard of care for spine fusion and are committed to providing solutions to patients, surgeons, and hospitals that reduce revision surgeries, improve outcomes, and reduce the cost of health care. We are just getting started and look forward to providing further updates on our rapid market adoption. With that, I will turn it over to Leonard, who will review our financial performance. Leonard Greenstein: Thank you, Michael, and good afternoon, everyone. I will begin today with first quarter 2026 P&L highlights. Revenue for Q1 2026 was $16.1 million compared to $10.2 million in Q1 2025, representing 58% growth year over year. This growth was driven by the continued expansion of our total surgeon user base and increased unit volume sales of Aprivile, as our average revenue per procedure remains substantially consistent between periods. Gross margins were 77.1% in Q1 2026 compared to 74.9% in Q1 2025. This 220 basis point increase was driven by our stable average revenue per Aprivo procedure combined with efficiency improvements in our digital production system with investments made over the past few quarters. This now allows us to deliver the Aprivoo kit to the operating room within six business days of surgeon approval of the digital surgical plan. This lead time and the associated production capacity it enables will support our continued scale. Total operating expenses were $21.7 million in Q1 2026 compared to $13.4 million in Q1 2025. Of this amount, R&D expenses were $5.2 million this quarter, compared with $3.2 million in Q1 2025. This increase was primarily due to higher personnel cost to advance our patient-centric product development priorities and AI-enabled initiatives for our digital surgical planning processes. Sales and marketing expenses were $10.3 million this quarter compared with $6.7 million in Q1 2025. This was substantially driven by increased sales headcount to drive our commercial execution strategy and variable commissions to our sales team and independent sales agents with our revenue growth, as well as increased marketing spend. General and administrative expenses were $6.2 million this quarter, compared with $3.5 million in Q1 2025. The increase was driven by personnel additions and professional services costs and legal fees for customary corporate and intellectual property matters, as well as compliance and other public company related costs. Our GAAP net loss was $8.7 million this quarter compared to a net loss of $5.7 million in Q1 2025. EBITDA adjusted for stock-based compensation was negative $7.5 million this quarter, compared to negative $5.5 million during Q1 2025. We anticipate continued improvement in adjusted EBITDA over the coming years driven by expected revenue growth and leverage across our expense base. As we scale, expanding contribution margin dollars enabled by our capital-light, digital-first business model provide a clearly modeled pathway towards cash flow breakeven. Moving to our balance sheet, our cash and investments as of 03/31/2026 totaled $97.1 million. The outstanding principal under our $50 million debt facility remains at $15.6 million. While we have no current plans to make additional draws ahead of its October 2030 maturity, this facility provides low-cost, nondilutive standby capital and supports general corporate flexibility. Total liabilities as of 03/31/2026 were $26.5 million, of which $15.6 million relates to this debt facility. Our cash used in operating activities was $13.0 million during the quarter, compared to $8.2 million in Q1 2025. Unlike traditional medtech businesses that require capital investments and stock implant and instrument sets, our business scales without these barriers to profitability. As a pure-play personalized surgery company, our working capital can be more strategically deployed towards continued commercial investments to drive significant growth, delivery of our operational excellence priorities in digital production, and continued R&D pipeline development for our business value and growth. Turning to guidance, we are raising our full-year 2026 revenue range to be between $72 million and $77 million, representing 48% growth at the midpoint over full-year 2025. As we progress towards profitability, we continue to expect gross margins to remain in the mid to high 70s, and anticipate driving operating expense leverage in the coming quarters with expected revenue ramp in Aprivo lumbar and cervical. With that, I will turn the call over to the operator for questions. Operator: As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from David Roman of Goldman Sachs. The line is now open. Analyst: Thank you. Good afternoon, everybody. I wanted to start a little bit on what you are seeing from a surgeon utilization perspective. We did see strong surgeon adds exiting 2025. Can you maybe give us some perspective on what you are seeing year to date qualitatively, and then how you are seeing utilization across both new and existing surgeons trend in the quarter? And how you are thinking about the balance of the year? And I think, Leonard, in your prepared remarks, you mentioned that average selling prices for Aprivo were roughly flat year over year. If I remember correctly, cervical procedures do come with lower ASP than lumbar. Can you corroborate that point? Is it just that cervical is not big enough as a percentage of total to move average ASPs, and how should we think about the weighted average selling price as cervical becomes a larger percentage of total going forward? Michael Cordonnier: We feel really good about our surgeon enthusiasm for the Aprivile platform. As we exited Q4 with really strong new surgeon adds, we saw that continue to accelerate into the year. As we discussed on the call, year over year, we have added about a 60% increase to our surgeon users. With that, we continue to see ongoing increases in utilization, particularly among those surgeon users that have gone through the initial trial process and continued through adoption. So we feel really good about the utilization and surgeon user adds that we have had. Leonard Greenstein: Yes, David. Our Q1 average revenue per procedures were consistent over the prior year quarter and in Q4 as well as Q1. As we think about the future and the combination of cervical and lumbar, we are projecting our average revenue per procedure to be in the mid to high $20 thousands as cervical takes a greater proportion of revenue over time. The average revenue per procedure for cervical is less than lumbar. To answer your question directly, the contribution margin and the ability for us to further scale our business on a single Aprivile platform that serves both the lumbar and cervical indications with largely the same ballpoint provides the operating leverage in our business to continue to scale efficiently. Operator: Thank you. One moment for our next question. Our next question comes from Travis Steed from Bank of America. Your line is now open. Analyst: Hi. This is Aden on for Travis. So first quarter, first full quarter of the cervical launch, can you talk about the puts and takes and how that is progressing? I think you said 20% of your surgeon users are trained on that. What are you seeing from those accounts that have been trained so far? And are we still expecting high single-digit to low double-digit revenue contribution from cervical for the year? And then I have a follow-up. Michael Cordonnier: Thank you. We feel really good about the traction that cervical has received here in the first quarter of launch. As reported, about 20% of our total lumbar users are now trained on cervical and going through the ramp. As we see this progression, high single-digit to low double-digit percent contribution of revenue from cervical in the total plan for the company looks about right. Analyst: Great. Thank you. And then in the Q, I see a callout of cost improvements and production fees charged by your contract manufacturer. Can you double click on that and talk about if that is a one-time item, or is that something we can expect to continue going forward? Thank you. Leonard Greenstein: Yes. We have made investments in our digital production system holistically that have allowed us to hit that six-day lead time. That really provided efficiencies in our production process inclusive of those with our contract manufacturer. The investments made in earlier quarters going back to 2025 now allow us to cut out costs and time—importantly—out of the system. What we are currently reporting in that high-70s gross margin we see to be sustainable. Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our next question comes from Richard Newitter from Truist Securities. Richard, your line is now open. Analyst: Hi. Thank you for taking the questions, and congrats on the quarter. I wanted to go to the CMS proposal that just came out. You mentioned a premium and also broader coverage. I think in the past those are two things that could be pretty significant tailwinds for you in 2027, assuming everything goes as proposed into the final rule. First, what percentage of your procedures currently are getting reimbursed and covered consistently, and how much would this broaden that coverage or access? Then on the premium, we did some calculations and are estimating it could be an incremental $50 thousand reimbursement for stock implant on average—there is a big range in there—somewhere around $25 thousand to $30 thousand on average today above and beyond the premium to traditional stock implants. Is that ballpark kind of the math that you have worked out? Thanks. Michael Cordonnier: Hi, Rich. Thanks for the questions. I will talk about this in two parts. First, the current state of reimbursement for the Opdivo lumbar platform. As reported in the script, we currently have 11 different MS-DRGs that cover the Aprivo lumbar platform, all with existing coverage and reimbursement. As noted, a portion of those elevate to a higher-paying DRG today. With the proposed IPPS rule, it really simplifies the coding and reimbursement such that all Aprivo procedures would map to one of three different MS-DRGs. Based on your calculations, that seems about in line with the national average, and we agree. We think this is a really great solution that CMS is proposing to give significant reimbursement to these procedures. Analyst: That is great. In terms of where you are potentially meeting resistance or there is just not great coverage currently, what could this do for you from that standpoint? Is it 50% currently? Is it 80%? Give us a sense as to how this could broaden your coverage and access. Michael Cordonnier: We really look at this as access versus coverage because we have full coverage today. Where we really think this will provide value to hospitals in particular is to remove the ambiguity and actually simplify coding for the Aprivo procedure. We see this as very beneficial to hospitals to simplify the process so that they can code procedures as they normally would and know that they will map to the right MS-DRG. Analyst: Okay. That is really helpful. If I could squeeze one more in, just following up to David's question earlier. As cervical increases as a percentage of the mix moving through the year, Leonard, how should we think of the gross margin impact if revenue per procedure gets impacted? Leonard Greenstein: As we mentioned during our prepared remarks earlier, we see gross margins being in the mid to high 70s over the coming quarters. That factors in, as Michael covered earlier, a high single-digit to low double-digit mix between lumbar and cervical. The headwinds with the lower gross margin profile of cervical—notwithstanding the tremendous contribution margin it provides and the leverage it provides in our business—are going to be offset, as we see it, with our efficiencies in digital production for lumbar. Operator: Thank you. Our last question comes from Ryan Zimmerman from BTIG. Ryan, your line is now open. Analyst: Hi. This is Izzy on for Ryan. Thank you for taking the question. Michael, I heard your comments and the discussion around the IPPS proposal for 2027. I was just curious what you have heard in terms of feedback from your hospital customers and surgeons in reaction to the proposal. I know it is going to simplify coverage, but do you expect that there could be some benefit in terms of volumes if it is finalized as written? Michael Cordonnier: Thanks for the question. It is early days, and it is a preliminary rule. We are really holding off on those discussions until the final rule goes into place. However, this is something that, as mentioned, simplifies coding and reimbursement and makes a permanent change to the Aprivo procedure at a higher reimbursement level. Net-net, we think this is better for all stakeholders. Analyst: Appreciate it. Thank you. And then, Leonard, I have heard your commentary on guidance, but as we consider contributions layering in in the back half of the year from those new product launches, is there anything that we need to keep in mind in terms of cadence on the top line? Thanks for taking the question. Leonard Greenstein: We see, over the coming quarters, Aprivo lumbar carrying the majority of our revenue and overall contribution. Certainly, we are very pleased with the early days here at cervical and the clinical results our surgeons are seeing with that indication, and how neatly it tucks into the Aprivile platform and ecosystem. We will provide additional color as we progress into the subsequent quarters with how we see additional things shaping up in the company's favor to further drive revenue beyond what we previously guided. Operator: This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

6天前Insight Analytics约5分钟阅读

KMTUY 2025 Q4 财报电话会议

Hiroshi Hosotani: I am Hiroshi Hosotani, CFO. I will now provide an overview of the business results for the fiscal year 2025. Page 4 shows the highlights of business results for fiscal '25. Foreign exchange rates were JPY 150.5 to the U.S. dollar, JPY 173.8 to the euro and JPY 99.2 to the Australian dollar. Compared to the previous fiscal year, the Japanese yen appreciated against the U.S. dollar and Australian dollar, but depreciated against the euro. Net sales increased by 0.7% to JPY 4,132.8 billion. Operating income decreased by 13.7% to JPY 567.3 billion. The operating income ratio was 13.7%, down 2.3 points. Net income attributable to Komatsu decreased by 14.4% to JPY 376.4 billion. Net sales reached a record high for the fifth consecutive year. ROE was 11.3%, down 2.9 points from the previous year. We plan to pay an annual cash dividend of JPY 190 per share, the same as the previous year, resulting in a consolidated payout ratio of 45.9%. Page 5 shows segment sales and profits for fiscal '25. Net sales in the Construction, Mining & Utility Equipment segment increased by 0.2% to JPY 3,806 billion. Sales exceeded the projection announced in October, as demand was higher than expected. Segment profit decreased by 18% to JPY 491.1 billion. The segment profit ratio was 12.9%, down 2.9 points. Retail finance sales increased by 2.4% to JPY 126.1 billion. Segment profit increased by 24.4% to JPY 36.6 billion. Industrial Machinery and Others sales increased by 6.8% to JPY 238.8 billion. Segment profit increased by 38.5% to JPY 37.9 billion. I will explain the factors behind the changes in each segment later. Page 6 shows the sales by region for the Construction, Mining & Utility Equipment segment for fiscal '25. Sales to outside customers for the segment increased by 0.2% to JPY 3,796.1 billion. Details of regional changes will be explained by Mining and Construction Equipment, respectively, on the following pages. Page 7 shows the sales by region for mining equipment within the segment for fiscal '25. Mining equipment sales decreased by 0.6% to JPY 1,904.4 billion. In Asia, sales decreased due to a decline in demand following low coal prices in Indonesia and demand decline. However, sales increased in Africa and Latin America, where demand for copper mines remained strong, keeping overall sales flat. Page 8 shows the sales by region for Construction Equipment within the segment for fiscal '25. Construction Equipment sales increased by 1.1% to JPY 1,891.7 billion. In real terms, excluding FX impact, sales increased by 0.2%. In Asia, sales decreased as it took time to adjust distributor inventories in Indonesia. Sales increased in North America, driven by demand for infrastructure, rental and energy and in Europe, where infrastructure investment is on a recovery trend. Page 9 shows the causes of difference in sales and segment profit for the Construction, Mining and Utility Equipment segment for fiscal '25. Sales increased by JPY 7.8 billion as price improvement effects outweighed the negative impact of decreased volume. Although we focused on improving selling prices, segment profit decreased. The negative effects of decreased volume, product mix and higher costs due to U.S. tariffs and production costs outweighed the price improvements, resulting in a JPY 107.8 billion decrease in profits. The segment profit ratio was 12.9%, down 2.9 points from the previous year. The impact of tariffs in fiscal '25 amounted to JPY 64.2 billion. Page 10 shows the performance of the Retail Finance segment for fiscal '25. Assets increased by JPY 238.3 billion from the previous fiscal year-end due to an increase in new contracts and the depreciation of the yen. New contracts increased by JPY 75.8 billion, mainly due to higher finance penetration in North America and Europe. Revenues increased by JPY 2.9 billion, mainly due to an increase in outstanding receivables. Segment profit increased by JPY 7.2 billion, mainly due to lower funding costs. Page 11 shows the sales and segment profit for the Industrial Machinery & Others segment for fiscal '25. Sales increased by 6.8% to JPY 238.8 billion. Segment profit increased by 38.5% to JPY 37.9 billion. The segment profit ratio was 15.9%, up 3.6 points. For the automotive industry, sales of large presses increased. For the semiconductor industry, sales and profits increased due to higher maintenance sales of excimer lasers with high profit margins. Page 12 shows the consolidated balance sheet and free cash flow. Total assets reached JPY 6,423.9 billion, an increase of JPY 650.4 billion, primarily due to the impact of the yen's depreciation. Inventories increased by JPY 195.2 billion to JPY 1,601.9 billion, affected by both the weak yen and U.S. tariffs. The shareholders' equity ratio was 54.7%, down 0.3 points and the net D/E ratio was 0.26x. Free cash flow for fiscal '25 was an inflow of JPY 249.7 billion, a decrease of JPY 56.8 billion from the previous year. From Page 13, I will explain the progress of the strategic growth plan. The current strategic growth plan, driving value with ambition, which started in fiscal ' 25, set 3 pillars of growth strategy, create customer value through innovation, drive growth and profitability and transform our business foundation. Under create customer value through innovation, we began operating a power agnostics truck at a copper mine in Sweden as part of our efforts to address various power sources. We also conducted a POC test of a hydrogen fuel cell powered hydraulic excavator at a highway construction site in Japan. As part of our efforts for advanced automation and remote control, we are advancing the development of SPVs for next-generation mining equipment in collaboration with applied intuition. We are also promoting the practical use of autonomous driving technology for Construction Equipment through collaboration with Tier 4. Next, under drive growth and profitability, we received the first major mining equipment order in the Middle East for the Reko Diq Copper Gold Project in Pakistan. We began deploying AHS in the U.S. and delivered the 1,000th unit globally. We will also strengthen our remanufacturing business through the acquisition of SRC of Lexington in the U.S. We have initiated the establishment of a training center in Côte d'Ivoire, and we'll work to strengthen our marketing and service capabilities in the Africa region. Lastly, regarding transformer business foundation, in addition to embedding risk management through ERM and strengthening our supply chain through cross-sourcing and multi-sourcing, we accelerated human resource development for innovation and business transformation through the utilization of AI and digital transformation. We succeeded in improving scores in our employee engagement survey. Also, our global brand campaign led to high recognition at international creative awards. Page 14 shows achievement of management targets in the strategic growth plan. Net sales for fiscal '25 increased by 0.7% year-on-year as improvement in selling prices offset the decline in sales volume. On the other hand, profit decreased year-on-year as the negative impacts of volume reduction and cost increases outweighed the effects of price improvements. Regarding management targets, in terms of profitability, the operating income ratio for fiscal '25 was 13.7%, a 2.3 point decrease from the previous year. Despite efforts to improve selling prices, the results were significantly impacted by volume decline, inflation-related cost increases and higher costs due to U.S. tariffs. In terms of efficiency, ROE was 11.3%, achieving our target of 10% or higher. For the retail finance business, we achieved our targets for both ROA as well as the net D/E ratio. Regarding shareholder returns, we expect to maintain a consolidated payout ratio of 40% or higher. Also, we executed the repurchase of JPY 100 billion of our own shares. Regarding the resolution of social issues, we have set 30 KPIs, and progress in fiscal '25 has been broadly in line. Among these, for the reduction of environmental impact, we achieved our target for CO2 reduction from production ahead of schedule. Reduction of CO2 emissions during product operation and the renewable energy usage ratio are also progressing largely as planned. That concludes my presentation. Operator: With that, fiscal year 2026 forecast of the business, and that will be explained by Mr. Hishinuma. Kiyoshi Hishinuma: This is Hishinuma, the GM from Business Coordination Department. I'd like to walk you through our forecast for fiscal year '26 in our primary markets. Page 16 summarizes the impact of the situation in the Middle East and the U.S. tariffs as well as the underlying assumptions that have been factored into the fiscal year 2026 earnings forecast. And then the fiscal 2026 forecast incorporates items for which estimates can be made based on information available at this time. Regarding the situation in the Middle East, assuming the turmoil in the Middle Eastern countries and soaring oil prices and supply chain disruptions will continue throughout the year. We have factored in a decrease in sales of JPY 90.1 billion and an increase in cost of JPY 18.8 billion. However, regarding the impact on production due to shortages of crude-oil-derived materials, while there is a risk, the situation is unclear at this time. Therefore, it has not been factored into the fiscal 2026 outlook. Now on to U.S. tariffs. Based on assumptions of Section 122, additional tariffs will apply throughout the year and the revised steel and aluminum tariffs will apply from April 6 throughout the year. We have factored in additional costs of JPY 67.8 billion. However, we have also factored in JPY 30 billion in refunds, resulting in a net cost increase of JPY 37.8 billion. Page 17 provides an overview of the outlook for fiscal year 2026. We anticipate exchange rates of JPY 150 to the U.S. dollar, JPY 170 to the euro and JPY 106 to the Australian dollar. We project net sales of the JPY 4,118 billion, a 0.4% year-on-year decrease and operating income of the JPY 508 billion, a 10.5% year-on-year decrease. Net income is projected to be JPY 318 billion, a decrease of 15.5% year-on-year. Furthermore, at the Board of Directors meeting held today, a resolution was passed to repurchase treasury stock up to a maximum of JPY 100 billion or 25 million shares and to cancel all repurchase shares during fiscal year 2026. ROE for fiscal '26 is projected to be 9.1%. The dividend per share is planned to be JPY 190, the same as previous year, and consolidated dividend payout ratio is projected to be 53.8%. In addition, when the JPY 100 billion share buyback announced today is included, the total payout ratio is projected to be 85.4%. Page 18 presents the revenue and profit forecast for each segment. Revenue for the Construction Machinery and Mining Equipment and Utilities segment is expected to decrease by 0.4% year-on-year to JPY 3.79 trillion, while segment profit is expected to decrease by 10.4% to JPY 440 billion. Revenue for Retail Finance is expected to increase by 1.1% year-on-year to JPY 127.5 billion, while segment profit is expected to decrease by 1.6% to JPY 36 billion. Revenue for Industrial Machinery and Others is expected to increase by 0.1% year-on-year to JPY 239 billion, while segment profit is expected to decrease by 2.5% to JPY 37 billion. We'll explain the factors behind the change in each segment later. Page 19 presents the regional sales forecast for the Construction Equipment and Utilities sector for fiscal '26. Sales of this segment are projected to decline by 0.5% year-on-year to JPY 3,778.2 billion. Details of the year changes by region are provided on the following pages, broken down by Mining Machinery and General Construction Machinery. Page 20 presents the regional sales forecast for Mining Machinery within the Construction Equipment and Utilities segment for fiscal '26. Sales of mining equipment are expected to decline by 2.4% year-on-year to JPY 1,858.5 billion. Sales are expected to decline in Asia and Middle East due to sluggish demand for coal and impact of situation in the Middle East. In North America and Oceania, demand is expected to decrease as mining companies complete their equipment renewal cycles, leading to a decline in sales. Page 21 shows regional sales forecast for general Construction Equipment within the Construction Equipment and Mining Equipment Utilities segment for fiscal '26. Sales of general Construction Equipment are forecast to increase by 1.5% year-on-year to JPY 1,919.7 billion, while sales expected to decline in Middle East and Asia due to regional situation. Overall sales of general Construction Equipment are projected to increase year-over-year, driven by growth in North America, where demand for infrastructure energy project remains strong and in Latin America, where public investment is robust. This page outlines the factors contributing to the projected changes in sales and segment profit for this segment. Although we are striving to improve selling prices, sales are expected to decrease by JPY 16 billion year-on-year due to negative impact of lower sales volume caused by situation in the Middle East. Segment profit is expected to decrease by JPY 51.1 billion year-on-year, although we will strive to improve selling prices. This is due to the negative impact of lower sales volume, the expanding impact of tariffs and rising procurement cost. The segment profit margin is expected to decline by 1.3 percentage points year-on-year to 11.6%. Page 23 presents the outlook for retail finance. Assets are expected to increase by JPY 23.6 billion compared to the end of the previous fiscal year as new lending exceeds collections. New lending volume is expected to increase by JPY 5 billion year-on-year as we anticipate a high utilization rate continuing from the previous year. Revenue is expected to increase by JPY 1.4 billion year-on-year, primarily due to an expansion in outstanding loan balance. Segment profit is expected to decrease by JPY 0.6 billion year-on-year, primarily due to higher costs. ROA is expected to decline by 0.1 percentage points year-on-year to 2.3%. Page 24 presents the sales and segment profit outlook for Industrial Machinery and Others. Sales are projected to increase by 0.1% year-on-year to JPY 239 billion, while segment profit is expected to decrease by 2.5% year-on-year to JPY 37 billion. In the Semiconductor Industry segment, sales are expected to increase due to customers ramping up production amid the market recovery. However, for the automotive industry application, revenue is expected to rise, while segment profit is expected to decline due to factors, such as decreased sales of large presses and automotive battery manufacturing equipment as well as rising procurement costs resulting from the situation in the Middle East. The segment profit margin is expected to decline by 0.4 percentage points year-on-year to 15.5%. Starting on Page 25, we will explain the demand trends and outlook for the 7 major Construction Equipment categories. The demand figures for the 7 major Construction Equipment categories include the mining equipment. The figures for the fiscal year '25 are preliminary estimates based on our projections. Demand for fiscal '25 appears to have increased by 5% year-on-year. For fiscal year '26, we anticipate a year-on-year decline in demand ranging from 0% to negative 5%. In addition to decline in demand in Indonesia, we expect a decrease in demand in Middle East and neighboring countries due to the deteriorating situation in the region. Page 26 outlines the demand trends and forecast for the North American markets. Demand for the 2025 fiscal year appears to have increased by 3% year-over-year. Demand remains strong in sectors, such as data centers and other infrastructure, rentals and energy. The demand forecast for '26 fiscal year is expected to remain on par with the previous year. We anticipate the infrastructure and energy sectors will continue to drive demand as we go forward. Page 27 shows the demand outlook and demand for European markets. The demand units for 2025 fiscal year is expected -- was expected to increase by 4% previous year. And the demand outlook for '26 is expected to be 0% to positive plus percent -- positive 5%. And Germany and the U.K. public investment demand is expected to lead overall demand, and we are expecting to see the robust demand. Page 28 covers demand trends and outlook for the Asia market. Demand for '25 fiscal year appears to have increased by 5% year-on-year. In Indonesia, although the demand for mining machinery declined due to sluggish coal prices, overall demand increased due to rising demand for general construction machinery, such as food estate projects. In India as well, demand increased driven by aggressive infrastructure investment. The demand outlook for fiscal '26 is projected to be a decrease of 5% to 10%. While demand in India is expected to remain robust, demand in Indonesia is forecast to decline significantly due to the government's policy to reduce coal production and the impact of the introduction of the B50, which is biodiesel fuel regulations. Page 29 outlines the trends and outlook for demand in the Japanese market. It appears that demand for the 2025 fiscal year declined by 13% compared to the previous year. We expect demand for '26 to remain at the same level as the previous year. Although nominal construction investment is increasing due to inflation, real-time growth -- real-term growth is stagnant due to soaring material and labor costs, and there are currently no signs of recovery in demand. Page 30 presents trends and outlooks for the prices of key minerals related to demand for mining machinery. We expect copper and gold prices to remain at high levels going forward. While both low grade and high-grade thermal coal are currently trending upward, we will continue to monitor future developments closely. Page 31 shows the trend in demand for mining machinery. It appears that the number of units in demand for fiscal '25 decreased by 10% year-on-year. Overall demand declined due to a significant drop in demand for coal-related machinery in Indonesia. The demand forecast for fiscal '26 is expected to be a 10% to 15% decline. Although demand for copper and gold mining equipment is expected to remain at a high level, overall demand is projected to decline due to weak coal-related demand and the completion of the replacement cycle in North America and Oceania and the impact of the situation in the Middle East. Page 32 presents the sales outlook for the construction machinery, mining equipment and Utilities segment, including equipment, parts and services. In fiscal '25, parts sales increased by 0.4% year-on-year to JPY 1,055.2 billion. The aftermarket segment as a whole, including services accounted for 52% of total sales. Excluding the impact of ForEx, total aftermarket sales increased by 1% year-on-year. For fiscal '26, parts sales are projected to increase by 2.2% year-on-year to JPY 1,078.5 billion. The aftermarket overall sales ratio, including services, is projected to be 53% and aftermarket sales, excluding ForEx effects are projected to increase by 3.1% year-on-year. The Page 33 presents outlook for capital expenditures and other investments for fiscal year '26. Excluding investments in rental assets on the left, capital expenditures are expected to increase year-on-year due to investments in production and sales facilities as well as the reconstruction of the head office. Research and development centers shown in the center are expected to increase year-over-year due to focused investment in adapting diverse power sources and automation. Fixed costs shown on the right incorporate the effects of the structural reforms. However, they are expected to increase year-over-year due to wage increases and higher R&D expenses. Next, I'll explain the main topics. Page 51 now. Komatsu has acquired a remanufacturing business for construction and mining machinery components and parts from SRC of Lexington through its wholly owned subsidiary, Komatsu North America, Komatsu America Corp. In 2009, Komatsu transferred its North American remanufacturing business to SRC Lexington, and since then, has continued to do business with the company as one of its most important suppliers for Komatsu's North American remanufacturing operations. With this acquisition of SRC of Lexington's remanufacturing business, Komatsu will further expand this operation by establishing a new dedicated manufacturing facility in North America, one of the largest markets for construction and mining equipment. Page 52. In December 2025, Obayashi Corporation, Iwatani Corporation and Komatsu conducted demonstration test of hydrogen fuel cell power hydraulic excavator during rockfall prevention work on the Joshin-Etsu Expressway. The test confirmed several benefits, including operational performance equivalent to that of conventional diesel-powered models and reduced operator fatigue due to the absence of vibration. At the same time, we reaffirm the challenges facing practical implementation, such as the need for higher capacity and the faster hydrogen supply and refueling systems. The three companies will continue to conduct the studies and verification tests aimed at practical implementation. Page 53. Komatsu exhibited at CONEXPO International Construction Machinery Trade Show held in Las Vegas, U.S.A. from March 3 to 7. The company showcased a new generation of vehicles, including bulldozers and hydraulic excavators equipped with the latest features, such as intelligent machine control as well as articulated dump trucks designed to further improve operational efficiency. Komatsu highlighted its initiatives to leverage data from vehicles and digital solutions to enhance customer productivity and safety while reducing total cost of ownership. Page 54. Komatsu has acquired Malwa Forest, a forestry machinery manufacturer through its wholly owned subsidiary, Komatsu Forest. By acquiring technological capabilities and product lineup for lightweight compact cut-to-length forestry machinery, specifically designed for thinning operations, a segment in which Komatsu previously had no presence, the company will contribute to value creation across the entire circular forestry process. Page 55. We have reached a cumulative total of the 1,000 units for our ultra-large autonomous dumb truck equipped with autonomous haul system, AHS, for mining operations. Since introducing AHS for the first time in the world in 2008, the cumulative total haulage volume has exceeded 11.5 billion tons. That concludes my presentation. Operator: Now we would like to move on to the Q&A session. So first, we would like to take any questions from the people here. Maekawa-san from Nomura, please. Kentaro Maekawa: This is Maekawa from Nomura. I have 2 questions. First, regarding tariff impact and price increases. Hosotani-san, you mentioned this in your presentation, but last fiscal year, JPY 64.2 billion was the cost impact. I think originally, you were expecting JPY 55 billion and about JPY 120 billion, which is 4 quarters -- a quarter multiplied by 4, what's going to be your expectation for fiscal '26? So what kind of changes did you experience in reaching your results for fiscal '25? Can you confirm that first? And what have you accounted for, for this fiscal year? Kiyoshi Hishinuma: This is Hishinuma speaking. Regarding U.S. tariffs, there are no major changes on a dollar basis. While we were converting it at JPY 140 before, but now it's at JPY 150 against the dollar or to be more exact, JPY 150.5 against the dollar. Therefore, on a U.S. dollar basis, it's not different. It hasn't changed. It's just because of the FX impact. For fiscal '26, the impact will materialize on a full year basis. So it was about around JPY 600 million before, but it should reach around JPY 900 million. Other than that, we have accounted for refunds as well, which is equivalent to the reciprocal tariffs that are likely to be refunded. So that's what we have accounted for. Kentaro Maekawa: So if it's $900 million, it's about JPY 135 billion. For steel and aluminum, how much of an increase? How much of a decrease are you expecting from reciprocal? And the JPY 30 billion refunds are also included in the JPY 135 billion. So when you look out at March '28, is it going to become JPY 165 billion? So can you break down the JPY 135 billion? What has been going up, what has been coming down? Or can you talk about how it's going to rise from the JPY 64.2 billion? Kiyoshi Hishinuma: Well, regarding the period, before, it was from the middle of the year. So at the beginning of the year, we did have inventory from the previous year. So we started paying the tariffs at a later timing from a payment point of view. From a P&L impact, we had year-end inventories. So it was relatively low. But in fiscal '26, from the beginning of the fiscal year, we are making payments. So there is a period difference. And regarding the details, reciprocal tariffs may be gone. But for steel and aluminum, we used to calculate the content in order to reduce the level of tariffs paid. But now it's at 25%. So the impact is greater. So that is one reason why it's greater than before. From that point of view, for the refunds, that's about last fiscal year's portion. So for fiscal '27, we won't have deferrals from the previous fiscal year. Therefore, we will see full impact. So if nothing changes, it's likely to be JPY 165 billion. Next year, of course, that 10% or Article 122, when that's going to end is a question mark. But well, if we're working off the assumption that the same thing is going to materialize for the next year, that's what we're accounting for, but we are not sure. In that case, it's JPY 135 billion, for next year, the following year, if sales and production is not going to change, it should be about JPY 130 billion for fiscal '27 as well. And this year, it's JPY 30 billion less, or excuse me, for the results for fiscal '25, we already said that it was JPY 64.2 billion. And for fiscal '26, originally, we were guiding JPY 130.7 billion or JPY 130.8 billion. But because of the refunds that we were explaining, which is worth USD 200 million, which we view as JPY 30 billion in terms. So when you account for that, it should be a little bit over JPY 100 billion of an impact on our P&L. Kentaro Maekawa: Got it. For price increases, and on Page 22, when you look at the projections for selling prices, it's plus JPY 68.9 billion. So hypothetically, even if you don't get the refunds at JPY 130 billion, you should be able to make up for it through price increases. Are you making progress? And have you gained visibility already? Can you also speak to that? Kiyoshi Hishinuma: This is Hishinuma speaking. Regarding pricing, we did a bottom-up approach looking at the business plans of our subsidiaries, but price increases are also accounted for, for the U.S. But Caterpillar is not raising prices, and those are the circumstances. So there may be a risk. However, for the tariff increases in the U.S., we won't be able to absorb it completely just with the U.S. So global price increases need to happen. So that's what we're accounting for. Kentaro Maekawa: Understood. My second question is for this fiscal year and your view on volume. Also going back to Page 16, in light of the Middle Eastern conflict, you have reduced sales by JPY 90.1 billion. And last year, when there were some tentative assumptions for GDP as much as you can see, what can you see, what can you not see? So what are the assumptions that led you to JPY 90.1 billion? Because in mining, when energy prices are high, I think that may also serve as a positive. So I was wondering how you view this situation. Kiyoshi Hishinuma: This is Hishinuma. First, regarding demand for the Middle East, a 60% decline is expected. So that has been accounted for, 6-0 percent. And also due to the impact from the Strait of Hormuz, we believe that costs are likely to increase and especially negative impact on countries in Asia. So we are expecting sales to decline. But when it comes to higher coal prices, there is a chance that they may stimulate demand. But when you look at countries like Indonesia, it's true that what originally used to be $40, $50 a ton are now reaching $60 a ton. But even so, we are seeing a higher idle standby rate of equipment, and we're not sure if this is going to continue or not in the future. So demand has not really picked up. So currently, people are still on the sidelines waiting and seeing. There may be an opportunity, but so far, we have not accounted for that in our expectations. Takuya Imayoshi: Just to add a comment to that. Last year, U.S. tariffs just started. So it was hard to account for it in our guidance. But based off IMF predictions and so forth, we have viewed how much GDP is likely to decline and what's going to happen to demand. And that is why we accounted for JPY 50 billion decline in sales. But the global economies have not yet fallen, but we try to account for risk as much as possible to the extent that we can calculate. And also the Middle Eastern crisis, we don't really know its impact clearly yet, but our way of thinking is the impact from the Strait of Hormuz is likely to continue. That's the assumption we have. But then because we are dependent on crude oil as well as LPG, like -- in regions like Africa as well as Asia are likely to be affected. So like Hishinuma-san explained, we are expecting a demand decline in Asia as well as in the Middle East, leading to a sales decline in turn. And also accounting for our gut feeling that we have experienced from the past, we have accounted for a JPY 90 billion impact. And also due to higher crude oil prices, we are already seeing material prices increase that are crude-oil-derived, and that impact is JPY 18.8 billion. So this is purely looked at as a cost increase. So JPY 90 billion of volume decline and JPY 18.8 billion of a cost increase SVM-wise is what we've assumed due to what I've just explained. On the other hand, of course, the impact may be greater than our assumptions or the crude-oil-derived goods may fall to a shortage, which may affect our production, but that is still not known. So we have not accounted for that negative impact. Operator: I would like to move on to the next one, Sasaki-san from UBS. Tsubasa Sasaki: This is Sasaki from UBS Securities. I've got several ones, but the first question is the figures I always ask you. Page 22, this waterfall chart and volume product mix and also the cost variance. Looking at the Page 9 and Page 22, the plan and actual performance, and there have been some figures related to tariffs, but could you please give us the details around those factors? And this volume mix has been negatively contributed to your performance. So the negative JPY 32.2 billion, that's in your plan, but what gets you to that number? Hiroshi Hosotani: This is Hosotani speaking. First, Page 9. Page 24 and Page 25 variance. First in segment profit, JPY 72.6 billion of the volume mix and product mix difference, just hold on a moment. I'm sorry on this one. First, JPY 25.8 billion for the volume difference, and that was a negative. And also product mix, JPY 25.1 billion, that's included. Now factors for this, is that as we explained, electric dump truck, as we explained those up until the last fiscal year, and it's not that they were able to enjoy the higher profitability, but the mix increased for this electrical dump truck. And also Chile contract business margin declined slightly. And also regional mix had negatives here. And among the region, the highest profitability comes from Indonesia. And sales volume significantly decreased in Indonesia market. And that's why regional mix has seen the impact from that and JPY 19.6 billion approximately. Now moving on to the right and production cost, JPY 81.6 billion negative. Let me give you the breakdown for that, which includes the U.S. tariff cost increase, JPY 64.2 billion. This is only applicable to the Construction Equipment of the JPY 64.2 billion and other ones, like the variance coming from industry others, Industrial Machinery and Others. And also cost variance, let me give you the breakdown for that. From third party, we purchased components, the major components, and those costs started to inflate. So that's why there is the major variance of cost of goods. And fixed cost variance, fiscal '24 to '25, the labor cost significantly increased. Apology, you talked about the volume variance, apology, hold on a moment. For fixed cost, JPY 20 billion comes from the labor cost and the SGP projects were underway. And also the variance in comparison between '25 and '26, JPY 31.8 billion of the volume that's been included here, and of which the volume mix amounts to JPY 40 billion. JPY 40 billion, the big chunk comes from Indonesia. Hold on a moment. Other than volume mix, the regional mix and product mix are written here. Fiscal '25, the losses we have to make were all gone for '26. So JPY 31.8 billion included volume mix and that amount to JPY 40 billion. That's all from me. Tsubasa Sasaki: What about the variance of cost of goods? Because I guess the cost increases comes from the conflict in the Middle East. Hiroshi Hosotani: Yes. Fiscal '25 and '26, JPY 49.6 billion for production. The U.S. tariff's impact is included here in this number. About JPY 67 billion is included here, but at the same time, the JPY 30 billion of the refund is included. So the net it all out, the JPY 37 billion of cost increase is included here. And also other cost of goods variance, JPY 10 billion-some is also included. Tsubasa Sasaki: My second question, let me take this opportunity to ask this question of Hosotani-san. You took office as CFO. Give us your commitment as a CFO as we look ahead. For example, as a Komatsu, the capital efficiency improvement and the better margin, I mean, there could be a number of the lists that you want to attain, but you're succeeding Horikoshi-san and took office as CFO. And as one of the members of the top management team, what are the things would you like to achieve? I mean this is your first time to be here in a financial briefing. Do you have any commitment would you like to make? That's my second question. Hiroshi Hosotani: Well, you set the high bar for me actually, but let me try to answer. My predecessor, Horikoshi-san, mentioned this too. But basically, we always have to be mindful of the shareholders in running the business. And I would like to be contributing to the way we run the business. So shareholder returns and balance sheet and ROE, those indicators are the things I always look. For example, in comparison '25 to '26, the net income -- I mean, volume declined because of the conflicts in the Middle East. So net income declined. Business size and the revenue size need to expand from our perspective. And to that end, we are engaged in various activities. As we expand the business size, I would like to be of a support for the better decision on the management level so that we are able to have a better top line. I'd like to engage in those activities as CFO. Tsubasa Sasaki: Is it more like a better top line? Is it one of the things, which you like to commit? That's what I get from your message. What made you think that way? Hiroshi Hosotani: Well, for example, as we look at the current status, the conflicts in the Middle East and there are impacts from that. It takes time until the situation will go back to where it has been. So in the longer term, this is the one-off factor. But the U.S. tariff is concerned, some say this is a one-off factor, but at the end of the day, this is about the balance of the export-import of the United States and other countries and try to correct this imbalance. So these costs are permanently are subjected to occur. So that's why we need to continue to contribute to the cost, but net profit size need to be secured to an extent, which means that we are able to -- we need to have a better top line. Operator: Let's take the next question from SMBC Nikko, Taninaka-san. Satoshi Taninaka: This is Taninaka from SMBC Nikko. Regarding mining equipment, mainly, I have 2 questions. For metal prices, including coal prices, they are rising lately. And in the new fiscal year, when you add up the after services, you're only accounting for about 3% growth year-over-year. I think you're being conservative when you think about the underlying trends. And when you look at the underground mining equipment manufacturers' results, their growth rates look stronger. So can you talk about the backdrop to how you derive these assumptions? Kiyoshi Hishinuma: This is Hishinuma speaking. For mining equipment, as you rightly said, prices have been going up for, obviously, copper and gold and so forth. But on the other hand, for equipment and the way we look at demand, the replacement cycle is pretty long. So there's ups and downs. And also when you look at it by region, there are regions where we're expecting higher demand and other regions where we're expecting lower demand. That's for equipment. And the growth we're expecting for the aftermarket business may look small. However, we did see drop-offs that were quite significant in Indonesia and also in the Middle East, including reman, we have been growing the business, but all in all, the numbers may not look as dynamic as you were expecting. Satoshi Taninaka: My second question is with respect to the replacement cycle and you talked that it has run its course. From 2011 through 2013, demand for mining equipment grew quite substantially. And then you have a replacement cycle. And are you trying to say that the message was that the replacement cycle is over? Or are you saying that over the short term, there are ups and downs and replacements are at a standstill at this moment? So for March '28, are you trying to imply that demand is going to go down even more? Kiyoshi Hishinuma: Well, the cycle we're referring to is not about the 2011 cycle. It's more about whether we have big deals or not in recent years. For example, in North America, in '24, '25, in North America, there were some big deals. And we have been explaining that some big deals have been absent in 2025 because there were more in 2024. So they were less in 2025. And in 2026, we are expecting at this moment less of large deals. But regarding the share volume of general deals, we are actually seeing an increase. So it's just a matter of whether or not we are carrying large deals or not. For example, in the case of Australia, in fiscal '26, we're not expecting that much of big deals, so to say. That's what we were referring to. But for super large dump trucks that we manufacture in North America, when you look at our production plans and compare '25 with '26, production volume is not going to change that substantially. Even if the sales may not be recognized in 2026, there is a possibility that it's going to go into 2027 sales. And rope shovels are being produced at 100% capacity. And we are also working on fiscal '27 already. And because copper is doing well, we're not really expecting that much a decline. However, we need to monitor closely the trends in Indonesia. Operator: I would like to take a question from Adachi-san from Goldman Sachs. Takeru Adachi: This is Adachi from Goldman Sachs. I have 2 questions, too. The first one, the mining equipment. As Hishinuma-san shared, Asian market, usually coal prices are on the rise, which is positive, but diesel prices and operating costs have been boosted, which is negative and negative outweighed the positive and the dormant that populated the vehicles is increasing. And what are the changes that you have seen for dormant and idle vehicles? And I think up until Q1 last fiscal year, there was a last minute demand was very strong and that sub demand in Q2. But as you look ahead, Q1, you see the sales can drop from the fiscal year, but do you think that, that will be flattish after Q2? Or do you think that Q2 and beyond, do you think the moderate decline continues, especially for the Indonesia mining equipment market? Kiyoshi Hishinuma: For Indonesia, as you raised a number of the points, the idle vehicles ratio and what are the historical trends? For example, 2024, the end, 5%, they used to be 5%. Then fiscal '25 in June, 8.5%. And then that was up to 9.6% in January and 10% afterwards and 17% in January. So the coal prices goes up and even the workload increases, and they are able to handle the increase in volume with the coal prices with the current volume. So B40 and now start in July, it starts B50 and production volume, 800 million tonnes, 600 tonnes -- 600 million tonnes. And there are some talks of increasing the volume. Throughout the year, we are not 100% confident that there are bound to increase. So fiscal '26, I believe that we are seeing this as a cautious note. Takeru Adachi: As Tanigawa-san and yourself discussed a bit, Indonesian coal and precious metal have been pretty strong in prices and the production plan is at full, as you said. In order to accelerate it, would you like to accelerate further on that point? Kiyoshi Hishinuma: In North America production capacity ramp-up, rope shovel might be at full. The electric dump truck production plan for fiscal '26 and '25 will be equivalent, I said. But versus what it has been in the past, there are some time where we produce more. So at the full capacity, if we produce them, and there could be some more availability. So in North American market, we are not -- we haven't gone to the point where we are dealing CapEx. Takeru Adachi: Okay. Next one is cash flow and the buyback is announced. And the previous year and two years ago, like those 2 years, you have announced JPY 100 billion. What are the decision-making process like? And behind that, free cash flow assumption were -- would have been calculated. How much free cash flow you're expecting, JPY 160 billion is expecting, I guess. So how much of the operating cash flow and the working capital level? And what are the production assumption to the working capital? Maybe you can have a breakdown approximately. Do you have any up and down of your planning for production? Hiroshi Hosotani: This is Hosotani speaking. For free cash flow, fiscal '24, free cash flow, JPY 300 billion-or-some. That's fiscal '24. And it's been a few years, the JPY 250 billion to JPY 300 billion of the free cash flow. That's our track record of the free cash flow. Now with this amount, dividend and buyback of the JPY 100 billion, we have enough excess capacity to do that with this amount because it amounts to JPY 300 billion. Now for fiscal '26, free cash flow or as planned of the JPY 250 billion plus and deposits and others, I mean, sales were not growing and profits declined, but the working capital is expected to improve. So as a result, so we are able to generate equivalent level. JPY 300 billion plus of the free cash flow are our commitment. So that will continue for 3 years. And M&A portion excluded, then JPY 1 trillion. And that's a commitment and goal we set ourselves. Operator: There are people raising their hands on Zoom. So we would like to take that question from [ Otake-san ], please. Unknown Analyst: Can you hear me? This is Otake speaking. Operator: Yes, we can. Unknown Analyst: Just wanted to confirm again. First question is regarding the impact from U.S. tariffs, please let me sort it out. For the year ended in March 2026, the impact was JPY 64.2 billion on your P&L. Is that correct? Hiroshi Hosotani: That is correct. JPY 64.2 billion for Construction Equipment. That's for Construction Equipment. But for Industrial Machinery, there are -- there is a bit of tariff's impact as well that has been incurred. Unknown Analyst: Up until the previous results, according to the materials, you were saying JPY 55 billion of impact from tariffs. So does this include Industrial Machinery as well on top of Construction Equipment? Kiyoshi Hishinuma: It's only several hundreds of millions of yen attributed to Industrial Machinery. So the level doesn't really change. There was about JPY 400 million of an impact from Industrial Machineries and Others. Unknown Analyst: Got it. And for -- from the assumption of JPY 55 billion, the reason why it increased to JPY 64.2 billion is due to FX impact, right? Kiyoshi Hishinuma: Yes, exactly. Unknown Analyst: No differences on the U.S. dollar basis, broadly speaking. It's just due to the differences in conversion FX rates. So for this fiscal year, for the year ending March '27, excluding refunds, you're expecting JPY 130.8 billion. Is that correct? Hiroshi Hosotani: That is correct. Unknown Analyst: Got it. And the impact amount, the reason why it's higher, you were saying that the content calculation has been abolished and that has had an impact. Can you walk me through what that means and entails? Kiyoshi Hishinuma: Regarding content, for steel and aluminum content, you calculate how much is included for -- as part of your product prices or cost. And that is subject to steel and aluminum tariffs and the rest to reciprocal tariffs. So by calculating the content, we have been able to reduce its cost. And even for derivatives, it is 25% now. So when we were calculating the content, it was less than 25% basically. Unknown Analyst: Or by doing a precise calculation of content, you have been explaining from before that you are able to reduce the cost. But I guess that is not possible anymore. Then in order to reduce tariff impact going forward, such as reviewing our supply chain or logistics, I think that will be key, but with respect to these measures, in order to reduce the negative impact, what are you focusing on? Or what would you like to focus on going forward? Takuya Imayoshi: Well, last year, in April, we shared with you various types of countermeasures we were planning for. For the products that used to go through North America that went to ultimately Canada or Latin America, by shifting to direct shipments instead and shipping out to Canada directly, we will be able to alleviate the impact, and that is fully contributing already. And there are some parts that are going through the U.S. as well. But by directly shipping and also creating warehouses in Panama, we are trying as much as possible to reduce the impact. And for countermeasures, for steel and aluminum tariffs, not by simply just paying for it, but by calculating the content, we had been trying to minimize the tariff impact. However, now it's going to be 25% across the board. So that countermeasure is no longer viable. However, reciprocal tariffs are now gone. So on a net-net basis, the actual amount of payments are slightly up. You referred to the P&L, but the impact on '25 and the impact on '26 because of more inventory impact, it's going to become a greater impact. And the difference in tariff rates have also been impact -- are expected to impact us as well. Unknown Analyst: I see. So you are working on various initiatives. But in order to mitigate tariff impact even more, one kinds of feels that it may be challenging. But what would you like to do additionally? Or do you feel that you will be able to reduce its impact? Takuya Imayoshi: Of course, increasing production in the U.S. is something we are considering. But from a cost point of view, it is also challenging, which is preventing us from doing so. So I think it's more of a buildup of various improvements. And hopefully, we could raise prices to make up for it globally or reduce costs globally as well so that we can ensure that we are profitable. And sorry for going on, but for price increases, you were talking about Caterpillar and that they are not raising prices recently, but currently, in the U.S. as well as in other regions. Unknown Analyst: When you look across the competitive landscape, how are the price increase trends from your point of view? How do you view the market? Takuya Imayoshi: Well, we have been communicating this from before. But from several years ago, in accordance with higher steel prices, we have been increasing prices, but our competitors have been more bullish in raising prices. So we were a little bit behind. But in order to catch up, we have continued to steadily raise prices. But now steel prices have calmed down and price increases just limited to higher tariffs is not really happening, and that is why we are seeing difficulty here. Unknown Analyst: My final question is about the Middle East and its impact. JPY 18.8 billion of a cost increase is what you're expecting. Can you break it down? How would it look like? Can you share it with us as much as possible the breakdown? Kiyoshi Hishinuma: It's -- costs are rising and parts are rising due to oil-derived products and also logistics, transportation costs because of higher fuel costs, that has been accounted for as well. The majority is because of higher parts prices and cost increases. Takuya Imayoshi: Meaning fuel, oils, paint, gas that are oil-derived, material prices have already been going up quite a lot. So that has been accounted for as a cost increase. Unknown Analyst: I see. So procurement cost increases is about maybe 80% of the cost increase and maybe 20% to 30% associated with seaborne transportation. Takuya Imayoshi: Maybe it's like a 70-30 split. Operator: I would like to take questions from anyone joining us online. BofA, Hotta-san. Kenjin Hotta: This is Hotta from Bank of America. I have 2 questions, too. First, with the conflicts of the Middle East and that has impacts on volume and other mix. On the production front, you have uncertainties, so you haven't incorporated them into the guidance, as you said. But if possible, on production front, how much impact do you think that there is? You said there is nothing for now, but given the current situation, how much potential impacts you might have to suffer from? Or are you saying that you have enough inventory, so you are able to have the muted impacts from that on the production front? Give us the details around production areas, if there's anything you can share with us. Kiyoshi Hishinuma: Well, first on production area or production front. First, we try to sustain production work, and we try to work with suppliers. We try to secure enough works and components. And how far we are able to secure them? It's not to say that we are able to secure them for 6 months and 1 year ahead. So we always have to cement where we are, and we try to secure production. To the worst-case scenario, naphtha and other materials could have issues in the future. And if and when, if we can secure some of the materials from plants for any of the one single supplier and the production itself could be impacted. But when would that happen? We're still not sure. That's why we haven't incorporated the potential factors into the guidance this time. Kenjin Hotta: Okay. My second question is the mining equipment. You said replacement cycle. And you said that there is a completed replacement cycle now, but fuel is on the rise. So a little bit outdated equipments. Needs to have -- needs to be a newer ones so that, that uses less oil or less fuel. Is that kind of the replacement demand that you're seeing? Kiyoshi Hishinuma: Well, it's not going to be a replacement cycle you're going to see in the passenger cars. Kenjin Hotta: Okay. But to stay on the same topic of the fuel prices, if you look at the Australian market, diesel shortages is very dire and SMEs mining companies started decide the shortage of diesel and they need to compromise the utilization ratio recently. And BHP has no issue whatsoever because they are big enough. But Australian market is primarily a market where the utilization ratio for the machine is declining. Is that something you're saying? Or isn't there any impact on your operation whatsoever in terms of the diesel shortage? Takuya Imayoshi: Well, we haven't witnessed any of the specifics, be it suspension of the operation itself, but there are risks, yes. Operator: There's another question from online, McDonald-san from Citigroup Securities. Graeme McDonald: Can you hear me? Operator: Yes, we can. Graeme McDonald: This is McDonald speaking. I have a question about Page 26 in North America. Looking at the right-hand side for Q4, for the 7PLs, it was plus 7%. And going back, I think for the first time in several occasions, it was a good number, maybe several years, where you're seeing an uptrend even so for this fiscal year. For volume, you're expecting flattish demand compared to fiscal '25. The non-housing space, when you look at the segments like mining, energy, road construction and data centers and so forth, for this fiscal year, I kind of think that you're conservative in your projections for North America this year. Of course, I'm sure you have a lot of concerns in your heads. But why are you guiding flattish demand? Shouldn't you be guiding having an assumption that is more positive? That's my first question. Kiyoshi Hishinuma: Thank you for the question. For North America, as you said, what we show in the material for Page 26, at the bottom right, we show the breakdown of demand by segment, divided into rental, energy, infrastructure that are performing positively across the board. It was only housing as well as government-related that was negatively contributing. So all in all, the trends are positive. And after completing fiscal '25, we saw plus 3% growth in demand. So when you listen to what customers are saying even, they have about order backlog of 6 months to 2.5 years. Therefore, we do believe the market is quite strong. So our assumptions are flattish, but we're not really anticipating any major negatives. Therefore, yes, you can say that we are being conservative. Graeme McDonald: Well, from a regional point of view, Indonesia apparently had the highest profitability in the past, but if you're so bearish about Indonesia, the highest profitability as a market, I guess, is coming from North America in the non-housing segments. Do you think that's true that it has the highest margins? Kiyoshi Hishinuma: If you just look at SVM, excluding fixed costs, the procurement cost inclusive of tariffs is quite big. So no, the margins are not the highest in North America. Graeme McDonald: Okay. So it will continue to be challenging. So I just wanted to confirm another thing about Page 9, I think. In your comments, Hosotani-san, for last fiscal year and the negatives from product mix was EDTs. Is this one-off? Or for electric dump trucks and its profitability, is it relatively low? I just wanted to confirm that point you made. Hiroshi Hosotani: This is Hosotani speaking. Our dump trucks is because of our dump truck mix. Globally, we sell -- the regions where dump truck margins were high was Indonesia. For Indonesia, we have been selling rigid dump trucks mainly. And for electric dump trucks are being made in the U.S. on the other hand, compared to rigid dump trucks, the costs are greater due to its structure. And sales in Indonesia, especially for mining has been dropping off. So product mix-wise, rigid went down, whilst EDT composition has increased. So from a product mix point of view, because of more electric dump trucks, average margins have come down slightly. Graeme McDonald: I see. So we shouldn't be that concerned, I guess. Hiroshi Hosotani: Correct. Graeme McDonald: Finally, I have a quick question on topics on Page 50, you talked about AHSs and reaching 1,000 units in volume. I think that's great. Going forward, do you have any numerical targets as to how to grow the business even more? That's my final question. Kiyoshi Hishinuma: Well, in the strategic growth plan and our targets, it was 1,000 units in fiscal '27. That was our original target, but we have been able to reach it beforehand. So we have been -- we are thinking about raising the target up to 1,200 units instead. So compared to the pace we saw back in fiscal '25, it looks like it's going to decelerate. However, new customer implementation is likely to increase. And in that case, the rate of increases is going to look like it's decelerating, but we will continue to work on its implementation. Graeme McDonald: How about margins? Compared to rigid dump trucks, is it lower? Kiyoshi Hishinuma: Well, we talked about electric dump trucks earlier. So that in itself is not that high, but this is an AHS system, and we receive income from subscriptions as well. So that is a positive. Operator: We are counting down some time. Anyone who has questions here? Okay. I'd like to take a final question from the floor. Issei Narita: Narita from Mizuho Securities. Sorry, I'm repeating myself, but Page 28, here in Indonesia, mining equipment demand doesn't look like it's declining so much. And yes, I do understand that there is a declining market, but the Chinese manufacturers try to make inroads into mining equipment more and more. And against the hard work in Latin America, the Indonesia and those smaller kinds of smaller dumps were utilized in those Indonesia. So other than the market, there have been anything that you can share other than the competitive landscape? And also, you said Indonesia, it has the highest margin, whereas coal prices will give you the headwind. And that might be changing in the future, but with your self-effort, do you see any capacity to increase further overall performance in Indonesia? Takuya Imayoshi: Well, as you see the bottom right, Page 28, you see the demand trend, and that might be misleading, but you see by sector here. So in terms of the size, the smaller equipment for mining are included here. And then fiscal year '25, we are shipping a lot of those smaller ones and 100 tons demand is on a decline. So that sounds like that doesn't add up. But the demand for 100 tons, the customer try to hold back the purchase. That's why we are struggling. And fiscal year '26, the coal production volume is going to be struggling, but we work with the distributors to secure enough volume here. Operator: So finally, Tai-san from Daiwa Securities, we would like to take your question remotely. Hirosuke Tai: Yes, I'll keep my question brief. I have a question for Imayoshi-san. With respect to the Middle East and tariffs, that was the main topic for today's call. Even if you add back those numbers into your guidance, profitability is expected to be about the same as last year or a little bit down, whether it be on a company-wide basis or for the C&ME segment. And I think it all comes down to inflation, maybe. But how about striving to raise profitability by making up for it? Do you have that intention? Or are you fine with this kind of margin? And would you like to instead raise top line? Because you have just started a new fiscal year. So Imayoshi-san, of course, can you talk about some themes that you're considering as a company? Of course, countermeasures for the Middle Eastern conflict may be one, but I was hoping that you could share 1 or 2 things on your mind. Takuya Imayoshi: Well, as stated in the strategic growth plan, we want to have profitability and growth rates that exceed industry levels. So it's not just about growing top line, but also profitability as well. Overall, demand-wise, we are at a juncture where it's broadly flat. It's not just tariffs impact, but Indonesia's drop-off is also a negative when it comes to profitability, but we will steadily implement the measures that we're stating in the strategic growth plan. We will work on product development as well as we'll think about ways to grow the aftermarket business. So we would like to ensure that we're able to generate results so that we can also enhance profitability. Operator: Thank you very much. This concludes the Q&A session.

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HSBC 2026 Q1 财报电话会议

Operator: Welcome to the analyst and investor presentation for HSBC Holdings plc First Quarter 2026 Earnings. This webinar is being recorded. I will now hand over to Pam Kaur, Group Chief Financial Officer. Manveen Kaur: Welcome, everyone. Thank you for joining. We have had another quarter of positive performance, which reflects further progress towards creating a simple, more agile, growing HSBC. Annualized return on tangible equity, excluding notable items, was 18.7%. We are confident in achieving the targets we set out to you at the full year. We are updating 2 pieces of guidance today, banking NII to around $46 billion and our expected ECL charge to around 45 basis points. I'll talk to the drivers of both shortly. In the quarter, we continued to make disciplined progress in simplifying the group to unlock HSBC's growth potential. We actioned a further $0.2 billion of simplification saves and remain well on course to deliver the $1.5 billion target. We completed the privatization of Hang Seng Bank, the sale of U.K. Life Insurance, Sri Lanka Retail Banking and South Africa. And as you will have seen, we have agreed the sale of our retail banking business in Indonesia. We expect to realize an up to $0.4 billion gain on completion anticipated in the first half of 2027. Our CIB business in Indonesia is unaffected. On outlook, the economic landscape remains complex and uncertainty will persist. Our thoughts are with all those affected by current events in the Middle East. We are fully engaged in supporting our colleagues, customers and partners across the region. We are well positioned to work with our customers and manage the uncertainties in the global environment from a position of financial strength. Let's turn first to the income statement, where I will focus on year-on-year comparisons unless I indicate otherwise. Profit before tax, excluding notable items, was $10.1 billion. Notable items this quarter include a loss of $0.3 billion on moving Malta to held for sale, a loss of $0.2 billion on the sale of U.K. Life Insurance and $0.1 billion of restructuring costs related to our simplification program. Revenue, excluding notable items, grew 4% year-on-year to $19.1 billion. This was driven by banking NII and strong growth in wealth fee and other income. Annualized RoTE was 18.7%, 0.3% higher than last year. It benefited from the removal of Hang Seng Bank minorities. Looking at capital and distributions. Our CET1 capital ratio is 14%, down 90 basis points on the quarter as expected following the privatization of Hang Seng Bank. Reflecting our strong organic capital generation, we are already back to our operating range of 14% to 14.5%. The dividend for the quarter is $0.10. We continue to target a dividend payout ratio for 2026 of 50% of earnings per ordinary share, excluding material notable items and related impacts. Let's now turn to our business segment performance. Each of our 4 businesses grew revenues and each also delivered annualized RoTE in excess of 17%, excluding notable items. This broad-based performance shows our strategy is working. I would just mention the $0.2 billion gain from a one-off property asset disposal in the Corporate Center, which is not a notable item. Moving now to banking NII. Banking NII increased $0.3 billion year-on-year to $11.3 billion. It fell by $0.5 billion quarter-on-quarter. $0.3 billion of this quarterly decline is day count. We also noted at the fourth quarter, $0.1 billion in gains that we did not expect to repeat. In addition, this quarter, HIBOR was lower in March, and we also recognized a $0.1 billion adverse one-off. We are now upgrading our full year banking NII guidance to around $46 billion. This reflects an improved interest rate outlook. I would highlight that interest rate curves have been volatile and can, of course, change further in either direction. Turning now to wholesale transaction banking. Recent economic, market and tariff situations have validated the strength of our franchise, both over the last 12 months and in this quarter. We grew fee and other income 2% year-on-year. Customers continue to turn to us to help them navigate volatility and uncertainty. Our balance sheet and franchise strength are particularly valuable in times like this. In the quarter, Securities Services grew fee and other income 11%, reflecting new mandates and higher transaction volumes. Trade grew 8%, driven by continued growth in volumes. Payments grew 3%, driven by growth in volumes across most regions. Foreign exchange fell by 1% compared to a strong first quarter last year. We continue to see growth in volumes and strong client engagement. Turning now to wealth. We grew fee and other income by 15% to $2.7 billion. I remind you that the first quarter of last year was a high base. Growth was driven by all 4 income lines, and we added 287,000 new-to-bank customers in Hong Kong. It is worth remembering there is typically favorable seasonality to the first quarter when compared with the fourth quarter. Having said that, we are pleased that the investments we are making in our wealth products, distribution channels and customer experience are translating into real results. Private Banking grew 8% and Asset Management, 3%. Investment distribution performed very well, up 21%, reflecting particularly strength in our customer franchise in Hong Kong. Insurance growth of 19% from a strong base was also pleasing, again, with Hong Kong, the standout. Our insurance CSM balance was $15.2 billion, up 19% versus the prior year. First quarter wealth balances were $1.6 trillion, up 12% or $170 billion year-on-year. Net new money in the first quarter was a strong $39 billion, of which $34 billion came from Asia. This is a broad-based and robust franchise. Our investments and focus are paying off. I will note that we saw a slowdown in flows in the early days of the conflict, but activity recovered in April across our wealth franchise in Asia. Turning now to credit. Our first quarter ECL charge was $1.3 billion, equivalent to an annualized charge of 52 basis points as a percentage of loans and advances. Given the ongoing uncertainty in the outlook, we are updating our full year 2026 credit guidance to around 45 basis points. This quarter includes a $0.3 billion charge related to the Middle East conflict. This is precautionary and related to the impact of the conflict everywhere, not just in the Middle East. We also include $0.4 billion for fraud-related secondary securitization exposure with a financial sponsor in the U.K. I will emphasize that we regard the Stage 3 charge this quarter as idiosyncratic and not representative of the risks in the wider portfolio. We have completed a full review of the highest risk areas in our portfolio and have not identified any comparable fraud concerns. We have updated our risk appetite and are incorporating lessons in our due diligence processes. This remains an area in which we are comfortable, but it is not a significant growth driver in our plan. In Hong Kong commercial real estate, we had some small recoveries in the quarter. And overall, it remains broadly stable. You will see our usual detailed breakdown on Slide 21. On Slides 15 and 16, we have also set out our private market exposure. We have made these expansive definitions to give you a full picture of our full-service business in private markets. Let's now turn to costs. We continue to take a disciplined approach to cost management. We are on track to achieve our target of 1% cost growth in 2026 compared to 2025 on a target basis. Cost growth this quarter is 3% year-on-year. This included 1% driven by higher variable pay accrual based on business performance. If you exclude the variable pay accrual, target basis cost growth was around 2% year-on-year. We manage costs on a full year basis. So looking at a quarter in isolation is not meaningful. We remind you that our simplification actions provide a cumulative year-on-year benefit through 2026. For the avoidance of doubt, our 2025 target cost baseline is $34 billion when updated for FX. Now let's turn to customer deposits and loans. Our deposit momentum continues with $99 billion of deposit growth, including held-for-sale balances over the last 12 months. CIB deposits increased $10 billion quarter-on-quarter in what is usually a soft quarter. Hong Kong was a particular driver. This corporate inflow offset a slower retail flow in our Hong Kong pillar. You will see deposit seasonality on Slide 20. Excluding the movement of Malta to held for sale, IWPB deposit growth was $4 billion. You will see on Slides 18 and 19 that we have set out additional deposit disclosure. This shows you the deposit base split between fixed term and instant access accounts. The 70% instant access proportion should help you see the strength and breadth of our deposit base across our businesses. Turning to loans. Growth picked up in the quarter. CIB mainly reflects continued momentum in GTS, higher term lending in Hong Kong and drawdowns on committed lines by high-quality borrowers in the Middle East. We are pleased to be there for our customers when they need us most. Hong Kong returned to volume growth this quarter after a period of decline. We are pleased to see borrowing appetite return as the economy grows and as residential property prices recover. Our $13.7 billion investment in Hang Seng Bank is a signal of our confidence in the opportunity in Hong Kong. We are investing across both iconic banks, and we see significant growth runway for both ahead. In the U.K., we delivered another quarter of good growth. This was both mortgages and our commercial lending book. We see good momentum in our domestic portfolio. Low levels of household and corporate debt in the U.K. provide a platform for the continued growth of our franchise. Now turning to capital. Our CET1 capital ratio was 14%, down 90 basis points in the quarter. This follows the 110 basis point impact of the Hang Seng Bank privatization and Malta disposal loss. We also saw a 12 basis points impact from the fair value through other comprehensive income bond portfolio, as government yields rose following events in the Middle East. These were offset by ongoing strong organic capital generation. We are pleased to have remained within our CET1 operating range since the announcement of the Hang Seng Bank privatization. A decision on future share buybacks will be taken quarterly, subject to our normal buyback considerations. Let's turn to targets and guidance. First, targets. We reiterate the targets we set out to you at the full year. Revenue rising to 5% year-on-year growth by 2028, excluding notable items. Return on tangible equity of 17% or better, excluding notable items each year. Dividends, 50% of earnings per share, excluding material notable items and related impacts. Finally, to guidance. Today, we are updating our banking NII to around $46 billion, given the higher rate outlook and our ECL charge to 45 basis points given macroeconomic and market uncertainty. In addition, to inform management planning, we have assessed a range of top-down stress scenarios. We have set these out for you on Slide 17. I'm happy to discuss these further in Q&A. All other guidance set out on this slide remains unchanged. To conclude, the intent with which we are executing our strategy is reflected in the growth and momentum in our first quarter. It shows discipline, performance and delivery. Discipline in the way we are applying strong cost control and investing to deliver focused sustainable growth. We are on track to achieve our target of around 1% cost growth in 2026 compared to 2025 on a target basis. And we are reallocating costs from nonstrategic or low-returning businesses towards growth opportunities, while upgrading our operating model. This includes investing in artificial intelligence to empower our colleagues, simplify how we operate and enhance the customer experience by personalizing service at scale. Performance in our earnings. Each of our 4 businesses grew revenues and each also delivered annualized RoTE in excess of 17%, excluding notable items and delivery. Our first quarter results show we are creating a simple, more agile, growing HSBC built on the strong foundations of a robust balance sheet and hallmark financial strength. This is why during periods of greater uncertainties, our customers turn to us as a source of financial strength, and we remain confident in delivering against our targets. With that, I'm happy to take your questions. Operator: [Operator Instructions] Our first question today comes from Guy Stebbings at BNP Paribas. Guy Stebbings: The first one was on wealth. Clearly, another very good performance, particularly on investment distribution, insurance. Can you talk about what you're seeing in terms of flows in the competitive landscape in Hong Kong right now? I'm sort of mindful it's been a very good story and the benchmark comparisons is getting tougher in terms of growth rates. But equally, there's sort of no evidence of let up in momentum and can see another really good performance for new business CSM, which is well above what you're actually booking through the P&L right now. And then the second question was on private markets. Thanks for Slide 15 and 16. Interested in any changes you're making in your approach to this segment. You've called out the $400 million hit in Q1, and you've not identified anything comparable in the book. One of your peers has signaled sort of partially stepping away from some exposures in this segment, as they've assessed sort of levels of financial controls. I know you said this wasn't a big growth driver of the plan, but are you changing how you're thinking about this segment in any way? Manveen Kaur: Thank you, Guy. If I take your questions in turn. On the first question on wealth, we are really pleased with the growing CSM balance and as well as on investment distribution. First quarter is always a very strong quarter for us, but I'm pleased to say that even after some slowdown in the month of March, we again see momentum coming through in April. We have a very vast range of products that we offer to our customers. So we've seen some shift in the products. So people moving from bonds and mutual funds into structured products and equities and all that obviously contributes very well to our fee income in wealth. We have an iconic brand in Hong Kong. And yes, competition is fierce. But as you can see, we are also growing new customers despite putting the fee in January, and these new customers over time also become customers from a wealth perspective, but more in the near term for the insurance business. So those are all very positive signs for us. From a private credit perspective, our overall exposure on private credit has stayed the same, as I called out at the year-end of $6 billion on the chart. And then this is both drawn and undrawn and the private credit and related exposure stays within 2% of our balance sheet. So that, again, from our perspective, is a comfortable position in terms of the concentration. Following the, what I would call, experience that we've seen in the fraud perspective, I've always said that in this ecosystem, no one is immune to second order sort of exposures, which is where we have had from financial sponsors. Clearly, as a learning, what we are working on is looking at very specifically some of the additional due diligence processes we may carry even where we are relying on the due diligence of financial sponsors. In terms of concentrations, we are also looking at any specific concentrations on individual counterparties in this space, but remain comfortable overall. And as I've said, we will not have this and it has never been a significant driver of private credit. So same as before, continue to be even more diligent where we are relying on financial sponsors related secondary exposures and their due diligence. Operator: Our next question today comes from Amit Goel at Mediobanca. Amit Goel: So 2 other questions from me. So one was just on the cost growth. So it seemed like the cost growth was a bit higher this quarter, even ex the VP than the overall target for the year. So just in terms of why you think the costs will be a bit more contained or at least the cost growth will be a bit more contained and the drivers there? And then also the second question is just on the Middle East scenario. So I appreciate the extra slide. Just curious on those stress scenarios. So what would we need to see or what would we have to see -- to be seeing some of that scenario play through and to have further impact on your ECL guidance? Manveen Kaur: Thank you, Amit. So I'll take the cost question first. So as we have said, our simplification actions will be completed by the middle of the year. And those simplification actions will give us cumulatively more savings in the second half of the year. And if we factor those in and phase out in line with our forecast and financial resource planning, we are very comfortable that we will be within our cost guidance of around 1% growth on a target basis. It is a timing of when you have the gross increase, which we said last year would be 3% and then the timing of when the 2% savings come so that you come to the net 1% cost growth. Now from a Middle East scenario, firstly, to be clear that our ECL guidance and indeed, when we reaffirm our targets, we look at all plausible downside scenarios, and we are, by nature, quite conservative in how we approach these matters. We have, in the fullness of an integrated top-down stress scenario called out a bookend stress scenario, which requires all 5 things to happen. So just to give you some perspective, in this kind of a scenario, you would expect stock markets to be down 35%. So it's pretty severe. You would also expect oil price at 145 basis points and market disruption as well as significant GDP slowdown across markets globally. So that is the context of this scenario. But as I said earlier, in terms of the right weightage of probability from an ECL perspective, that has already been factored in the 45 basis points guidance. And this scenario gets driven by not just an ECL number, but also an impact on the revenue line, and it assumes that the wealth business, which has continued to do really well even through the month of April will have a significant impact in this kind of a scenario as well as deposits, which typically in a stress position always become an inflow for large deposits. But because of the extreme market disruption, very high inflation that the deposits will come down because customers will need to get money in order to survive through a very stressful economic scenario. Operator: The next question today comes from Aman Rakkar at Barclays. Aman Rakkar: I just wanted to ask one quick follow-up on the Middle East scenario. Is there any chance -- I think just back of the envelope, it's a kind of $2 billion to $3 billion hit to PBT in terms of the mid- to high single-digit percentage on '26. Is there any chance you could just kind of round out the disclosure on that in terms of what the breakdown in that scenario is between revenues and impairments? I'm assuming it's literally revenues and ECLs and if you could just quantify that for us, that would be really helpful. The second question was just on banking NII, please. So first of all, I think you're calling out $100 million negative impact in the quarter. Just kind of adding that back in, I guess, to the underlying run rate, it looks like your Q1 banking NII is annualizing a shade above the $46 billion that you are guiding for your full year. So I'm interested in the sequential drivers of net interest income, please, from here, as you see them presumably rates not that much of a headwind and you've got some balance sheet momentum. So trying to work out what the negative is from here to offset that, please? Manveen Kaur: Thank you, Aman, for your 2 questions. So taking the first one. Firstly, to say, yes, the impact absolutely is equal between sort of revenues and ECLs broadly in this scenario and your numbers were right. I also want to say this is what I would call an unmitigated impact. In other words, it's prior to management actions. We are very comfortable that even in stress scenarios, we have a range of management actions we would be taking. And therefore, we are very confident in reiterating our RoTE targets for '26, '27 and '28. Now on banking NII guidance, as always, as you would expect, we tend to be quite conservative. We consider in the guidance all possible downside scenarios as well, at least the plausible ones. So in terms of the mathematical calculation, as you've done ex the one-off and looking at the day count, et cetera, it, of course, takes you above the $46 billion. Our guidance is around $46 billion, not just $46 billion. So that's the first point to call out. And the things that we have considered in terms of a possible plausible headwind would be, of course, there's an uncertainty on the interest rates. Also, we have seen the experience. There were a few weeks of impact of a lower HIBOR in the month of March, but I'm very pleased to note that the HIBOR has again come to the range that we are most pleased with, which is around 2.5% and obviously, there is the continuing tailwind of our structural hedge reinvestment. We've given you disclosures on that. And the deposit flow overall continues to be very strong, but we are happy to say around $46 billion with our usual conservatism. Operator: Our next question today comes from Andrew Coombs at Citi. Andrew Coombs: A couple of follow-ups from me, please. Just firstly, coming back on the private credit exposures on Slide 16. I think the exposure on which you booked the charge today falls within the $3 billion securitization financing bucket that you list on that slide. Can you just give us an idea, please, of how much of the exposure that you've taken a charge on today accounts for of that $3 billion total, please? And then secondly, coming back to wealth, it's difficult to quibble on 15% year-on-year growth, but that revenue growth does look slightly weaker than your peers. So can you just give us an idea of where you think the differences are? Is it business mix, which means you have lower transaction income benefit year-on-year? Anything you can comment on relative performance? Manveen Kaur: Thank you. So just in terms of the exposure, we have substantially provided for that exposure. And that exposure, when you can see mathematically, is not an insignificant part of the $3 billion that you've called it quite rightly, it really comes from that particular bucket. Coming back to your point on our revenue. So in terms of the revenue, I'll just bring to attention that the CSM balances have been growing, but the way they actually hit the P&L, it is really over a period of time. And therefore, what you capture in the P&L is 1/10 and that then flows through over the following years. So that is how I would look at it in terms of the fee income growth. If you ex that or adjust for that, we are very much in line or indeed ahead of peers in certain pockets. Operator: The next question today comes from Katherine Lei at JPMorgan. Katherine Lei: Pam, I would like to ask about the fraud cases. Like can we have more color about the fraud cases such as like what is our total exposure? Because the key concern is that is this $0.4 billion one-off or we were going to see more like step-up in impairment charges because of this particular case? I think this is the number one question. Number two question is like I look at the risk weighting, right? It seems like a downside scenario, now we aside, 45% versus like before the war, like, say, 4Q '25 is roughly about 15%. Can we get more color of like, say, in this scenario, would that be -- let's put it this way, under what situations do you think we will continue to see continue rise in this 45% of downside scenario? Manveen Kaur: Thank you, Katherine. So firstly, this fraud is an idiosyncratic fraud. We have gone back and reviewed all our highest risk exposures across our portfolio and specifically looked at the private credit exposures as called out on the slide, and we see no comparable fraud risks in this matter. And of course, we continue to review our risk appetite, tightened due diligence and so on. So therefore, we feel quite comfortable that this is a one-off fraud indeed, and it comes to us through a secondary exposure that we have through a financial sponsor and where there was reliance on the financial sponsor due diligence. So that's the first case. And second one, in terms of the downside scenarios, the 45% downside scenario is built also from a 30% Middle East-related specific scenario that we created, which was a fifth scenario. So we do not expect that 45% downside scenario to shift much. And I can just give you as a comparison as we went through periods of COVID, Russia, Ukraine, that's sort of a leaning on the downside scenario. It's pretty much at the top end of the downside scenarios. And then once the situation gets more normalized, we bring the scenarios back to what our normalized scenarios that you have called out. I also want to stress to you that the IFRS 9 downside scenarios factor in, what we think at this point of time, the full extent of the forward-looking guidance, as we would obviously calculate based upon what we're seeing on the ground as well as assumptions as well as the probabilities given to all the scenarios. And this is quite distinct and different from the bookend Middle East conflict stress scenario on Slide 18, which has a much holistic view and a range of things happening, including, as I called out, from very severe stock market disruptions as well as oil price distinction. So I just want to make a clear distinction between what you account for, what you have in your outlook versus what you keep as part of a planning exercise in terms of the range of scenarios that you should always be aware of as a good management practice. Operator: Our next question today comes from Chris Hallam at Goldman Sachs. Chris Hallam: Two for me. So the first, again, on wealth. So $5 billion of that $39 billion of net new money was deposits. So it feels as though sort of 90% of the flows were invested, whereas if I think about the stock of your wealth balances, it's closer to 60%. So how should we think about that? Is that a structural trend you're seeing? Are clients becoming more invested? And if so, what does that mean for fee margins and for returns going forward? And maybe just within the $39 billion, without the conflict in Iran, would that number have been higher or lower? And then second, on capital, like you said, well managed through the guidance range throughout the HSB privatization process. Obviously, this quarter, a couple of one-offs within the quarter, but the underlying business performance appears to be encouraging. So given all of that, can you comment on when you expect to restart share buybacks? Manveen Kaur: Thank you, Chris. So firstly, in terms of invested assets, we are very pleased with the growth in invested assets. But I just want to remind you, typically, Q1 is strong for investments. So there is some seasonality of money moving from deposits into investment assets into -- in Q1. We've also been very strong in terms of the new mandates we've got from private banking. So overall, wealth is a very robust story to call out, and it's very broad-based, not just dependent on one lever. In terms of the conflict, there was a bit of risk-off wait and watch in the second half of March. However, as April has come through, we continue to see high volume of transactional activity. And as I said earlier, our customers, they continue to readjust their portfolios and our strength lies in the broad range of products we have on offer. And we have really invested in this business. So going forward, from a fee income perspective, I do believe there is a huge tailwind for us in terms of how we build on this year-on-year. So coming back to capital now. Firstly, I'm really pleased that even with this very large core investment we have done in Hong Kong, which is a critical market for us where we are hugely confident about the future growth prospects, we have still remained throughout the entire period within our CET1 operating range, and that truly reflects the very strong capital generation capabilities of our business across all 4 businesses. So that is indeed very encouraging. Now in terms of share buybacks, you're right that even with all the one-offs we've had in the first quarter, we are in a good position, and I expect Q2 to be equally highly capital generative for us. But of course, a share buyback decision is done on a quarterly basis. Starting point is always capital generation, which looks strong. We have to also look at loan growth, then we have to look at our 50% dividend payout ratio, which is an important target for us and the residual is always in terms of share buybacks and distributions, notwithstanding any inorganic opportunities for which we have an extremely high hurdle rate. So we will look at it again starting from Q2. Operator: The next question today comes from Kunpeng Ma at China Securities. Kunpeng Ma: I got 2 questions for you. And the first one is about Hang Seng. I'm glad to hear the momentum in deposit and wealth management in the first quarter and the pickup in the momentum from April. But how -- what proportion of such momentum could be attributed to the synergies out of the Hang Seng deal? And also some color on future synergies, future synergy effects of the Hang Seng deal would be much more helpful for us. Yes. The second question is on HSBC's global footprint. Yes, this is out of the proposed disposal of the Indonesian retail business. I think the Indonesian market is quite important. It's not the kind of some marginal or less important market. So I want to know the HSBC's views on your global franchise. I mean, which markets are important to you or which markets and which business are less important? Yes. Manveen Kaur: Thank you, Kunpeng. So firstly, we have made a very good start on the Hang Seng privatization, but the synergies at the moment have been very little, if any, because it's just the start of the process. We have already started investing in Hong Kong, both in the red brand and the green brand in terms of technology, in terms of simplifying customer journeys and training and skilling of our colleagues. So we do expect progressively the growth from the synergies to come through starting from the second half of this year, but mainly through 2027, '28. So that's a very strong tailwind, again, to support our targets as we progress. And so far, everything is very much on plan and with a lot of engagement with colleagues on the ground, which is, I think, really important, both in terms of maintaining the momentum, the sentiment as well as reinforcing our strong optimism in Hong Kong, as you've already seen in the results as well as in the stabilization of the Hong Kong commercial real estate market. Now coming to our global footprint from an Indonesia perspective, we think Indonesia is a critical market for us from a CIB perspective. It is an important network market and the economy is significant from an Asian perspective. However, our retail business of the size and the scale it was and the scope it had was not within the strategy of our wealth business. It was a valuable business, remains a valuable business, as you've seen from the financials for the transaction that has been announced. But from our perspective, from a wealth perspective, it did not meet the high hurdle rate criteria we had. We have other markets where we are investing in a far more focused manner. Operator: Our next question today will come from Alastair Warr at Autonomous. Alastair Warr: Just a couple of follow-ups on the credit costs and on the insurance that we touched on just a moment ago. If you've got 52 basis points booked in for the first quarter on credit costs, it looks like, therefore, to get to your 45 over the rest of the year, you'd be looking at a little bit above 40 for the remaining quarters of the year? You were at 40 for the full year before. So is that just implicitly building in maybe a little bit more drag from the Middle East? Or is there anything else going on anywhere else for us to be thinking about? And just a second point, you touched on the CSM there and how it can make a difference to how you're booking your speed of growth of income at the wealth line. HSBC has been really strong on some big ticket quite short payment period and products that some of your big name peers in Hong Kong are not necessarily so keen on. So can I just confirm, you talked about 10 there -- that your release rate in years is about 10 years and that this shorter payment period thing doesn't turn up in a shorter release rate as well. Manveen Kaur: Thank you, Alastair. So firstly, on the credit costs. You're right, this quarter's credit cost of 52 basis points has 2 significant numbers in it. One is obviously the idiosyncratic one-off fraud-related. If you take that off, we are pretty much in line with where we would be in Q1 of 2025. Our books overall ex these 2 items have performed really well. The second being obviously the Middle East reserve. So if you take the Middle East reserve build of $300 million and the fraud number, then the actual credit cost would be lower than what it was in Q1 2025 at around $600 million. What we are looking -- $600 million, sorry. As we look at going forward into the next few quarters, we are always a bit conservative, and we do have a little bit of scope built in, both in terms of what happens on Stage 3s of the fraud-related item, obviously, that's a one-off, but the ex-fraud-related Stage 3 buildup increases because of a prolonged conflict in the Middle East. Also Q1 has been very benign on Hong Kong commercial real estate. We are very pleased that we are seeing the beginning of a stabilization, but we are not calling it the end of the cycle. So therefore, we keep that sort of a buffer for the rest of the year. So in terms of the CSM balances very specifically, there is no change in the accounting policy. Obviously, it's based upon IFRS 17 principles, hence, the drip feed over the 9- to 10-year period that we will see. And the key thing there is as long as with the new customers that we are onboarding, with the growth in the CSM balance, the growth in the CSM balance exceeds the P&L flow from the CSM balance because the trajectory is very positive in the growth of that business in Hong Kong. It is an iconic brand for us. So therefore, the demand for the product from a distribution perspective remains extremely strong. Operator: Thank you, Pam. We will take our last question today from Joseph Dickerson at Jefferies. Joseph Dickerson: I just wanted to ask in terms of the numbers you've given the guidance upgrade on the banking NII, is that taking into account the -- effectively marking the market for the current yield curve in the U.K. I note some footnotes around you were using rates, as I think mid-April. Does that take account of the yield curve in the U.K.? And then presumably, there's some outer year tailwind into that. And given you've got some outer year revenue growth assumptions, I'd be keen to know how that -- how any maturities at higher rates might influence the outer year revenue growth rate. Manveen Kaur: Thank you, Joe. So from a banking NII perspective, yes, we looked at the yield curves as -- at the middle of April across the currencies. So that's correct. In terms of the revenue growth projections that we gave for the outer years, they were based upon the yield curves as when we set our targets. So if the yield curves continue to be higher or grow, then everything else being equal, that will be a tailwind for revenue in future years. The banking NII guidance, as you know, we always only give for the current year. Operator: Thank you very much. That ends today's Q&A. So I'll now hand back to you, Pam, for any closing remarks. Manveen Kaur: So thank you all for your questions. As you've seen from our results, we are very pleased with our return on tangible equity of 18.7%. We have never printed a number of this size for nearly 20 years now. And that gives us a very good start in terms of where our targets are and how firmly we stand behind them for the next 3 years. Of course, there are macro uncertainties in the current environment, and we have given disclosures, which are very fulsome, both on private credit as well on extreme downside stress scenarios, bookends. So hopefully, in that context, I have answered all your questions. And obviously, if you have any more detailed questions, please reach out to the IR team. Thank you very much again for your patience and interaction. Operator: Thank you, everyone, for joining today. You may now disconnect.

6天前Insight Analytics约5分钟阅读

AMD 2026 Q1 财报电话会议

Operator: Greetings, and welcome to the AMD First Quarter 2026 Conference Call. [Operator Instructions] And please note that this conference is being recorded. I will now turn the conference over to Matt Ramsay, Vice President of Financial Strategy and IR. Thank you, Matt. You may begin. Matthew Ramsay: Thank you, and welcome to AMD's First Quarter 2026 Financial Results Conference Call. By now, you should have had the opportunity to review a copy of our earnings press release and the accompanying slides. If you have not had a chance to review these materials, they can be found on the Investor Relations page of amd.com. We will refer primarily to non-GAAP financial measures during today's call. The full non-GAAP to GAAP reconciliations are available in today's press release and slides posted on our website. Participants on today's conference call are Dr. Lisa Su, our Chair and CEO; and Jean Hu, Executive Vice President, CFO and Treasurer. This is a live call and will be replayed via webcast on our website. Before we begin the call, I would like to note that Jean Hu will present at the Bank of America Global TMT Conference on Tuesday, June 2 in San Francisco. Today's discussion contains forward-looking statements based on current beliefs, assumptions and expectations, speak only as of today and as such, involve risks and uncertainties that could cause actual results to differ materially from our current expectations. Please refer to our cautionary statement in our press release for more information on factors that could cause actual results to differ materially. With that, I will hand the call over to Lisa. Lisa Su: Thank you, Matt, and good afternoon to all those listening in today. We delivered an outstanding start to the year driven by accelerating demand for AI infrastructure across our portfolio. Growth was broad-based with every segment increasing year-over-year, led by 57% data center revenue growth. First quarter revenue increased 38% year-over-year to $10.3 billion, earnings grew more than 40%, and free cash flow more than tripled to a record $2.6 billion, driven by significantly higher sales of EPYC CPUs, Instinct GPUs and Ryzen processors. These results mark a clear inflection in our growth trajectory and a structural shift in our business. Data center is now the primary driver of our revenue and earnings growth. And as AI adoption scales, demand is increasing, not only for accelerators, but also for the high-performance CPUs that power and orchestrate those workloads. Turning to our segments. Data Center revenue increased 57% year-over-year to a record $5.8 billion, led by strong demand for our EPYC CPUs and Instinct GPUs. In Server, we delivered our fourth consecutive quarter of record server CPU revenue. Revenue increased more than 50% year-over-year with sales to both Cloud and Enterprise customers each growing more than 50%. Share gains accelerated year-over-year, reflecting the ramp of fifth-gen EPYC Turin CPUs and continued strength of fourth-gen EPYC processors across a wide range of workloads. In Cloud, AI was the primary driver of growth in the quarter as every major cloud provider expanded their EPYC footprint to support a broad range of AI workloads from general purpose compute and data processing to head nodes for accelerators and emerging Agentic applications. EPYC-powered cloud instances increased nearly 50% year-over-year to more than 1,600 with instances optimized for virtually every enterprise workload and expanded availability across the largest global cloud providers. In Enterprise, demand accelerated with record revenue and record sell-through in the quarter. We expanded our customer base with new wins across financial services, health care, industrial and digital infrastructure companies, while also building momentum with mid-market and SMB customers. We are well positioned to continue gaining share as more enterprises standardize on EPYC across on-prem and hybrid environments based on our leadership performance and TCO. Looking ahead, our sixth-gen EPYC Venice processor built on our Zen 6 architecture and 2-nanometer process technology is designed to extend our leadership across cloud, enterprise and AI workloads. The Venice family spans a broad set of CPUs optimized for throughput, performance per watt and performance per dollar, including Verano, our first EPYC CPU purpose built for AI infrastructure. Across the portfolio, Venice widens our competitive advantage, delivering substantially higher performance per socket and per watt versus competitive x86 offerings and more than 2x throughput per socket versus leading ARM-based AI solutions. Customer demand is very strong with more customers validating and ramping platforms at this stage than with any prior EPYC generation, and we remain on track to launch Venice later this year. Looking more broadly, we are seeing a meaningful acceleration in customer demand driven by the rapid scaling of AI workloads across both Cloud and Enterprise. Inferencing and Agentic AI are increasing the need for server CPU compute as these workloads require additional CPU processing for orchestration, data movement and parallel execution in addition to serving as the head nodes for GPUs and accelerators. As a result, we are seeing both stronger near-term demand and deeper engagement with customers on long-term capacity planning. At our Financial Analyst Day in November, we outlined the server CPU market growing at approximately 18% annually over the next 3 to 5 years. Based on the demand signals we are seeing today and the structural increase in CPU compute requirements driven by Agentic AI, we now expect the server CPU TAM to grow at greater than 35% annually, reaching over $120 billion by 2030. In response to this demand, we are working closely with our supply chain partners to meaningfully increase our wafer and back-end capacities to support this growth. As a result, we now expect server CPU revenue to grow by more than 70% year-over-year in the second quarter, with robust growth continuing through the second half of 2026 and into 2027 as we ramp our next-generation EPYC processors. Now turning to our Data Center AI business. Revenue grew by a significant double-digit percentage year-over-year as adoption of Instinct accelerates across cloud, enterprise, sovereign and supercomputing customers. We're seeing strong momentum as customers move from pilots to large-scale production deployments, particularly in inference where our leadership memory capacity and bandwidth are key advantages. This momentum is driving deeper, long-term customer engagements, including large-scale multi-generation deployments. A key example is our expanded strategic partnership with Meta to deploy up to 6 gigawatts of AMD Instinct GPUs spanning several product generations. Our agreement includes a custom GPU accelerator based on our MI450 architecture, co-designed to support Meta's next-generation AI workloads. Shipments are on track to begin in the second half of the year, leveraging our Helios rack-scale architecture, which integrates Instinct GPUs with EPYC Venice CPUs to deliver fully optimized high-performance AI infrastructure. Together with our previously announced OpenAI partnership, these engagements position AMD as a core partner to the world's largest AI infrastructure builders with deep co-engineering relationships and multiyear visibility into large-scale deployments. More broadly, Instinct adoption continues to expand across AI native and enterprise customers for both training and inference workloads. Existing partners are expanding Instinct across a broader set of workloads, while a growing number of new partners are deploying production AI workloads on Instinct, highlighting the maturity of our hardware and software stack. On the software front, we continue to make strong progress with ROCm, improving performance, scalability and enabling customers to reach production faster. In our latest MLPerf results, MI355X delivered strong competitive performance across the full suite with leadership results in multiple categories. We also expanded day 0 support for the leading open models, including the latest Google Gemma 4 family, Qwen, Kimi and others, enabling customers to deploy new models quickly with optimized performance. To build on this momentum, we have significantly accelerated our ROCm development cadence through increased software investments and agent-based coding workflows, enabling faster performance improvements and more rapid deployment of new capabilities. Looking ahead, customer pull for Helios is very strong, driven by our leadership performance, memory bandwidth and scale out capacity. Helios development is progressing well with strong execution across silicon software and systems as we advance through key milestones. We have begun sampling MI450 series GPUs to lead customers and remain on track to ramp Helios production shipments in the second half of the year. As we approach production, demand for MI450 series GPUs continues to strengthen, with lead customer forecasts now exceeding our initial plans and a growing number of new customers engaging on large-scale deployments, including additional multi-gigawatt opportunities. With this expanded visibility, we have strong and increasing confidence in our ability to deliver tens of billions of dollars in annual Data Center AI revenue in 2027 and to exceed our long-term growth target of greater than 80% in the coming years. I look forward to sharing more on our next-generation Instinct GPUs, EPYC processors, Helios rack-scale platform and our growing customer engagements at our Advancing AI event in July. Turning to Client and Gaming. Segment revenue increased 23% year-over-year to $3.6 billion. In client, revenue grew 26% year-over-year to $2.9 billion, led by strong sales of our latest Ryzen processors and continued share gains across consumer and commercial markets. In desktop, we strengthened our Ryzen lineup, including our latest X3D processors that deliver leadership performance across gaming, content creation and professional workloads. We also introduced the Ryzen AI 400 series and Ryzen AI Pro 400 series desktop CPUs, expanding our AI PC offerings across both consumer and commercial systems. In Mobile, we delivered strong growth driven by a richer product mix as Ryzen 400 mobile PC shipments ramped and commercial adoption increased. Commercial was a key highlight in the quarter with sell-through of Ryzen Pro PCs increasing more than 50% year-over-year as Dell, HP and Lenovo broadened their AMD offerings. We also closed new enterprise wins across large technology, financial services, health care and aerospace customers. Looking ahead, we expect demand for our Ryzen CPUs to remain solid in the second quarter. However, we are planning for second half PC shipments to be lower due to higher memory and component costs. Against this backdrop, we still expect our client revenue to grow year-over-year and outperform the market, driven by the strength of our Ryzen portfolio and expanding commercial adoption. In Gaming, revenue increased 11% year-over-year to $720 million. Semi-custom revenue declined year-over-year as expected at this stage of the console cycle, while engagements with customers on next-generation platforms remain strong. In graphics, revenue increased year-over-year led by demand for our latest generation Radeon 9000 series GPUs. We also strengthened our Radeon portfolio with updates to our FSR software that improved performance and digital quality across a broad set of gaming workloads. Similar to the PC market, we believe that second half demand in gaming will be impacted by higher memory and component costs, and we are planning the business accordingly. Turning to our Embedded segment. Revenue increased 6% year-over-year to $873 million, driven by strength in test, measurement and emulation, aerospace and defense and communications as well as increased adoption of our embedded x86 products. Design win momentum grew by a double-digit percentage year-over-year with billions of dollars in new wins across markets, reflecting the continued expansion of our Embedded business from a primarily FPGA-focused portfolio to a broader set of adaptive embedded x86 and semi-custom solutions significantly expanding our TAM. Our semi-custom engagements also expanded in the quarter as data center, communications and other embedded customers leverage our broad IP portfolio and high-performance expertise to build differentiated solutions. In summary, our first quarter results mark a clear step-up in our growth trajectory with accelerating momentum across the business. Our client business continues to outperform the market, driven by Ryzen adoption and share gains, while in Embedded design win momentum and demand are strengthening across our expanded adaptive and x86 portfolio. At the same time, our Data Center business is inflecting with strong demand for both EPYC and Instinct products significant growth. While we are still in the early stages of the AI infrastructure cycle, the pace and scale of deployments we are seeing today reinforce both the magnitude and durability of the opportunity ahead. As inferencing and Agentic AI deployment scale, they are fundamentally increasing compute requirements, driving both larger scale accelerator deployments and significantly more CPU compute. AMD is uniquely positioned to lead in this next phase of AI with leadership products across high-performance service CPUs and AI accelerators and the ability to optimize them together as fully-integrated rack-scale solution. We have a world-class supply chain and are making significant investments to expand capacity and execute at scale. With the momentum we are seeing across the business and the expanding market opportunity, we see a clear path to exceed our long-term financial targets, including delivering more than $20 in EPS over the strategic time frame. Now I will turn the call over to Jean to provide additional color on our first quarter results. Jean? Jean Hu: Thank you, Lisa, and good afternoon, everyone. I'll start with a review of our first quarter financial results and then provide our current outlook for the second quarter of fiscal 2026. We are pleased with our outstanding first quarter results delivering accelerated revenue growth and earnings expansion driven by strong execution and operating leverage. First quarter revenue was $10.3 billion, exceeding the high end of our guidance, growing 38% year-over-year, driven by strong growth in the Data Center and Client and Gaming segments and the return to growth in the Embedded segment. Revenue was flat sequentially with continued growth in the Data Center segment, offset by seasonality in the Client and the Gaming segment and the Embedded segment. Gross margin was 55%, up 170 basis points versus a year ago, driven by a favorable product mix, including a higher data center revenue contribution. Operating expenses were $3.1 billion, an increase of 42% year-over-year as we continue to invest in R&D to support our AI roadmap and the long-term growth opportunities and go-to-market activities. As the business scales, operating income grew faster than topline revenue. Operating income was $2.5 billion, representing a 25% operating margin. Taxes, interest and other result in a net expense of approximately $275 million. For the quarter, diluted earnings per share was $1.37, up 43% year-over-year, underscoring the significant operating leverage in our model as we scale. Now turning to our reportable segment starting with the data center segment. Revenue was a record $5.8 billion, up 57% year-over-year and 7% sequentially, driven by strong demand for EPYC processors and the continued ramp of Instinct GPUs. Data Center segment operating income was $1.6 billion or 28% of revenue compared to $932 million or 25% a year ago. Client and Gaming segment revenue was $3.6 billion, up 23% year-over-year. On a sequential basis, revenue was down 9%, consistent with seasonality. The client business revenue was $2.9 billion, up 26% year-over-year, driven by strong demand for our latest Ryzen processors, favorable product mix and continued share gains across consumer and commercial markets. Sequentially, client revenue was down 7% due to seasonality. The Gaming business revenue was $720 million, up 11% year-over-year, primarily driven by higher demand for Radeon GPUs, partially offset by lower semi customer (sic) [ custom ] revenue. Sequentially, gaming revenue was down 15%, consistent with our expectations. In addition, as Lisa mentioned earlier, we expect second half demand in gaming to be impacted by higher memory and component costs. We now expect second half gaming revenue to decline more than 20% compared to the first half. Client and Gaming segment operating income was $575 million or 16% of revenue compared to $496 million or 17% a year ago. Embedded segment revenue was $873 million, up 6% year-over-year as demand strengthened across several end markets. Sequentially, Embedded revenue was seasonally down 8%. Embedded segment operating income was $338 million or 39% of revenue compared to $328 million or 40% a year ago. Turning to the balance sheet and the cash flow. During the quarter, we generated $3 billion in cash from continuing operations and a record $2.6 billion in free cash flow or 25% of revenue, demonstrating the cash-generating power of our business model. Inventory was roughly flat at $8 billion. At the end of the quarter, cash, cash equivalents and short-term investment was $12.3 billion. In the quarter, we repurchased 1.1 million shares and returned $221 million to shareholders. We ended the quarter with $9.2 billion authorization remaining under our share repurchase program. Now turning to our second quarter 2026 outlook. We expect revenue to be approximately $11.2 billion, plus or minus $300 million. At the middle of our guidance, revenue is expected to be up 46% year-over-year driven by a very strong growth in our Data Center segment, growth in our Client and Gaming segment and a double-digit growth in our Embedded segment. Sequentially, we expect revenue to be up approximately 9% driven by double-digit growth in both our Data Center and the Embedded segments and modest growth in our Client and Gaming segment. In addition, we expect second quarter non-GAAP gross margin to be approximately 56%, non-GAAP operating expenses to be approximately $3.3 billion, non-GAAP other income and expense to be a gain of approximately $60 million. Non-GAAP effective tax rate to be 13%, and the diluted share count is expected to be approximately 1.66 billion shares. In closing, the first quarter of 2026 was an outstanding quarter for AMD, reflecting strong momentum across the business with accelerated revenue and earnings expansion. We are very well positioned to build on the momentum as we scale our Data Center business, expand margins, drive continued earnings growth and the long-term shareholder value creation. With that, I'll turn it back to Matt for the Q&A session. Matthew Ramsay: Thank you, Jean. Operator, we're ready to start the Q&A session now. [Operator Instructions] Operator: [Operator Instructions] The first question comes from the line of Joshua Buchalter with TD Cowen. Joshua Buchalter: Congrats on the results. Actually, I'm going to start with CPUs, which hasn't happened in a bit. It hasn't been that long since you announced the $60 billion server CPU TAM for 2030 at the Analyst Day, and it's very quickly doubled. Agentic AI has obviously gotten a lot of attention in recent months, but it would be helpful to hear your thoughts on how this TAM is inflecting and changing so meaningfully in such a short amount of time. And maybe you could also speak to your confidence in hitting that greater than 50% share target from the Analyst Day as your x86 competitor seems to be improving its supply and also there seems to be more momentum on the merchant and custom ARM CPU side. Lisa Su: Yes. Sure, Josh. Thanks for the question. So first of all, back to the -- when we think about CPU TAM, I mean we've always said that CPUs are very critical part of data center infrastructure, and that's been where we've invested. And we saw the first signs of, let's call it, AI demand really pulling CPU demand last year, and that was the reason we updated the TAM to, let's call it, the 18% CAGR or approximately $60 billion. And what we've seen is all of the things that we believed in terms of Agentic AI and inferencing and all the CPU compute that is required, is just happening, and it's happening at a much faster pace. So over the last, let's call it, the last few months, as we've talked to our customers and we've seen how AI adoption is really unfolding, we're seeing significant more CPU demand from really every major cloud provider as well as enterprise customers. And the way that comes across is as AI adoption scales, you need more inferencing. As inferencing scales and you do more -- you have more agents and Agentic AI, they all require CPUs for all of the orchestration and the data processing and these other tasks. So with that, we've looked at it both bottoms up in terms of talking to customers and having them give us longer-term forecasts as well as just doing some clear workload analysis. And yes, I mean, it's a very exciting TAM. I think it's exciting to see CPUs growing greater than 35% to over $120 billion. And then when you think about AMD in the context of that, I mean, CPUs are critical for so many tasks that you are seeing a lot more discussion about CPUs in the market. But we actually view it in 3 categories, right? There's general purpose compute. There's the head nodes that really support the AI accelerators. And then there are CPUs just for all of the Agentic AI work. And to do all of this, our belief is you need a broad portfolio of CPUs, and that's really what we have been focused on is building not just one type, but really broader in terms of throughput optimized, power optimized, cost optimized, AI infrastructure optimized as we've done in the Venice family. So when you put all that together, we're very excited about the larger TAM, and we're also very happy with the traction that we're getting. We're clearly feeling like we're seeing significant share gain as we're going into our Turin portfolio that has ramped very nicely. Venice is extremely well positioned, and we're working with customers right now on -- beyond Venice and what we're doing in those architectures. So we feel really good about the market as well as our opportunity to grow to greater than 50% share of that market. Joshua Buchalter: I wanted to ask about the Instinct side. So in the press release, you mentioned that MI450 and Helios engagements are strengthening with customer forecast exceeding the expectations and the pipeline growing. You certainly have the big public OpenAI and Meta deals. Was this comment referring to those engagements upsizing versus the announced initial deployments? Or was it other customers and maybe the increase on the MI450 timeline? Or is it MI500 and beyond? Lisa Su: Sure, Josh. So we are very excited about MI450 and Helios. We're seeing significant customer interest in those products as well. So we have certainly talked about our large partnerships with OpenAI and Meta, and those are going really well. We appreciate the deep co-engineering that is going on there. When we look at the totality of, let's call it, based on our current visibility, how those forecasts are coming in with all of our customers, we're actually seeing it above our initial plans that we had planned for 2027. And I think the encouraging thing is we're seeing a breadth of customers who are now very interested in deploying at significant scale MI450 series. And those are for both training and inference workloads, although the largest deployments are for inference. And based on all of that and the scale of new customer interest, we see a path to really get to exceed our original targets of greater than 80% CAGR. And these are really 2027 time frame. Obviously, when we talk to customers, we're talking to them about MI355. There's a lot of good traction we're seeing there. MI450 and Helios, I think for significant large-scale deployments, and then many customers are also very engaged with us on the MI500 series and all of the opportunities there. So we feel like very, very good progress. And the key is that we're continuing to broaden and widen the scope of both customers as well as workloads. Operator: And the next question comes from the line of Thomas O'Malley with Barclays. Thomas O'Malley: Lisa, if I get your numbers correct here in the March quarter, it sounds like the server processor side of the CPU side grew over 50%. If you take it just at the word, it looks like maybe the data center GPU side actually grew in Q1. So I was curious around the cadence of this year kind of previously, you had talked about really a back half weighted and then kind of more so Q4 weighted year. Could you talk about if that's changed at all? And then the second part of the question is, as you go into 2027, clearly, you're pointing out a lot of upside from the larger customers and then kind of the ecosystem around them with new customers as well. But when you look at supply, that's a major issue in the ecosystem today, could you talk about where you're concerned on supply, if you are? And then any gating factors as you look into next year, whether that be power, data center build-outs, et cetera? Or do you feel really good about the ability to grow? Lisa Su: Yes. Okay. A lot of pieces of that question, Tom. So let me try to get through it. So first of all, on the Data Center segment in Q1, the Server business was greater than 50% year-over-year as we said in the prepared remarks. The Data Center AI was actually down modestly because of the China transition. We had more China revenue -- I'm sorry, sequentially more China revenue in Q4, and it was less in Q1. But as we go forward, I think we see strong growth in both segments. So we guided data center Q2, up sequentially double digits, and that's double digits in both Server as well as Data Center AI. And progression as we go forward. So first, on the server CPU side, we talked about growing to over 70% year-over-year in Q2, and that continuing into the second half of the year. And on the Data Center AI side, we will be ramping Helios in the second half of the year, so let's call it, starting with initial volume in Q3 with a significant ramp in Q4 and then continuing to ramp in Q1. So that's kind of a little bit of progression. And then to your questions about customers and supply, I think I answered, Josh, the customer question. I think we have very good visibility now into the deployments that are on track for 2027. And when I say good visibility, it's visibility down to which data centers are the GPU is going to be installed in. And so that's necessary just given all of the constraints out there. We feel that there is tightness in the supply chain, there's certainly tightness in sort of data center build-outs, but we are confident in our ability to supply to the levels of growth that we're talking about and to exceed the levels of growth that we're talking about. And we're also working very closely with our customers and our partners to ensure that we have good visibility to Data Center power. And there is much more power that's coming online in 2027. And so with all those things in mind, I think, again, lots of things to manage. It's a complex ramp, but we're very pleased with the progress on the ramp. Matthew Ramsay: All right, Tom, I think you shotgun approached the multiple questions there. So operator, maybe we can go on to the next caller, please. Thank you. Operator: The next question comes from the line of Ross Seymore with Deutsche Bank. Ross Seymore: The first one is just on the EPYC competition. Lisa, you went through some of the statistics of you versus x86 and you versus ARM, but I wanted to dive a little bit deeper into that. How do you see AMD truly differentiating, especially when you're signing -- well, you see some of your competition signing up the same customers from the ARM side and the x86 competition having more supply. So I just wanted to see if you could dig a little bit deeper into how you think the market share is going to trend over time? Lisa Su: Ross, look, we're very engaged with every major hyperscaler and in terms of understanding their needs on the CPU side. I think we have very much wanted to, let's call it, optimize our CPU roadmap for the various workloads. I think we were early to call this AI component of CPUs. And so we've been actually optimizing very closely with those customers. The way to think about this, Ross, is that you're going to need a broad portfolio of CPUs, like not all CPUs are the same. Frankly, you're going to need different CPUs for whether you're talking about general purpose operations or you're talking about head nodes or you're talking about Agentic AI tasks, they're going to be optimized differently. And we thought through that, and we are absolutely optimizing across the various workloads. So from a competitive standpoint, we feel very good about where things are. And from a deep relationship with the customer set, I think we feel very good about that. So from our current standpoint, I think the depth of our roadmap just expands as we go forward. And you shouldn't think about it as people are going to do one or the other. I think you're going to see people actually use x86 and ARM for many of the large hyperscalers. And even for those who are developing their own, they're still buying lots of CPUs in the merchant market for the reason that I just stated, which is unique different CPUs for the different types of workloads, and there's very high demand at the moment. Ross Seymore: I guess for my follow-up, maybe more for Jean on the gross margin side of things. It's nice to see the gross margin popping up in the second quarter guide. But I just wanted to get some trends longer term, maybe not specific numbers, but how should we think about when Helios and the Instinct side really ramps in the fourth quarter and more so next year. I could see some offsets with that carrying a below corporate average gross margin, but then everything that Lisa talked about with the EPYC side of things being significantly stronger might be more of an offset than it was in the past. So just walk us through the puts and takes of that and maybe directionally where you think gross margin goes over the next year or 2? Jean Hu: Yes, Ross, thanks for the question. We are very pleased with how our gross margin is trending. It came in really strong in Q1. And also, as you mentioned, we guided Q2 higher at 56%. I think as we think about the second half quarter-over-quarter, as you know, there are some puts and takes, right? I would just say, from a tailwind perspective, we actually have multiple tailwinds really are going to help our gross margin. First is the server CPU. Lisa talked about the server CPU expected to grow more than 70% in Q2 and continue to be really strong in second half. That really helps our gross margin. Secondly, in the second half for Gaming actually is going to come down, and our Client business actually continued to go up the stack. So from a Client and Gaming segment, the gross margin actually is going to be also very helpful. Embedded actually is very accretive to our gross margin. Its momentum actually is continuing in the second half. So we are really pleased with all the tailwinds we have. On the other side, MI450 will start to ramp in Q3 and then ramp significantly in Q4. That is below corporate average. So that will have different puts and takes in Q4 in the gross margin side. But when we sit here, when we look at all the positive trends we have to really offset some of the gross margin dilution from MI450 side, we actually feel really good about the setup of the gross margin for 2026. And into next year, I think some of the tailwinds I talked about that will actually continue. That's why we feel confident about continue to drive the gross margin. We actually, during our financial Analyst Day, we outlined the long-term gross margin in the range of 55% to 58%. We think for the first year, we are making good progress there. Operator: And the next question comes from the line of Timothy Arcuri with UBS. Timothy Arcuri: I wanted to ask about units versus ASP for server CPU. If I look at the June guidance, it sort of implies up 25% to 30% for server CPU. And Lisa, you had mentioned second half of the year. It sort of implies that server CPU could grow like 70%, maybe a little more this year. And so I guess my question is, how much of that growth either in June or for the year, is like units versus pricing? Is the -- are these price increases sort of mostly captured in June? Or is that also helping in the back half of the year? Lisa Su: Yes. Tim, the way I would say it is, maybe let me bring you back to Q1 for a moment. So if you look at our significant growth in the server business, it was actually -- although we were up on a year-over-year basis for both ASPs and units, it was actually much more unit driven. So we are shipping more CPUs across not just the high-end Turin family, but we're actually shipping a lot of Genoa sort of the Zen 4 family as well. As we go forward for Q2 and into the second half, we are guiding for a significant amount of growth. I think there's a little bit of ASP in there, but the way we're thinking about pricing, to be fair, is we are in a range where the supply chain is tight. And so there are some inflationary pressures. Costs have gone up a bit, and we are sharing some of that with our customers. But we are also being very thoughtful in -- look, this is -- we're playing out for the long term, and that means that we are -- our goal is to ship more units and a lot more units. And so from that standpoint, you should imagine that the majority of the growth is unit driven, and the ASPs are just really to help cover some of the inflationary pressures. Jean Hu: And just to add to what Lisa said, our ASP is increasing because of the mix where actually each new generation, the core counts, those are increasing, that actually drives the ASP up. Timothy Arcuri: And then I guess, Lisa also, so there's a lot of new architectures that are being used from multi-tenancy all the way to low latency. And your competitor has talked about the low latency part of the market being 20% plus and they, of course, added to their portfolio there. Can you talk about how you see that part of the market? I mean, obviously, you have enough business now you don't need to worry about that probably for now. But can you talk about that? Lisa Su: Yes, sure. So look, I think what we're seeing is what we expected in the sense that as you go -- as the AI adoption continues and the volumes continue to go up and the overall market goes up, you are going to see, let's call it, different compute architecture is being used because you want to get more cost optimization from that. So we expect that even in that situation, obviously, the vast majority of the TAM is still going to be, let's call it, data center GPUs as the primary accelerator. But you may choose to do optimization around inference, around low latency, around certain parts of the stack, whether it's decode versus prefill, I think that's very natural. The way we look at it is we're developing a full compute portfolio. So that's CPUs, that's GPUs, that's the ability to connect to all accelerators as well as the ability to do customization for certain customers, and we've also talked about our semi-custom capabilities. And with all of those sort of compute capabilities in our tool chest, I think we will be able to address, very effectively, a large portion of this market, including the low latency portion of the market. So from our standpoint, this is kind of a natural evolution. Now how fast it goes depends a bit on the technology in terms of what share of the TAM these things become, but we should expect that there will be different variants, and we're well prepared to address those different variants. Operator: And the next question comes from the line of Vivek Arya with Bank of America. Vivek Arya: Lisa, do you think Agentic CPU growth is incremental? Or is it coming at the expense of GPUs conceptually? So if you're raising server CPU TAM, are you also implicitly kind of raising AI TAM? So just I'm interested in your perspective on what did you think server CPU was as a percentage of AI TAM before? And what is it now with this $120 billion number? Lisa Su: Sure, Vivek. So the way we're thinking about is it's largely additive to the TAM. So you should think about we need all of the accelerators to run these foundational models, and then as these agents do work, they spawn more CPU tasks. So I would say largely incremental. The key is to make sure -- what we're seeing is in these deployments, the key is to make sure the ratio of CPUs to GPUs are the right ratio. So if you're installing a gigawatt of compute, the ratio -- there's a percentage of CPU as part of that gigawatt will increase. Some of the conversation in the industry has been about CPU to GPU ratios. And it's very hard to call exactly, but we certainly see the movement towards where in the past, the CPU to GPU ratio was primarily just as a host node in like a 1:4 or 1:8 configuration node, now changing and getting closer to a 1:1 configuration or even -- you can even imagine if you get lots and lots of agents that you could have more CPUs and GPUs. So -- but all in all, to answer your question, I think it's largely additive to the TAM. And the key is that everyone is now planning and thinking about CPUs at the same time that they're thinking about their accelerator deployments, which is a good thing. Vivek Arya: All right. And from my follow-up, Lisa, we continue to see memory prices go up. I imagine that is both kind of a cost inflation for you but perhaps an opportunity to take price as well. I'm curious, how is that dynamic playing out for AMD? And especially for your customers because a greater part of their CapEx increase is really kind of this memory inflation tax, right, that they have to pay. So how is this dynamic playing out for you and for your customers? And the part that I'm really interested in is that have you secured enough supply versus your other larger competitor who has disclosed a lot of prepayments and other things? So just how is this memory inflation dynamic playing out? And are you kind of adequately supplied from that perspective? Lisa Su: Sure. So Vivek, let me answer the second one first. I think from a supply standpoint, we are very happy with our partnerships with the memory vendors, and we have secured enough supply to certainly meet and exceed our targets. So it is a tight memory environment. Let me be clear. But I think we are very deep partnerships with the memory providers. And then back to your comments on the inflationary pressures. I mean, look, this is something that everyone in the industry is working with in the time of tight supply, we are seeing some cost increases on the memory side. I think we are all working through that. The way we're seeing it unfold in the market is actually on the Data Center side, because of the, let's call it, the demand for AI compute, I mean people are largely focused on supply and ensuring that the supply assurance is there. The corollary of that, the larger impact that we're watching is the impact on the consumer markets. And as we said in the prepared remarks, we are expecting that there could be some demand -- sort of the demand impact as a result of the memory price increases on things like the PC business in the second half of the year as well as the Gaming business. So we're taking that into account in our overall model. And we continue to work closely with the memory providers as well as our customers to ensure that every time we ship a CPU or GPU, then it's paired with the memory on the other side so that we don't have compute that is not being deployed. Operator: And the next question comes from the line of Aaron Rakers with Wells Fargo. Aaron Rakers: Congrats on the results. I want to stick on the topic of CPU to GPU. And as we think about the chart that you had outlined at the Analyst Day, there was obviously broken out between traditional CPUs and then the AI bucket on top of that. Obviously, I think the new forecast has a lot to do with the AI CPU expansion. I'm just curious, when you're doing a CPU in an AI workload, is there structurally a different level of ASP tied to that kind of CPU optimized for AI relative to a general purpose server CPU? Any kind of color or help on that would be useful. Lisa Su: Sure, Aaron. So let me start with the broader question. The broader question regarding -- the way we think about the CPU TAM is, again, think about it as 3 categories. So there is a traditional CPUs, let's call it, general purpose CPU TAM that is increasing, but let's call it, increasing at low rate, maybe, let's call it, low double digits, then you have your AI head node, which is connecting to accelerators, which is also growing, but it's smaller. And then the largest piece of the growth is this Agentic AI piece, which we think is really stemming from all of the Agentic processes. I don't have a number that I can tell you in terms of relative ASPs because it really depends on the workload that is being run. And what we see going forward is as core counts increase, obviously, we will see ASP increase. And that's the direction that we're going in as we go forward. But the main point is -- the largest portion of this is the Agentic AI, the CPUs that are serving these Agentic AI workloads in terms of the TAM increase. Aaron Rakers: And as a quick follow up, I'm curious, how do you characterize the competitive landscape as we see some of the ARM introductions in the market. Just curious of your views on the competitive landscape and server CPU. Lisa Su: Yes. Aaron, the best way to think about the server CPU landscape is, again, number one, everyone is talking about CPUs. So that tells you how critical they are for the AI infrastructure. And I think that's a good thing. We feel like we're very well positioned. No question, ARM is good architecture. It has a place in the Data Center market. We view it as more point products relative to a portfolio, where, from an AMD standpoint, we've built this broad portfolio of CPUs, going forward, what you're going to need for all of these different workloads. And we have, in the Venice time frame, added an AI-optimized CPU with the Verano in addition to our throughput optimized and sort of cost optimized point. So from that standpoint, I think we're very competitive. We're continuing to innovate on architecture. We're continuing to innovate on both advanced packaging as well as all of the architectural pieces. So we feel very well positioned going forward. And the key is the TAM is much, much larger than anybody thought. And so there's a lot of opportunity for different products to be successful in this area. Operator: And the next question comes from the line of C.J. Muse with Cantor Fitzgerald. Christopher Muse: I guess first question, I was hoping to speak a bit more about client for all of calendar '26. You talked about growth -- expected growth, but would love to hear your thoughts around seasonality in the second half. And I'm assuming that you are repurposing certain logic tiles from clients over to the Data Center and would love to kind of better understand what the implications are for ASPs on the client side looking into the second half. Lisa Su: Sure. So C.J. I think the client business has performed really well for us. I think if we look at Q1, it actually was a little bit stronger than what we expected. We are seeing some mix shift in the client business. The mix that we're seeing is the M&C or the Notebook business is actually growing, especially the premium portion. We're making very good progress in the commercial PC arena with our AI PCs. We did see desktops a little bit softer just given desktop is a more consumer-focused market. And so in that market, it's more impacted by some of the memory pricing and the component price increases. When we look at the full year, our commentary is we are planning for some demand impact in the second half due to the memory pricing. But even in that environment, what we're focused on is ensuring that we continue to make good progress on the Commercial business and continuing to focus on the premium segments of the market. So we believe that we will continue to grow on a year-over-year basis for the Client business compared to last year. And as it relates to ASPs, again, it's a little bit of puts and takes between Notebook and Desktop. But overall, I think we're feeling good about our opportunity to outperform the market and clients going forward. Does that answer? Christopher Muse: That was perfect. And then I guess a question on Instinct gross margins. With compute essentially sold out and obviously, you're building a business, so one has to be, I guess, conservative on that front. But I would think outside of kind of passing through HBM that given the very tight wafer environment that this would be a place where you could look to drive your Instinct margins closer to your corporate average? How are you thinking about that either today or in the coming 1, 2, 3 years? Jean Hu: C.J. at this stage, we really focus on driving the topline revenue growth on our Instinct family of product. I think on the gross margin side, you're absolutely right, it's really -- the demand for compute is tremendous. We actually are very strategic in how we think about the -- how we work with the customers. And of course, the different customers also have a different gross margin. I think, over time, once we start to ramp our revenue, we'll have a lot of opportunities to improve gross margin, both on the ASP side, but also, more importantly, on the cost side when we scale our business. Operator: And the next question comes from the line of Stacy Rasgon with Bernstein Research. Stacy Rasgon: For the first one, I just wanted to make sure I have the near-term AI GPU trajectory correct. So I know you said it was down sequentially in Q1 because of China. You had like $390 million of China revenue in Q4. So the AI business in Q1 actually grow sequentially ex China because it doesn't feel like it, given the server outlook? And then I look at what's maybe suggested for Q2, are you thinking GPUs and servers kind of grow similar rate sequentially because it would probably put GPUs in Q2 below the overall revenue in Q4, which seems low to me. I'm just trying to tie all that out. Could you help me with that, please? Jean Hu: Yes. So I think, Stacy, I appreciate the question. I think if you look at Q1, we did mention Data Center AI was down modest pace sequentially, primarily due to lower China revenue in the quarter. I think on your second question regarding Q2, you're right, both Data Center AI and the server will grow double digit in Q2. Stacy Rasgon: Yes. But you didn't answer my question. In Q1, did it grow sequentially ex the China step down, I guess, is what I'm asking. Jean Hu: The China, for our business, in Q1, it's not material. So I think I will repeat what I just said. Yes, the revenue -- the China revenue in Q1 is not material. Stacy Rasgon: Okay. Okay. So you don't want to -- okay. Second question, OpEx [indiscernible] for spending -- but it sort of continues to blow past the targets. You kind of give an OpEx guide and then it blows through it and then you guide higher. So again, I'm not bothered by this. I'm just wondering why is the OpEx been so hard to forecast? And how should we be thinking about OpEx through the rest of the year given the revenue growth? Jean Hu: Yes. Thanks, Stacy, for that question. I think the most important thing is given the tremendous market opportunities we have, we actually are investing aggressively. If you look at the past several quarters, we're really leaning in, in investing, but all the AI investments are driving the revenue momentum. So if you look at the Q1, revenue was 38% up, then Q2, we guided 46% up. The investments are driving the revenue momentum. Some of the OpEx increase, of course, is tied to the revenue. When you look at our beat on the revenue side versus our guidance, we did beat on the revenue side, right? So that impacted a little bit. But also, at the same time, we have a lot of customer engagement with our Data Center AI business, we do continue to make sure we have the resource to support our different customers. Matthew Ramsay: Thank you very much. Operator, I think we have time for one more caller on the call. Thank you. Operator: Our final question comes from the line of Blayne Curtis with Jefferies. Blayne Curtis: Lisa, I just want to go back to the supply side. There was a lot of story about your competitor restarting 7-nanometer. I'm just kind of curious as you look at that landscape which is quite robust through the end of the decade, do you think that the older products will stay around longer? And is there a way to think about the implications for gross margin in such a strong market. Is that actually a negative? Lisa Su: Actually, Blayne, I don't think we see the older products hanging around longer. In our case, I think it might be company-specific stuff. In our case, we actually see -- first of all, Turin is very strong. We actually crossed over 50% of our revenue being Turin this quarter. Genoa is very strong. We're still shipping some Milan, but I would say that's come down over time. So in general, people want to use the newer products because they're just more efficient in every aspect from performance, from cost structure, from a power standpoint. So that's what we're seeing. By the way, I should also mention, in addition to what we're seeing in the cloud segment of server, we're seeing really nice strong pickup in enterprise. And there as well, we're seeing our newer products do very well. So from our standpoint, it is all about ensuring that we ship what the customer needs. And in this case, it typically is our newer products, and we expect that to continue. As we transition into Venice later this year, we will expect Turin and Genoa to continue shipping, but there's a lot of goodness in going to the new products. And on the supply chain side, I know there's been a lot of discussion about how tight the supply chain is. The supply chain is tight. I would definitely say that. But I also think this is an area where we excel. We have very deep relationships across the supply chain on the wafer side, on the back end capacity side. And we are seeing meaningful improvements in that. And as our customers come to us with more demand, we are getting more supply. And the good thing about this is we're now talking about '27 CPU demand, we're talking about '28 CPU demand. And so that allows us to just plan much better as we go forward. Blayne Curtis: And then just a quick one for Jean. I'm just curious to follow up on Stacy's question on OpEx. I guess I was a little surprised that SG&A is kind of outpacing R&D. I was just kind of curious, is that start-up costs, because in a strong market, you wouldn't think you would have to discount or have a big sales effort. So I'm just kind of curious for the year, how you think about R&D growth versus SG&A? Jean Hu: I think for the year, you should expect us to grow R&D much faster than SG&A. I think in the past few quarters, we have been really building our go-to-market machine, and we have been investing more in sales and marketing side. But going forward, you should expect the year-over-year growth R&D will grow faster than SG&A growth. Lisa Su: Yes. And if I just add to that, Blayne, the places that we invest -- Jean is absolutely right. We're investing in R&D ahead of sales and marketing. But the places that we're investing in sales and marketing are paying off. So the investments are going into enterprise servers. They're going into commercial PCs. They're going into mid-market, small and medium business. These are places where AMD traditionally didn't invest, but now that we have a much broader portfolio, both on the server CPU and on the commercial PC side, it makes sense for us to invest because that's sort of the very best part of those markets. Matthew Ramsay: All right. Thank you very much, everybody, for joining and your interest in AMD. John, you can go ahead and close the call now. Thanks. Operator: Thank you. And ladies and gentlemen, that does conclude the question-and-answer session, and that also concludes today's teleconference. We thank you for your participation. Please disconnect your lines, and have a wonderful day.

6天前Insight Analytics约5分钟阅读

NPO 2026 Q1 财报电话会议

Operator: Greetings, and welcome to the Enpro First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to James Gentile, Vice President, Investor Relations. Thank you. You may begin. James Gentile: Thanks, Jessie, and good morning, everyone. Thank you for joining us today as we review Enpro's first quarter 2026 earnings results and discuss our improved outlook for 2026. I'll remind you that this call is being webcast at enpro.com, where you can find the presentation that accompanies the call. With me today is Eric Vaillancourt, our President and Chief Executive Officer; and Joe Bruderek, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling the historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we will be making statements on this call, including our current perspectives for full year 2026 guidance that are not historical facts and that are considered forward-looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric Vaillancourt, our President and Chief Executive Officer. Eric? Eric Vaillancourt: Thanks, James, and good morning, everyone. Thank you for your interest in Enpro, as we discuss our first quarter results, provide an update on strategic initiatives and share our current views for the balance of 2026. Before we discuss our results for the first quarter, I would like to recognize our 4,000 colleagues across the company who are accelerating their personal and professional growth, while contributing to Enpro's strategic and financial successes. Momentum and excitement is showing up throughout the organization. And we are off to a strong start in the second year of Enpro 3.0. We are energized to continue providing critical products and solutions to our customers, while driving significant enterprise value creation, by unlocking compounding strength of our portfolio. Our leading market positions, committed colleagues and strong balance sheet support the continued execution of our multiyear value creation strategy. After my update, I will turn the call over to Joe for a more detailed discussion of our results and drivers of our increased guidance for 2026. Now on to the highlights for the first quarter. We started 2026 off on the front foot with reported sales up nearly 11% year-over-year. Improving demand in semiconductor markets drove sales in the Advanced Surface Technologies segment up over 11%. Additionally, the contributions from the 2 businesses that we acquired in the fourth quarter, AlpHa Measurement Solutions and drove Sealing Technologies sales up 10.8%. Total company adjusted EBITDA increased nearly 13% to over $76 million at a margin over 25% for the first quarter. We are pleased with these results, especially as we continue to invest in growth opportunities across the company at high-margin return thresholds, while accelerating investments in the development and growth of our colleagues. Throughout our organization, teams are excited to drive our 3.0 strategy forward. Our early progress shows the benefits we expect to unlock as we move into this phase of our strategy. We are confident that our proven excellent execution will allow us to continue to succeed in a variety of macroeconomic backdrops. In AST, positive trends across the segment's portfolio of products and solutions are translating into strong performance. The slope of the demand curve has steepened with order patterns accelerating during the first quarter ahead of our expectations at the start of the year. For us, execution is top of mind. And we began building inventory during the first quarter to ensure that we can effectively deliver for our customers and proactively manage potential capacity, supply chain and labor constraints as demand increases. We are already seeing the investments we made in AST during the downturn begin to bear fruit in the early stages of the recovery cycle. We expect these investments will position us well to capture opportunities from the acceleration of semiconductor capital equipment spending for the balance of the year and beyond. We also believe that, our vertical integration model is a key differentiator for Enpro in the next phase of the semiconductor industry growth, as many of our new business wins are using more of our solutions to drive value for our customers, enhancing our specified position in critical in-chamber tools, including gas dispersion and wafer handling applications. In addition, hard work to qualify and earn processor record designations solidifies our position in leading-edge precision cleaning solutions, a business that is currently strong and accelerating. Our capacity expansion in Taiwan, California and Arizona, both executed and ongoing, position us to participate in the rapid expansion of leading-edge chip production, capacity supporting advanced computing and artificial intelligence. In Sealing Technologies, segment revenue of 10.8% was primarily driven by the first full quarter contribution from the acquisitions of AlpHa and Overlook completed in the fourth quarter of 2025, recovering nuclear solutions sales and currency tailwinds. Commercial vehicle sales were down year-over-year, below our expectations as demand remains slow, although we're cautiously optimistic that we are nearing the bottom in commercial vehicle markets. Aerospace sales in Sealing were flat year-over-year, reflecting a difficult year-over-year comparison in commercial aerospace, which was partially offset by continued acceleration in demand for products supporting space applications. Total Sealing segment orders were up double digits during the first quarter. Sealing Technologies segment profitability remained strong at 32.5% with disciplined execution helping to offset continued growth investments, softness in commercial vehicle sales and tepid general industrial demand internationally. Aftermarket sales represented 60% of Sealing segment revenue in the quarter. Integration is going well at AlpHa and Overlook. And we are making the appropriate investments to fully integrate these businesses into Enpro and unlock additional growth opportunities. Our new colleagues are already finding ways to leverage Enpro network, including our sourcing, supply chain capabilities and operational expertise while delivering strong top line growth during the first quarter. Additionally, AMI, which we acquired in January 2024, continues to perform above plan. We expect the Sealing Technologies segment to continue to deliver continued best-in-class performance. Our growth priorities underpinning the Enpro 3.0 strategy remain unchanged and will guide our performance through 2030. Over the long term, we are positioned to generate mid to high single-digit organic top-line growth with strong profitability and returns complemented by capability expanding acquisitions that meet our rigorous strategic and financial criteria. We are targeting mid-single-digit organic growth in Sealing Technologies. While at AST, we are targeting at least high single-digit organic growth, with both segments capable of generating 30% adjusted segment EBITDA margins plus or minus 250 basis points through 2030. Our cash flows allow us to maintain our strong balance sheet with a net leverage ratio currently at 1.9x after taking into account the fourth quarter acquisitions of AlpHa and Overlook. Our first capital allocation priority is to reinvest in the business and our people, while pursuing select strategic acquisitions that expand our leading-edge capabilities and meet our stringent criteria, without the use of excess leverage to drive growth in line or above Enpro 3.0 goals. We are excited to deliver on our promises and continue to execute our strategic plan. Life is good at Enpro and the future is bright. Joe? Joe Bruderek: Thank you, Eric, and good morning, everyone. Enpro started 2026 with strong results and consistent execution despite a dynamic macroeconomic environment. For the first quarter, sales of $303 million increased nearly 11%, supported by strong year-on-year revenue growth at AST of over 11%. The contributions from the recent acquisitions and steady overall performance in the Sealing Technologies segment. First quarter adjusted EBITDA of $76.4 million increased nearly 13% compared to the prior year period. Total company adjusted EBITDA margin of 25.2% expanded by 40 basis points year-over-year, driven by consistent performance in the Sealing Technologies segment and a nearly 20% increase in AST segment EBITDA, which includes expenses tied to growth investments, both executed and ongoing. Corporate expenses of $13.7 million in the first quarter of 2026 increased from $11.3 million a year ago, primarily driven by higher incentive compensation accruals and $1.2 million in restructuring costs. Adjusted diluted earnings per share of $2.14 increased 13%, largely driven by the factors behind adjusted EBITDA growth year-over-year. Moving to a discussion of segment performance. Sealing Technologies sales increased 10.8% to $199 million. Growth was driven by the contributions from the AlpHa and Overlook acquisitions, a recovery in Nuclear solutions sales from the choppiness experienced last year, strength in compositional analysis applications, as well as strategic pricing actions. These gains more than offset soft commercial vehicle demand and slower general industrial sales internationally. Foreign currency translation was also a tailwind. North American general industrial, aerospace and food and biopharma sales were firm throughout the quarter. For the first quarter, adjusted segment EBITDA increased over 10%, driven by favorable mix, strategic pricing initiatives, contributions from AlpHa and Overlook and foreign exchange tailwinds, partially offset by lower commercial vehicle volumes and investment in growth initiatives. Adjusted segment EBITDA margin was 32.5% and remained above 30% for the ninth consecutive quarter. Turning now to Advanced Surface Technologies. Sales for the first quarter were up over 11% and orders during the quarter hit a clear inflection point. Demand for precision cleaning solutions tied to advanced node chip production is accelerating. In addition, our outlook for semiconductor capital equipment spending has improved. And we built inventory of key products during the first quarter to prepare for the expected increase in demand. For the first quarter, adjusted segment EBITDA increased 18.5% versus the prior year period. Adjusted segment EBITDA margin expanded 140 basis points to 23.3%. Operating leverage on higher sales growth and higher production volumes, as well as favorable mix were offset in part by $2 million of increased expenses tied to growth initiatives. Our #1 priority is to serve our customers and remain agile as we enter this period of unprecedented demand for our semiconductor products and solutions. Moving to the balance sheet and cash flow. Our balance sheet remains strong. And we have ample financial flexibility to execute on our long-term organic growth initiatives and consider select acquisitions that align with our strategic priorities and deliver attractive returns. We generated strong free cash flow in the first quarter, more than doubling from last year to $26.5 million, while capital expenditures increased nearly 40% to $13.1 million, largely supporting growth and efficiency projects. During the first quarter, we repaid $50 million in revolving debt, bringing our leverage ratio to 1.9x trailing 12-month adjusted EBITDA. We expect to continue generating strong free cash flow in 2026 with an unchanged capital expenditure budget of around $50 million this year as we continue to invest in the company at solid margin and return thresholds. Finally, our strong balance sheet and cash generation provide us with ample liquidity to make these investments, while continuing to return capital to shareholders. In the first quarter, we paid a $0.32 per share quarterly dividend totaling $6.9 million. We also have an outstanding $50 million share repurchase authorization. Moving now to our increased guidance. We are raising our total year 2026 guidance issued in mid-February and now expect total Enpro sales to increase in the 10% to 14% range, up from 8% to 12%. Adjusted EBITDA in the range of $315 million to $330 million, up from $305 million to $320 million previously and adjusted diluted earnings per share to range from $8.85 to $9.50, up from $8.50 to $9.20. The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25% and fully diluted shares outstanding are 21.3 million. In Sealing Technologies, shorter cycle order patterns remain solid as we enter our seasonally strong second quarter. As Eric mentioned, we are seeing double-digit order growth year-on-year despite a slightly softer commercial vehicle outlook than previously expected. And we expect mid-single-digit revenue growth, excluding the contributions from AlpHa and Overlook in the Sealing Technologies segment for the year. We are encouraged by positive order momentum in domestic general industrial, aerospace, food and biopharma and compositional analysis, as well as smaller but improving pockets of earned growth in areas such as communications and data center infrastructure. We expect these elements to support improved sequential sales performance in Sealing Technologies into the second quarter while not factoring in any recovery in commercial vehicle markets in our improved guidance ranges. Finally, we expect Sealing segment profitability to remain towards the high end of our long-term target range of 30%, plus or minus 250 basis points for the year. In the Advanced Surface Technologies segment, we are seeing significant order momentum with strong acceleration in Precision cleaning solutions and critical in-chamber tools. New platforms and capacity expansions that we have invested in will begin to generate revenue in the second half of 2026, with ramp schedules dependent on underlying volume into 2027 and beyond. At this time, we expect AST revenue growth in the mid-teens range year-over-year, with segment profitability improving to a run rate close to 25% by the end of 2026 as capacity and supply chains aligned to meet elevated demand levels. Thank you for your time today. I will now turn the call back to Eric for closing comments. Eric Vaillancourt: Thank you, Joe. We are excited to demonstrate our strength and agility as we continue to accelerate our personal and profitable growth in the second year of Enpro 3.0. Thank you all for your interest in Enpro. We'll now welcome your questions. Operator: [Operator Instructions] Our first question is coming from the line of Jeff Hammond with KeyBanc Capital Markets. Mitchell Moore: This is Mitch Moore on for Jeff. Obviously, just really nice margin progression sequentially for AST. Could you help us just unpack a little bit how that inventory investment helped margins in AST? And then separately, just could you help us understand the margin trajectory kind of through the balance of the year? Is it kind of a linear progression to that 25% you talked about? Joe Bruderek: Yes. Thanks, Mitch. As you noted, we did see progression from the low 20%s to 23% and change for the first quarter. The inventory build, which is really important as we head into significant demand in the second quarter and more specifically for the back half of the year, contributed about 150 basis points to the margin increase in the first quarter. We also saw Precision cleaning continue to be very strong, tied to advanced node precision cleaning work, both in Taiwan and the U.S., which helped margins. And we're also seeing a little bit of leverage on the revenue growth. We expect to continue to build inventory a little bit in the second quarter. It might be a little bit less than we had in the first quarter. And then revenue increasing to offset any lower inventory build potentially in the second quarter. So margins relatively similar in the second quarter and then seeing incrementally throughout the second half, pointing towards that roughly 25% run rate that we expect to exit the year at. Mitchell Moore: Great. That's helpful. And then maybe just the Sealing. I think orders were up double digits in the quarter. Could you just expand on the order activity you saw there, where you're seeing it, if it's concentrated or more broad-based? And then if you could just talk a little bit about your confidence in Sealing kind of picking up through the remainder of the year with a little bit slower start here. Eric Vaillancourt: Very confident in Sealing picking up throughout the year. Our order rate is very strong, exiting the first quarter and building throughout the quarter. So very positive on the year. I don't have any concerns there. Very strong in North America, space, aerospace in general. General industrial in the U.S. is still pretty strong. Only area of weakness really is general industrial and a little bit in Europe, a little bit in Asia. But it still doesn't have any meaningful impact to our overall results. Operator: Our next question is coming from the line of Steve Ferazani with Sidoti & Company. Steve Ferazani: Appreciate the detail on the presentation. Eric, I understand commercial vehicles still being weak. Obviously, we've seen 3 or 4 quarters -- 3 or 4 months of much stronger Class 8 truck orders, obviously, coming off of a significant trough. When would you start seeing that? And do you -- is that built in at all that CV comes back at all in the second half? Eric Vaillancourt: It's not built into our projections at all, as we said in the script. Although, I am cautiously optimistic that it does start to pick up in the second half of the year. Keep in mind, the reason for the acceleration in truck orders is really to avoid the extra cost dilution enhancements in the trucks. And so right now, people are prioritizing trucks versus trailers. But that demand will normalize over time to roughly -- if you look over a 20-year cycle, it's about 250,000 units a year, we're somewhere 170,000 to 180,000 now. So I expect next -- at the end of this year, beginning of next year, somewhere in that time frame, you'll start to see some momentum build. I mean, the ratio between trucks and trailers really doesn't change much. We expect to have about 1.1 trailers per truck. So you would expect that to come back. And our aftermarket business remains very strong. Steve Ferazani: Got it. How are you feeling about the 2 acquisitions now with the quarter under your belt? I know that with Overlook, they had made some pretty significant capacity additions prior to the acquisition. In terms of those 2 businesses, do they require significant investments to grow moving forward? How do you feel about them? Eric Vaillancourt: Very, very strong. Very excited about them going forward. They don't require significant investments. Overlook, they made a pretty significant investment and moved into a new building or did move into a new building in the first quarter. But that was already ongoing before we closed on the business. So it really, it was just a move at this point. And so most of the upfitting that already done and their backlog and their performance is really impressive. AlpHa continues to go well. And so we're still excited about those businesses going forward. Joe Bruderek: And I'll just add, Eric, the integrations are going well. I think the teams are joining our functional support, we're helping where we can there. We're already seeing some supply chain opportunities. In addition, we're making some smaller investments. But investments in their commercial organizations to help expand growth opportunities and enter a few new markets and new customers. So we expect that's an area that we can add value and help them grow over time. Steve Ferazani: And I think you mentioned in the script that AMI since the acquisition was 2024, I believe, continues to outperform in general. How are you thinking about that compositional analysis market? Eric Vaillancourt: Love the space. We just would like to do more. And we continue to have a very active pipeline and we continue to look for the right opportunities to meet all of our criteria that are exciting. And there's several opportunities in our pipeline exciting and the more and more opportunities seem like to come to the market. So there's more momentum in that space. Joe Bruderek: Overall, if you take into consideration the compositional analysis growth perspective. We're looking for a kind of minimum high single-digit organic top-line growth moving forward with incremental investments to expand end market positions and commercial expertise. Steve Ferazani: Got it. That's helpful. Just if I get one more in, in terms of where you are with the various qualifying processes to meet advanced node production. Is there a lot more to go there? Eric Vaillancourt: I don't think it ever stops. So I start by saying that. So no, Arizona is getting fully qualified now. I don't know how much longer -- it shouldn't be long at all. But at the same time, there's new investments in Taiwan that are just starting. There's new customers that are starting as well. So I don't think it ever ends, 2-nanometer is going to start to ramp at some point in the next little bit and then you're already trying to qualify 1.4. So it's -- I don't it stops. I think of that as continued investment. Operator: [Operator Instructions] Our next question is coming from the line of Ian Zaffino with Oppenheimer & Company. Isaac Sellhausen: This is Isaac Sellhausen on for Ian. Just on the updated guidance, if you could unpack a little bit more on what has changed with regards to the outlook for the AST business. Maybe if you could parse out the demand drivers between cleaning and coating and the semi cap side. It sounds like visibility is a bit better in capital equipment. Joe Bruderek: Yes, we're clearly seeing increased order momentum and longer lead times. And demand is inflecting significantly sooner and higher than we expected coming into the year from an AST's perspective. And it's coming from both. It's coming from precision cleaning and semiconductor capital equipment in really all geographies. So our increased guidance is pretty much all driven by AST. Our teams are rallying around meeting the higher demand, working with our customers and the entire supply chain and all of our partners to kind of meet the overall industry demand. The outlook is really bright for the rest of the year. The second half is firming up where when we had the call in February, we talked about we saw orders for the second half and really starting in the end of the second quarter. Well, the second quarter is filling in nicely. We're seeing some of that demand come a little sooner into the second quarter. And the second half is clearly going to be significantly increased over the first half in the magnitude of double-digit increase second half versus the first half. And the industry is all talking about rallying to meet this higher demand and out through the end of '26 and really into '27. So there's tremendous optimism. And we expect to participate and even outperform what the market expects. Isaac Sellhausen: Okay. Great. And then just as a follow-up on the margin outlook for both businesses, obviously, it sounds like you guys are managing any kind of inflationary pressures just fine. But is there anything to call out maybe on the cost side with regards to whether it's fuel or equipment. But yes, that would be helpful. Joe Bruderek: No, there really isn't anything that's going to be meaningful from the supply side or cost side. Like I said, we do a very good job in general. Operator: We have no further questions at this time. So I would like to turn the floor back over to James Gentile for closing comments. James Gentile: Thank you, everyone. We're seeing strong momentum across Enpro and look forward to updating all of you when we report second quarter results in early August. Have a great rest of your day. Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. And you may disconnect your lines at this time.

6天前Insight Analytics约5分钟阅读

MNTN 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to MNTN Inc.'s First Quarter 2026 Earnings Conference Call. This call is being recorded for replay purposes, and at this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session following prepared remarks from MNTN Inc.'s management. I would now like to turn the call over to Mirza Plesche, from the Gilmartin Group, for a few introductory comments. Great. Thank you. Mirza Plesche: By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one emailed to you. Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond MNTN Inc.'s control, including risks and uncertainties described from time to time in MNTN Inc.'s SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for MNTN Inc.'s franchises and growth initiatives, future product approvals and clearances, competition, reimbursement, and clinical trial enrollment and outcomes. MNTN Inc.'s results may differ materially from those projected. MNTN Inc. undertakes no obligation to publicly update any forward-looking statement. Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA, and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website. And with that, I would like to turn the call over to Mike Carroll, President and Chief Executive Officer. Mike Carroll: Great. Good afternoon, everyone, and welcome to our call. MNTN Inc. is off to a strong start in 2026, with worldwide revenue of $140 million in the first quarter, reflecting 14% growth year-over-year. We are building on the momentum we established in 2025 from new product launches, with this quarter marking an acceleration in our worldwide growth rate from the preceding quarter and the comparable quarter last year. Fueling this acceleration is our U.S. business, which drove approximately 15% in the quarter from expanding adoption of AtriClip Flex Mini and Pro Mini devices, Cryosphere Max Probe, and continued strength from our Encompass clamp. In addition, we generated $17 million in adjusted EBITDA, nearly double the first quarter of last year. Our results this quarter once again demonstrate our ability to deliver durable, double-digit revenue growth and expand profitability. Beyond our financial results, we have made exceptional progress in our BOX NOAF clinical trial. Since initiating trial enrollment in the fourth quarter of last year, we have enrolled approximately 300 total patients to date in this 960-patient randomized controlled trial. We are tracking well ahead of our original timeline and now expect complete enrollment around the end of this year, nearly one year ahead of plan. The pace of enrollment in this trial reflects an extremely high level of engagement from surgeons who experienced firsthand the impact postoperative AFib has on their patients. As a reminder, up to half of cardiac surgery patients without preexisting AFib will develop postoperative AFib, which is the most common complication of cardiac surgery. Because there is no established treatment today, postoperative AFib is a substantial burden on health care spending, with estimates exceeding $2 billion annually in the U.S. alone. We are confident that our BOX NOAF clinical trial utilizing our Encompass clamp and AtriClip device has the potential to meaningfully change treatment outcomes for this patient population and address the significant unmet clinical need. BOX NOAF is also highly complementary to our LEAF's clinical trial studying stroke reduction benefit of left atrial appendage management in cardiac surgery patients without atrial fibrillation. We expect both of our landmark clinical trials to generate robust clinical evidence in support of preventative treatments for cardiac surgery patients, unlocking a massive global market opportunity for MNTN Inc. while establishing new standards of care in cardiac surgery. We at MNTN Inc. are well positioned to realize these significant catalysts for our business in the coming years. Now on to updates covering franchise performance in the first quarter. Pain management once again led our portfolio growth, increasing 28% year-over-year. The CrowdStrike Max Pro continues to be the primary driver of growth, contributing roughly 70% of our pain management sales this quarter. Surgeons across both new and existing accounts recognize the significant time savings and clinical effectiveness it provides, leading to more patients having their postoperative pain managed effectively. Building on our legacy of innovation, we are also pleased that our Cryo XD Pro for amputation procedures is beginning to gain traction. We continue to receive outstanding feedback from each new surgeon that uses this device, and through our registries we are capturing clinical outcomes for this therapy. We are still in the early innings for Cryo XD therapy development and adoption; however, we remain confident in Cryo XD contributing more meaningfully as we move to the back half of 2026. Within our cardiac ablation franchises, worldwide open ablation revenue grew 15% in the first quarter, led by steady adoption of Encompass clamp in the United States and Europe. Encompass is delivering growth from both new and existing accounts, even as we approach the four-year anniversary of our U.S. full market launch. As mentioned in our fourth quarter earnings call, our drive to treat AFib in cardiac surgery patients was validated with a recent announcement from the Society of Thoracic Surgeons annual meeting, including concomitant AFib treatment as a quality metric. There is strong precedent for the impact of quality metrics in cardiac surgery, and we believe this change will support increased adoption for surgical AFib ablation and appendage management, serving as a durable tailwind for growth for years ahead. Our minimally invasive ablation franchise continued to face headwinds in the first quarter. We believe there is a role for hybrid therapy in the current and future treatment landscape and remain committed to providing a solution for the unmet need for patients with long-standing persistent AFib. Finally, turning to our appendage management franchise, which saw 16% growth worldwide driven by both our open and minimally invasive appendage management products. Our open left atrial appendage management business benefited from strong adoption of AtriClip Flex Mini in the United States, where we exited the quarter with Flex Mini contributing approximately 40% of our open appendage management revenue. More importantly, we believe our Flex Mini device has been impactful in driving share gains in this market. Surgeons using or trialing competitive devices are impressed by the small form factor of AtriClip Flex Mini, along with robust clinical evidence and superior product performance of our AtriClip devices. In minimally invasive procedures, AtriClip Pro Mini is building upon that adoption in the U.S., providing a pricing uplift that offsets pressure of our hybrid AF therapy procedure volumes. It remains clear that differentiated innovation plays an important role in maintaining our position as the leader in appendage management in cardiac surgery, and we continue to prioritize investments in this platform. In our international markets, we are growing adoption across our legacy left atrial appendage management devices. Following the first quarter, we received CE Mark under EU MDR in Europe for both AtriClip Flex Mini and Pro Mini devices and expect to launch both products in Europe later this year. New product launches in Europe, the United States, China, and Japan, coupled with the future LEAF's clinical trial outcomes, provide a long runway for growth in our appendage management franchise. In closing, the performance we delivered this quarter underscores the power of our innovation and focus on execution, while the rapid progress in our BOX NOAF clinical trial reinforces the significant opportunity ahead at MNTN Inc. We remain committed to advancing standards of care, scaling responsibly, and delivering durable growth with improving profitability for our shareholders. I will now turn the call over to Angie Wyrick, our Chief Financial Officer. Angie? Angie Wyrick: Thanks, Mike. Worldwide revenue for 2026 was $141.2 million, up 14.3% on a reported basis and 12.8% on a constant currency basis versus 2025. Our performance reflects substantial growth driven by the continued adoption of key new products in the United States and many regions throughout the world. On a sequential basis, worldwide revenue increased approximately 1% compared to the fourth quarter 2025. First quarter 2026 U.S. revenue was $116.2 million, a 14.9% increase from 2025. Open ablation product sales grew 17.3% to $39.1 million, fueled by the strong and sustained adoption of our Encompass clamp across new and existing accounts. U.S. sales of appendage management products were $48.4 million, up 14.9% over 2025, driven primarily by increasing adoption of our AtriClip Flex Mini and Pro Mini devices. U.S. MIS ablation sales were $6.4 million, a decline of approximately 25% over 2025. And finally, U.S. pain management sales were $22.4 million, up 29.5% over 2025, led by the Cryosphere Max Pro, which contributed approximately 70% of pain management sales in the quarter, driving increased adoption in both thoracic and sternotomy procedures. International revenue totaled $25 million for 2026, up 11.5% on a reported basis and up 3.3% on a constant currency basis as compared to 2025. European sales were $16.1 million, up 13.2%, and Asia Pacific and other international market sales were $8.9 million, up 8.4%. International growth was tempered by continued uncertainty in the U.K. as well as lower distributor sales in Asia. Offsetting these headwinds, we saw significant growth across franchises in other major geographies, largely driven by our direct markets. Gross margin for 2026 was 77.4%, up 246 basis points from 2025. The increase was driven primarily by favorable product and geographic mix, with strong U.S. performance propelled by our new product launches and adoption. Transitioning to operating expenses for the quarter. Patrick Pohlen: We expect adjusted EBITDA to be between $96 million and $101 million. To wrap up, we delivered another solid quarter and believe MNTN Inc. will continue to gain market share in the massive performance television market. We are confident that our future growth initiatives and the strength of our operating model will position MNTN Inc. to drive continued growth and profitability. With that, we will open up the line for questions. Operator: We will now open the call for questions. Please limit yourself to one question and one follow-up. If you would like to ask a question, please use the raise-your-hand function. If you have dialed in to today's call, please press 9 to raise your hand and 6 to unmute. Please stand by as we compile the Q&A roster. Your first question comes from Shyam Patil of Susquehanna. Your line is open. Please go ahead. Shyam Patil: Hey, guys. Congrats on the continued strong execution and results. Mark, I had one question for you. You mentioned in your script that the company has made some pretty significant hires with some very strong backgrounds in this space. Can you just talk a little bit more about this and maybe what you are envisioning? Mark Douglas: Yeah, thanks for the question. What we are seeing is that we think the market that essentially we created, which is the concept of performance TV and bringing television to the small and mid-sized business sector, is starting to move from early adopter to mainstream. We added these individuals to the team—Garland Hill and Peter Blacker—and they, of course, are also adding people to the teams that they are building out in the company in order to meet that mainstream market head on. Garland, in particular, has been involved in significant buildouts in the performance marketing space, so his experience, his knowledge, his skills, and his network are incredibly valuable to the company. Same with Peter. He was there day one building out streaming at NBCUniversal, building out that team and that whole concept at NBCUniversal and Peacock. I am pretty excited about these individuals, them being on the team, the people they are going to bring, and I am excited as the year unfolds and we see the market moving from that early adopter phase into the mainstream segment, where every company starts to expect that they can be on television as part of their marketing mix. Thanks. Operator: Thanks, Mark. Your next question comes from the line of Ronald Josey with Citi. Your line is open. Please go ahead. Ronald Josey: Great, thanks for taking the question. Mark, I wanted to ask about your streaming partners, and with the addition of more and more events like March Madness and NHL playoffs and the hire of Peter, talk to us about how your partnerships have evolved here and how your partners are viewing you as an additional source of monetization. Has anything changed here or perhaps accelerated? And then I wanted to ask about QuickFrame AI 3.0. We are now on version three after having been in beta maybe since the fall. Talk to us about how the sales cycles have been post QuickFrame, how conversion rates are trending—anything along those lines. Thank you. Mark Douglas: Sure. In terms of the streaming partners question, what is really critical is that for performance marketing to work, you have to reach the consumer where they are. You cannot pick a single network; you need to reach everyone within the target group of consumers you are going after. We have built out relationships with virtually every streaming network in America. As the overall connected TV space has brought on things like live sports and tentpole events like the Oscars, we think it is important that we bring our customers to those events also. Bringing Peter on—this year NBC is covering virtually everything; they have the Olympics, the World Cup—his experience and knowledge in terms of how that content plays out, with all the relationships we already have with these networks as well as those he has, made this a role where we wanted someone with tremendous industry experience to make sure that MNTN Inc. is giving our customers access to everything. In terms of our relationships with networks, I believe they view us as a growth channel. Ninety-five percent of our customers have never advertised on television before, so that is net new revenue to the industry, to MNTN Inc., and to our partners. His role is important: wherever the target consumer is, MNTN Inc. is there, and we are bringing our customers there with us. On QuickFrame AI, the product is new. We wanted to go beyond video clips to full-blown professional-quality commercials, so we did a long beta. Many companies have used QuickFrame AI and continue to use QuickFrame. With version three, we believe it is fully ready for anyone to use. The team is excited, and we are excited with the commercials people are building in the product. Regarding the sales cycle, most of our younger customers—small businesses—are in some way using QuickFrame AI. We are measuring how quickly companies get live and how frequently they refresh creative once live. Those are the stats we are focused on, and we are excited about where that is headed. Operator: Your next question comes from Andrew Boone with Citizens. Your line is open. Please go ahead. Andrew Boone: Thanks so much for taking the questions. I would like to start with guidance. The full-year guide implies an acceleration in the back half. Can you explain that to us or talk about the confidence you have to achieve that? And then, Patrick, I think in your comments earlier you talked about throttling new customers in terms of onboarding. Can you talk about how you think about the pacing of onboarding customers—what may be a good fit versus not—and help us understand the dynamics of what you are looking for in terms of customer adds? Thanks so much. Patrick Pohlen: Sure. I will take the first one, and Mark and I may share the second. We continue to see a lot of strength in the PTV business, indicated in both our Q2 guide and our fiscal year guide. We anticipate continued growth in revenue and adjusted EBITDA and see a long runway of growth ahead. The Q2 guide is $81 million to $83 million, $82 million at the midpoint—20% year-over-year growth. The fiscal year guide is $347 million to $357 million—24% growth at the midpoint. We continue to invest strategically in areas that will drive revenue growth, particularly in sales and marketing, and we also have initiatives to continue to improve our gross margins. The combination of strong customer and revenue growth, gross margin strength, and disciplined investment to drive more revenue sets us up very nicely for the future. Mark Douglas: On onboarding, we think about small business and what we call mid-market. One line of distinction is size, but an even more important distinction is that larger companies have dedicated marketing teams with very specific needs. Our platform initially focused on the needs of those mid-market customers. Smaller businesses are often owner-led, with individuals handling a lot of marketing who may not have a fully developed marketing skill set. The core platform is the same, but some needs differ. Our mid-market has been consistently growing since we launched version one of the concept of performance TV. For small business, we want to make sure they come on, are successful, our cost to acquire them is where we want it, and that they have long and sustained growth. Each day we adjust how much small business we drive toward, and we make adjustments to the product and reporting. When Patrick says we control it, he means we control the marketing investment in acquiring those customers, we control where they come on board in terms of product minimums, and we make sure we continue our success in mid-market while bringing on small businesses at a sustainable, responsible, and profitable rate. That part of our business we tune to land exactly where we want it, and it will continue to evolve this year and beyond. We have dedicated teams on it. Patrick Pohlen: And we did grow 46% year-over-year in terms of customer growth. Operator: Your next question comes from Robert Coolbrith with Evercore ISI. Your line is open. Please go ahead. Robert Coolbrith: Hi, everybody. This is Rob on the call for Mark. Thanks for the opportunity to ask a question. Two if I could. First, to follow up on the QuickFrame question, are there any benefits you are seeing in the beta period that give you more confidence on go-live times, creative refresh, and matching up the product with where it needs to be for customers to have success, especially as you go down market into SMB? Does that give you any additional confidence, Patrick, to invest incrementally or press a little harder on the accelerator? And second, gross margin came in better than expected. Any particular levers you pulled in the quarter that you would like to call out? Thank you. Patrick Pohlen: Mark and I will share the first one. Mark Douglas: On QuickFrame AI—why is version three the version we are calling full production? We announced that today and you will see more marketing. We have been watching customers use the product, looking at their rates of starting projects, getting them live, and how much time it is taking. We are pleased with where those metrics have gotten. We have brought the effort down and the go-live rate up. We are seeing that people with less creative skills are increasingly successful. Part of that is our technology investment—savable characters (AI casting), savable locations, the ability to pick products you want in the video—all that functionality. Part of it is that the AI generative models keep getting better, and we are integrated with the best models—Sora, Kling, Gemini, and others. It is hard to remember, but last March you could not create a usable AI video. A little over a year later, the evolution of these models, as well as our orchestration, has reached the professional-grade level. In terms of benefit to sales cycle or go-live times, we are seeing benefits, especially in small business—mainly because there are no approvals involved. A person can create an account, create the video, and go live. In mid-market there are typically more approvals and sometimes professional video people involved, so improvement is smaller but present. We are not ready to quantify those numbers yet, but we are really excited about the production release and what it means for customers and for MNTN Inc. Patrick Pohlen: Rob, we have enough anecdotal evidence that it is what we thought it would be—an enabler to our core PTV business, particularly in small business, but we also see many mid-sized customers using it. We have not quantified the cost yet because we just came out of beta, but we are managing costs quite well. It is worth it for enabling both mid-sized customers and small businesses to get TV commercials and get on the platform. We will start to track it more now. We did not build it primarily for a revenue stream, but rather to enable the core PTV business. Robert Coolbrith: And then, Patrick, anything you can call out on gross margin? It was a little bit better. Thank you. Patrick Pohlen: Sure. We had a nice quarter in terms of gross margin at 81%. That reflects a mix of strong revenue growth—revenue growth drives gross margin improvement—as well as specific actions. We spun out Maximum Effort, which gives us a significant benefit in creative COGS. And for Q1, we had the full benefit of switching hosting providers. The combination is quite strong, and we think it continues. We believe the combination of revenue growth driving gross margin, the creative COGS, the hosting COGS, and discipline on other COGS will keep us within the long-term target of 75% to 80%. Operator: Your next question comes from Matt Weber with Canaccord. Your line is open. Please go ahead. Matt Weber: Hi, thanks so much for taking the question, and congrats on the strong quarter. As we think about the broader macro backdrop, how would you describe the health of your SMB advertiser base over the past few months? Have you noticed any changes in budget pacing or campaign duration that might reflect a tighter discretionary spending environment? And are large enterprise customers behaving any differently? Mark Douglas: In the SMB sector, we do not think they are greatly affected by macro unless circumstances are very extreme. You can look back to COVID when business activity nearly stopped, and that was one of the biggest years many in advertising had. SMB customers do not lose their ambition in difficult environments; if anything, they are more determined to grow and outpace competitors. We are seeing nearly zero impact from macro concerns. In the enterprise space—truly large global brands—that is not really part of MNTN Inc.'s business, so I would look to others for that read. In the SMB market, it is full speed ahead. Macro is not mentioned. They are entirely focused on return on ad spend and hitting their goals—often with personal incentives tied to metrics. In a metrics-focused business like ours and theirs, these are not generally issues we have had to deal with. Matt Weber: Got it. As a quick follow-up, is there any update you can share on your media planning tool? When are you targeting to bring that to market, and any key points of differentiation versus existing solutions? Mark Douglas: I was joking today that I am obviously not Steve Jobs, but I usually have one more thing. You will be hearing more about that very soon. We think it is another exciting AI development from MNTN Inc. It is with customers now and getting very positive reviews. I have a tendency to talk about things before they are fully released, but you will hear more soon. Operator: Your next question comes from Andrew Merrick with Raymond James. Your line is open. Please go ahead. Andrew Merrick: Hi, thanks for taking my questions. Two, please. First, on the recent Pinterest announcements with TV Scientific—how does that affect the broader performance TV space and you in particular? Second, given what you saw from events in Q1 like March Madness and the pro playoffs, how are you thinking about a World Cup boost as we get into the summer months? Thank you. Mark Douglas: On Pinterest and TV Scientific, at one time TV Scientific was a company trying to copy the concept of performance TV. I think Pinterest’s interest is driven by their data and finding more ways to monetize it. That makes sense for them. We are not seeing that as competitive in the sense of running into TV Scientific in sales cycles. For the World Cup, it is a massive event, especially with it in the U.S. this year, and MNTN Inc. is making World Cup inventory available to our customers. One reminder: our customers are always focused on return on ad spend first. We think television has the best content in the world and our customers should be on all of it, including the World Cup, but spend on our platform is driven by ROAS, not specific events. Being on all available content, including the World Cup, supports that. It is not a separate line item or driver in our guidance or internal forecast. Operator: Your next question comes from Robert Sanderson with Loop Capital. Your line is open. Please go ahead. A reminder that you may have to unmute locally. Robert Sanderson: Good afternoon. Thanks for taking my question. I want to talk about your go-to-market evolution. In past years, your business has really been driven by inbound leads—90% plus of new customers—but you have expanded the sales team meaningfully and seem to be focusing more on developing agency relationships. Can you talk about how these efforts are going so far and when you expect to see more fruits of those efforts? Are direct sales and agencies incremental to inbound, or are you shifting the mix deliberately? And any notable margin implications if the mix changes? Mark Douglas: On go-to-market, this speaks to the market moving from early adopter to mainstream. The agencies MNTN Inc. works with are generally performance agencies—not holding companies like WPP or Publicis—independent agencies built around paid search and paid social that now see performance TV as a new channel. We want to power that opportunity and help them grow. That is not a shift in strategy. More than 90% of performance TV advertisers do not use an agency. Even if we wanted to shift, we could not meaningfully because the vast majority of performance advertisers are direct—direct users in our platform and in other performance platforms. There is a sizable portion—around 10%—larger mid-sized brands that do use agencies. We want to be a great partner there, too. We announced agency as one of our fastest-growing segments and continue to see it as a big opportunity. With Garland coming on as Chief Revenue Officer, he is shaping the organization to ensure we have coverage wherever there is opportunity—both direct to brand and via agencies. In terms of mix, we ultimately count brands. Agencies are a “one-to-many” opportunity, but the brand is the financially responsible party and decision-maker on platform use, so it ultimately goes back to the brand. Robert Sanderson: And the direct sales expansion? Mark Douglas: As you noted, it is a bit early, but we have no concerns. We think the opportunity is large, and there is room to continue expanding our sales organization to meet it head on. It takes time for individuals to become fully productive, but we are pleased with where it is headed. We view it as a low-risk investment. Patrick Pohlen: On margin, as you have seen, our model has a lot of natural leverage. We do not think this will impact our bottom-line margin. Robert Sanderson: If I could do another on competitive dynamics and sustainability: larger players aspire to move down market and focus more on SMBs—Amazon, Roku, AppLovin, and maybe eventually The Trade Desk. What are common misperceptions about your differentiation, and what are the most durable elements of your competitive moat? Mark Douglas: We are purpose-built for the SMB market. The targeting is incredibly important because the smaller the business, the smaller the target pool of customers; these businesses are often trying to reach thousands, not millions. You need pinpoint targeting, which is why leveraging AI technology early as part of our targeting engine was so important. Ninety-five percent of companies that come to MNTN Inc. do not have a TV ad, and they do not have the budget for production crews—so we addressed that. Even the way we buy ads—our programmatic bidding engine—is purpose-built to respond to performance signals and alter the ad buy to purchase the right media. We talked about media planning—giving customers a single solution that addresses their needs across nearly every streaming network in America, with premium content, not remnant, and that gets consumers to respond. Finally, the go-to-market motion: if you have a sales team built around large enterprise customers, getting that team to pursue small businesses is nearly impossible. You need to build a separate sales and marketing organization, drive more traffic to your brand, and get them to sign up. All of this has to be built out. I respect the efforts of other companies; their interest validates the scale of the opportunity. But we are not standing still—we are moving forward and capturing more of the opportunity. You cannot just take an enterprise motion and technology and repackage it for small businesses; you have to build a whole new organization and platform. We think we have done that, we are good at it, and we never stand still. More than half of MNTN Inc. is software engineers. We are excited about that. Operator: Your next question comes from Laura Martin with Needham. Your line is open. Please go ahead. Laura Martin: Hi there. I want to talk about orchestration. You have talked about orchestration, and Amazon is saying they are seeing on Bedrock that almost all companies are using multiple AI LLMs. Have you moved forward in being an orchestration layer? And on the competitive landscape, everyone is getting into omnichannel performance and adding connected television. Is there a competitive advantage for you in not being omnichannel and just being performance CTV? Thank you. Mark Douglas: On orchestration, I use that primarily in the context of creative, though it can apply elsewhere. It means using the best-of-breed LLM and generative AI capabilities for the specific task. In creative—a 30-second TV commercial—different scenes might be using different base models. Some are better at showing products, some at multiple talking actors. To reach professional quality, you need a layer of technology that knows that and can orchestrate them, plus voice-overs and music. We recognized that early and built a proprietary layer of tech, using our own AI to do it. Others will likely recognize this need too. On omnichannel, our biggest advantage is that we have the highest level of performance for TV. We have never been in a head-to-head where we lost. We built models and a programmatic ad stack to drive outcomes. Being the highest performer in a channel is a big competitive advantage. As to going omnichannel, we are not doing that right now. I think about it and will follow the customer. If the customer wants to hand a single bag of money to one company to spend across channels, that is intriguing, but I am not sure customers are fully on board yet. We will see how it develops, and it is an interesting area we will continue to talk about. Operator: There are no further questions at this time. I will now turn the call back to Mark for closing remarks. Mark Douglas: I thank everyone for their time. We are happy with this quarter, and we are excited about the rest of the year. Stay tuned, and we will keep doing this. Thanks, everyone. Operator: This concludes today's call. Thank you for attending. You may now disconnect.

6天前Insight Analytics约5分钟阅读

SWIM 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to the Latham Group, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Casey Kotary, Investor Relations representative. Please go ahead. Thank you. This afternoon, we issued our first quarter 2026 earnings press release, which is available on the Investor Relations portion of our website. Casey Kotary: On today's call are Latham Group, Inc.'s President and CEO, Sean Gadd, and CFO, Oliver Gloe. Following their remarks, we will open the call to questions. During this call, Latham Group, Inc. may make certain statements that constitute forward-looking statements, which reflect the company's views with respect to future events and financial performance as of today or the date specified. Actual events and results may differ materially from those contemplated by such forward-looking statements due to risks and other factors that are set forth in the company's Annual Report on Form 10 and subsequent reports filed or furnished with the SEC as well as today's earnings release. Latham Group, Inc. expressly disclaims any obligation to update any forward-looking statements except as required by applicable law. In addition, during today's call, the company will discuss certain non-GAAP financial measures. Reconciliations of the directly comparable GAAP measures to these non-GAAP measures can be found in the slide presentation that is available on our Investor Relations website. I will now turn the call over to Sean Gadd. Sean Gadd: Thank you, Casey, and thank you all for joining us today to review our first quarter results and discuss our business outlook. Our first quarter results represent a good start to 2026. We are especially pleased with our performance given the adverse weather conditions that plagued most of North America. There are several key takeaways from the quarter that are worth noting. First, this was another quarter in which we saw year-on-year sales growth in each of our product lines. Latham Group, Inc.'s category leadership position across our product portfolio and our geographic diversification are key competitive advantages for us. Secondly, we continue to effectively execute our Sand States strategy, showing double-digit sales gains in fiberglass pools in our priority Florida market. We are taking further actions to accelerate our growth in this region. Third, we expanded our margins, benefiting from operating leverage inherent in our business model and from the lean manufacturing and value engineering initiatives that continue to yield very positive results. Oliver will provide additional detail on this later on in the call. And lastly, we are pleased to confirm our 2026 guidance, which anticipates significant sales growth and even stronger growth in adjusted EBITDA within a challenging macro environment, where pool starts will be about flat to last year. Our guidance includes a moderate increase in transportation and commodity costs due to today's high oil prices, which we are mitigating with temporary fuel surcharges. We are closely monitoring the dynamic situation in the Middle East and the potential impacts on costs and consumer demand. Taking a closer look at our first quarter results, in-ground pool sales increased 3.5%, and virtually all of that growth can be attributed to the one-month contribution from the Freedom Pools acquisition. Adverse weather was definitely a factor in our organic performance, keeping organic in-ground pool sales steady year on year. However, April sales trends were in line with our expectations, and we are on track for fiberglass pools to approach 80% of our full-year in-ground pool sales in 2026. The Freedom Pools acquisition we completed on February 26 is integrating as expected. As we have noted, the acquisition expands our presence in Australia and New Zealand, markets where fiberglass pool models have a strong foothold, and broadens our reach into new markets in Western Australia, including Perth, which is the fastest-growing city in the country. We recently spent a week in Australia bringing together the Narellan and Freedom teams. In addition to this transaction being immediately accretive to Latham Group, Inc., giving us a market-leading position in the country, we anticipate achieving considerable revenue synergies from this combination over time, as well as gaining firsthand experience from the direct-to-consumer business model. Cover sales advanced 6% in the first quarter, driven by growth in auto cover demand as consumers increasingly recognize the safety and economic benefits of this excellent product. Our industry-leading auto covers are compatible with all in-ground pool types. In many parts of the U.S., they provide the homeowner with an alternative to fencing while delivering additional cost savings from reduced evaporation and chemical usage. Educational marketing campaigns, including our partnership with Olympic Gold Medalist and pool safety advocate, Bode Miller, and his wife, Morgan, to promote pool safety are surging consumer awareness and increased attachment rates of auto covers to new pool installations. First quarter liner sales were up 9% year on year, reflecting increased demand and buying in advance of the pool season. We continue to gain traction with our Sand States strategy in the first quarter and are moving forward with plans to accelerate our growth in this important region. Many of the investors and analysts who I have met since taking on the CEO role in January have asked me where I see the major growth opportunities ahead for Latham Group, Inc. and what our playbook is for capturing that growth. Let me start by saying that the opportunity is substantial. We do not need to wait for the recovery in the U.S. pool markets to drive growth. There are enough pool starts for us to go and attack the Sand States now, given our relatively low penetration in that region. The key here is that fiberglass is a growing category, and we are the number one player in it in the U.S., and so we are best positioned to gain share. Fiberglass pools are an excellent fit for the Sand States for many of the same reasons that the category is growing nationally: fast and easy installation, lasting durability, low maintenance, and we have an exceptional design range of sizes and options to choose from, many of which are smaller, rectangular-shaped pools with attached spas that are perfect for our target community. Latham Group, Inc. has laid a good foundation for growth in the Sand States. There is definitely increased brand awareness among consumers and dealers in Florida, thanks to several high-profile marketing campaigns paired with local activations. In 2026, we plan to build on that foundation to set the stage for accelerated long-term growth. As you know, I have many years of experience successfully selling against the standard in the building products industry. When I apply that experience to Latham Group, Inc.'s current position in the Sand States, I have identified several actions to capture consumer demand and provide additional value for our dealers. First, we are building out our commercial organization, with the key pillars being sales strategy, sales operations, and sales execution, with responsibilities to design and drive sales plans, product leadership, and sales effectiveness. Our goal is to provide a world-class commercial organization that supports our growth not just in Florida, but across all the Sand States and all of North America. Second, we have introduced a new market development framework and approach at Latham Group, Inc. that I believe will make us even more effective in capturing share. The key element of this framework is segmentation, meaning that we will be very selective with our targeted Sand State markets, determining the specific sections and neighborhoods that offer the greatest opportunity for us. In essence, it is all about neighborhoods. We are looking for neighborhoods with a large number of homes with home values, lot sizes, and household incomes that fall within our parameters. These can be in, adjacent to, or outside of master-planned communities. Third, we will be adding sales resources in the field to make sure we stay close to the consumer throughout the pool-buying process. In this way, we will be able to assist our dealers in converting more leads into sales and gain greater understanding of the consumer journey. We know that consumers are looking for designs that fit their lifestyle. We believe that Latham Group, Inc. has the best range of products to meet those needs. In 2026, we are increasing our investment in branding and marketing in a very targeted way to capture greater consumer awareness. Together with our network of trusted dealers, we are able to fulfill the demand we generate. In support of all this, we are revamping our marketing and advertising campaigns to give homeowners a full understanding of the true benefits of fiberglass, and why it is the right solution for their backyard to enable their dreams of creating wonderful memories to come true. With that, I will turn over the call to Oliver Gloe, our CFO, for a financial review. Oliver Gloe: Thank you, Sean, and good afternoon, everyone. I am pleased to report on what was a solid start to 2026. Please note that all comparisons we discuss today are on a year-over-year basis compared to 2025 unless otherwise noted. Net sales for 2026 Q1 were $117 million, 5% above $111 million in 2025, of which 3% represented organic growth and 2% represented the one-month benefit of the Freedom Pools acquisition we completed in February. Organic growth was led by the continued strength of auto covers and increased demand for our pool liners. By product line, in-ground pool sales were $60 million, up 4% from Q1 2025, with virtually all the year-on-year growth coming from Freedom's fiberglass pool sales. Cover sales were $33 million, up 6%, and liner sales were $24 million, up 9% compared to 2025. We achieved a first quarter gross margin of 32%, reflecting a 220 basis point increase above last year's 30%. This performance is primarily due to volume leverage, along with production efficiencies driven by our lean manufacturing and value engineering initiatives. SG&A expenses increased to $37 million, up 20% from $31 million in 2025. This was largely tied to strategic investments in sales and marketing to accelerate fiberglass adoption, digital transformation initiatives, and acquisition and integration-related costs, which include $2.3 million of performance-based compensatory earnout expenses related to our Coverstar Central acquisition in 2024. Target synergies have been realized for Coverstar Central, and we are pleased with the contribution from the acquisition, which has exceeded our initial expectations. This earnout will total roughly $9 million over the course of the year, with a similar impact in each remaining quarter in 2026. Net loss was $9 million, or $0.07 per diluted share, compared to a net loss of $6 million, or $0.05 per diluted share, for the prior year's first quarter, primarily due to the aforementioned increase in SG&A expenses. First quarter adjusted EBITDA was $12 million, 9% above $11 million in the prior year period, primarily resulting from volume leverage and efficiencies gained through our lean manufacturing and value engineering initiatives. Adjusted EBITDA margin was 10.4%, a 40 basis point expansion compared to last year's first quarter. Turning to the balance sheet, we continue to maintain a strong financial position, ending the first quarter with a cash position of $27 million, in line with our expectations. Net cash used in operating activities was $48 million, reflecting a seasonal increase in working capital needs ahead of peak pool selling season. We ended the quarter with total debt of $311 million and a net debt leverage ratio of 2.8, also in line with our expectations. Capital expenditures were $23 million in Q1 2026, compared to $4 million in the prior year period. The increase is primarily due to the purchase of four key fiberglass manufacturing facilities in Florida, Texas, California, and West Virginia for $18 million, including a $12 million deposit made in 2025 that was settled in Q1 2026. Additionally, we incurred $5 million of CapEx relating to ongoing projects in line with our expectations. As a reminder, we expect CapEx to range between $42 million and $48 million in 2026. This includes $25 million of maintenance CapEx expenditures related to the purchase of the fiberglass manufacturing facilities that I just mentioned, and investments to upgrade our newly acquired Freedom Pools manufacturing facilities. While the beginning of 2026 was affected by adverse weather conditions across North America, we are encouraged that April sales trends have been in line with the historical seasonal ramp. We continue to monitor geopolitical developments and their potential impact on our freight and raw material costs, but we believe we are well positioned to manage effectively through this pool building season. We are pleased by the steady progress we are seeing from our fiberglass awareness and adoption initiatives, highlighted by strong consumer engagement with our branding and marketing campaigns, and continued gains in Florida, our initial Sand State target market. Based on our performance to date and our current visibility into the remaining season, we are pleased to reaffirm our guidance for 2026 revenue growth of 9% and adjusted EBITDA growth of 13% at the midpoint, amid expectations for new U.S. pool starts to be flat with last year. With that, I will turn the call back to Sean for his closing remarks. Sean Gadd: Thanks, Oliver. In summary, we are pleased with our first quarter performance, encouraged by recent order trends, and excited by the growth opportunities we see on the horizon. Latham Group, Inc. is firmly on track to outperform the market for new U.S. pool starts again in 2026, and we intend to take advantage of soft markets to accelerate our Sand States strategy and strengthen our execution. I see tremendous opportunity for Latham Group, Inc. to drive market penetration in the Sand States as well as the rest of North America, Australia, and New Zealand. With that, operator, please open the call to questions. Operator: We will now open the call for questions. If you are using a speakerphone, please pick up your handset before pressing the keys. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Ryan James Merkel with William Blair. Please go ahead. Ryan James Merkel: Everyone, appreciate the question. I wanted to start off with the fiberglass backlog and orders as you enter season. How is that looking, and then have you seen trends pick up now that the weather has cleared? Sean Gadd: Yes. Thank you for that question. We are seeing what we would have expected to see coming out of the first quarter. The order file in April looks strong to us, and it looks like it is picking up for the season. We feel good enough that we have reaffirmed guidance. Generally, we are seeing the pickup in orders and feel pretty good about the trend. Ryan James Merkel: Got it. Thanks for that. And then my second question: the fiberglass conversion is key to the story, and you are adding a bunch of resources. What are the biggest tweaks that you are making to the strategy, and then any early results, or is it a little too early? Sean Gadd: We are definitely making some tweaks. It is too early for definitive results. The main thing, as I talked about earlier, is we are segmenting the market a little bit differently than we have in the past. We have criteria now built up where we feel like if a neighborhood fits that criteria, the likelihood of them going to Latham Group, Inc. and then to fiberglass is higher. We like that. We are starting to test that, and if we get those right with the right dealers, we will be able to start building out more and more neighborhoods. We are early, but that is on a good path for us. The second thing we are doing is adding heads, and really I am organizing commercialization into three areas: sales strategy, which is understanding where to play, doing more of the segmentation, becoming a little bit smarter around sales; sales operations, which for me is about converting what we think about the market into real game plans that the sales team can execute and then measuring that team; and then sales execution, to go and execute. We are getting a little bit more organized so that we get the most out of our sales organization across the whole U.S., including the Sand States. Operator: Thank you. Our next question comes from Gregory William Palm with Craig-Hallum Capital Group. Please go ahead. Gregory William Palm: I wanted to piggyback on the first question a little bit since a lot has happened in the last couple of months since we were all on the phone together. It does not sound like the demand environment has changed all that much, relative to what you would have thought a couple months ago. Can you confirm that? And from an input cost side of things, you mentioned freight. I wanted to get your sense on how you are dealing with that and anything else on your radar, whether it be increasing resin prices. Are you seeing any availability shortages of key inputs like that? Anything else that should be on our radar? Sean Gadd: Thanks, Greg. I will start by talking about the market a little bit. We still see the market overall for this year likely to remain flat, so our assumption for that has not changed. But we are seeing some green shoots, and we feel good about that. Our order trend for April looks strong and into May, so we feel good about that. PK data would have indicated some growth starting to occur with cheaper pools. We like that. Pools are getting smaller, so that is good. The volatility is not helping, but I know we have a sound approach, and we will work through that. From a dealer perspective, when we catch up with dealers, they will tell us it is pretty competitive — four or five quotes per job, which is generally up. My take is it is certainly uncertain, but I believe fewer people will be traveling — the price of gas does not help — and so they are staying at home. I think that is the opportunity and what the green shoots are that we are seeing: that people would rather spend time at home and hopefully let us help build a pool. Oliver Gloe: Let me address the second part with regards to the conflict in the Middle East and updates on input costs. We do not see availability to be an issue as of today. Partially that is due to our supply diversification coming out of COVID. We aimed to be multisource and as diversified as possible. But we are seeing headwinds in freight. That comes in two forms. One is transportation — the price at the pump. Especially in the world of fiberglass, we are incurring transportation costs. It is expensive to ship those fiberglass pools across the nation. In terms of mitigation, we have introduced temporary fuel surcharges that we plan to fully mitigate us on transportation costs. I think it is too early to tell what the impact will be on the commodity side. We are exposed to oil derivatives in the world of resins, HDPE, and so forth. It is too early to tell. We are in discussions with suppliers and making the first purchase orders as we speak under slightly higher price levels. We will have to see how the very dynamic situation evolves. But I am confident in the playbook that we have. We applied that playbook during COVID and last year, and we have confidence that the playbook could also work this year as we work through commodities. Gregory William Palm: On some of these initiatives that you talked about — resegmentation, adding sales resources — how do you feel about your current dealer network, and how important of a lever can that be, not just adding new and more dealers, but also leaning into some of your more successful ones? Sean Gadd: Dealers are very important. They are the extension of us as they sit across the kitchen table, and we need them to represent us well. I believe we have the opportunity to get more out of our current network, which is goal number one. In our core markets — Midwest, Northeast, Canada — that is really about account management. We are defining what account management looks like for Latham Group, Inc. and making sure our organization is trained around good account management. I expect to get more out of our current network. Then we will add where we have white space. We will always look for dealers to take on white space if our current dealer network does not get us there. That is part of the strategy. In the Sand States and material conversion, we have a good network of dealers there right now that we will be feeding as we go into these neighborhoods, and they will benefit from referrals and everything else that comes out of those neighborhoods. We feel good about the network in the Sand States, particularly Florida, and our intention will be over time to grow it. Operator: Thanks, Greg. Our next question comes from Timothy Ronald Wojs with Baird. Please go ahead. Timothy Ronald Wojs: Good afternoon. First question on the resegmentation of some of the sales force and things like that. Is the plan that there are incremental investments in terms of dollars going into some of the initiatives, or are you just reallocating what you have? Sean Gadd: A little bit of both. We are definitely going to get ahead a little bit because we need more people on the ground and people thinking about the game plan. That would be additive, but our intention is that SG&A as a percentage of sales should stay the same over the medium and long term. We will continue to fund that as we grow. We will also look at opportunities to trim back on the back side of the business to give us some space to spend on the front side of the business and invest. Timothy Ronald Wojs: And, Oliver, on the price/cost question, is higher resin in the guide, or is it more of a wait-and-see approach? If you do see higher resins, do you have the ability to take cost out or improve efficiencies or pass them on price? Is that the main message? Oliver Gloe: It is probably more the latter. Transportation cost is relatively foreseeable, and that is in the guide. Commodities are too early to tell. Timothy Ronald Wojs: Sounds good. Thank you. Operator: Our next question comes from William Andrew Carter with Stifel. Please go ahead. William Andrew Carter: I wanted to double click to make sure we understand exactly what the pricing is for the year. You are putting in temporary fuel surcharges — can you give a magnitude of how much that is incremental to the old guidance? You are not taking any price increases on products for resins — just want to triple check that. And you said we are well prepared for materials during the season. Is that a comment that everything is good for now and you take a price increase later? Finally, if you have to take a price increase, can you take one mid-season, or does that mess things up? How do those dynamics work around when you have to make a decision on pricing? Oliver Gloe: Perfect. For transportation cost and the temporary surcharge, for the year it is probably worth about 60 basis points. Again, it is very dynamic and volatile, and as the headwinds change, the temporary surcharge can change over time as well — but that is the order of magnitude. For commodities, it is too early to tell. We are just about to start ordering materials that would be subject to a change in pricing. Materials get shipped to our sites, work their way through inventory, and ultimately into the P&L as they are consumed. We have our playbook, and we will react in time if necessary. As a reminder, last year we did a mid-season price increase in June. It is not preferred, but it is not unheard of. Operator: Thanks. Thank you. Scott Stringer: Our next question comes from Scott Stringer with Wolfe Research. Please go ahead. The adverse weather mentioned in Q1 — did that push some sales into the second quarter? The guidance implies some acceleration through the rest of the year, so it would be helpful to know the tailwind from sales being pulled into Q2, if that is the case. Oliver Gloe: I would say the adverse weather really means we had a lot of snow and ice on the ground in January and February. If you think of our annual organic growth of 6%, we certainly did not quite achieve that in Q1 — it was probably half of that — and I would attribute that to weather. If you translate that to shipping days, that equates to about one shipping day in today’s seasonality. I am not reading too much into that. The season is young; Q1 is a comparatively small quarter. Translating our under-proportional organic growth in Q1 vis-à-vis the annual guide into shipping days, it is one day. Another way of saying it: April trends have been as expected. We are seeing the seasonal ramp. Whether we catch up on that one day in Q2 or Q3, nothing we have seen in Q1 and in our ramp in April would make us change our view on 2026 and the guide. Scott Stringer: Got it. And then on visibility into Q2 and Q3 for in-ground pool installs — is that pretty much set, or how much variability is there over the next two quarters? Sean Gadd: For Q2, we are all but set based on our current lead times. We started the quarter really well. For Q3, while we have orders that fall into Q3, it is probably too early to tell, but from what we are hearing in the market and what we are seeing, we remain very confident in what the order file looks like and will continue to hold guidance. Oliver Gloe: If I compare today’s order book versus prior years, there is really nothing that would cause us to think differently about the seasonal pattern vis-à-vis last year — all confirming the guide. Scott Stringer: That is helpful. Thanks for the time, guys. Operator: Our next question comes from Analyst with Barclays. Please go ahead. Analyst: Good afternoon. For my first question, what are the top concerns you are seeing from buyers today? Between rates, economic uncertainty, and the need to step up consumer awareness of fiberglass pools, what is the biggest challenge today? Sean Gadd: The number one thing tied to interest rates is financing — basic financing is difficult to get. Anyone who does not have the cash or a strong FICO score is unable to get financing. We are hearing that a fair bit, similar to last year. Dealers are saying they are having to fight for the sale a little harder than previously. When I mentioned four to five quotes, it is typically two to three quotes, so everyone is fighting for the business. In an environment where things are tough, I actually feel good about fiberglass pools because pools are getting smaller — that fits our trend. Fiberglass pools have low maintenance, so the ongoing cost is lower than alternatives. The expenditure on chemicals and evaporation is lower, especially if you have an auto cover. And the composite pool means there are no ongoing resurfacing expenses. While we see the market as a little tough, we do not see it adversely affecting us relative to last year. Analyst: Got it. In terms of your increased branding and marketing spend, can you walk us through the cadence through the year and its impact on SG&A? And what does this look like — a targeted program for dealers, more salespeople on the ground, or more on ads and marketing? Sean Gadd: It is a bit of both. We are running a national campaign — that lifts all markets, which is great. With the trend of people moving from the Midwest and Northeast into the Sand States, we like that because fiberglass is the standard in those markets, so they know us. The timing for the national campaign is set for the pool season — we started mid-to-late February and are running through July/August. For the neighborhoods, that will be much more tactical — digital marketing, door hangers, localized marketing around homes, and events to inspire the neighborhood. Those are tactical, smaller expenses that we will run city by city, neighborhood by neighborhood. Oliver Gloe: On the increase and cadence, over the foreseeable future, SG&A as a percent of sales will be flat. It was 22.5% last year; we expect a similar amount this year. The majority is spent as-you-go in the sales organization and marketing. There is a little bit of digital transformation and also inflation on core G&A. Additionally, we have about $3 million of SG&A from Freedom. I would like to remind you that in addition, we have the earnout expenses for Coverstar Central — about $9 million — tied to 2026, so it will not recur in 2027; it did not occur in 2025. With regards to cadence, it is roughly the same as usual. Q1 and Q2 are a little bit heavier because we are running our national TV campaign earlier and longer in 2026 versus 2025. Operator: Our next question comes from Charles Perron in for Susan Maklari with Goldman Sachs. Please go ahead. Charles Perron: First, I would like to shift gears and talk about auto covers and the opportunities you see in this market. Considering the changing macro dynamics, is there any impact you are seeing in terms of adoption, and any efforts you can undertake to further expand penetration over the coming years? Sean Gadd: We are not seeing a decrease in adoption. We had a pretty good quarter in auto covers and covers in general. We had very large growth last year; we expect it to grow this year and in the coming years as well. It is really about awareness. The reality is most people still do not know that auto covers are available. Auto covers can fit on every pool, so the market is very large for us. We have our value-added resellers set up to take advantage of that. We are also getting our licensed sales organization focused around that product, and it is still early. We see that as more upside as we go. It is a good product; it does what it needs to do; consumers who have it love it, and we just need to continue to drive awareness. We do not see that trend changing. Charles Perron: And on input costs and inflation, should we see more unfavorable dynamics, can you further lean on lean manufacturing and value engineering initiatives to protect margins? Oliver Gloe: Lean and value engineering continue to be key contributors to our P&L. The contribution is about $2.0–$2.5 million per quarter. In Q1, it was $2.0 million — Q1 is a light quarter and value engineering programs move with volume. As programs mature, you see the tailwind becoming part of our DNA — how we lead our plants and factories — as part of the everyday cadence. You will see a lot more programs, maybe not all of the same magnitude, because the low-hanging fruit in lean manufacturing has been largely addressed. In value engineering, we are in the beginning of the journey; there are still some low-hanging fruits our team is pursuing. Both initiatives are under full steam and in Q1 delivered what we expected, with no change in our thoughts for the rest of the year. Operator: Our next question comes from Sean Callan with Bank of America. Please go ahead. Sean Callan: Hi, thank you for taking my question. First, the double-digit growth in Florida was quite impressive. What do you think has led to the success in Florida versus the other Sand States, and what lessons can you take from Florida to apply to the other Sand States? And then one cleanup question on the surcharges — are you aiming to offset the higher transportation cost on a dollar basis or a margin basis? Sean Gadd: Florida is our largest focus of all the Sand States. We are set up quite well from a sales headcount perspective. We have worked on dealers for the last eighteen months, so we have dealers that are really the right partners to help fulfill the demand we are creating. We have been running a marketing campaign for eighteen months, so we are seeing the flow of that. We have a strong value proposition relative to concrete, and we are getting deeper into the market and communicating it better. We feel that if a homeowner understands the benefits of fiberglass over concrete, there is a high chance they go with fiberglass. We are still early in the adoption curve. Our mission is to drive awareness and connect that awareness to our dealers’ positioning at the kitchen table. While we are pleased with the numbers, we intend to accelerate from here, and we are still working off relatively small numbers in Florida. Oliver Gloe: On the surcharges, we are aiming to offset transportation cost on a dollar basis. The headwind we incur is being passed on with temporary surcharges. Operator: Our next question comes from William Andrew Carter with Stifel. Please go ahead. William Andrew Carter: Hey, thanks. I wanted to double click and make sure on that incentive cost — you are not backing that out. So if you were to put that back in, the incremental here is still $28–$38 million in investment year? I just want to understand that. No — sorry, the earnout around Coverstar. My fault. Oliver Gloe: The earnout is included in SG&A and will be sitting on top of roughly 22.5% of revenue as it is an expense tied to an acquisition. For EBITDA purposes, it is backed out. William Andrew Carter: Okay, so it is not excluded — it is within guidance, that expense. Just double checking. Oliver Gloe: Correct. It is an add-back to EBITDA, and it is in the ceiling. William Andrew Carter: My fault. Sorry about that. Thank you. Operator: This concludes our question and answer session. I would like to turn the call back over to management for closing remarks. Sean Gadd: Thank you very much. I want to thank everybody for joining the call. We felt like we had a strong quarter — mildly impacted by weather — but the momentum is there. April looks strong, and we feel confident about our guide. With that, I want to conclude the call. I look forward to seeing you over the coming weeks and months at different events, and again, thank you for attending. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

6天前Insight Analytics约5分钟阅读

BOW 2026 Q1 财报电话会议

Operator: Hello, and welcome to Bowhead Specialty Q1 2026 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Shirley Yap, Head of Investor Relations. Shirley, you may begin. Shek Yap: Thanks, Mariana. Good morning, and welcome to Bowhead's First Quarter 2026 Earnings Conference Call. I'm Shirley Yap, Bowhead's Chief Accounting Officer and Head of Investor Relations. Joining me today are Stephen Sills, our Chief Executive Officer; and Brad Mulcahey, our Chief Financial Officer. And as we have done in previous quarters, we have invited a key member of our management team to our earnings calls to share insights from their area of expertise. Today, we are joined by Brandon Mezick, our Head of Digital, who will walk us through Bowhead's Digital Underwriting initiatives, which cover Baleen Specialty and Bowhead Express. Turning to our performance. Earlier this morning, we released our financial results for the first quarter of 2026. You can find our earnings release in the Investor Relations section of our website. And later this evening, you'll also be able to find our Form 10-Q on our website. I'd like to remind everyone that this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors should not place undue reliance on any forward-looking statement. These statements are made only as of the date of this call and are based on management's current expectations and beliefs. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. You should review the risks and uncertainties fully described in our SEC filings. We expressly disclaim any duty to update any forward-looking statement, except as required by law. Additionally, we will be referencing certain non-GAAP financial measures on this call. Reconciliations of these non-GAAP financial measures to their respective most directly comparable GAAP measure can be found in the earnings release we issued this morning and in the Investor Relations section of our website. With that, it's my pleasure to turn the call over to Stephen Sills. Stephen Sills: Thank you, Shirley. Good morning, everyone, and thank you for taking the time to join us today. Bowhead delivered a strong start to 2026 with gross written premiums increasing 24% year-over-year to approximately $217 million. Once again, we delivered disciplined premium growth across all divisions, with casualty driving the largest growth complemented by strong execution in Baleen. Starting with Casualty, GWP increased more than 20% to $147 million in the quarter. We continue to grow in areas where terms and pricing were favorable, while contracting in areas where we saw downward pricing pressure due to an overabundance of supply. This quarter, growth in casualty was driven by our excess portfolio. The major contributors included strong rate on our real estate book, new construction projects and an increase in manufacturing and hospitality business. Though we see some downward pressure from admitted carriers, nonrisk-bearing MGAs and broker sidecars, overall, while there are certainly exceptions, we still see the market exercising discipline in limit deployment and coverage expansion. That said, we continue to believe excess casualty remains the most favorable segment in our marketplace today. Turning to professional liability, GWP increased 6% to approximately $28 million in the quarter. Our growth was primarily driven by our Cyber liability Express portfolio, which targets small and midsized accounts through our digital underwriting platform. Partially offsetting this growth was a reduction in our commercial public D&O portfolio, driven by lost renewals to markets who we believe have overaggressive appetites and little to no discipline. In our Healthcare Liability division, GWP increased 28% to more than $30 million in the quarter. Growth was driven by our hospitals, senior care and miscellaneous medical facilities portfolios. While we remain disciplined in expanding the book and reducing average limits deployed, the market remains challenging, particularly in connection with coverage associated with sexual abuse and molestation. Finally, we're pleased to report that Baleen generated over $11 million in premiums during the quarter, an encouraging start to the year that reinforces the confidence we have in our digital underwriting platform. As a reminder, we built Bowhead to deliver sustainable and profitable growth across market cycles, and we do so by delivering our products through two complementary underwriting platforms. The first is our craft underwriting platform, which is our foundation, led by experienced underwriters who specialize in complex, nonstandard, high-severity risks and who deliver tailored solutions for our brokers and insurers. The second is our digital underwriting platform comprised of Baleen and Express, which represents our cutting-edge approach to specialty flow business. As Shirley mentioned, we have Brandon Mezick, our Head of Digital, here with us today. Having launched our digital underwriting platform and is leading the expansion of our digital initiative, I'm pleased to pass the call over to Brandon to walk you through the details. Brandon? Brandon Mezick: Thanks, Stephen. I'll take a few minutes to describe our digital underwriting businesses, Baleen Specialty and Bowhead Express and why we believe they represent a long-term structural advantage for Bowhead. The core thesis is straightforward. Craft underwriting by its nature, is hyper cycle sensitive. As market conditions shift, the risk-adjusted opportunity set in large account E&S narrows. Digital underwriting gives us a durable complementary channel, one that is specifically designed to access the SME E&S market efficiently and we believe more profitably with less volatility. The SME E&S market represents a massive opportunity, one that has historically required more underwriting effort than the returns justified because the right technology wasn't available. Our digital platforms change that equation, bringing technology-enabled efficiencies without sacrificing the underwriting discipline that defines Bowhead. Starting with Baleen, we focus exclusively on the E&S market. We target customers who are not eligible for admitted products, and we work through binding and light brokerage teams at our wholesale partners. Our current product offering is targeted at SME E&S customers in construction and real estate, where we provide primary general liability coverage for hard-to-place risks with minimum premiums below $1,000. The process is nearly fully automated from the moment a submission arrives via e-mail and not a proprietary portal through quote generation and policy delivery, the workflow is straight through. We meet brokers where they are, and that simplicity is a competitive advantage. In the SME E&S market, being first to quote matters enormously, and our brokers often tell us we are the first. In the first quarter, more than 75% of our new business submissions received a response within 15 minutes and 100% of submissions received a response within 1 business day. Those responses are overwhelmingly bindable quotes. Our new business quote ratio was above 75% in the first quarter. And if a customer decides to purchase, we deliver a complete policy in under 5 minutes. The market has long wrestled with a fundamental tension, how to deliver speed without sacrificing underwriting quality. Various approaches have emerged in an attempt to resolve it. Some have leaned on large teams of low-cost labor to process volume. Others have relied on legacy systems that while familiar, were never built for the demands of today's market. Still others have simply asked their people to work harder and faster, substituting effort for infrastructure. Each of these approaches trades something essential away. Baleen was built on a different premise. Our platform combines modern, modular technology with experienced underwriting judgment at every critical decision point. The result is a process that is both disciplined and scalable, rigorous and repeatable, deliberate and fast. What separates Baleen from our competitors is not just the workflow. It's the underwriting rigor embedded within it. Behind the automation is a highly codified set of business rules governing eligibility, pricing and coverage built by experienced underwriters with direct input from our actuarial and claims teams. Third-party data is integrated at the point of submission to validate risk characteristics before any quote is generated and underwriters are engaged where judgment is required, but discretion, particularly on coverage, is intentionally constrained. This isn't a black box. It's a disciplined rules-based framework with experienced people behind it, underpinned by regular performance monitoring led by our actuarial and analytics teams. The results reflect that. In the first quarter, Baleen generated over $11 million in premium, more than 3x the same period last year. New business submissions were up over 140%. New business quotes were up over 110% and new business bus were up over 260%. We're also seeing strong repeat engagement from broker partners, which tells us this is about consistency and ease of doing business, not just speed. Looking ahead, we see two clear avenues for continued growth. The first is broker expansion, both deepening relationships with our existing wholesale partners who have significant volumes of the business we want and extending into digitally native programmatic platforms where very few markets with our appetite and product set currently exist. Those platforms experience real leakage when risks fall outside the standard appetite, and we are well positioned to fill that gap. The second is product development, guided by our wholesale partners who actively bring us opportunities. We have a disciplined internal process to evaluate each opportunity on its merits and a team that can move from concept to launch quickly. Last week, we launched a supported access offering for construction risks that is nearly frictionless for our wholesale partners. Both paths, broker expansion and product development expand our addressable market without requiring us to compromise on limits, coverage or what's made Baleen work. Turning now to BOHA! Express. This is a distinct model from Baleen, but relies on the same underlying technology. Bowhead Express is being built to serve smaller versions of the risks our craft business already underwrites. Express is generally low touch. Nearly every risk is reviewed by an underwriter, but that review is structured to take less than 15 minutes per risk. We aggregate internal and third-party data upfront, so an underwriter sees everything they need at the outset. There are no additional data requests and practically no back and forth with our broker partners. This frees our underwriters from repetitive, low-value work and allows them to focus their judgment where it matters most. The result is significant operating leverage. A key objective with Express is radical simplification, streamlining our process to the point where we can introduce no-touch capabilities while maintaining underwriting integrity. Our offering in Cyber Express is a good example, where we've evolved into a no-touch model for the smallest, simplest risks. The products offered through Express use the same core policy framework as Craft, the same forms and the same endorsement philosophy, but with much less customization. That means we're not introducing new underwriting exposure. We're simply applying a more efficient delivery model to a segment that was previously uneconomic for us to serve while driving more submissions to Craft as we deepen our relevance with brokers. In the first quarter, Express generated over $3 million in premium with a quote ratio of approximately 65%. The growth opportunity ahead for Express follows a similar pattern to Baleen. On the broker side, our existing wholesale partners have significant volumes of the business Express is designed to serve. To earn more of that flow, we are focused on being visible and delivering a great experience. On the product side, our road map is informed by two sources: our wholesale partners who actively tell us what they want us to build and our own craft underwriters who surface risks that Express could solve for. We have a disciplined process to evaluate each opportunity and a team that can move quickly. Later this month, we expect to be launching a primary casualty offering for middle market construction risks, which is a segment where we've received considerable submission flow but have been unable to serve economically until Express. Each new product and each expanded appetite expands our addressable market, and we are well supplied with opportunities to pursue. Stepping back, I want to offer a clear framework for how we think about digital underwriting within Bowhead. First, growth. Digital underwriting represents just under 7% of total Bowhead GWP in the first quarter, and we expect that contribution to grow as both of our Baleen and Express platforms scale throughout the year, driven by strong broker engagement and a product pipeline that continues to expand our addressable market. Second, economics. Our digital underwriting businesses are structurally designed for attractive unit economics, shorter limit profiles and smaller average risks mean lower expected severity. And because technology replaces manual steps, the expense ratio for digital should be lower than Craft as these platforms scale. Third, discipline. Digital underwriting at scale only works if the underwriting works. We believe our approach, codified rules designed by experienced underwriters, data enhancement and validation and actuarial oversight is the right framework. We monitor performance daily and early results are consistent with our long-term expectations. And finally, differentiation. We built and launched both businesses in a matter of months with strong alignment across the organization. Our technology is modular and not legacy bound. That combination, the speed of execution, underwriting expertise and operational flexibility is difficult to replicate, particularly in large or more complex organizations. We're still early, but the first quarter results give us real confidence in both the model and the opportunity ahead. With that, I'll turn the call over to Brad to discuss our financial results. Brad Mulcahey: Thanks, Brandon. Bowhead generated adjusted net income of $16 million in the first quarter of 2026, up approximately 40% year-over-year. Diluted adjusted earnings per share was $0.48 for the quarter and adjusted return on average equity was 14.1%. Our strong results were driven by top and bottom line growth. Gross written premiums increased 24% to approximately $217 million for the quarter. As Stephen mentioned, we achieved growth in each of our divisions with casualty continuing to be the largest driver and Baleen generating $11.4 million of premiums during the quarter. Our loss ratio for the quarter was 66.9%, unchanged from the same period in 2025. Our current accident year loss ratio was flat as the impact of the loss picks we made in the fourth quarter of 2025 were offset by changes in our business mix. As I've mentioned in past earnings calls, the continuation of approximately $600,000 of prior accident year reserves is simply due to IBNR booked on additional premiums that were billed and fully earned in the current quarter, but relating to policies from prior accident years. This is not based on actual losses settling for more than reserved and does not represent an increase in estimated reserves on unresolved claims. We are simply putting IBNR into the appropriate accident year regardless of when the premiums are billed and earned. As a reminder, since we're writing long-tail lines and have relatively short history of losses, when setting our loss reserves, we're heavily reliant on industry observed loss information over our own internal data. This reliance is evident in our high ratio of IBNR as a percentage of total reserves, which was 91% at the end of the quarter. Our expense ratio for the quarter was 28.4%, a decrease of 2 points compared to 30.4% year-over-year. The reduction was primarily driven by a 2.9 point decrease in our operating expense ratio, which is partially offset by a 1.2 point increase in our net acquisition ratio. The decrease in our operating expense ratio was due to the continued scaling of our business as well as the prudent management of our expenses, including new estimates of deferrable costs. The increase in our net acquisition ratio was driven by the increase in broker commissions due to mix changes in our portfolio, especially as more premiums are sourced from wholesalers and the ceding fee we pay to American Family. These increases were partially offset by an increase in earned ceding commissions from our outward reinsurance treaties. Overall, the effect of our loss ratio and expense ratio contributed to a combined ratio of 95.3% for the quarter. Turning to our investment portfolio, pre-tax net investment income increased approximately 44% year-over-year to $18 million for the quarter, primarily due to a larger investment portfolio resulting from increased free cash flow and our $150 million debt raise in late 2025. The investment portfolio had a book yield of 4.6% and a new money rate of 4.7% at the end of the quarter. The average credit quality of the investment portfolio was AA- at the end of the quarter, and the average duration increased from 3 years at the end of 2025 to 3.2 years at the end of the quarter. As we mentioned during last quarter's earnings call, we expect to extend our duration slightly over the course of the year from 3 to 4 years to closer match the duration of our investments to the duration of our liabilities. Our effective tax rate for the quarter was 22.2%. As a note, our effective tax rate may vary due to items such as state taxes, stock-based compensation and nondeductible excess officer compensation. Total equity at the end of the quarter was $459 million. This resulted in a diluted book value per share of $13.80 at the end of the quarter. I also wanted to provide an update on our May 1 ceded reinsurance renewals, which apply to all of our departments, except for our cyber liability products. Overall, we increased our quota share treaty from 26% in 2025 to 33.5%, while increasing our ceding commissions. We also had a decrease in our excess of loss treaty from 65% in 2025 to 57.5%. Our renewals continue to be placed with reinsurers with an AM Best financial strength rating of A or better. Finally, we expanded our agreement with American Family to support the around 20% GWP growth we're expecting this year. This update raises the $1 billion annual premium cap, which we are projected to exceed this year if we grow around 20%. For more details, please refer to the Form 8-K we filed earlier today. With that, we'll turn the call over for questions. Operator: Thankyou. [Operator Instructions] Our first question comes from Rowland Mayor at RBC Capital Markets. Rowland Mayor: I wanted to quickly ask Brandon, the stats you cited on Baleen imply a pretty sharp increase in the bind rate year-over-year. Could you maybe elaborate on that change and how Baleen has iterated? Brandon Mezick: Sure. I think the major contributors to our buying rate include just simply the time we've spent in market. We are more well known to the brokers that we are working with. The process is more familiar. We're giving them a great experience. We've also invested a lot in distribution. We have a great head of distribution in Baleen that has us way more active and visible in the marketplace. And I think those two relevance and being top of mind are the biggest contributors for the buying rate increase year-over-year. Rowland Mayor: Okay. Perfect. And then I was wondering if we could go through the growth in the underwriting expenses and how we should think about it for the full year. It looks like in the first quarter, they were up about 8%. And should the remainder of 2026 be higher than that? Or is there any major investment down the road that we need to have? Brad Mulcahey: Rowland, this is Brad. Just to be clear, are you talking in overall Bowhead or just in Baleen? Rowland Mayor: Overall Bowhead, I think it was up 7.8% year-over-year on the other underwriting expenses. Brad Mulcahey: Yes. A couple of things going on there. Obviously, I think don't pay too much attention to one individual quarter. It's more the trend, but we are seeing the trend increase in our underwriting expenses. We've got investments, obviously, still hiring people. We -- on the acquisition side, we've got ceding expenses kind of, I think, offsetting some of that, some of our ceding commission coming from reinsurers. We are getting continued commission increases though from the book as we pivot to more of a wholesale source book, so kind of going the opposite direction there. And then obviously, the American Family ceding fee going up as we've talked about in the past. So I don't think there's anything in particular on the underwriting expenses, though to call out necessarily. Operator: Our next question comes from Meyer Shields at Keefe, Bruyette & Woods. Meyer Shields: Am I coming through? Brad Mulcahey: We can hear you. Meyer Shields: Sorry. Brad, you mentioned a reevaluation of deferrable costs. Was that an offset to operating expenses? Or is this just like a newer run rate going forward? Brad Mulcahey: Thanks for the question, Meyer. On the overall expense ratio, we mentioned we updated an estimate on some of our deferrable internal costs that relate to acquisitions or acquisition costs. So that's a sort of, I would call it, a favorable timing item in Q1 that's going to normalize eventually in future quarters. So I think that's maybe the one item in Q1 I would highlight. But again, like I said, the expense ratio trend, we're comfortable with being under 30%. I don't want to read too much into one quarter. Obviously, it can be volatile. Meyer Shields: Okay. That's helpful. And when we look at the changes that you went through on the 5/1 renewals, is the bottom line impact of that higher or lower net to gross written premium? Brad Mulcahey: Yes, the headline on that is it's basically neutral to net income. There will be some puts and takes, obviously, as we see more premium, net earned premium will go down. But obviously, our losses will go down and our ceding commission should come up. There will also be maybe a little bit of pressure on investment income as we pay more to our reinsurers upfront. But otherwise, I think overall, it should be pretty much neutral to the bottom line. Operator: Our next question comes from Cave Montazeri at Deutsche Bank. Cave Montazeri: First question is on the health care liability, which is a line we don't really talk about or spend much time on. There was some pretty strong growth this quarter. So -- could you maybe tell us, I guess, where are we in the underwriting cycle for health care liability? And if you can unpack some of the growth drivers in the sector and how we should think about growth going forward this year? Stephen Sills: Sure. I think it's a marketplace in flux. There's -- the last several years have experienced an increase in sexual abuse and molestation claims. And part of that was driven by the creation of these reviver statutes that suddenly brought claims to light that then got reported. I think the marketplace is bifurcating some in that some people are just saying, well, it's behind us, and they're prepared to give full coverage for that. We think it's very situational in terms of attachment points and retentions. So I think overall, we're going to continue to see growth in that space driven mostly by hospitals themselves. I think senior care also, some areas though, are still -- this goes back to different pockets again, that there are some areas where people just get really aggressive. And so it's difficult to say. I don't know how satisfying that answer was because it really goes on a risk-by-risk basis. People -- sometimes they get confronted, we believe, with having to make budgets for the month of the quarter and suddenly get a lot more aggressive. But we think our positioning, our reputation where we -- where people like capping us on their business, I think, holds us in good stead for increasing that -- our volume in that space. Cave Montazeri: Okay. And then my follow-up is on cyber. I'm just wondering how you protect yourself against tail risk as we see like new AI technologies like Anthropic because -- just wondering how you're thinking about the risk that some of those new technology could bring into the world of cyber insurance if, I guess, if cyber attacks become more frequent or more destructive. Stephen Sills: Sure. We obviously think about it a lot. It is a concern on one level. But on the other hand, the type of business we're going after and the way we underwrite the business, we think, makes a big difference. Keep in mind that our large Fortune 500 type cyber risk is business that we have become less and less competitive on. And we've definitely lost ground in that space. We have picked up ground in the space that Brandon was talking about in the express area. And there, once again, the underwriting is key. that we believe things like having a multifactor authentication makes a big difference, making that an important screen of what it is we're looking at, whether they're -- whether they operate in the cloud or not. Those are -- so I think our underwriting, I think, will provide a lot of protection for us. And also, I think there's -- the general conversation goes that the -- all these new cyber hacking tools are only available to the bad guys, but the good guys have them also. And so I'm sure there's going to be a battle going forward as fast as people evolve to try and hack systems, the good guys are finding ways to close systems. So for the time being, we're very comfortable with what we see, the way we do it. in the type of business we're writing. Operator: Our next question comes from Pablo Singzon at JPMorgan. Pablo Singzon: Can you hear me? Stephen Sills: Yes. Pablo Singzon: All right. Perfect. One first question for Brad. I just wanted to follow up on the deferable cost, right? Were these costs that you previously reported as OpEx will now amortize way back over time? And if yes, are you able to size how much the impact was in the first quarter? Brad Mulcahey: Yes and yes. Yes. So they will amortize into the acquisition costs. And when we submit the Q later today, you'll see the full disclosure on how much that is. Happy to point that out to you later if you want. Pablo Singzon: And then second one for Brandon. So some insurers and brokers have said they're seeing more small case E&S moving back to admitted on the margin. It probably doesn't matter as much to you just given your growth rate of where you are. But I wonder, as you're looking out to the broader market, small case market, if you're seeing any of that trend? Brandon Mezick: We are -- especially as the property market continues to experience declines, we see admitteds playing more in the -- what is traditionally E&S segment. We're comfortable with the experience we're delivering to brokers. We're comfortable with the relationships we have with them. And we don't expect the emergence or reemergence of admitted markets to have any effect on the growth rate for digital. Stephen Sills: And as a reminder, we do not write property insurance. Operator: Our next question comes from Daniel Lee at Morgan Stanley. Daniel Lee: My first one is just on the expense ratio. I know you guys are scaling and longer term, maybe I just wanted to think -- what's a good way to think about the expense ratio for -- as you guys continue to grow the business and maintain momentum with your tech investments and with Express. Is lower teams operating expense ratio possible in the long term for Bowhead? Brad Mulcahey: Hey Dan, this is Brad. Thanks for the question. Yes, I think -- you're right. Look at it longer term, like I said, there can be volatility each quarter for the expense ratio. Below 30s in total is where we are comfortable at. Not really -- we haven't really talked about the split between acquisition and operating. But I think if you're below 30s for the remaining quarters of this year, I think that's probably pretty good. Daniel Lee: My second question is also on the Casualty segment. I know construction projects has been a driver in the past, but with the market kind of softening now, how should we think about the business opportunities going forward for construction? Or how should we think about construction in 2026? Stephen Sills: Sure. We're still seeing opportunities in that space. It's still an important driver of ours. Obviously, we can't predict what's going to be in the news, whether that starts to slow down construction projects or if interest rates were to spike. But at the current time, we're seeing a steady as she goes in the construction opportunities for our book. Operator: Our next question comes from Paul Newsome at Piper Sandler. Jon Paul Newsome: A couple of broad questions. One is we focus a lot on pricing. I wanted to ask if you're seeing any changes in terms and conditions. I tend to think of that as a pretty important determinant of rational or irrational behavior in the market. Anything out there of notable with terms and conditions in the businesses that you're running? Stephen Sills: I would say it's mostly in the pricing world that we're seeing changes like particularly in publicly traded D&O, we're seeing people doing risks at rate per million that we think are not wise. And that's caused a decrease in that business for us. We're -- I mentioned earlier about the SAM coverage, sexual abuse and moestation with health care. Different markets are somewhat sporadic on that in terms of when they give it and how they give it. But I would say the biggest driver to the extent that there's a driver of the market going south would be price. People maybe having good few years and thinking that they can still drive things lower. We don't see that in the casualty space. We're seeing -- still, we're seeing rate increases in that space. But we have not seen that much, I would say, in the broadening of coverage area. There's -- we've still seen a good market for our Baleen product that Brandon talked about that offers somewhat restricted coverage. But that hasn't -- the need or the desire for that product has not diminished. Jon Paul Newsome: That's great. Second question, just any updates? It doesn't sound like you are, but I just want to make sure any updates on capital management from philosophy here. Brad Mulcahey: Yes, no updates other than maybe the reinsurance changes will help us. So that was something we plan to do. Anyway, the increase in our ceding quota share was more of a capital play than it was an appetite or anything like that. So I think the debt raise we did in Q4 of last year should be enough to last us at least through this year. Reinsurance changes help. We also have a credit facility available for $35 million with an accordion of $15 million. So I think we're good this year, absent anything growth much higher than we expected or something that would hopefully be good news. So I think we're set on capital. Operator: That concludes the question-and-answer portion of today's call. I will now hand the call back to Stephen Sills, CEO, for closing remarks. Stephen Sills: Thank you. Bowhead delivered another strong quarter to start the year. Thank you to our Bowhead team members for your continued dedication and hard work. To everyone else joining us on the call today, we appreciate your support, and we'll speak to you along the way. Thank you. Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

6天前Insight Analytics约5分钟阅读

FWRG 2026 Q1 财报电话会议

Operator: Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc. First Quarter Earnings Conference Call occurring today, May 5, 2026, at 8:00 a.m. Eastern Time. [Operator Instructions] This call will be archived and available for replay at investors.firstwatch.com under the News and Events section. I would now like to turn the conference over to Steven Marotta, Vice President of Investor Relations at First Watch to begin. Steven Marotta: Hello, everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tomasso; and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the first quarter of fiscal 2026 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the condition of the company's industry and its operations, performance and financial condition, outlook, growth plans and strategies and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release and the risk factor disclosure in the company's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. Lastly, management's remarks today will include references to various non-GAAP measures, including restaurant-level operating profit, restaurant level operating profit margin, adjusted EBITDA and adjusted EBITDA margin. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the company's earnings release filed this morning. Any reference to percentage growth when discussing the first quarter performance is a comparison to the first quarter of 2025, unless otherwise indicated. And with that, I will turn the call over to Chris. Christopher Tomasso: Good morning, everyone. Thank you for joining us to discuss our first quarter results as well as our plans for the balance of 2026. First, I want to express my appreciation to our entire team across the country, more than 17,000 dedicated employees whose commitment to making days brighter drives our success. We're pleased with our first quarter performance as several of our key growth initiatives supported solid financial results. We delivered same-restaurant sales growth of 2.8%, generated restaurant-level operating profit margin of 18.5% and expanded the system to 648 restaurants with the opening of 16 new locations. We believe our first quarter results and the benefits we are realizing from our growth initiatives line up well with our full year expectations. As a result, we are reiterating our fiscal 2026 same-restaurant sales growth and total revenue growth guidance. We're also raising the low end of our adjusted EBITDA guidance. Early last year, we began investing in digital marketing programs and accelerated that effort in the first quarter of 2026. We expanded the rollout of our digital marketing campaign to approximately 75% of our restaurant base, up from roughly 1/3 in 2025. Based on early analytics, we are already realizing a positive ROI on the increased expense in the markets receiving support for the first time in addition to the positive ROI in markets benefiting from a second year of investment, reinforcing our conviction in the strategy and plan. The campaign is built around a targeted multichannel approach that spans paid social, online video, paid search and connected TV, allowing us to reach consumers in a relevant and engaging way. We're encouraged by the engagement across several key measures. The campaign is attracting first-time customers who may not have previously considered the brand, reengaging customers who had lapsed in frequency and driving greater frequency among our existing customer base. At the same time, we are seeing improvement across key metrics, including gains in both unaided brand awareness and future purchase intent, which we believe are critical indicators of First Watch's long-term growth potential. These early results demonstrate that our increased investment is not only driving near-term traffic and engagement, but also strengthening the brand and building a higher lifetime customer value, so much so that we are pulling forward several million dollars of marketing spend into the second quarter from the back half of 2026. We're also pleased with the performance of our new core menu. As we discussed on our last conference call, we conducted extensive testing of the menu in 2025, our first comprehensive menu update in more than a decade. The primary objective was to elevate the overall guest experience while also simplifying execution and improving efficiency for our restaurant teams. Following the positive test results, we rolled out the new core menu system-wide by late February. Early reads have been positive across a host of KPIs. For instance, the 2 prior seasonal menu fan favorite items we highlighted, the Barbacoa Breakfast Tacos and the Barbacoa Chilaquiles Breakfast Bowl are both mixing above our expectations and both are higher-margin entrees. In addition, the menu enhancements are driving positive mix of our fresh juices, shareables and add-ons. The new core menu is constructively impacting our consolidated sales mix and overall check composition. We're seeing higher attachment rates and more frequent trade-ups, which have translated into per person check average growth in the first quarter that was incremental to our carried pricing. That dynamic indicates that customers are not only responding well to the updated menu, but also that the new design is encouraging them to explore deeper into our offerings, validating both the strategic intent and the financial discipline behind this important initiative. We also made a tactical decision to extend the duration of our Jumpstart seasonal menu from the traditional 10-week to 20 weeks, a first for our company. This move was motivated by 3 key objectives. First, the increased repetition realized in the longer LTO menu window enables our operators to focus on the exceptional execution of the new core menu. Second, we are using the extended time frame of our Jumpstart seasonal menu to evaluate how a longer-tailed marketing campaign could influence future seasonal menu mix as a percentage of consolidated sales. Encouragingly, attachment of our seasonal menu items has improved alongside the launch of the new menu. Even alongside the positive mix we are seeing from the core menu, it's exciting to see attachment to our seasonal offerings strengthen as customers respond enthusiastically to both. Third, we brought back several of our most successful limited time offerings to the menu in order to generate excitement and strengthen customer engagement. Among these returning favorites were the BEC, a Bacon Egg and Cheddar sandwich served on thick artisan Sordough and the Strawberry Tres Leches French Toast. The newest introduction, the Chimichurri Steak & Eggs Hash is now our highest performing seasonal entree of all time. Successful innovations in our restaurants, like those I've been sharing on this call, illustrate the power of the entrepreneurial First Watch culture. Promising ideas quickly rise to in-restaurant testing, which provides for optimization through the working partnership of our culinary and operations teams. The result is our rich portfolio of new initiatives and upcoming offerings. We recently wrapped up testing of the highest mixing new shareable item is Million Dollar Bacon, which will launch in just a few weeks. Moreover, a suite of offerings that are driving higher attachment and boosting the guest experience is going into test now with an expectation that they will earn their way under the core menu early next year. Shifting the spotlight to development and growth. We remain the fastest-growing full-service restaurant brand in the United States and the success of our recent classes reflects the benefits of following our disciplined real estate site selection criteria and our broad appeal. Our preopening period marketing builds anticipation and trial, which has been supported by our operations teams, who work together to ensure we are executing at a high level upon opening in the critical early months following and for years to come. The class of 2025 annualized sales remains solidly ahead of both our underwriting targets and our comp base. And while still early, our recent class of 2026 NROs is performing even better. Looking ahead, our priorities for 2026 and beyond are focused on driving durable, profitable growth. We're going to expand our presence in the new markets we've recently entered, moving briskly from market entry to market densification. By increasing restaurant density within a local market, we enhance regional efficiencies, broaden our customer base and build additional brand awareness. At the same time, we will continue to be disciplined about where we expand. We are strategically filling in core markets where we already have strong operating leverage while also expanding in emerging markets where we have identified compelling long-term demand and significant white space. The bottom line is First Watch works everywhere. Considering our proven portability, we have the competitive advantage of opening new restaurants in a balanced fashion across core, emerging and new markets on our march to 2,200 locations. We have established ourselves as the leader in daytime dining and continue to grow market share, strengthening our leadership position. When one looks across the landscape, there is simply no other daytime dining brand that brings together our scale, our discipline, our proven ability to grow consistently and the size of the white space still in front of us. Taken together, these attributes truly differentiate First Watch. We're energized by what lies ahead with ongoing innovation leading to growth, and we remain focused on doing what we do best, creating a wonderful place to work for our teams and delivering an experience that keeps customers coming back. And with that, I'll turn it over to Mel. Mel Hope: Thank you, Chris. Total first quarter revenues were $331 million, an increase of 17.3% with positive same-restaurant sales growth of 2.8%. Our top line growth results from the positive same-restaurant sales growth, coupled with contributions from 194 noncomp restaurants, including 68 company-owned new restaurant openings and 19 franchise locations acquired since the fourth quarter of 2024. Same-restaurant traffic growth was negative 2%, with weather negatively affecting the quarter by around 100 basis points in addition to our customary planned sales transfer. Excluding those impacts, underlying traffic trends remain consistent with our expectations. Food and beverage expense was 22.6% of sales compared to 23.8%. As a percentage of sales, costs benefited from carried pricing of around 4% and commodity deflation around 1.6%. The commodity deflation was driven primarily by eggs, avocados and a brief favorable market trend in bacon prices. Labor and other related expenses were 33.7% of sales in the first quarter, a 90 basis point improvement from 34.6% reported in the first quarter of 2025. Carried pricing offset 3.7% of labor inflation, while our labor efficiency was essentially flat as compared to last year. We realized restaurant-level operating profit margin of 18.5% in the first quarter of 2026, a 200 basis point improvement over last year. We realized a percentage margin of 0.3% this quarter at the income from operations line. At $39.9 million, general and administrative expenses were 12.1% of total revenue. The increase compared to last year was largely due to the scheduling of our leadership conference in the first quarter and the expansion of our 2026 equity compensation program. First quarter G&A expenses were lower than our plan due largely to the timing of certain activities. Although, our full year G&A expense plan remains unchanged, we are applying to the second quarter a portion of the marketing expense planned for the back half of the year, leading to our expectation that total second quarter G&A expenses will approximate the first quarters. Adjusted EBITDA increased 22.2% to $27.8 million, a $5 million increase versus the $22.8 million reported last year. Adjusted EBITDA margin was 8.4% as compared to the 8.1% margin we realized in the first quarter of 2025. Net loss was $2.7 million. We opened 16 new system-wide restaurants during the first quarter, of which 13 are company-owned and 3 are franchise owned and ended with 648 restaurants across 32 states. The net effect of acquisitions in the quarter, which includes only the impact of purchases made within the last 12 months, increased revenue by about $8 million and adjusted EBITDA by just over $1 million. For further details on the first quarter, please review our supplemental materials deck on our Investor Relations website beneath the webcast link. Now, I'll provide our updated outlook for 2026. We are reiterating the 1% to 3% range of same-restaurant sales growth, and we continue to expect positive same-restaurant sales growth in each quarter of 2026. Our guidance includes carry pricing of around 4% in the first half of the year, which blends to 2% for the full year. As a reminder, we did not take any price at the beginning of 2026. And as we have done in the past, we'll revisit menu pricing in the coming months. We continue to expect total revenue growth of 12% to 14% with around 100 net basis points of impact from acquisitions. We are reaffirming a total of 59 to 63 net new system-wide restaurants, which will result from 53 to 55 company-owned restaurants and 9 to 11 franchise-owned restaurants. We also plan to close 3 company-owned restaurants this year. Our company-owned new restaurant development pipeline is weighted to the second half of 2026 Q4 in particular. We continue to expect full year commodity inflation of 1% to 3%. Restaurant level labor cost inflation is expected to be in the range of 3% to 5%. We're raising the lower end of our 2026 adjusted EBITDA guidance range. Our new range is $133 million to $140 million, up from $132 million to $140 million previously. We're reiterating the net impact from the 19 restaurants we acquired in April last year, which are expected to contribute about $2 million to our adjusted EBITDA this year. We continue to expect capital expenditures of $150 million to $160 million. I want to acknowledge the execution across our entire organization this quarter. I'm proud of our operators, our field leaders and our home office staff who navigated a dynamic environment, including weather impacts, welcoming and training a host of new employees, opening high-volume new restaurants and adjusting to our new core menu. Our updated outlook for the year underscores our confidence in our operators and in our new restaurant development pipeline. We appreciate your continued interest in First Watch. And operator, we'd now like you to open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Jim Salera with Stephens Inc. James Salera: Chris, I wanted to start by just asking if you could give us some detail around the outperformance that you guys have seen relative to maybe the overall perception of breakfast. I think a lot of investors are concerned that breakfast is one of the more pressured dayparting restaurants given the kind of economic backdrop and yet you guys continue to deliver pretty durable same-store sales. So can you just help us kind of bridge that delta you guys are doing versus kind of the broader breakfast category? Christopher Tomasso: Sure. Thanks. I think for us, it comes down to really 3 things: experience, execution and value. So I think a lot of the news and noise around breakfast and the softness around breakfast really has been targeted more and coming more from QSR. And I think you've seen a lot in the environment here about consumers really looking for value, consistency and the experience. And I think we bring that every day. And so I just think that the consumer is putting a high value on that and finding time in their mornings and middays to come see us. James Salera: If we think about some of the potential impacts on the commodity front, given the energy cost increase following the Iran conflict. Is there anything you are keeping an eye on or we should be keeping an eye on as you start to contemplate pricing in the back half of the year? I know eggs have still come down significantly, but there's been some fluctuation on some other commodities. Christopher Tomasso: Yes, we'll be collecting all that information, and it's part of the consideration. We need to know where the customer is, and we consider that as part of the pricing philosophy and thinking that we'll go through. So it's -- the short answer to your question is absolutely, we think about the pressures that are on the customer from either gas or any other inflation that we see out there. Operator: Our next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. Just following up from the comp trend perspective. Obviously, there was a spike in gas prices later in the quarter with the geopolitical concerns and the Iran conflict. I'm just wondering if you could maybe share your thoughts on your ability to work through that, whether there was any change in trend late in the quarter and perhaps into 2Q, if you're willing to share April, just related to the gas price spike. If you can share those sequential trends, that would be great. And then I had one follow-up. Christopher Tomasso: Yes. I think a couple of things from kind of what we just said that I could expand upon. One is the traffic pressure that we felt really was impacted more by weather than gas prices and fuel prices and other pressures. So -- and then when you heard me talk about the performance of our menu and our seasonal menu and how the guests are electing to spend more and go deeper on our menu and add shareables and things like that. That came a little bit later, obviously, because we didn't launch that menu until February. So we've actually been very pleased with how our consumer has interacted with us despite what's going on in the macro. So we're fortunate that we -- our core demographic is higher income. And I think we have a little more insulation to that. And I think the behavior that we're seeing from our customer, certainly as we innovate and give them new reasons to come in and work around our menu has been something that we've been very encouraged by. Mel Hope: And Jeff, our development team does a really good job of locating our new restaurants and the business is close to our customers. So in terms of just convenience, I think that's a helpful attribute that our system enjoys in terms of being near the customer and convenient to them. Jeffrey Bernstein: Understood. And then just a follow-up. Well, first of all, whether you're willing to share April trends or whether there's been any change in trajectory. But otherwise, you did reiterate that you expect positive comps each quarter of this year. The compares are clearly much more difficult. In fact, the third quarter, they're like 600 basis points more difficult than the quarter you just completed. So just wondering your confidence in that. Maybe there are particular initiatives to support such confidence. I'm assuming marketing is near the top, but your willingness to guide to positive through the rest of the year and what gives you that confidence? Mel Hope: Yes. We haven't seen a big shift in the trend in terms of the overall growth or what we have planned for the year. Operator: Our next question comes from the line of Brian Vaccaro with Raymond James. Brian Vaccaro: Just to ask on the First Watch value proposition and kind of your thinking on menu pricing. And maybe you could just talk about how you view the relative value proposition and price points kind of specifically versus some direct peers of the broader category. And when you think about menu pricing, assuming something material doesn't change in terms of the consumer backdrop, do you plan to take something in the second half, given there's still some underlying inflation, whether it be food, labor, et cetera? Christopher Tomasso: Brian, you know us well. You know you're not going to get that answer, but I appreciate you asking. Our philosophy does not change despite the macro environment. You saw what we did when we had record inflation. We will always lean towards the consumer whenever we can. And sometimes that means taking it on the margin. And sometimes it means we catch up a little bit later on. So I'd just tell you that we go into the beginning of the year and the middle of the year, really looking at things that we control. I think you heard me say that the seasonal menu is driving mix above our carried pricing. We love that, obviously. It's -- that's very different than taking price on a like-for-like item and a consumer paying one price one day and another price another day. So -- that's how we like to build check is through innovation and things like that. That said, we see the realities of inflation and other things, labor and all of that, and we try to keep that nice balance. We do know from our research that we have tremendous pricing power, but we also know that the consumer is under pressure. So we really try to walk that fine line. But we go into, and we're about to do it here in the next couple of weeks, a full evaluation of that. And I will say that we feel good that our consumer, our customer is behaving a little bit differently than what we're seeing and hearing out there. And I think it's because of the cocktail of things that we've put out there and put in place 18 months ago. The menu that we launched now has been something we've tested for 18 to 24 months. Same with the marketing and media. You know how we've kind of done the crawl walk run on that. Well, that's all leading to kind of bring together of all those things for our benefit and for the consumer's benefit. So the direct answer to your question is we're going to evaluate it here for a midyear price increase, and we'll do what we think is best. Brian Vaccaro: All right. You know, I had to take a shot at it, but I appreciate that. On commodity inflation, just a quick follow-up. Obviously, nice to see a little bit of year-on-year relief here in the first quarter, Mel, you noted some brief bacon relief maybe, but you obviously reiterated the guide for the year. So can you help us square those 2 a bit? And any color you can provide sort of on your Q2 expectations versus what's embedded in the second half? Mel Hope: So we did have some first quarter relief. The pork prices were a little bit unexpected relief in terms of price for us because our contracts are priced off published agency rates. And during the period that the government shut down, the agency prices were held flat rather than continue to ascend during the period. So that was a little bit of a surprise to us on an important commodity, but also our crop-related commodities of avocados and coffee continue to be expected to rise some through the year. So even though we enjoyed some relief in the first quarter, we are seeing sort of the seasonal increases in some of those. So we're -- our 1% to 3% guide on inflation in COGS, we're standing on that pretty firmly. Brian Vaccaro: All right. And then maybe just one more quick one. Thanks for the color on the G&A pull forward into Q2. Pretty clear on that. But can you just remind us what your expectations are for G&A for the year? Mel Hope: We don't guide to G&A for the year. It's just embedded in our adjusted EBITDA guidance. Operator: Our next question comes from the line of Andrew Charles with TD Cowen. Zachary Ogden: This is Zach Ogden on for Andrew. So you talked about the 1Q mix being driven by the new menu, but that was only fully rolled out for about a month. So is your expectation that mix can actually accelerate further in the balance of the year relative to 1Q? Christopher Tomasso: Yes. Just for clarity, it was about 2 periods in the quarter. So -- and again, it's also -- that mix is also driven by the seasonal menu that is out right now that has our highest mixing item ever. So that's driving it, too. But yes, we don't plan for mix, but based on what we've seen as long as the rest of our seasonal menus deliver the way the first one has or similar to it or on a year-over-year basis, I wouldn't be surprised to see positive mix. Zachary Ogden: Got it. And then you talked about the class of 2026 actually being even stronger than the class of 2025. So can you talk about what's driving that? Is that more of a function of the second-gen sites you're shifting into this year? Or is that a separate factor? Christopher Tomasso: I think the mix of second-gen sites is similar from a percentage standpoint, about half. So I wouldn't say it's necessarily that. I just -- to Mel's point, we're just -- that's an area where we are constantly learning and adapting as we either in site selection or prototype execution, design, those type of things. And that's one of the beauties of our model where we can kind of do those things. We have a kit of parts that we apply to each restaurant. So no 2 of them look alike, but they have very recognizable elements. And we're just constantly getting better. I think if you go back and look at our -- the performance of our new restaurants over the last 7, 8 years, you'll see that every year has gotten better than the last, and we have some standouts in each class. And so that's something that we just continue to innovate around and get better. Actually, I want to add one more thing to that. We've also -- with that comes the evolution of our preopening marketing and building the anticipation for the openings and that type of thing. So we're seeing stronger openings than we've ever seen before, and then they just carry on from there as well. Operator: Our next question comes from the line of Sara Senatore with Bank of America. Sara Senatore: I wanted to ask about marketing. You mentioned that you're pulling forward marketing, but your annual G&A target is unchanged. I guess is the implication that even if the ROI remains quite high, you wouldn't increase the annual spend on marketing? I'm just looking at -- I think last year, I know what you report in your 10-K is maybe not comprehensive, but it looks like you kind of doubled marketing last year. So just trying to understand, given how high the ROI appears to be, whether you would think about just stepping up the marketing budget for the full year? And then a quick follow-up. Christopher Tomasso: I guess -- probably an easy way to think about it is that G&A is the cocktail of a lot of different items, too. So when we maybe throttle up or down the marketing spend. There may be some other areas where we can dial back or push it out. So we manage G&A throughout the year. So the timing shifts from time to time based on what we think is important and what people will respond to at certain times of the year. So those adjustments, I mean, they're ordinary and normal. So we are continuing to manage our G&A inside what our full year plan is. Mel Hope: But specific to marketing, what I would say is by pulling that forward and getting more time to read the results of those dollars being spent gives us the flexibility and optionality to consider doing what you mentioned, Sarah, later in the year should the environment be conducive to that. Sara Senatore: Okay. Got it. And then, Mel, just on the -- you also mentioned that the G&A in the first quarter was slightly below to the same point, below your expectations. And is that the reason your EBITDA beat was a little bigger this first quarter than the full year guidance raised at the low end. Is that how I should think about it, which is some of that beat was maybe timing of G&A? Mel Hope: Yes, that's right, some favorability. Operator: Our next question comes from the line of Brian Mullan with Piper Sandler. Brian Mullan: Just a question on marketing also. If you look at the restaurants that have had the enhanced marketing tactics in place for longer, so maybe the first third of stores, are those performing differently than the stores they got it only more recently? I think what I'm really trying to ask is do the benefits build over time, do you get an initial lift and maybe followed by more benefits? Any color you could shed on that? Mel Hope: Yes. The lift in the restaurants that enjoyed some additional marketing spend last year has been sustained. So we're continuing to spend in those as well. So it's been effective for them not only last year when it was introduced there, but now in this year as well. Christopher Tomasso: And obviously, that was part of what we wanted to evaluate was the cumulative effect of a class, if you will, or a group receiving support and then receiving it again the following year what we should or could expect when that happens. And so that's part of our overall marketing planning as well, certainly as we go through the rest of the year and then into next year. Brian Mullan: Okay. And then as a follow-up, could you just comment maybe on the delivery channel broadly or generally speaking, really strong growth last year, you have to lap it. Is that kind of in the base now and you can grow more slowly? Or would you expect a little mean reversion this year? Just any comments on the balance of the year? Mel Hope: We've continued to see growth there, not to the level that we saw last year. But what we said earlier was that it's kind of in the base now, and we expect it to grow similarly to the rest of the system. And we're pleased that we kind of set a new level that we're growing from organically at this point. Operator: Our next question comes from the line of Jon Tower with Citi. Jon Tower: Chris, this one is for you. I'm just curious, obviously, you mentioned earlier that your new stores are performing exceptionally well, and they continue to build new class year after year after year, getting better in terms of productivity. The backdrop, though, within the competitive set has certainly weakened, at least based on what we can look at in terms of where you guys were thinking around the time of the IPO versus today. So I'm just curious if you can comment on the company's thinking around development over time and the commitment to that long-term low double-digit percent growth for units that you've spoke to over time. Christopher Tomasso: Sure. I think if you look back at how we've grown and how we got to this leadership position over the years, it was through our organic company-owned growth, acquisitions, sizable ones for that matter, external M&A and franchising at some point. This was really at a time when we had a lot of players in our space, in our direct space, at least espousing that they were going to have aggressive growth. And so we absolutely took the opportunity to take footholds in markets -- key markets for us and did so aggressively, and we continue to do that now. But that said, we're always looking at our capital allocation, what's the best strategy for the next 5 years, that type of thing. And so we're comfortable with our current unit growth outlook right now, but we are always evaluating. And if that changes, we'll obviously communicate that appropriately. Jon Tower: Okay. And then maybe just switching up a little bit. In terms of -- you talked about the new menu and the marketing helping with building brand awareness and it sounds like traffic too, to some extent. Can you speak to maybe any complexion of the customer base that you're drawing in with the new marketing campaigns? Are you seeing maybe younger guests come in relative to your existing base? Are you seeing less affluent consumers move into the stores for the first time versus kind of the core base that you have out there? Christopher Tomasso: Yes, that's a great question. We have seen our average age go down for the entire system. And a lot of that's driven by the new market entries, the new restaurants. And if you look -- I mean, if you look at the way our marketing is the channels that we're using, it's a little bit of a self-fulfilling prophecy with our focus on digital and social and that type of thing. So it's something that we're targeting. But we've actually seen quite a bit of growth in millennials. And so just the overall mix of our customer base now is dynamic and is changing, but it's going in the right way. And that's why we talk about attracting the next generation of First Watch customers so that we've been around 43 years and to kind of set us up for the next couple of decades by having a strategy like this. And as we've seen with other concepts, that's not an easy thing to do to keep your current customer base happy and engaged and coming while you engage and onboard, if you will, that next generation. So I think our teams have done an incredible job doing that. And I'm really pleased with the mix of our consumer. We haven't seen anything from -- you mentioned about higher income and that type of thing. Obviously, millennials from an income standpoint, act more like a high-income cohort in the way they choose to prioritize certain things that are important to them. And I think experience is one of those things. So that's a group that's willing to lean in on that. So I just think our offering is so ideal for this kind of transition to broadening our demographic appeal, the social occasion, the social gathering, group dining, brunch, those type of things. So yes, just long answer to it, we are seeing our customer cohort skew a little younger. Operator: Our next question comes from the line of Todd Brooks with Benchmark StoneX. Todd Brooks: Chris, you had said on the last call that you were equally as excited about the potential for the new menu versus the expansion of the enhanced marketing activities to be drivers of the business. here in fiscal '26. I guess, a, any surprises in how things performed across Q1 that either increased or maybe have you favoring one of the initiatives as a driver versus the other? And b, how is kind of the Q1 performance and what these key tactics are delivering kind of bolstering your confidence to still maintain the commentary about positive same-store sales in each quarter for the balance of the year? Christopher Tomasso: Yes. My comment comes from my philosophy of the menu being really the #1 marketing tool. It's something every one of our customer touches. We can -- there can be a cause and effect relationship immediately that you can see and how customers respond to what you've done, how you've innovated. And so I'm not surprised by what we're seeing from the new menu. I think even before we got it in test, there was a level of excitement around here about how it's being presented. We derisked it by bringing on some customer favorites from the past. And so I'm just really pleased that the consumer responded the way we expected them to. We've been very pleased by some of the add-ons like potatoes becoming million potatoes and add an egg and adding salmon to your avocado toast. And these aren't things that we just sat around and talked about. These are things that through our Y tour in speaking with our hourly employees, we hear that customers were adding salmon to the avocado toast. And so why not put it out there and see, okay, if people are willing to ask for it when it's not on the menu, if we put it on there and raise the profile of that, would we see the penetration and we absolutely have. So building the check that way in a way that the consumer wants to do it, again, versus just increasing prices on like-for-like items to me is the most healthy way to drive check, and we've seen that. I will say that, I think all of these things together, whether it's all the work that we did a couple of years ago with the KDS system and the dining room optimizations and the digital waitlist management improvements now coupled with the evolved menu and the increased marketing, I think, is all a really nice mix that's helping us to outperform the industry and deliver results like this. Todd Brooks: That's great. My follow-up and then I'll jump back in queue. Obviously, a really strong opening quarter here in Q1. And I think, Mel, you talked about still looking for a second half and fourth quarter focused balance to the openings for the year. Any cadence you give us first half versus second half on openings? And you talked about densifying markets here in '26. You had the strong same-store sales performance, almost up 3%. But what -- can you share with us kind of the anticipated sales transfer that you plan to absorb this year with more of a focus on backfilling in existing markets? Mel Hope: Yes. So in terms of the cadence of openings, we historically kind of have a big fourth quarter just because human nature tends to push projects a little bit heavier into the fourth quarter. And so I think at least for the average throughout each of the remaining quarters of the year, it's probably pretty similar this year to last year as we continue to try and improve that over time so that we can eliminate bulges in the development that put strain on our operators. So I would -- I'd kind of look to the cadence that we had last year as pretty similar for us this year. And then in terms of densification and sales transfer, when we underwrite new projects, we always consider the sales transfer and we -- and the new restaurants need to cover for that. They need to perform a little bit better in order to sort of pay back the other restaurants that experienced some temporary sales transfer. But that's all pretty planful for us and built into our overall underwriting. So when we say that, restaurants are outperforming or they're doing according to plan, we've already determined what we believe is the sales transfer. And it's generally within our range of expectations overall. We don't typically quantify it, because there's lots of factors that go into the success of building out a market or fortifying a market or cutting off competition or some of those other advantages as well. So we know what it is internally. We don't speak to it publicly very much. But generally, it's part of all the strategic consideration of how we build out a market and how we fortify the brand against a competitive intrusion as opposed to our own sales transfer. Christopher Tomasso: And Todd, I think that's one of the things that -- the point that sometimes gets lost on us because there aren't many, if any, high-growth full-service concepts out there that we do have -- we're a high-growth concept. We have sales transfer as we fortify these markets and do that. It's not immaterial, and it's just a natural headwind to restaurant traffic. But we view it as a positive one rather than any weakness in the core business because for us, same-restaurant traffic is certainly one of the metrics we look at, but there are so many other ones that we do as well. But for us, the profitable market share growth, the attractive new unit returns, all of those things together for us is what we look at and evaluate. So as Mel said, we model for it. We plan for it in the new restaurants, and it's something we've had for a while. Operator: Our next question comes from the line of Gregory Francfort with Guggenheim Partners. Gregory Francfort: I have 2 questions. My first is just labor per operating week growth and it was obviously a lot slower this quarter. And anything to call out maybe besides wage rate, just any other kind of onetime drivers? Mel Hope: Of the labor inflation, you kind of got garbled at the first part of your question on our phone. Can you just say it again? Gregory Francfort: Yes. Sorry, just labor operating week growth. You got more leverage on that line than maybe I expected. Any call-outs or anything else that might continue through this year? Mel Hope: No. I think our operators -- just compared to the first quarter of last year when there was -- when our traffic was under so much pressure and the inflation was affecting everybody. I think our operators had to adjust, but it wasn't sort of a linear adjustment. This year, we have a better operating environment, and that makes it a little bit more predictable in the restaurants in order to manage the crews and to drive operational initiatives through the organization that are efficiencies or staffing, that kind of thing. So nothing remarkable. It's the hard work in Elbow Grease of a good operating crew. Gregory Francfort: Got it. That's helpful. And then maybe this question is for Chris. Obviously, the stock has been maybe more pressured than you or I would have expected. And the returns are still better to develop than they are maybe to buy back stock. But I guess, have you considered potentially doing that? And are there other ways to maybe signal to the market your enthusiasm? And I'm just curious kind of how you think through that piece of the capital allocation, maybe the returns on buying stock versus developing stores, even if it's a lower return, maybe it's more certain. Just any thoughts there? Christopher Tomasso: I'd say the answer to your question is that I agree with you on the stock performance. And I'll just go back to my point that we are evaluating capital allocation. And we have very good returns on our new restaurants. We're creating a vast network of cash-producing machines at high returns and something that the consumer is interested in, right? So we wanted to take advantage of that. But overall, I'd say that from a capital allocation standpoint, we, as a management team and our Board, always look at opportunities to optimize that. And so we'll continue to do that. Mel Hope: And I think Chris is exactly right. Right now, the right thing for the company to do and our strategy is to continue to grow that cash engine, cash production engine. And the day that there is a shift in strategy, we owe the market a lot of explanation about how we -- how that would take place. But you want that cash engine to be as big as it can be. Therefore, you have more options of what to do with the excess cash at the time you make that shift. So I think continuing to build with the kind of returns we get out of our restaurants, the -- our capacity, the way we're building out markets, I think taking advantage of that now is important in the life cycle of the company right now. So building that cash engine is building a lot of value for the future. Operator: Our last question comes from the line of Chris O'Cull with Stifel. Christopher O'Cull: Chris, can you just elaborate on the decision to eliminate the COO position? And maybe what you see as the biggest areas of opportunity with operations to drive efficiency and maybe even improved guest experience? Christopher Tomasso: Yes, absolutely. I think as we looked at our overall G&A setup, and there were a couple of things. It was just a natural evolution for us. And -- but more specifically, it got me closer to operations, which I think is important. It's something that I've done for a long time here in this company and the opportunity to work more closely with the operations leaders. The way we restructured it, it only added one direct report to me. We created 2 SVPs of operations and basically split the country, and I'm able to now be more involved in a day-to-day basis on ops execution and ops strategy, frankly, and kind of be that one foot here, one foot in the field. And I'm excited about it. I think the team is excited about it, but I know we'll be a lot more efficient and effective because I can be more involved. Operator: Thank you. This now concludes our question-and-answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

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